IFS0020F
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995, AS AMENDED
NOVEMBER 14, 1995
SELECT ADVISORS VARIABLE INSURANCE TRUST oTouchstone Emerging Growth Portfolio
oTouchstone International Equity Portfolio oTouchstone Balanced Portfolio
oTouchstone Income Opportunity Portfolio oTouchstone Standby Income Portfolio
Select Advisors Variable Insurance Trust (the "Trust") is composed of
five funds: Emerging Growth Portfolio, International Equity Portfolio, Balanced
Portfolio, Income Opportunity Portfolio and Standby Income Portfolio (each, a
"Portfolio"). The Trust is an open-end, diversified, management investment
company formed as a Massachusetts business trust.
TABLE OF CONTENTS
Investment Objectives, Policies, Restrictions and Risks . . . . . 2
Performance Information . . . . . . . . . . . . . . . . . . . . . 22
Valuation of Securities; Redemption in Kind . . . . . . . . . . . 24
Management of the Trust . . . . . . . . . . . . . . . . . . . . . 25
Organization of the Trust . . . . . . . . . . . . . . . . . . . . 31
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 34
Appendix (Bond, Commercial Paper and Municipal
Obligations Ratings) . . . . . . . . . . . . . . . . . . . . . . A-1
Shares of the Portfolios are sold by Touchstone Securities, Inc.
("Touchstone Securities" or the "Distributor"), the Trust's Distributor.
Touchstone Advisors, Inc. ("Touchstone" or the "Advisor") is the investment
advisor of each Portfolio and the specific investments of each Portfolio are
managed on a day-to-day basis by their respective investment advisors
(collectively, the "Portfolio Advisors"). Signature Financial Services, Inc.
("Signature" or the "Administrator") serves as administrator and fund accounting
agent to each Portfolio.
The Prospectus is dated May 1, 1995, as amended November 14, 1995 and
provides the basic information investors should know before investing, may be
obtained without charge by calling the Trust at the telephone number listed
below. This Statement of Additional Information, which is not a prospectus, is
intended to provide additional information regarding the activities and
operations of the Trust and should be read in conjunction with the Prospectus.
This Statement of Additional Information is not an offer of any Portfolio for
which an investor has not received a Prospectus. Capitalized terms not otherwise
defined in this Statement of Additional Information have the meanings accorded
to them in the Prospectus.
TOUCHSTONE ADVISORS, INC.
INVESTMENT ADVISOR OF EACH PORTFOLIO
TOUCHSTONE SECURITIES, INC.
DISTRIBUTOR
318 Broadway Cincinnati, Ohio (800) 669-2796
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INVESTMENT OBJECTIVES, POLICIES, RESTRICTIONS AND RISKS
INVESTMENT OBJECTIVES
The investment objective(s) of each Portfolio is described in the
Prospectus. There can, of course, be no assurance that any Portfolio will
achieve its investment objective(s).
INVESTMENT POLICIES, PRACTICES, RESTRICTIONS AND RISKS
The following provides additional information about the investment
policies employed by one or more Portfolios. Please refer to the Prospectus for
information as to which investment techniques are employed by which Portfolio.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of
deposit are receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from
1 to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which is
a type of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
For a description of commercial paper ratings, see the Appendix.
LOWER-RATED DEBT SECURITIES. While the market for high yield corporate
debt securities has been in existence for many years and has weathered previous
economic downturns, the 1980's brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and restructuring.
Past experience may not provide an accurate indication of future performance of
the high yield bond market, especially during periods of economic recession. In
fact, from 1989 to 1991, the percentage of lower-rated debt securities that
defaulted rose significantly above prior levels.
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The market for lower-rated debt securities may be thinner and less
active than that for higher rated debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not available,
lower-rated debt securities will be valued in accordance with procedures
established by the Board of Trustees, including the use of outside pricing
services. Judgement plays a greater role in valuing high yield corporate debt
securities than is the case for securities for which more external sources for
quotations and last sale information is available. Adverse publicity and
changing investor perception may affect the ability of outside pricing services
to value lower-rated debt securities and the ability to dispose of these
securities.
In considering investments for the Portfolio, the Portfolio Advisor
will attempt to identify those issuers of high yielding debt securities whose
financial condition is adequate to meet future obligations, has improved or is
expected to improve in the future. The Portfolio Advisor's analysis focuses on
relative values based on such factors as interest on dividend coverage, asset
coverage, earnings prospects and the experience and managerial strength of the
issuer.
A Portfolio may choose, at its expense or in conjunction with others,
to pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interest of security holders if it determines this to be in
the best interest of the Portfolio.
ILLIQUID SECURITIES. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the "1933
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the 1933 Act are referred to as "private placements"
or "restricted securities" and are purchased directly from the issuer or in the
secondary market. Investment companies do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. An investment company might also have
to register such restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
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The Securities and Exchange Commission (the "SEC") has adopted Rule
144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act of resales of certain securities to qualified institutional buyers. The
Advisor anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.
Each Portfolio Advisor will monitor the liquidity of Rule 144A
securities in each Portfolio's portfolio under the supervision of the Board of
Trustees. In reaching liquidity decisions, the Portfolio Advisor will consider,
among other things, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers and other potential
purchasers wishing to purchase or sell the security; (3) dealer undertakings to
make a market in the security and (4) the nature of the security and of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).
FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING EASTERN EUROPE.
Investments in companies domiciled in Eastern European countries may be subject
to potentially greater risks than those of other foreign issuers. These risks
include: (i) potentially less social, political and economic stability; (ii) the
small current size of the markets for such securities and the low volume of
trading, which result in less liquidity and in greater price volatility; (iii)
certain national policies which may restrict the Portfolios' investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; (v) the absence
of developed legal structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries, or in the
Commonwealth of Independent States (formerly the Union of Soviet Socialist
Republics).
So long as the Communist Party continues to exercise a significant or,
in some countries, dominant role in Eastern European countries, investments in
such countries will involve risks of nationalization, expropriation and
confiscatory taxation. The Communist governments of a number of Eastern European
countries expropriated large amounts of private property in the past, in many
cases without adequate compensation, and there may be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
a Portfolio could lose a substantial portion of any investments it has made in
the affected countries. Further, no accounting standards exist in Eastern
European countries. Finally, even though certain Eastern European currencies may
be convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to the Portfolio's shareholders.
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LENDING OF PORTFOLIO SECURITIES. By lending its securities, a Portfolio
can increase its income by continuing to receive interest on the loaned
securities as well as by either investing the cash collateral in short-term
securities or obtaining yield in the form of interest paid by the borrower when
U.S. Government obligations are used as collateral. There may be risks of delay
in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. Each Portfolio will adhere to the following
conditions whenever its securities are loaned: (i) the Portfolio must receive at
least 100 percent cash collateral or equivalent securities from the borrower;
(ii) the borrower must increase this collateral whenever the market value of the
securities including accrued interest rises above the level of the collateral;
(iii) the Portfolio must be able to terminate the loan at any time; (iv) the
Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (v) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a material event
adversely affecting the investment occurs, the Board of Trustees must terminate
the loan and regain the right to vote the securities.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The successful use of such instruments draws upon the
Portfolio Advisor's skill and experience with respect to such instruments and
usually depends on the Portfolio Advisor's ability to forecast interest rate and
currency exchange rate movements correctly. Should interest or exchange rates
move in an unexpected manner, a Portfolio may not achieve the anticipated
benefits of futures contracts or options on futures contracts or may realize
losses and thus will be in a worse position than if such strategies had not been
used. In addition, the correlation between movements in the price of futures
contracts or options on futures contracts and movements in the price of the
securities and currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
FUTURES CONTRACTS. A Portfolio may enter into contracts for the
purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any index of U.S.
Government securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange. A Portfolio may enter into futures
contracts which are based on debt securities that are backed by the full faith
and credit of the U.S. Government, such as long-term U.S. Treasury Bonds,
Treasury Notes, GNMA modified pass-through mortgage-backed securities and
three-month U.S. Treasury Bills. A Portfolio may also enter into futures
contracts which are based on bonds issued by entities other than the U.S.
Government.
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At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Portfolio will incur brokerage fees when it purchases or sells futures
contracts.
The purpose of the acquisition or sale of a futures contract, in the
case of a Portfolio which holds or intends to acquire fixed-income securities,
is to attempt to protect the Portfolio from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities or
foreign currencies. For example, if interest rates were expected to increase,
the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt security in the Portfolio would decline, but the
value of the futures contracts to the Portfolio would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio from
declining as much as it otherwise would have. The Portfolio could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Portfolio to maintain a defensive position
without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, a Portfolio could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market.
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When a Portfolio enters into a futures contract for any purpose, the
Portfolio will establish a segregated account with the Portfolio's custodian to
collateralize or "cover" the Portfolio's obligation consisting of cash, cash
equivalents or high grade liquid debt securities from its portfolio in an amount
equal to the difference between the fluctuating market value of such futures
contracts and the aggregate value of the initial and variation margin payments
made by the Portfolio with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Portfolio Advisor may
still not result in a successful transaction.
In addition, futures contracts entail risks. Although each applicable
Portfolio Advisor believes that use of such contracts will benefit the
respective Portfolio, if the Portfolio Advisor's investment judgment about the
general direction of interest rates is incorrect, a Portfolio's overall
performance would be poorer than if it had not entered into any such contract.
For example, if a Portfolio has hedged against the possibility of an increase in
interest rates which would adversely affect the price of debt securities held in
its portfolio and interest rates decrease instead, the Portfolio will lose part
or all of the benefit of the increased value of its debt securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if a Portfolio has insufficient cash, it may have
to sell debt securities from its portfolio to meet daily variation margin
requirements. Such sales of bonds may be, but will not necessarily be, at
increased prices which reflect the rising market. A Portfolio may have to sell
securities at a time when it may be disadvantageous to do so.
OPTIONS ON FUTURES CONTRACTS. Each Portfolio may purchase and write
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.
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The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may purchase a put option on a futures contract to hedge
its portfolio against the risk of rising interest rates.
The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The Portfolio will not enter into any futures contracts or options on
futures contracts if immediately thereafter the amount of margin deposits on all
the futures contracts of the Portfolio and premiums paid on outstanding options
on futures contracts owned by the Portfolio would exceed 5% of the market value
of the total assets of the Portfolio.
OPTIONS ON FOREIGN CURRENCIES. Options on foreign currencies are used
for hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, are utilized. For example, a decline
in the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Portfolio may purchase put
options on the foreign currency. If the value of the currency does decline, a
Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
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adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Portfolio could sustain losses on
transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
Options on foreign currencies may be written for the same types of
hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the options will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
Certain Portfolios intend to write covered call options on foreign
currencies. A call option written on a foreign currency by a Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in cash, U.S. Government securities and other high quality liquid
debt securities in a segregated account with its custodian.
Certain Portfolios also intend to write call options on foreign
currencies that are not covered for cross-hedging purposes. A call option on a
foreign currency is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in the U.S. dollar value of a
security which the Portfolio owns or has the right to acquire and which is
denominated in the currency underlying the option due to an adverse change in
the exchange rate. In such circumstances, the Portfolio collateralizes the
option by maintaining in a segregated account with its custodian, cash or U.S.
Government securities or
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other high quality liquid debt securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked to market daily.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND
OPTIONS ON FOREIGN CURRENCIES. Unlike transactions entered into by a Portfolio
in futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.
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As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. A
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.
OPTIONS ON SECURITIES. The respective Portfolios may write (sell),to a
limited extent, only covered call and put options on a security then held in its
portfolio ("covered options") in an attempt to increase income. However, the
Portfolio may forgo the benefits of appreciation on securities sold or may pay
more than the market price on securities acquired pursuant to call and put
options written by the Portfolio.
When a Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio will realize
income in an amount equal to the premium received for writing the option. If the
option is exercised, a decision over which the Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the exercise
price. By writing a covered call option, the Portfolio forgoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.
When a Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at the exercise price. By writing
a covered put option, the Portfolio, in exchange for the net premium received,
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<PAGE>
accepts the risk of a decline in the market value of the underlying security
below the exercise price. The Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio owns or which the Portfolio wishes to acquire the securities
at the exercise price.
A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." Where the Portfolio cannot effect a closing purchase transaction,
it may be forced to incur brokerage commissions or dealer spreads in selling
securities it receives or it may be forced to hold underlying securities until
an option is exercised or expires.
When a Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount
of the deferred credit will be subsequently marked to market to reflect the
current market value of the option written. The current market value of a traded
option is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written.
Securities against which options are written will be segregated on the
books of the custodian for the Portfolio. If the Portfolio does not own the
security on which the option is written, the Portfolio will "cover" its
obligation by placing high grade liquid debt securities in a segregated account
at the Portfolio's custodian.
A Portfolio may purchase call and put options on any securities in
which it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio, in exchange for the premium paid,
to purchase a security at a specified price during the option period. The
Portfolio would ordinarily have a gain if the value of the securities increased
above the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price during
the option period.
A Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell a security, which may or may not be held in the Portfolio's portfolio, at a
specified price during the option period. The purchase of protective puts is
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<PAGE>
designed merely to offset or hedge against a decline in the market value of the
Portfolio's portfolio securities. Put options also may be purchased by the
Portfolio for the purpose of affirmatively benefiting from a decline in the
price of securities which the Portfolio does not own. The Portfolio would
ordinarily recognize a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would recognize a loss if
the value of the securities remained at or above the exercise price. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.
Each Portfolio has adopted certain other nonfundamental policies
concerning option transactions which are discussed below. The Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.
A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Portfolio Advisor will
monitor the creditworthiness of dealers with whom a Portfolio enters into such
options transactions under the general supervision of the Board of Trustees.
OPTIONS ON SECURITIES INDICES. Such options give the holder the right
to receive a cash settlement during the term of the option based upon the
difference between the exercise price and the value of the index. Such options
will be used for the purposes described above under "Options on Securities" or,
to the extent allowed by law, as a substitute for investment in individual
securities.
Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close out
options positions on securities indices is more likely to occur, although the
Portfolio generally will only purchase or write such an option if the Portfolio
Advisor believes the option can be closed out.
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<PAGE>
Use of options on securities indices also entails the risk that trading
in such options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolio will not purchase such options unless
the Advisor and the respective Portfolio Advisor each believes the market is
sufficiently developed such that the risk of trading in such options is no
greater than the risk of trading in options on securities.
Price movements in a Portfolio's portfolio may not correlate precisely
with movements in the level of an index and, therefore, the use of options on
indices cannot serve as a complete hedge. Because options on securities indices
require settlement in cash, the Portfolio Advisor may be forced to liquidate
portfolio securities to meet settlement obligations.
When a Portfolio writes a put or call option on a securities index it
will cover the position by placing high grade liquid debt instruments in a
segregated asset account with the Portfolio's custodian.
FORWARD CURRENCY CONTRACTS. Because, when investing in foreign
securities,a Portfolio buys and sells securities denominated in currencies other
than the U.S. dollar and receives interest, dividends and sale proceeds in
currencies other than the U.S. dollar, such Portfolios from time to time may
enter into forward currency transactions to convert to and from different
foreign currencies and to convert foreign currencies to and from the U.S.
dollar. A Portfolio either enters into these transactions on a spot (I.E., cash)
basis at the spot rate prevailing in the foreign currency exchange market or
uses forward currency contracts to purchase or sell foreign currencies.
A forward currency contract is an obligation by a Portfolio to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract. Forward currency contracts establish an
exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward currency contract generally has
no deposit requirement and is traded at a net price without commission. Each
Portfolio maintains with its custodian a segregated account of high grade liquid
assets in an amount at least equal to its obligations under each forward
currency contract. Neither spot transactions nor forward currency contracts
eliminate fluctuations in the prices of the Portfolio's securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.
A Portfolio may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into a Portfolio Advisor's long-term
investment decisions, a Portfolio will not routinely enter into foreign currency
hedging transactions with respect to security transactions; however, the
Portfolio Advisors believe that it is important to have the flexibility to enter
into foreign currency hedging transactions when it determines that the
transactions would be in a Portfolio's best interest. Although these
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<PAGE>
transactions tend to minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of the hedged currency increase. The precise
matching of the forward currency contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date the forward currency
contract is entered into and the date it matures. The projection of currency
market movements is extremely difficult, and the successful execution of a
hedging strategy is highly uncertain.
While these contracts are not presently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward currency contracts. In
such event the Portfolio's ability to utilize forward currency contracts in the
manner set forth in the Prospectus may be restricted. Forward currency contracts
may reduce the potential gain from a positive change in the relationship between
the U.S. dollar and foreign currencies. Unanticipated changes in currency prices
may result in poorer overall performance for the Portfolio than if it had not
entered into such contracts. The use of foreign currency forward currency
contracts may not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the prices of or rates of return on a Portfolio's foreign
currency denominated portfolio securities and the use of such techniques will
subject a Portfolio to certain risks.
The matching of the increase in value of a forward currency contract
and the decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, a Portfolio may not always be able to enter into foreign
currency forward currency contracts at attractive prices and this will limit the
Portfolio's ability to use such contract to hedge or cross-hedge its assets.
Also, with regard to a Portfolio's use of cross-hedges, there can be no
assurance that historical correlations between the movement of certain foreign
currencies relative to the U.S. dollar will continue. Thus, at any time poor
correlation may exist between movements in the exchange rates of the foreign
currencies underlying a Portfolio's cross-hedges and the movements in the
exchange rates of the foreign currencies in which the Portfolio's assets that
are the subject of such cross-hedges are denominated.
RATING SERVICES
The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection of
portfolio investments, the Portfolio Advisors also make their own evaluation of
these securities, subject to review by the Board of Trustees. After purchase by
a Portfolio, an obligation may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Portfolio. Neither event would
require a Portfolio to eliminate the obligation from its portfolio, but a
Portfolio Advisor will consider such an event in its determination of whether a
Portfolio should continue to hold the obligation. A description of the ratings
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<PAGE>
used herein and in the Trust's Prospectus is set forth in the Appendix to this
Statement of Additional Information.
INVESTMENT RESTRICTIONS
The following investment restrictions are "fundamental policies" of
each Portfolio and may not be changed with respect to the Portfolio without the
approval of a "majority of the outstanding voting securities" of the Portfolio,
as the case may be. "Majority of the outstanding voting securities" under the
Investment Company Act of 1940, as amended (the "1940 Act"), and as used in this
Statement of Additional Information and the Prospectus, means, with respect to
the Portfolio, the lesser of (i) 67% or more of the outstanding voting
securities of the Portfolio present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Portfolio are present or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of the Portfolio.
As a matter of fundamental policy, no Portfolio may:
(1) borrow money or mortgage or hypothecate assets of the Portfolio,
except that in an amount not to exceed 1/3 of the current value of the
Portfolio's net assets, it may borrow money (including through reverse
repurchase agreements, forward roll transactions involving mortgage backed
securities or other investment techniques entered into for the purpose of
leverage), and except that it may pledge, mortgage or hypothecate not more than
1/3 of such assets to secure such borrowings, provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for purposes
of this restriction and except that assets may be pledged to secure letters of
credit solely for the purpose of participating in a captive insurance company
sponsored by the Investment Company Institute; for additional related
restrictions, see clause (i) under the caption "State and Federal Restrictions"
below;
(2) underwrite securities issued by other persons except insofar as the
Portfolios may technically be deemed an underwriter under the 1933 Act in
selling a portfolio security;
(3) make loans to other persons except: (a) through the lending of the
Portfolio's portfolio securities and provided that any such loans not exceed 30%
of the Portfolio's total assets (taken at market value); (b) through the use of
repurchase agreements or the purchase of short term obligations; or (c) by
purchasing a portion of an issue of debt securities of types distributed
publicly or privately;
(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (the
Portfolio may hold and sell, for the Portfolio's portfolio, real estate acquired
as a result of the Portfolio's ownership of securities);
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<PAGE>
(5) concentrate its investments in any particular industry (excluding
U.S. Government securities), but if it is deemed appropriate for the achievement
of a Portfolio's investment objective(s), up to 25% of its total assets may be
invested in any one industry;
(6) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction; and
(7) with respect to 75% of its assets, invest more than 5% of its total
assets in the securities (excluding U.S. Government securities) of any one
issuer.
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and federal statutes and policies each Portfolio (or the Trust, on behalf of
each Portfolio) will not as a matter of "operating policy" (changeable by the
Board of Trustees without a shareholder vote):
(i) borrow money (including through reverse repurchase agreements
or forward roll transactions involving mortgage backed
securities or similar investment techniques entered into for
leveraging purposes), except that the Portfolio may borrow for
temporary or emergency purposes up to 10% of its net assets;
provided, however, that no Portfolio may purchase any security
while outstanding borrowings exceed 5%;
(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's net assets (taken at market value),
provided that collateral arrangements with respect to options
and futures, including deposits of initial deposit and
variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this
restriction;
(iii) purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;
(iv) sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a
right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale
is made upon the same conditions;
(v) invest for the purpose of exercising control or management;
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(vi) purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of
merger or consolidation; provided, however, that securities of
any investment company will not be purchased for the Portfolio
if such purchase at the time thereof would cause: (a) more
than 10% of the Portfolio's total assets (taken at the greater
of cost or market value) to be invested in the securities of
such issuers; (b) more than 5% of the Portfolio's total assets
(taken at the greater of cost or market value) to be invested
in any one investment company; or (c) more than 3% of the
outstanding voting securities of any such issuer to be held
for the Portfolio; provided further that, except in the case
of a merger or consolidation, the Portfolio shall not purchase
any securities of any open-end investment company;
(vii) invest more than 15% of the Portfolio's net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not readily marketable (excluding Rule 144A
securities deemed by the Board of Trustees of the Portfolio to
be liquid);
(viii) invest more than 15% of the Portfolio's total assets (taken at
the greater of cost or market value) in (a) securities
(including Rule 144A securities) that are restricted as to
resale under the 1933 Act, and (b) securities that are issued
by issuers which (including predecessors) have been in
operation less than three years (other than U.S. Government
securities), provided, however, that no more than 5% of the
Portfolio's total assets are invested in securities issued by
issuers which (including predecessors) have been in operation
less than three years;
(ix) invest more than 10% of the Portfolio's total assets (taken at
the greater of cost or market value) in securities (excluding
Rule 144A securities) that are restricted as to resale under
the 1933 Act;
(x) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio to hold more than 10% of any
class of securities of such issuer, for which purposes all
indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be
subject to this restriction;
(xi) purchase or retain in the Portfolio's portfolio any securities
issued by an issuer any of whose officers, directors, trustees
or security holders is an officer or Trustee of the Trust, or
is an officer or partner of the Advisor, if after the purchase
of the securities of such issuer for the Portfolio one or more
of such persons owns beneficially more than 1/2 of 1% of the
shares or securities, or both, all taken at market value, of
such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities
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together own beneficially more than 5% of such shares or
securities, or both, all taken at market value;
(xii) invest more than 5% of the Portfolio's net assets in warrants
(valued at the lower of cost or market), but not more than 2%
of the Portfolio's net assets may be invested in warrants not
listed on the New York Stock Exchange Inc. ("NYSE") or the
American Stock Exchange;
(xiii) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into
or exchangeable, without payment of any further consideration,
for securities of the same issue and equal in amount to, the
securities sold short, and unless not more than 10% of the
Portfolio's net assets (taken at market value) is represented
by such securities, or securities convertible into or
exchangeable for such securities, at any one time (the
Portfolios have no current intention to engage in short
selling);
(xiv) purchase puts, calls, straddles, spreads and any combination
thereof if by reason thereof the value of the Portfolio's
aggregate investment in such classes of securities will exceed
5% of its total assets;
(xv) write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the investment policies of the Portfolio
and the option is issued by the Options Clearing Corporation,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b)
the aggregate value of the obligations underlying the puts
determined as of the date the options are sold shall not
exceed 50% of the Portfolio's net assets; (c) the securities
subject to the exercise of the call written by the Portfolio
must be owned by the Portfolio at the time the call is sold
and must continue to be owned by the Portfolio until the call
has been exercised, has lapsed, or the Portfolio has purchased
a closing call, and such purchase has been confirmed, thereby
extinguishing the Portfolio's obligation to deliver securities
pursuant to the call it has sold; and (d) at the time a put is
written, the Portfolio establishes a segregated account with
its custodian consisting of cash or short-term U.S. Government
securities equal in value to the amount the Portfolio will be
obligated to pay upon exercise of the put (this account must
be maintained until the put is exercised, has expired, or the
Portfolio has purchased a closing put, which is a put of the
same series as the one previously written); and
(xvi) buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or financial futures or
options on financial futures unless such options are written
by other persons and: (a) the options or futures are offered
through the facilities
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<PAGE>
of a national securities association or are listed on a
national securities or commodities exchange, except for put
and call options issued by non-U.S. entities or listed on
non-U.S. securities or commodities exchanges; (b) the
aggregate premiums paid on all such options which are held at
any time do not exceed 20% of the Portfolio's total net
assets; and (c) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed
5% of the Portfolio's total assets.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Portfolio Advisors are responsible for decisions to buy and sell
securities, futures contracts and options on such securities and futures for
each Portfolio, the selection of brokers, dealers and futures commission
merchants to effect transactions and the negotiation of brokerage commissions,
if any. Broker-dealers may receive brokerage commissions on portfolio
transactions, including options, futures and options on futures transactions and
the purchase and sale of underlying securities upon the exercise of options.
Orders may be directed to any broker-dealer or futures commission merchant,
including to the extent and in the manner permitted by applicable law, the
Advisor, the Portfolio Advisors or their subsidiaries or affiliates. Purchases
and sales of certain portfolio securities on behalf of a Portfolio are
frequently placed by the Portfolio Advisor with the issuer or a primary or
secondary market-maker for these securities on a net basis, without any
brokerage commission being paid by the Portfolio. Trading does, however, involve
transaction costs. Transactions with dealers serving as market-makers reflect
the spread between the bid and asked prices. Purchases of underwritten issues
may be made which will include an underwriting fee paid to the underwriter.
The Portfolio Advisors seek to evaluate the overall reasonableness of
the brokerage commissions paid (to the extent applicable) in placing orders for
the purchase and sale of securities for a Portfolio taking into account such
factors as price, commission (negotiable in the case of national securities
exchange transactions), if any, size of order, difficulty of execution and skill
required of the executing broker-dealer through familiarity with commissions
charged on comparable transactions, as well as by comparing commissions paid by
the Portfolio to reported commissions paid by others. The Portfolio Advisors
review on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
The Portfolio Advisors are authorized, consistent with Section 28(e) of
the Securities Exchange Act of 1934, as amended, when placing portfolio
transactions for a Portfolio with a broker to pay a brokerage commission (to the
extent applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research, market or
statistical information. The term "research, market or statistical information"
includes advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts.
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Consistent with the policy stated above, the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. and such other policies as
the Board of Trustees may determine, the Portfolio Advisors may consider sales
of shares of the Trust and of other investment company clients of the Advisor or
the Portfolio Advisor as a factor in the selection of broker-dealers to execute
portfolio transactions. The Portfolio Advisor will make such allocations if
commissions are comparable to those charged by nonaffiliated, qualified
broker-dealers for similar services.
Higher commissions may be paid to firms that provide research services
to the extent permitted by law. A Portfolio Advisor may use this research
information in managing a Portfolio's assets, as well as the assets of other
clients.
For the period November 21, 1994 (commencement of operations) to
December 31, 1994, the aggregate commissions paid by each Portfolio is as
follows:
<TABLE>
<CAPTION>
Inter-
Emerging national Income Standby
Growth Equity Balanced Opportunity Income
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Aggregate $2,204 $15,378 $2,043 $0 $0
Commissions
</TABLE>
Except for implementing the policies stated above, there is no
intention to place portfolio transactions with particular brokers or dealers or
groups thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to a Portfolio and to the corresponding
Portfolio Advisor, it is the opinion of the management of the Portfolios that
such information is only supplementary to the Portfolio Advisor's own research
effort, since the information must still be analyzed, weighed and reviewed by
the Portfolio Advisor's staff. Such information may be useful to the Portfolio
Advisor in providing services to clients other than the Portfolios, and not all
such information is used by the Portfolio Advisor in connection with the
Portfolios. Conversely, such information provided to the Portfolio Advisor by
brokers and dealers through whom other clients of the Portfolio Advisor effect
securities transactions may be useful to the Portfolio Advisor in providing
services to the Portfolios.
In certain instances there may be securities which are suitable for a
Portfolio as well as for one or more of the respective Portfolio Advisor's other
clients. Investment decisions for a Portfolio and for the Portfolio Advisor's
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling that same security. Some simultaneous
transactions
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<PAGE>
are inevitable when several clients receive investment advice from the same
investment advisor, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as a Portfolio in
concerned. However, it is believed that the ability of a Portfolio to
participate in volume transactions will produce better executions for the
Portfolio.
PERFORMANCE INFORMATION
STANDARD PERFORMANCE INFORMATION
From time to time, quotations of a Portfolio's performance may be
included in advertisements, sales literature or shareholder reports, if
accompanied by performance of your insurance company's corresponding insurance
separate account. These performance figures are calculated in the following
manner:
YIELD: Yields for a Portfolio used in advertising are computed by
dividing the Portfolio's interest and dividend income for a given
30-day or one-month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing
this figure by the Portfolio's net asset value per share at the end of
the period, and annualizing the result (assuming compounding of income)
in order to arrive at an annual percentage rate. Income is calculated
for purpose of yield quotations in accordance with standardized methods
applicable to all stock and bond mutual funds. Dividends from equity
investments are treated as if they were accrued on a daily basis,
solely for the purpose of yield calculations. In general, interest
income is reduced with respect to bonds trading at a premium over their
par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a
discount by adding a portion of the discount to daily income. Capital
gains and losses generally are excluded from the calculation.
Income calculated for the purposes of calculating a Portfolio's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding assumed in yield calculations, the yield quoted for a
Portfolio may differ from the rate of distributions of the Portfolio
paid over the same period or the rate of income reported in the
Portfolio's financial statements. For the 30-day period ended December
31, 1994, each Portfolios SEC yield was as follows:
Income Standby
Opportunity Income
Portfolio Portfolio
Yield 5.18% 5.15%
22
<PAGE>
TOTAL RETURN: A Portfolio's average annual total return is calculated
for certain periods by determining the average annual compounded rates
of return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. A Portfolio may also calculate total return figures which
represent aggregate performance over a period or year-by-year
performance.
The aggregate total return (not annualized) for each of the Portfolios
for the period November 21, 1994 (commencement of operations) to
December 31, 1994 is set forth below:
<TABLE>
<CAPTION>
Inter-
Emerging national Income Standby
Growth Equity Balanced Opportunity Income
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Total Return 1.00% (4.90)% 1.70% (5.80)% 0.30%
</TABLE>
PERFORMANCE RESULTS: Any total return quotation provided for a
Portfolio should not be considered as representative of the performance
of the Portfolio in the future since the net asset value and public
offering price of shares of the Portfolio will vary based not only on
the type, quality and maturities of the securities held in the
Portfolio, but also on changes in the current value of such securities
and on changes in the expenses of the Portfolio. These factors and
possible differences in the methods used to calculate total return
should be considered when comparing the total return of a Portfolio to
total returns published for other investment companies or other
investment vehicles. Total return reflects the performance of both
principal and income.
COMPARISON OF PORTFOLIO PERFORMANCE
Comparison of the quoted nonstandardized performance of various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effect of the methods used to calculate performance when comparing
performance of a Portfolio with performance quoted with respect to other
investment companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, a Portfolio also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices. The performance figures of unmanaged indices may assume
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs. Evaluations of a Portfolio's performance
made by independent sources may also be used in advertisements concerning the
Portfolio. Sources for a Portfolio's performance information could include ASIAN
WALL STREET JOURNAL, BARRON'S, BUSINESS WEEK, CHANGING TIMES, THE KIPLINGER
MAGAZINE, CONSUMER DIGEST, FINANCIAL TIMES, FINANCIAL WORLD, FORBES, FORTUNE,
GLOBAL INVESTOR, INVESTOR'S DAILY, LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL
PORTFOLIO PERFORMANCE ANALYSIS, MONEY, THE NEW YORK TIMES, PERSONAL INVESTING
NEWS, PERSONAL INVESTOR, SUCCESS,
23
<PAGE>
U.S. NEWS AND WORLD REPORT, THE WALL STREET JOURNAL, WEISENBERGER INVESTMENT
COMPANIES SERVICES and WORKING WOMEN.
VALUATION OF SECURITIES; REDEMPTION IN KIND
The value of each security for which readily available market
quotations exists is based on a decision as to the broadest and most
representative market for such security. The value of such security is based
either on the last sale price on a national securities exchange, or, in the
absence of recorded sales, at the readily available closing bid price on such
exchanges, or at the quoted bid price in the over-the-counter market. Securities
listed on a foreign exchange are valued at the last quoted sale price available
before the time net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market. Debt
securities are valued by a pricing service which determines valuations based
upon market transactions for normal, institutional-size trading units of similar
securities. Securities or other assets for which market quotations are not
readily available are valued at fair value in accordance with procedures
established by the Portfolio Trust. Such procedures include the use of
independent pricing services, which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. All portfolio securities
with a remaining maturity of less than 60 days are valued at amortized cost,
which approximates market.
The accounting records of the Portfolios are maintained in U.S.
dollars. The market value of investment securities, other assets and liabilities
and forward contracts denominated in foreign currencies are translated into U.S.
dollars at the prevailing exchange rates at the end of the period. Purchases and
sales of securities, income receipts, and expense payments are translated at the
exchange rate prevailing on the respective dates of such transactions. Reported
net realized gains and losses on foreign currency transactions represent net
gains and losses from sales and maturities of forward currency contracts,
disposition of foreign currencies, currency gains and losses realized between
the trade and settlement dates on securities transactions and the difference
between the amount of net investment income accrued and the U.S. dollar amount
actually received.
The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
("FRR 1" (formerly Accounting Series Release No. 113)) which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1 such factors
would include consideration of the:
type of security involved, financial statements, cost at date
of purchase, size of holding, discount from market value of
unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as
to any transactions or offers with respect to the security,
existence of merger
24
<PAGE>
proposals or tender offers affecting the security, price and
extent of public trading in similar securities of the issuer
or comparable companies, and other relevant matters.
To the extent that the Portfolio purchases securities which are
restricted as to resale or for which current market quotations are not
available, the Portfolio Advisor will value such securities based upon all
relevant factors as outlined in FRR 1.
Each Portfolio reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the Trust and valued as they are for purposes of computing the Portfolio's net
asset value (a redemption in kind). If payment is made in securities a
shareholder may incur transaction expenses in converting these securities into
cash. The Trust, on behalf of each Portfolio has elected, however, to be
governed by Rule 18f-1 under the 1940 Act as a result of which each Portfolio
are obligated to redeem shares or with respect to any one investor during any
90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Portfolio at the beginning of the period.
Each investor in a Portfolio, including the corresponding Fund, may add
to or reduce its investment in the Portfolio on each day that the NYSE is open
for business. As of 4:00 p.m., New York time, on each such day, the value of
each investor's interest in a Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in a Portfolio will
then be recomputed as the percentage equal to the fraction (i) the numerator of
which is the value of such investor's investment in the Portfolio as of 4:00
p.m. on such day plus or minus, as the case may be, the amount of net additions
to or reductions in the investor's investment in the Portfolio effected on such
day and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of 4:00 p.m. on such day plus or minus, as the case may be, the
amount of net additions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of 4:00 p.m. on the following day the NYSE is open for trading.
MANAGEMENT OF THE TRUST
The Trustees and officers of the Trust and their principal occupations
during the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate those Trustees who are "interested
persons" (as defined in the 1940 Act) of the Trust. Unless otherwise indicated,
the address of each Trustee and officer is 318 Broadway, Cincinnati, Ohio 45202.
25
<PAGE>
TRUSTEES OF THE TRUST
*EDWARD G. HARNESS, JR. -- Trustee and President; Director, President
and Chief Executive Officer, Touchstone (since December, 1993); Director, Chief
Executive Officer, Touchstone Securities (since October, 1991); President, IFS
Financial Services, Inc. (since November, 1990); President, Landmark Financial
Corporation (prior to July, 1990).
*WILLIAM J. WILLIAMS -- Trustee; Chief Executive Officer, The Western
and Southern Life Insurance Company (since March, 1994); Chairman of the Board
of Directors, The Western and Southern Life Insurance Company (since 1984).
JOSEPH S. STERN, JR., -- Trustee; Retired Professor Emeritus, College
of Business, University of Cincinnati.
PHILLIP R. COX -- Trustee; President and Chief Executive Officer, Cox
Financial Corp. (prior to 1989); Director, Federal Reserve Bank of Cleveland
(since January, 1994); Director, Cincinnati Bell, Inc. (since March, 1993);
Director, PNC Bank (since October, 1992); Director, CG & E (since May, 1994).
ROBERT E. STAUTBERG -- Trustee; Director, Scripps Howard Broadcasting
Co. (since May, 1989); Retired Partner, KPMG Peat Marwick (prior to 1989);
Trustee, Good Samaritan Hospital (since January, 1988); Trustee and Director of
other not for profit organizations.
DAVID POLLAK -- Trustee; Retired; President, Ultimate Distributing
Company (prior to 1994); Vice Chairman and Director, Continental Steel (prior to
1986); Director Emeritus, Fifth-Third Bank; Trustee Emeritus, Cornell
University; Trustee and officer of other not for profit organizations.
OFFICERS OF THE TRUST
Unless otherwise specified, each officer listed below holds the same
position with the Trust and each Portfolio.
JILL T. MCGRUDER -- Vice President; Director, Vice President and Chief
Operations Officer, Touchstone (since December, 1993); President and Chief
Operations Officer, Touchstone Securities (since October, 1991); Officer,
Nationwide Life Insurance Company (prior to 1991).
EDWARD S. HEENAN -- Treasurer; Vice President and Controller,
Touchstone (since December, 1993); Director, Controller, Touchstone Securities
(since October, 1991); Vice President and Comptroller, The Western and Southern
Life Insurance Company (since 1987).
THOMAS M. LENZ -- Secretary; Vice President and Associate General
Counsel, Signature Financial Group, Inc. ("SFG") (since November, 1989);
Attorney, Ropes & Gray (prior to November, 1989). His address is 6 St. James
Avenue, Boston, Massachusetts 02116.
26
<PAGE>
DAVID G. DANIELSON -- Assistant Treasurer; Assistant Manager, SFG
(since May, 1991); Graduate Student, Northeastern University (from April, 1990
to March, 1991); Tax Accountant and Systems Analyst, Putnam Companies (prior to
March, 1990). His address is 6 St. James Avenue, Boston, Massachusetts 02116.
JOHN R. EDLER -- Assistant Treasurer; Vice President, SFG (since
January 1993); Senior Tax Compliance Accountant, Putnam Investments (prior to
December 1992). His address is 6 St. James Avenue, Boston, Massachusetts 02116.
JAMES S. LELKO, JR. -- Assistant Treasurer; Assistant Manager, SFG
(since January 1993); Senior Tax Compliance Accountant, Putnam Investments
(prior to December 1992). His address is 6 St. James Avenue, Boston,
Massachusetts 02116.
BRIAN J. MANLEY -- Assistant Treasurer; Vice President and Chief
Financial Officer, Touchstone (since December, 1993); Vice President and Chief
Financial Officer, Touchstone Securities (since November, 1991); Assistant
Controller, The Union Central Life Insurance Company (prior to 1991).
DANIEL E. SHEA -- Assistant Treasurer; Assistant Manager, SFG (since
November 1993); Supervisor and Senior Technical Advisor, Putnam Investments
(prior to November 1993). His address is 6 St. James Avenue, Boston,
Massachusetts 02116.
LINDA T. GIBSON -- Assistant Secretary; Legal Counsel and Assistant
Secretary, SFG (since May, 1992); student, Boston University School of Law
(September, 1989 to May, 1992); Product Manager, SFG (January, 1989 to
September, 1989). Her address is 6 St. James Avenue, Boston, Massachusetts
02116.
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and Assistant
Secretary, SFG (since December, 1988). Her address is 6 St. James Avenue,
Boston, Massachusetts 02116.
ANDRES E. SALDANA -- Assistant Secretary; Legal Counsel, SFG (since
November, 1992); Attorney, Ropes & Gray (September, 1990 to November, 1992); law
student, Yale Law School (September, 1987 to May, 1990). His address is 6 St.
James Avenue, Boston, Massachusetts 02116.
Messrs. Danielson, Elder, Lelko, Lenz, Saldana and Shea and Mss. Gibson
and Mugler also hold similar positions for affiliates of SFG and for other
investment companies for which SFG or an affiliate serves as administrator or
principal underwriter.
No director, officer or employee of the Advisor, the Portfolio
Advisors, the Distributor, the Administrator or any of their affiliates will
receive any compensation from the Trust for serving as an officer or Trustee of
the Trust. The Trust, Select Advisors Portfolios, Select Advisors Trust A and
Select Advisors Trust C (the "Fund Complex") pay, in the aggregate, each Trustee
who is not a director, officer or employee of the Advisor, the Portfolio
Advisors, the Distributor, the Administrator or any of their affiliates an
annual fee of $5,000, respectively, per annum plus $1,000, respectively, per
meeting attended and reimburses them for travel and out-of-pocket expenses. For
the period November 21, 1994 (commencement of operations) to December 31, 1994
the Portfolio incurred $1,164 in aggregate Trustee fees and expenses. The
following table reflects fees paid for the same period.
27
<PAGE>
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION AS PART OF TRUST BENEFITS UPON FROM FUND COMPLEX
POSITION FROM TRUST EXPENSES RETIREMENT PAID TO TRUSTEES
<S> <C> <C> <C> <C>
Edward G. Harness, Jr., none none none none
Trustee of Trust
William J. Williams, none none none none
Trustee of Trust
Joseph S. Stern, Jr., $388 none none $2,250
Trustee of Trust
Phillip R. Cox, $388 none none $2,250
Trustee of Trust
Robert E. Stautberg, $388 none none $2,250
Trustee of Trust
David Pollak,* none none none none
Trustee of Trust
- -------------------
<FN>
* Mr. Pollak was elected to the Board of Trustees on March 30, 1995 and,
therefore, was not compensated as a Trustee during the period ended December
31, 1994.
</FN>
</TABLE>
As of March 1, 1995, the Trustees and officers of the Trust owned in
the aggregate less than 1% of the shares of any Portfolio or the Trust (all
series taken together).
ADVISOR, PORTFOLIO ADVISORS, ADMINISTRATOR AND DISTRIBUTOR
ADVISOR
Touchstone Advisors provides service to each Portfolio pursuant to an
Investment Advisory Agreement with the Trust (the "Advisory Agreement"). The
services provided by the Advisor consist of directing and supervising each
Portfolio Advisor, reviewing and evaluating the performance of each Portfolio
Advisor and determining whether or not any Portfolio Advisor should be replaced.
The Advisor furnishes at its own expense all facilities and personnel necessary
in connection with providing these services. The Advisory Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Trustees and by a majority of the Board of Trustees who are not
parties to the Advisory Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Advisory Agreement.
The Advisory Agreement is terminable, with respect to a Portfolio
without penalty on not more than 60 days' nor less than 30 days' written notice
by the Trust when authorized either by, in the case of a Portfolio, majority
vote of the Portfolio's shareholders or by a vote of a majority of the Board of
Trustees or by the Advisor, and will automatically terminate in the event of its
assignment. The Advisory Agreement provides that neither the Advisor nor its
personnel shall be liable for any error of judgment or mistake of law or for any
loss
28
<PAGE>
arising out of any investment or for any act or omission in its services to the
Portfolios, except for wilful misfeasance, bad faith or gross negligence or
reckless disregard of its or their obligations and duties under the Advisory
Agreement.
The Trust's Prospectus contains a description of fees payable to the
Advisor for services under the Advisory Agreements.
For the period November 21, 1994 (commencement of operations) to
December 31, 1994, each Portfolio incurred the following investment advisory
fees equal on an annual basis to the following percentages of the average daily
net assets of the Portfolio.
<TABLE>
<CAPTION>
Inter-
Emerging national Income Standby
Growth Equity Balanced Opportunity Income
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Rate 0.80% 0.95% 0.70% 0.65% 0.25%
Amount $1,753 $5,033 $1,519 $1,401 $1,368
</TABLE>
For the period November 21, 1994 (commencement of operations) to
December 31, 1994, the Advisor waived its entire Investment Advisory fee.
PORTFOLIO ADVISORS
The Advisor has, in turn, entered into a portfolio advisory agreement
(each, a "Portfolio Agreement") with each Portfolio Advisor selected by the
Advisor for a Portfolio. Under the direction of the Advisor and, ultimately, of
the Board of Trustees, each Portfolio Advisor is responsible for making all of
the day-to-day investment decisions for the respective Portfolio (or portion of
a Portfolio).
Each Portfolio Advisor furnishes at its own expense all facilities and
personnel necessary in connection with providing these services. Each Portfolio
Agreement contains provisions similar to those described above with respect to
the Advisory Agreement.
ADMINISTRATOR
Pursuant to an administrative services and fund accounting agreement
(the "Administrative Services Agreement"), Signature provides the Trust with
general office facilities and supervises the overall administration of the
Trust, including, among other responsibilities, the negotiation of contracts and
fees with, and the monitoring of performance and billings of, the independent
contractors and agents of the Trust; the preparation and filing of all documents
required for compliance by the Trust with applicable laws and regulations; and
arranging for the maintenance of books and records of the Trust. The
Administrator provides persons satisfactory to the Board of Trustees to serve as
officers of the Trust. Such officers, as well as certain other employees and
Trustees of the Trust, may be directors, officers or employees of the
Administrator or its affiliates.
29
<PAGE>
Each Administrative Services Agreement provides that Signature shall
receive from each Portfolio administrative and fund accounting fees equal, in
the aggregate, on an annual basis to the following:
0.16% of the average daily net assets of all Select Advisory
Portfolios (as defined below) up to $100 million;
0.14% of the average daily net assets of all Select Advisory
Portfolios from $100 million to $200 million;
0.10% of the average daily net assets of all Select Advisory
Portfolios from $200 million to $500 million;
0.06% of the average daily net assets of all Select Advisory
Portfolios from $500 million to $1 billion; and
0.05% of the average daily net assets of all Select Advisory
Portfolios greater than $1 billion.
(As used above, the term "Select Advisory Portfolios" includes all
registered investment companies (or series thereof) the securities
issued by which are not registered under the Securities Act of 1933, as
amended (the "1933 Act") and which invest in a portfolio of securities,
as opposed to investing all or most of their Assets in another
registered investment company, with which the Advisor has an investment
advisory agreement and with which Signature has an administrative
services and fund accounting agreement.)
In addition, each Portfolio is subject to a minimum annual
administrative services and fund accounting fee of $25,000.
For the period November 21, 1994 (commencement of operations) to
December 31, 1994, each Portfolio incurred $2,740 in administrative and fund
accounting fees.
The Administrative Services Agreement provides that Signature may
render administrative services to others. Each Administrative Services Agreement
also provides that neither the Administrator nor its personnel shall be liable
for any error of judgment or mistake of law or for any act or omission, except
for wilful misfeasance, bad faith or gross negligence in the performance of its
or their duties or by reason of reckless disregard of its or their obligations
and duties under the Administrative Services Agreement.
The Administrative Services Agreement terminates automatically if it is
assigned and may be terminated, with respect to a Portfolio, without penalty by
majority vote of the shareholders of the Portfolio or by either party on not
more than 60 days' nor less than 30 days' written notice.
Signature is a wholly-owned subsidiary of SFG, a Delaware corporation.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts 02111, serves as custodian for the and for each Portfolio pursuant
to a custody agreement. As custodian, it holds each Portfolio's assets.
30
<PAGE>
IBT also serves as transfer agent of the Trust pursuant to a transfer
agency agreement. Under its transfer agency agreement with the Trust, IBT
maintains the shareholder account records for each Portfolio, handles certain
communications between shareholders and the Trust and causes to be distributed
any dividends and distributions payable by the Trust. IBT may be reimbursed by
the Trust for its out-of-pocket expenses.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Frost & Jacobs, 2500 PNC Center, 201 East 5th Street, Cincinnati, Ohio
45202, serves as counsel to the Trust and each Portfolio. Coopers & Lybrand
L.L.P., One Post Office Square, Boston, Massachusetts 02109, acts as independe
nt accountants of the Trust and each Portfolio.
ORGANIZATION OF THE TRUST
Shares of the Trust do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees. Shares are transferable but have no preemptive,
conversion or subscription rights. Shareholders generally vote by Portfolio,
except with respect to the election of Trustees and the ratification of the
selection of independent accountants.
Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Declaration of Trust provides for indemnification
from the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations, a possibility that the Trust believes is remote. Upon payment of
any liability incurred by the Trust, the shareholder paying the liability will
be entitled to reimbursement from the general assets of the Trust. The Trustees
intend to conduct the operations of the Trust in a manner so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the
Trust.
TAXATION
The Trust intends to qualify annually and to elect each Portfolio to be
treated as a regulated investment company under the Code.
To qualify as a regulated investment company, each Portfolio must,
among other things: (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; (b) derive less than 30% of its gross
income from the sale or other disposition of certain assets (namely, (i) stock
or securities;
31
<PAGE>
(ii) options, futures, and forward contracts (other than those on foreign
currencies); and (iii) foreign currencies (including options, futures, and
forward currency contracts on such currencies) not directly related to the
Portfolio's principal business of investing in stock or securities (or options
and futures with respect to stocks or securities)) held less than three months
(the 30% Limitation"); (c) diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the
Portfolio's assets is represented by cash and cash items (including
receivables), U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of any one
issuer limited for the purposes of this calculation to an amount not greater
than 5% of the value of the Portfolio's total assets and not greater than 10% of
the outstanding voting securities of such issuer and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies); and (d) distribute at least 90% of its investment company
taxable income (which includes, among other items, dividends, interest and net
short-term capital gains in excess of net long-term capital losses) and its net
tax-exempt interest income, if any, each taxable year.
As a regulated investment company, each Portfolio will not be subject
to U.S. federal income tax on its investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to shareholders. The Portfolio
intends to distribute to its shareholders, at least annually, substantially all
of its investment company taxable income and net capital gains. Amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax. To prevent imposition
of the excise tax, the Portfolio must distribute during each calendar year an
amount equal to the sum of: (1) at least 98% of its ordinary income (not taking
into account any capital gains or losses) for the calendar year; (2) at least
98% of its capital gains in excess of its capital losses (adjusted for certain
ordinary losses, as prescribed by the Code) for the one-year period ending on
October 31 of the calendar year; and (3) any ordinary income and capital gains
for previous years that was not distributed during those years. A distribution
will be treated as paid on December 31 of the current calendar year if it is
declared by the Portfolio in October, November or December with a record date in
such a month and paid by the Portfolio during January of the following calendar
year. Such distributions will be taxable to shareholders in the calendar year in
which the distributions are declared, rather than the calendar year in which the
distributions are received. To prevent application of the excise tax, the
Portfolio intends to make its distributions in accordance with the calendar year
distribution requirement.
FOREIGN SECURITIES. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to determine
the effective rate of foreign tax in advance since the amount of each applicable
Portfolio's assets to be invested in various countries will vary.
If a Portfolio is liable for foreign taxes, and if more than 50% of the
value of the Portfolio's total assets at the close of its taxable year consists
of stocks or securities of foreign corporations, it may make an election
pursuant
32
<PAGE>
to which certain foreign taxes paid by it would be treated as having been paid
directly by shareholders of the entities, which have invested in the Portfolio.
Pursuant to such election, the amount of foreign taxes paid will be included in
the income of the investing entities' shareholders and such investing entities'
shareholders (except tax-exempt shareholders) may, subject to certain
limitations, claim either a credit or deduction for the taxes. Each such
investor will be notified after the close of the Portfolio's taxable year
whether the foreign taxes paid will "pass through" for that year and, if so,
such notification will designate (a) the shareholder's portion of the foreign
taxes paid to each such country and (b) the portion which represents income
derived from sources within each such country.
The amount of foreign taxes for which an investor may claim a credit in
any year will generally be subject to a separate limitation for "passive
income," which includes, among other items of income, dividends, interest and
certain foreign currency gains. Because capital gains realized by the Portfolio
on the sale of foreign securities will be treated as U.S.-source income, the
available credit of foreign taxes paid with respect to such gains may be
restricted by this limitation.
DISTRIBUTIONS
Dividends paid out of the Portfolio's investment company taxable income
will be taxable to a U.S. shareholder as ordinary income. Distributions of net
capital gains, if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Portfolio's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the net
asset value of a share of the Portfolio on the reinvestment date. Shareholders
will be notified annually as to the U.S. federal tax status of distributions.
FOREIGN WITHHOLDING TAXES
Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries.
BACKUP WITHHOLDING
A Portfolio may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions payable to shareholders who fail to
provide the Portfolio with their correct taxpayer identification number or to
make required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate shareholders and
certain other shareholders specified in the Code generally are exempt from such
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's U.S. federal income tax
liability.
33
<PAGE>
OTHER TAXATION
The Trust is organized as a Massachusetts business trust and, under
current law, neither the Trust nor any Portfolio is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Portfolio
continues to qualify as a regulated investment company under Subchapter M of the
Code.
TAXATION OF VARIABLE CONTRACTS
For a discussion of tax consequences of variable contracts, please
refer to your insurance company's separate account prospectus.
Variable contracts purchased through insurance company separate
accounts provide for the accumulation of all earnings from interest, dividends
and capital appreciation without current federal income tax liability to the
owner. Depending on the variable contract, distributions from the contract may
be subject to ordinary income tax and a 10% penalty tax on distributions before
age 59 1/2. Only the portion of a distribution attributable to income is subject
to federal income tax. Investors should consult with competent tax advisors for
a more complete discussion of possible tax consequences in a particular
situation.
Section 817(h) of the Code provides that the investments of a separate
account underlying a variable insurance contract (or the investments of a mutual
fund, the shares of which are owned by the variable separate account) must be
"adequately diversified" in order for the contract to be treated as an annuity
or life insurance for tax purposes. The Department of the Treasury has issued
regulations prescribing these diversification requirements. Each Portfolio
intends to comply with these requirements.
FINANCIAL STATEMENTS
The following financial statements for the Trust at and for
the period indicated are attached hereto:
SELECT ADVISORS VARIABLE INSURANCE TRUST
Schedule of Investments, December 31, 1994
Statement of Assets and Liabilities, December 31, 1994
Statement of Operations, for the period November 21, 1994 (commencement
of operations) to December 31, 1994
Statement of Changes in Net Assets, for the period November 21, 1994
(commencement of operations) to December 31, 1994
Financial Highlights, for the period November 21, 1994 (commencement of
operations) to December 31, 1994
Notes to Financial Statements
Report of Independent Accountants
34
<PAGE>
EMERGING GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------- -----------
<C> <S> <C>
COMMON STOCKS (44.4%)
ADVERTISING SERVICES (2.1%)
400 Omnicom Group, Inc............. $ 20,700
500 True North Communications,
Inc.......................... 21,500
---------
42,200
---------
BANKING EQUITY (1.1%)
700 FirsTier Financial, Inc........ 21,875
---------
COMPUTER EQUIPMENT & DATA
PROCESSING (3.4%)
1,500 Scitex Corp., Ltd.............. 24,937
800 Seagate Technology *........... 18,400
900 Wallace Computer Services,
Inc.......................... 26,100
---------
69,437
---------
CONSUMER PRODUCTS (3.2%)
1,100 Armor All Products Corp........ 22,275
600 First Brands Corp.............. 21,000
1,500 Southdown, Inc.*............... 21,750
---------
65,025
---------
CRUDE PETROLEUM & NATURAL GAS
(2.3%)
1,500 Cabot Oil & Gas Corp.--Class
A............................ 21,750
3,800 Nabors Inds., Inc.*............ 24,700
---------
46,450
---------
ELECTRIC & GAS (1.0%)
700 Equitable Resources, Inc....... 18,988
---------
ELECTRICAL EQUIPMENT (1.1%)
900 National Service Industries.... 23,062
---------
ENTERTAINMENT (1.0%)
600 Kingworld Productions, Inc.*... 20,700
---------
GENERAL BUILDING CONTRACTORS
(4.0%)
1,000 CBI Industries, Inc............ 25,625
1,200 Centex Corp.................... 27,300
900 Trinity Industries, Inc........ 28,350
---------
81,275
---------
INDUSTRIAL (3.4%)
700 Carlisle Cos., Inc............. $ 25,288
500 Sundstrand Corp................ 22,750
1,000 Trimas Corp.................... 20,000
---------
68,038
---------
INSURANCE (2.3%)
700 Gallagher Arthur J. & Co....... 22,400
600 Hartford Steam Boiler.......... 23,925
---------
46,325
---------
MANUFACTURING (1.1%)
1,000 Sonoco Products Co............. 21,500
---------
METALS & MINING (2.5%)
1,000 Kennametal, Inc................ 24,500
1,000 Miller Herman.................. 26,000
---------
50,500
---------
MOTOR VEHICLES & EQUIPMENT
(2.6%)
1,000 Arvin Industries, Inc.......... 23,250
1,200 Standard Products Co........... 28,800
---------
52,050
---------
NEWSPAPERS (1.5%)
900 Lee Enterprises, Inc........... 31,050
---------
RETAIL (6.8%)
900 Alberto Culver Co.--Class A.... 22,050
1,400 Fingerhut Companies, Inc....... 21,700
800 LA-Z-Boy Chair Co.............. 25,500
2,200 Stride Rite Corp............... 24,475
1,100 Vons Co., Inc.*................ 19,800
1,300 Waban, Inc.*................... 23,075
---------
136,600
---------
RUBBER & PLASTIC PRODUCTS
(1.2%)
1,000 Hanna (M.A.) Co................ 23,750
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
EMERGING GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
SERVICES (1.2%)
1,600 CCH Co., Inc.--Class B......... $ 24,800
---------
SURGICAL SUPPLIES (1.2%)
900 West Co., Inc.................. 24,750
---------
WATER TRANSPORTATION (1.4%)
1,200 Overseas Shipholding Group,
Inc.......................... 27,600
---------
TOTAL COMMON STOCKS (COST $884,429)....... 895,975
---------
---------
PRINCIPAL
- ---------
SHORT-TERM INVESTMENTS (55.5%)
$ 117,023 Eurodollar Time Deposit, Harris
Trust & Savings Bank 5.29%,
01/03/95.......................... 117,023
-----------
MATURITY
AMOUNT
- ----------
SHORT-TERM INVESTMENTS--CONTINUED
$1,005,830 Salomon Brothers, Inc. investments
in a repurchase agreement at 5%
dated 12/30/94 due 01/03/95
(collateralized by $1,033,268 U.S.
Treasury Notes 6.5% due
09/30/96--05/15/97 valued at
$1,027,019)....................... $ 1,005,272
-----------
TOTAL SHORT-TERM INVESTMENTS 1,122,295
(COST $1,122,295).............................. -----------
TOTAL INVESTMENTS AT VALUE (99.9%)
(COST $2,006,724)(A)........................... 2,018,270
------------
CASH AND OTHER ASSETS
NET OF LIABILITIES (0.1%)...................... 1,234
-----------
NET ASSETS (100.0%)............................ $2,019,504
- -------------------------- -----------
-----------
* Non Income Producing Security.
(a) The aggregate cost for federal income tax purposes is
$2,006,724, the aggregate gross unrealized appreciation
is $26,817, and the aggregate gross unrealized
depreciation is $15,271, resulting in net unrealized
appreciation of $11,546.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS (93.2%)
ARGENTINA (1.4%)
700 Buenos Aires Embotelladora S.A.
ADR (Beverages)............... $ 22,575
1,000 Quilmes Industries S.A. ADR
(Beverages)................... 23,000
400 Telefonica De Argentina S.A. ADR
(Telephone Communication)..... 21,200
---------
66,775
---------
AUSTRALIA (1.0%)
1,500 News Corp. Ltd. ADR
(Publishing).................. 23,438
4,500 Western Mining Corp. Holdings,
Ltd. (Smelting & Refining).... 26,025
---------
49,463
---------
BRAZIL (4.4%)
1,800 Brazil Fund, Inc. (Investment
Company)...................... 59,400
2,400 Companhia Energetica De Minas
Gerais ADR (Electric
Distributor).................. 56,729
2,100 Telecomunicacoes Brasileiras
S.A. ADR
(Telecommunications).......... 93,968
---------
210,097
---------
CANADA (0.8%)
1,000 Magna International, Inc.--Class
A (Plastics & Metals)......... 38,375
---------
CHILE (2.4%)
800 Empresa Nacional de Electridad
S.A. ADR (Electric & Gas)..... 20,600
1,200 Compania de Telefonos De Chile
S.A. ADR (Telephone
Communications)............... 94,500
---------
115,100
---------
DENMARK (1.0%)
1,900 Tele Danmark A/S ADR (Telephone
Communications)............... 48,450
---------
FINLAND (1.6%)
1,000 Nokia Corp. ADR
(Telecommunications).......... 75,000
---------
FRANCE (5.6%)
190 Carrefour Super Marche (Grocery
Stores)....................... $ 78,689
485 Lafarge Coppee S.A. (Building
Supplies)..................... 34,507
40 Le Grand (Electronics).......... 48,530
915 Michelin B (Rubber & Plastic
Products)*.................... 33,287
530 Pechiney Co. (Smelting &
Refinery)..................... 35,724
265 Peugeot Citroen SA (Motor
Vehicles & Equipment)*........ 36,319
---------
267,056
---------
GERMANY (5.6%)
1,300 Daimler Benz AG ADR (Motor
Vehicles & Equipment)......... 64,025
85 Deutsche Bank AG (Banking)*..... 39,494
180 Hoechst AG (Chemical
Products)..................... 39,146
185 Veba Vereigte Elektrizitaets &
Bergwerks AG (Electric &
Gas).......................... 64,468
224 Volkswagen AG (Motor Vehicles &
Equipment).................... 61,580
---------
268,713
---------
GREAT BRITAIN (10.4%)
5,660 British Airport Authority PLC
(Transportation).............. 41,891
3,140 De La Rue PLC (Publishing)...... 46,431
6,180 Guinness PLC (Beverages)........ 43,516
19,650 House of Fraser PLC (Building
Supplies)..................... 53,501
1,800 Reuters Holdings PLC ADR
(Communication)............... 78,975
16,950 Standard Chartered PLC
(Banking)*.................... 74,527
2,500 VodaFone Group PLC ADR
(Telecommunications).......... 84,062
43,600 WPP Group PLC ORD (Publishing).. 74,704
---------
497,607
---------
HONG KONG (1.9%)
4,000 Cheung Kong Holdings, Ltd. (Real
Estate Operations)............ 16,284
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
HONG KONG--CONTINUED
6,000 Henderson Land Development, Ltd.
(Real Estate Development)..... $ 28,614
11,000 New World Development (Financial
Services & Property).......... 29,357
3,000 Sun Hung Kai Properties, Ltd.
(Real Estate Operations)...... 17,913
---------
92,168
---------
INDIA (2.0%)
8,400 Morgan Stanley India Investment
(Investment Co.).............. 94,500
---------
INDONESIA (1.3%)
10,000 Bank International Indonesia
(For. Reg.) (Banking)......... 31,847
25,500 Pt Japfa Comfeed Indonesia
(Variety Stores).............. 29,873
---------
61,720
---------
ISRAEL (1.2%)
1,500 ECI Telecommunications, Ltd.
(Telecommunications).......... 20,438
2,400 Geotek Communications, Inc.
(Telecommunications).......... 20,400
750 Teva Pharmaceutical Inds. Ltd.
ADR (Pharmaceuticals)......... 18,094
---------
58,932
---------
ITALY (1.8%)
13,100 STET (Telecommunications)....... 38,439
18,200 Telcom Italia SPA
(Telecommunications).......... 47,198
---------
85,637
---------
JAPAN (29.7%)
13,000 Aoki Corp. (Construction)....... 56,761
6,000 Asahi Denka Kogyo (Chemicals)... 49,503
4,000 Chubu Electric Power, Inc.
(Electric Utilities).......... 97,561
7,000 Daikyo, Inc. (Real Estate
Development).................. 55,154
JAPAN --CONTINUED
4,000 Fuji Photo Film, Ltd.
(Photographic Equipment &
Supplies)..................... $ 92,743
4,000 Fujita Corp. (Engineering)...... 21,238
5,000 Gunze, Ltd. (Textiles).......... 32,872
10,000 Hitachi, Ltd. (Electronics)..... 99,267
15,000 Hokkaido Bank (Banking)......... 57,965
1,000 Industrial Bank of Japan
(Banking)..................... 29,610
14,000 Konica Corporation (Photographic
Equipment & Supplies)......... 118,036
5,000 Kureha Chemical Industry
(Chemicals)................... 27,100
6,000 Matsushita Elec. Ind. (Durable
Goods)........................ 98,765
12,000 Orient Corporation (Financial
Services)..................... 71,545
8,000 Ricoh Corp., Ltd. (Data
Processing)................... 79,494
7,000 Sakura Bank, Ltd. (Banking)..... 94,149
4,000 Seino Transportation Co., Ltd.
(Transportation).............. 73,070
5,000 Shiseido, Ltd.
(Pharmaceuticals)............. 59,219
4,000 Takeda Chemicals Industries,
Ltd. (Chemicals).............. 48,580
3,000 Tohoku Electric Power, Inc.
(Electric Utilities).......... 76,182
9,000 Yasuda Trust and Banking, Ltd.
(Banking)..................... 71,725
---------
1,410,539
---------
KOREA (1.6%)
3,300 Korea Fund, Inc. (Investment
Co.).......................... 75,075
---------
MALAYSIA (2.5%)
5,000 Genting Berhad (Amusement &
Recreation)................... 42,883
7,000 Malayan Banking Berhad
(Banking)..................... 42,216
11,000 Technology Resources, Inc.
(Telecommunications).......... 35,109
---------
120,208
---------
MEXICO (5.7%)
8,000 Cementos de Mexicanos--Class B
S.A. (Cement)................. 41,890
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
MEXICO--CONTINUED
20,000 Cifra -- Class C S.A. (Consumer
Goods)........................ $ 38,190
1,600 Empresas ICA Sociedad Control
ADR (Heavy Construction)...... 24,800
10,000 Fomento Economico Mexicano --
Series B S.A. (Beverages)..... 25,608
6,000 Grupo Financiero Banamex --
Series C S.A. (Banking)....... 17,729
15,000 Grupo Sidek, Accive -- Series B,
S.A. (Holding Company)........ 39,197
1,000 Grupo Televisa -- Class B S.A.
GDS (Television).............. 31,750
1,200 Telefonos De Mexico S.A. ADR
(Telephone Communications).... 49,200
---------
268,364
---------
NETHERLANDS (1.0%)
1,640 Philips Gloeilampen Gem Bezit
(Durable Goods)............... 48,560
---------
SINGAPORE (1.2%)
3,000 Sembawang Corp. Ltd. (Ship
Building & Repairing)......... 22,436
3,000 United Overseas Bank, Ltd.
(Banking)..................... 31,698
---------
54,134
---------
SPAIN (1.1%)
600 Empresa Nacional de Electricidad
S.A. ADR (Electric
Utilities).................... 24,300
800 Repsol S.A. ADR (Petroleum &
Natural Gas).................. 21,800
---------
46,100
---------
SWEDEN (2.2%)
1,300 Ericsson L.M. ADR (Telephone
Communication)................ 71,663
2,125 Pharmacia AB B Free (Consumer
Goods)........................ 33,889
---------
105,552
---------
SWITZERLAND (1.0%)
58 Brown Boveri & Cie -- Series A
(Electronics)................. $ 49,922
---------
THAILAND (4.8%)
20,000 Krung Thai Bank, Ltd.
(Banking)..................... 66,122
5,500 Phatra Thanakit Co. (Financial
Services)..................... 42,501
8,900 Thai Farmers Bank (Banking)..... 72,321
11,000 Thai Military Bank, Ltd.
(Banking)..................... 46,445
---------
227,389
---------
TOTAL COMMON STOCKS (COST $4,675,301)...... 4,435,436
---------
MATURITY
AMOUNT
- ---------
SHORT-TERM INVESTMENTS (6.8%)
$323,544 Cantor Fitzgerald investments in a
master trust repurchase agreement
at 5.50% dated 12/30/94 due
01/03/95 (collateralized by
$336,104 U.S. Treasury Notes 5.50%
due 04/30/96 valued at $330,573)
(Cost $323,339)................... 323,339
-----------
TOTAL INVESTMENTS AT VALUE (100.0%) (COST
$4,498,640)(A)................................. 4,758,775
-----------
CASH AND OTHER ASSETS
NET OF LIABILITIES (0.0%)...................... (1,358)
-----------
NET ASSETS (100.0%)............................ $4,757,417
- -------------------------- -----------
-----------
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is
$4,998,640, the aggregate gross unrealized appreciation
is $65,636, and the aggregate gross unrealized
depreciation is $305,501, resulting in net unrealized
depreciation of $239,865.
ADR = American Depositary Receipt
GDS = Global Depositary Shares
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS (59.7%)
AIRCRAFT & PARTS (2.0%)
800 General Electric Ltd............ $ 40,800
---------
AUTOMOTIVE (1.4%)
600 Chrysler Corp................... 29,400
---------
BANKING & FINANCIAL (4.8%)
600 Banco LatinoAmericano De Exp.... 18,750
800 Citicorp........................ 33,100
300 Federal National Mortgage
Association................... 21,862
600 Integra Financial Ltd........... 24,675
---------
98,387
---------
COMMUNICATIONS EQUIPMENT (2.0%)
700 Motorola, Inc................... 40,512
---------
COMPUTER & DATA PROCESSING
SERVICES (3.1%)
700 BMC Software, Inc.*............. 39,725
800 Storage Technology Corp.*....... 23,200
---------
62,925
---------
CONSTRUCTION EQUIPMENT (1.9%)
700 Caterpillar, Inc................ 38,588
---------
CONSUMER PRODUCTS (6.5%)
500 Coca-Cola Co.................... 25,750
600 Johnson & Johnson............... 32,850
1,200 Mattel, Inc..................... 30,150
300 Procter & Gamble Co............. 18,600
800 Singer Company N.V. (The)....... 23,900
---------
131,250
---------
CRUDE PETROLEUM & NATURAL GAS
(2.9%)
200 Amoco Corp...................... 11,825
700 Louisiana Land & Exploration.... 25,462
800 Unocal Corp..................... 21,800
---------
59,087
---------
DRUGS (1.9%)
600 Eli Lilly & Co.................. $ 39,375
---------
ELECTRONICS (3.9%)
1,000 Cisco Systems, Inc.*............ 35,000
700 Intel Corp...................... 44,538
---------
79,538
---------
FINANCIAL/BUSINESS SERVICES
(1.6%)
900 Value Health, Inc.*............. 33,525
---------
FOREST PRODUCTS (1.3%)
700 Weyerhauser Co.................. 26,250
---------
GENERAL INDUSTRIAL MACHINERY
(1.3%)
600 Thermo Electron Corp.*.......... 26,925
---------
GOLD AND SILVER ORES (2.1%)
1,000 American Barrick Resources...... 22,250
1,500 Stillwater Mining Company*...... 19,875
---------
42,125
---------
HOTELS & MOTELS (1.7%)
1,100 Promus Company, Inc.*........... 34,100
---------
INDUSTRIAL INORGANIC CHEMICALS
(1.0%)
300 Dow Chemical Co................. 20,175
---------
INSURANCE (2.8%)
300 American International Group,
Inc........................... 29,400
500 MBIA, Inc....................... 28,062
---------
57,462
---------
LUMBER & BUILDING MATERIAL
DEALERS (1.1%)
500 Home Depot, Inc................. 23,000
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
MEDICAL & HEALTH SERVICES (4.8%)
800 Horizon Healthcare Corp.*....... $ 22,400
800 Nationwide Health Properties,
Inc........................... 28,600
300 Oxford Health Plans, Inc.*...... 23,775
500 United Health Care Corp......... 22,563
---------
97,338
---------
METAL CANS & SHIPPING CONTAINERS
(1.5%)
800 Crown Cork & Seal, Inc.*........ 30,200
---------
PAPERBOARD CONTAINERS AND BOXES
(1.2%)
1,600 Riverwood International Corp.... 25,000
---------
PHOTOGRAPHIC EQUIPMENT &
SUPPLIES (1.2%)
500 Eastman Kodak Co................ 23,875
---------
PLASTICS & METALS (1.3%)
700 Magna International, Inc.--Class
A............................. 26,863
---------
SPECIAL INDUSTRY MACHINERY
(2.2%)
700 Ionics, Inc.*................... 43,925
---------
STEEL (0.6%)
600 Allegheny Ludlum Corp........... 11,250
---------
TELECOMMUNICATIONS (3.6%)
300 Ericsson L M Co. ADR............ $ 16,538
600 PT Indonesia Satellite ADR*..... 21,450
200 Nokia Corp. ADR*................ 15,000
600 VodaFone Group PLC ADR.......... 20,175
---------
73,163
---------
TOTAL COMMON STOCKS (COST $1,188,042)...... 1,215,038
---------
PRINCIPAL
- ---------
U.S. GOVERNMENT OBLIGATIONS (38.1%)
$450,000 U.S. Treasury Note 5.75%, 10/31/97.. 426,938
400,000 U.S. Treasury Note 5.75%, 8/15/03... 347,624
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $774,562)................................ 774,562
-----------
MATURITY
AMOUNT
- ------
SHORT-TERM INVESTMENTS (0.9%)
$ 18,952 Salomon Brothers, Inc. investments
in a repurchase agreement at 5%
dated 12/30/94 due 01/03/95
(collateralized by $49,448 U.S.
Treasury Notes 6.5% due
09/30/96--05/15/97 valued at
$19,351) (Cost $18,941)........... 18,941
-------------
TOTAL INVESTMENTS AT VALUE (98.7%)
(COST $1,981,545)(A)........................... 2,008,541
-------------
CASH AND OTHER ASSETS
NET OF LIABILITIES (1.3%)...................... 25,609
-------------
NET ASSETS (100.0%)............................ $2,034,150
- -------------------------- -----------
-----------
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is
$1,981,545, the aggregate gross unrealized appreciation
is $46,335, and the aggregate gross unrealized
depreciation is $19,339, resulting in net unrealized
appreciation of $26,996.
ADR = American Depositary Receipts
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
INCOME OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
CORPORATE BONDS (31.4%)
CHEMICALS & ALLIED
PRODUCTS (5.0%)
$ 100,000 Stone Container Corp., 9.875%,
02/01/01...................... $ 94,125
---------
INDUSTRIAL (10.8%)
100,000 Gearbulk Holding Ltd., 11.25%,
12/01/04...................... 101,500
100,000 Rexene Corp., Sr. Notes, 11.75%,
12/01/04...................... 102,000
---------
203,500
---------
NATURAL RESOURCES (5.0%)
100,000 Bridas Corp., 12.5%, 11/18/99... 94,500
---------
STEEL (5.2%)
100,000 AK Steel Holding Corp. 10.75%,
04/01/04...................... 99,000
---------
TELECOMMUNICATIONS (5.4%)
100,000 Mobile Telecommunications
Technologies, Corp. 13.50%,
12/15/02...................... 101,250
---------
TOTAL CORPORATE BONDS (COST $589,165)...... 592,375
---------
FOREIGN GOVERNMENT OBLIGATIONS (55.6%)
250,000 Republic of Argentina Series L,
7.125%, 03/31/23.............. 152,500
178,500 Brazil C Bond 4%, 04/15/14...... 85,680
200,000 Bulgaria 6.0625%, 07/28/11...... 84,000
250,000 Kingdom of Jordan 4%,
12/23/23...................... 106,250
250,000 Central Bank of Nigeria 5.50%,
11/15/20...................... 97,500
100,000 Republic of Panama 7.125%,
05/10/02...................... 78,750
150,000 Philippine Pars 5.75%,
12/01/17...................... 92,625
FOREIGN GOVERNMENT OBLIGATIONS--CONTINUED
$ 200,000 Poland Past Due Interest, 3.25%,
10/27/14...................... $ 89,000
100,000 Republic of South Africa 9.625%,
12/15/99...................... 97,200
300,000 United Mexican States 6.25%,
12/31/19...................... 163,125
---------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(COST $981,921)............................ 1,046,630
---------
UNITS
- ---------
WARRANTS (0.0%)
250,000 Nigeria Warrants 5.50%,
11/15/20*..................... --
300,000 United Mexican States Warrants
0%, 06/30/03*................. --
MATURITY
AMOUNT
- ---------
SHORT-TERM INVESTMENTS (26.1%)
$ 491,815 Prudential Bache Securities,
Inc. investments in a
repurchase agreement at 5.65%
dated 12/30/94 due 01/03/95
(collateralized by $2,099,008
Federal National Mortgage
Bonds 1.935% through 10.5% due
12/01/00--01/15/24 valued at
$501,340) (Cost $491,506)..... 491,506
---------
TOTAL INVESTMENTS AT VALUE (113.1%)
(COST $2,062,592)(A)....................... 2,130,511
---------
CASH AND OTHER ASSETS
NET OF LIABILITIES (-13.1%)................ (247,134)
---------
NET ASSETS (100.0%)........................ $1,883,377
---------
---------
- --------------------------
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes
is $2,062,592, the aggregate gross unrealized
appreciation is $14,960, and the aggregate gross
unrealized depreciation is $82,879, resulting in
net unrealized depreciation of $67,919.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STANDBY INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- --------- -----------
<C> <S> <C>
COMMERCIAL PAPER (54.5%)
$ 250,000 Boston Edison Co. 6.20%,
01/06/95...................... $ 249,268
250,000 Caterpillar Financial Services
6%, 01/27/95.................. 248,857
250,000 Conagra, Inc. 6.05%, 01/10/95... 249,060
250,000 Dominion Resources, Inc. 5.85%,
01/20/95...................... 247,562
250,000 General Electric Cap. Corp.
5.80%, 02/06/95............... 248,385
250,000 General Motors Acceptance Corp.
6.15%, 03/02/95............... 247,455
250,000 Hercules, Inc. 5.8%, 01/17/95... 247,785
250,000 Merrill Lynch & Co. 5.83%,
02/21/95...................... 247,748
250,000 Nynex Corp. 5.8%, 01/12/95...... 247,906
250,000 Norfolk South Corp. 5.82%,
02/16/95...................... 247,862
250,000 Wisconsin Pwr & Light Co. 5.77%,
02/01/95...................... 248,632
---------
TOTAL COMMERCIAL PAPER
(COST $2,722,975).......................... 2,730,520
---------
CORPORATE BOND (5.0%)(COST $249,125)
250,000 Texas Utilities 6.0625%,
05/01/99...................... 249,688
---------
U.S. GOVERNMENT OBLIGATIONS (5.0%) (COST
$253,984)
250,000 U.S. Treasury Note 8.875%,
07/15/95...................... 252,500
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (35.4%)
$ 500,000 Federal Home Loan Bank
02/21/95...................... $ 496,053
300,000 Federal Home Loan Mortgage Corp.
04/04/95...................... 295,397
540,000 Federal National Mortgage
Association 5.97%, 03/08/95... 534,287
250,000 Federal National Mortgage
Association 6.15%, 03/24/95... 246,694
200,000 Student Loan Marketing
Association 6.095%,
11/27/96...................... 200,654
---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $1,767,087).......................... 1,773,085
---------
MATURITY
AMOUNT
- ---------
SHORT-TERM INVESTMENTS (0.1%)
$ 7,234 Cantor Fitzgerald investments in
a master trust repurchase
agreement at 5.5% dated
12/30/94 due 01/03/95
(collateralized by $7,386 U.S.
Treasury Notes 5.50% due
04/30/96 valued at $7,265)
(Cost $7,234)................. 7,234
---------
TOTAL INVESTMENT AT VALUE (100.0%)
(COST $5,000,405)(A)....................... 5,013,027
---------
CASH AND OTHER ASSETS
NET OF LIABILITIES (0.0%).................. (243)
---------
NET ASSETS (100.0%)........................ $5,012,784
---------
---------
- --------------------------
(a) The aggregate cost for federal income tax purposes
is $5,000,405, the aggregate gross unrealized
appreciation is $14,106, and the aggregate gross
unrealized depreciation is $1,484, resulting in
net unrealized appreciation of $12,622.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 1)* $1,012,998 $4,435,436 $1,989,600 $1,639,005 $5,005,793
Repurchase agreements, at value (Note 1) 1,005,272 323,339 18,941 491,506 7,234
Receivables for:
Investments sold -- -- 13,082 -- --
Dividends 1,262 7,357 1,500 -- --
Interest 2,371 232 12,988 34,031 29,239
Deferred organization expenses (Note 1) 23,838 23,838 23,838 23,838 23,838
Expense reimbursement receivable from sponsor (Note 3) 19,996 17,928 16,055 21,683 16,007
--------- ----------- ---------- ----------- ----------
Total assets 2,065,737 4,808,130 2,076,004 2,210,063 5,082,111
--------- ----------- ---------- ----------- ----------
LIABILITIES:
Payable for investments purchased -- 2,568 -- 279,453 --
Payable for administration and fund accounting fees (Note
2) 1,781 1,781 1,781 1,781 1,781
Accrued expenses and other liabilities 20,521 22,433 16,142 21,521 16,755
Distributions payable -- -- -- -- 26,860
Organization expenses payable (Note 1) 23,931 23,931 23,931 23,931 23,931
--------- ----------- ---------- ----------- ----------
Total liabilities 46,233 50,713 41,854 326,686 69,327
--------- ----------- ---------- ----------- ----------
NET ASSETS: $2,019,504 $4,757,417 $2,034,150 $1,883,377 $5,012,784
--------- ----------- ---------- ----------- ----------
--------- ----------- ---------- ----------- ----------
NET ASSETS CONSIST OF:
Paid-in capital 1,999,920 4,999,920 1,999,920 1,999,920 4,999,920
Undistributed net investment income 8,038 -- 9,278 24,234 --
Accumulated net realized gain (loss) on investments -- (2,638) (2,044) (72,858) 242
Net unrealized appreciation (depreciation) on investments 11,546 (239,865) 26,996 (67,919) 12,622
--------- ----------- ---------- ----------- ----------
Net assets applicable to shares of beneficial interest
outstanding $2,019,504 $4,757,417 $2,034,150 $1,883,377 $5,012,784
--------- ----------- ---------- ----------- ----------
--------- ----------- ---------- ----------- ----------
Shares outstanding 199,992 499,992 199,992 199,992 499,992
--------- ----------- ---------- ----------- ----------
--------- ----------- ---------- ----------- ----------
Net asset value $ 10.10 $ 9.51 $ 10.17 $ 9.42 $ 10.03
--------- ----------- ---------- ----------- ----------
--------- ----------- ---------- ----------- ----------
*Cost of investments (including repurchase agreements) $2,006,724 $4,998,640 $1,981,545 $2,062,592 $5,000,405
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 21, 1994 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER
31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1):
Interest $ 9,296 $ 5,334 $ 9,671 $ 26,067 $ 29,602
Dividends 1,262 7,780# 1,568 -- --
----------- ------------ ----------- ----------- ---------
TOTAL INVESTMENT INCOME: 10,558 13,114 11,239 26,067 29,602
----------- ------------ ----------- ----------- ---------
EXPENSES:
Investment advisory fee (Note 2) 1,753 5,033 1,519 1,401 1,368
Custody fee 120 120 120 120 120
Administration and fund accounting fee (Note 2) 2,740 2,740 2,740 2,740 2,740
Auditing fees 13,500 14,500 9,000 14,500 8,700
Legal fees 2,157 2,157 2,157 2,157 2,157
Printing fee 1,400 1,400 1,400 1,400 1,400
Trustee fees (Note 2) 1,350 1,350 1,350 1,350 1,350
Amortization of organization expenses (Note 1) 534 534 534 534 534
Miscellaneous 715 1,749 715 715 1,748
----------- ------------ ----------- ----------- ---------
TOTAL EXPENSES 24,269 29,583 19,535 24,917 20,117
----------- ------------ ----------- ----------- ---------
Waiver of investment advisory fees (Note 2) (1,753) (5,033) (1,519) (1,401) (1,368)
Reimbursement from advisor (Note 3) (19,996) (17,928) (16,055) (21,683) (16,007)
----------- ------------ ----------- ----------- ---------
NET EXPENSES 2,520 6,622 1,961 1,833 2,742
----------- ------------ ----------- ----------- ---------
NET INVESTMENT INCOME 8,038 6,492 9,278 24,234 26,860
----------- ------------ ----------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments -- (9,130)+ (2,044) (72,858) 242
Net unrealized appreciation (depreciation) on investments 11,546 (239,865) 26,996 (67,919) 12,622
----------- ------------ ----------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) 11,546 (248,995) 24,952 (140,777) 12,864
----------- ------------ ----------- ----------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 19,584 $(242,503) $ 34,230 $(116,543) $ 39,724
----------- ------------ ----------- ----------- ---------
----------- ------------ ----------- ----------- ---------
</TABLE>
# Net of foreign tax withholding of $1,076.
+ Includes foreign currency transactions loss of $9,130.
The accompanying notes are an integral part of the financial statements.
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD NOVEMBER 21, 1994 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER
31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 8,038 $ 6,492 $ 9,278 $ 24,234 $ 26,860
Net realized gain (loss) on investments and foreign
currency -- (9,130)+ (2,044) (72,858) 242
Net change in unrealized appreciation (depreciation)
on investments 11,546 (239,865) 26,996 (67,919) 12,622
----------- ------------ ------------ ----------- ------------
Net increase (decrease) in net assets resulting from
operations 19,584 (242,503) 34,230 (116,543) 39,724
----------- ------------ ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income -- -- -- -- (26,860)
----------- ------------ ------------ ----------- ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from shares of beneficial interest sold 1,999,820 4,999,820 1,999,820 1,999,820 4,999,820
----------- ------------ ------------ ----------- ------------
TOTAL INCREASE IN NET ASSETS 2,019,404 4,757,317 2,034,050 1,883,277 5,012,684
NET ASSETS
Beginning of period 100 100 100 100 100
----------- ------------ ------------ ----------- ------------
End of period $2,019,504 $4,757,417 $2,034,150 $1,883,377 $ 5,012,784
----------- ------------ ------------ ----------- ------------
----------- ------------ ------------ ----------- ------------
</TABLE>
+ Includes foreign currency transactions of $9,130.
The accompanying notes are an integral part of the financial statements.
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
FINANCIAL HIGHLIGHTS
FOR THE PERIOD NOVEMBER 21, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1994
- --------------------------------------------------------------------------------
For a share outstanding throughout the period as follows:
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME
GROWTH EQUITY BALANCED OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00 $ 10.00
------ ------ ----------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.04 -- 0.05 0.12
Net realized and unrealized gain (loss) on investments 0.06 (0.49) 0.12 (0.70)
------ ------ ----------- ------
Total from investment operations 0.10 (0.49) 0.17 (0.58)
------ ------ ----------- ------
LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- --
Net capital gain -- -- -- --
------ ------ ----------- ------
Total dividends and distributions 0.00 0.00 0.00 0.00
------ ------ ----------- ------
Net asset value, end of period $ 10.10 $ 9.51 $ 10.17 $ 9.42
------ ------ ----------- ------
------ ------ ----------- ------
TOTAL RETURN (NOT ANNUALIZED) 1.00% (4.90)% 1.70% (5.80)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 2,020 $ 4,757 $ 2,034 $ 1,883
Ratios to average net assets (annualized):
Expenses 1.15% 1.25% 0.90% 0.85%
Net investment income (loss) 3.67% 1.23% 4.26% 11.24%
Ratios to average net assets without waiver and reimbursement
(annualized):
Expenses 11.08% 5.58% 8.97% 11.56%
Portfolio turnover (not annualized) 0% 0% 3% 45%
<CAPTION>
STANDBY
INCOME
PORTFOLIO
-----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05
Net realized and unrealized gain (loss) on investments 0.03
-----------
Total from investment operations 0.08
-----------
LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.05)
Net capital gain --
-----------
Total dividends and distributions (0.05)
-----------
Net asset value, end of period $ 10.03
-----------
-----------
TOTAL RETURN (NOT ANNUALIZED) 0.30%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 5,013
Ratios to average net assets (annualized):
Expenses 0.50%
Net investment income (loss) 4.90%
Ratios to average net assets without waiver and reimbursement
(annualized):
Expenses 3.67%
Portfolio turnover (not annualized) 56%
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Select Advisors Variable Insurance Trust (the "Trust") is registered under
the Investment Company Act of 1940, as amended, (the "Act") as an open-end
management investment company organized as a Massachusetts business trust on
February 7, 1994. The Trust consists of five Portfolios: Emerging Growth
Portfolio, International Equity Portfolio, Balanced Portfolio, Income
Opportunity Portfolio and Standby Income Portfolio.
As of December 31, 1994, Western-Southern Life Assurance Company
("Western-Southern") owned 100% of each Portfolio.
The following is a summary of the significant accounting policies of the
Portfolios:
a) INVESTMENT VALUATION. The value of each security for which readily
available market quotations exist is based on a decision as to the broadest and
most representative market for such security. The value of such security will be
based either on the last sale price on a national securities exchange, or, in
the absence of recorded sales, at the readily available closing bid price on
such exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on foreign exchanges are valued at the last quoted sale price
available before the net assets are valued. Unlisted securities are valued at
the average of the quoted bid and asked prices in the over-the-counter market.
Debt securities are valued by a pricing service which determines valuations
based upon market transactions for normal, institutional-size trading units of
similar securities. Securities or other assets for which market quotations are
not readily available are valued at fair value in accordance with procedures
established by the Trustees. Such procedures include the use of independent
pricing services, which use prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. All portfolio securities with a
remaining maturity of less than 60 days are valued at amortized cost, which
approximates market.
b) FOREIGN CURRENCY TRANSLATION. The accounting records of the Portfolios
are maintained in U.S. dollars. The market value of investment securities, other
assets and liabilities and forward contracts denominated in foreign currencies
are translated into U.S. dollars at the prevailing exchange rates at the end of
the period. Purchases and sales of securities, income receipts, and expense
payments are translated at the exchange rate prevailing on the respective dates
of such transactions. Reported net realized gains and losses on foreign currency
transactions represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions and
the difference between the amount of net investment income accrued and the U.S.
dollar amount actually received.
The effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statement of Operations from the effects of
changes in market prices of these securities, but are included with the net
realized and unrealized gain or loss on investments.
c) INVESTMENT INCOME. Dividend income is recorded on ex-dividend date
except that certain dividends from foreign securities where ex-dividend date has
passed are recorded as soon as the fund is informed of the ex-dividend date.
Interest income, which includes the amortization of premium and accretion of
discount, if any, is recorded on an accrual basis. Dividend and interest income
is recorded net of foreign taxes where recovery of such taxes is not assured.
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
d) DIVIDENDS AND DISTRIBUTIONS. Distributions to shareholders for the
Emerging Growth Portfolio, International Equity Portfolio, Balanced Portfolio,
and Income Opportunity Portfolio are recorded by the Portfolio on the
ex-dividend date. It is the policy of the Standby Income Portfolio to record
income dividends daily and distribute them monthly. Distributions to
shareholders of net realized capital gains, if any, are declared and paid
annually.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principals. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital. Undistributed
net investment income may include temporary book and tax basis differences which
will reverse in a subsequent period.
e) FEDERAL TAXES. Each Portfolio of the Trust is treated as a seperate
entity for federal income tax purposes. Each Portfolio's policy is to comply
with the provisions of the Internal Revenue Code of 1986, as amended, applicable
to regulated investment companies and to distribute substantially all its
income, including net realized capital gains, if any, within the prescribed time
periods. Accordingly, no provision for a federal income tax is necessary.
f) FORWARD CURRENCY CONTRACTS. Each Portfolio may enter into forward
foreign currency contracts to protect securities and related receivables and
payables against fluctuations in foreign currency rates. A forward contract is
an agreement to buy or sell currencies of different countries on a specified
future date at a specified rate.
Risks associated with such contracts include the movement in the value of
the foreign currency relative to the U.S. dollar and the ability of the
counterparty to perform. The market value of the contract will fluctuate with
changes in currency exchange rates. Contracts are valued daily based on
procedures established by and under the general supervision of the Trustees of
the Portfolio Trust and the change in the market value is recorded by the
Portfolios as unrealized appreciation or depreciation of forward foreign
currency contracts.
g) REPURCHASE AGREEMENTS. The Portfolios may invest in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Portfolio from a third party with the commitment that they will be
repurchased by the seller at a fixed price on an agreed upon date. Each
Portfolio may enter into repurchase agreements with banks or lenders meeting the
creditworthiness standards established by the Portfolio Trust Board of Trustees.
The resale price reflects the purchase price plus an agreed upon market rate of
interest. The Portfolio, through its custodian, receives as collateral, delivery
of the underlying securities, whose market value is required to be at least
equal to the resale price.
h) ORGANIZATION EXPENSE. As of December 31, 1994, each Portfolio incurred
organization expenses of $24,372. These costs were deferred and are being
amortized by each Portfolio on a straight-line basis over a five-year period
from commencement of operations. Each Portfolio's organizational fees payable
includes fees and expenses payable to Touchstone Advisors, Inc., a subsidiary of
Western-Southern, of $23,931. The amount paid by the Trust on any redemption by
Touchstone Advisors, Inc. or, any other then-current holder of the
organizational seed capital shares ("Initial Shares") of the Portfolio, will be
reduced by a portion of any unamortized organization expenses of the Portfolio
determined by the proportion of the number of the Initial Shares of the
Portfolio redeemed to the number of the Initial Shares of the Portfolio
outstanding after taking into account any prior redemptions of the Initial
Shares of the Portfolio.
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
i) OTHER. Securities transactions are recorded on a trade date basis. For
financial and tax reporting purposes, realized gains and losses are determined
on the basis of specific lot identification.
2. TRANSACTIONS WITH AFFILIATES
a) SPONSOR. Touchstone Advisors, Inc. ("Sponsor"), a subsidiary of
Western-Southern, as sponsor to the Trust, pursuant to a Sponsor Agreement
provides oversight of the various service providers to the Trust, including the
Trust's Administrator, Custodian and Transfer Agent. As Sponsor to the Trust,
Touchstone Advisors reserves the right to receive a sponsor fee from each
portfolio equal on an annual basis to 0.20% of average daily net assets of that
Portfolio for its then-current fiscal year. The Sponsor Agreement may be
terminated by the Sponsor or by the Trust on not less than 30 days prior written
notice. The Sponsor has advised the Trust that it will waive all fees under the
Sponsor Agreement through April 30, 1995.
b) INVESTMENT ADVISOR. The Trust has an investment advisory agreement with
the Sponsor. Under the terms of the investment advisory agreement, each
Portfolio pays an investment advisory fee that is computed daily and paid
monthly. For the period November 21, 1994 (commencement of operations) to
December 31, 1994, each Portfolio incurred the following investment advisory
fees equal on an annual basis to the following percentages of the average daily
net assets of the Portfolio.
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rate: 0.80% 0.95% 0.70% 0.65% 0.25%
Amount: $ 1,753 $ 5,033 $ 1,519 $ 1,401 $ 1,368
</TABLE>
For the period November 21, 1994 (commencement of operations) to December
31, 1994, the Advisor has voluntarily agreed to waive its entire Investment
Advisory Fee.
Fort Washington Investment Advisors, Inc., an affiliate of the Advisor, is
the sub-advisor for the Standby Income Portfolio.
c) ADMINISTRATOR AND FUND ACCOUNTANT. The Trust retains Signature
Financial Services, Inc. ("Signature") to serve as administrator and fund
accountant. Certain officers of Signature serve as officers of the Portfolios.
Signature provides administrative services necessary for the operations of the
Portfolios, including the preparation and filing of all documents required by
the Trust for compliance with applicable laws and regulations; arranging for the
maintenance of books, records and custody of the Portfolios; and paying the
compensation of the Portfolios'
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
officers affiliated with Signature. For these services, Signature receives from
each Portfolio a fee that is computed daily and paid monthly equal on an annual
basis to the following percentages of the average daily net assets of each of
the Portfolios.
<TABLE>
<CAPTION>
LEVEL OF AVERAGE FEE AS A % OF
NET ASSETS AVERAGE DAILY NET ASSETS
- ---------------------------------- -------------------------
<S> <C>
up to $100 million 0.16%
more than $100 to $200 million 0.14%
more than $200 to $500 million 0.10%
more than $500 to $1 billion 0.06%
more than $1 billion 0.05%
</TABLE>
In addition, each Portfolio is subject to a minimum annual fee of $25,000.
For the period November 21, 1994 (commencement of operations) to December 31,
1994, each Portfolio incurred $2,740 for administration and fund accounting
fees.
d) TRUSTEES. Each Trustee who is not an "interested person," (as defined
in the Act), of the Trust, receives in aggregate $5,000 annually plus $1,000 per
meeting attended, as well as, reimbursement for reasonable out-of-pocket
expenses. For the period November 21, 1994 (commencement of operations) to
December 31, 1994, each Portfolio incurred $1,350 in aggregate Trustee fees.
3. EXPENSE REIMBURSEMENTS
The Sponsor has agreed to reimburse each Portfolio so that, following such
reimbursement, the aggregate total operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) of each Portfolio are
not greater, on an annualized basis, than the percentage of average daily net
assets of the Portfolio listed below for the period November 21, 1994
(commencement of operations) to December 31, 1994.
<TABLE>
<CAPTION>
VOLUNTARY AMOUNT OF
EXPENSE LIMIT REIMBURSEMENT
--------------- --------------
<S> <C> <C>
Emerging Growth Portfolio 1.15% $ 19,996
International Equity Portfolio 1.25% $ 17,928
Balanced Portfolio 0.90% $ 16,055
Income Opportunity Portfolio 0.85% $ 21,683
Standby Income Portfolio 0.50% $ 16,007
</TABLE>
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
Investment transactions (excluding purchases and sales of U.S government
obligations and U.S. government agency obligations and excluding short-term
investments) for the period November 21, 1994 (commencement of operations) to
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
---------------- ------------------
<S> <C> <C>
Emerging Growth Portfolio $ 884,429 --
International Equity Portfolio 4,675,301 --
Balanced Portfolio 1,216,688 $ 31,658
Income Opportunity Portfolio 3,299,071 1,554,398
Standby Income Portfolio 1,731,738 --
</TABLE>
Purchases and sales of U.S. government obligations for the period November
21, 1994 (commencement of operations) to December 31, 1994 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
---------------- ------------------
<S> <C> <C>
Emerging Growth Portfolio -- --
International Equity Portfolio -- --
Balanced Portfolio $ 778,367 --
Income Opportunity Portfolio -- --
Standby Income Portfolio 2,275,912 $246,430
</TABLE>
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trust to issue an unlimited number of
full and fractional shares of beneficial interest. Transactions in shares of
beneficial interest for the period November 21, 1994 (commencement of
operations) through December 31, 1994 are as follows:
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shares sold 199,982 499,982 199,982 199,982 499,982
----------- ----------- ----------- ----------- -----------
Net increase 199,982 499,982 199,982 199,982 499,982
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Investors and Trustees of
the Select Advisors Variable Insurance Trust:
We have audited the accompanying statements of assets and liabilities of the
Select Advisors Variable Insurance Trust (consisting of Emerging Growth
Portfolio, International Equity Portfolio, Balanced Portfolio, Income
Opportunity Portfolio and Standby Income Portfolio), including the schedules of
investments, as of December 31, 1994, and the related statements of operations,
statements of changes in net assets and financial highlights for the period
November 21, 1994 (commencement of operations) to December 31, 1994. These
financial statements and financial highlights are the responsibility of the
Portfolios' 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit and 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. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. 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 the
Select Advisors Variable Insurance Trust as of December 31, 1994, the results of
its operations, the changes in its net assets and the financial highlights for
the period November 21, 1994 (commencement of operations) to December 31, 1994,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 17, 1995
<PAGE>
APPENDIX
BOND, COMMERCIAL PAPER AND MUNICIPAL OBLIGATIONS RATINGS
Set forth below are descriptions of the ratings of Moody's and S&P,
which represent their opinions as to the quality of the Municipal Obligations
and securities which they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and are not absolute standards of
quality.
MOODY'S BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligatio
ns, I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
A-1
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Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated. Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1.
S&P'S BOND RATING
AAA. Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A. Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.
BBB. Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
A-2
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BB, B, CCC, CC, and C. Bonds rated BB, B, CCC, CC, and C are regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of this obligations.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.
C1. The rating C1 is reserved for income bonds on which no interest is
being paid.
D. Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or Minus (-). The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR. Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
S&P'S COMMERCIAL PAPER RATINGS
A is the highest commercial paper rating category utilized by S&P,
which uses the numbers 1+, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt rating is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward trend.
Typically, the issuer is a strong company in a well-established industry and has
superior management.
MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
A-3
<PAGE>
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
A-4
<PAGE>
IFS0020F
DISTRIBUTOR
Touchstone Securities, Inc. SELECT ADVISORS VARIABLE INSURANCE TRUST
318 Broadway
Cincinnati, Ohio 45202 oTOUCHSTONE EMERGING GROWTH PORTFOLIO
oTOUCHSTONE INTERNATIONAL EQUITY PORTFOLIO
oTOUCHSTONE BALANCED PORTFOLIO
INVESTMENT ADVISOR oTOUCHSTONE INCOME OPPORTUNITY PORTFOLIO
oTOUCHSTONE STANDBY INCOME PORTFOLIO
Touchstone Advisors, Inc.
318 Broadway
Cincinnati, Ohio 45202
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company STATEMENT OF ADDITIONAL INFORMATION
89 South Street MAY 1, 1995, AS AMENDED NOVEMBER 14, 1995
Boston, Massachusetts 02111
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
LEGAL COUNSEL
Frost & Jacobs
2500 PNC Center
201 East 5th Street
Cincinnati, Ohio 45202
