<PAGE> 1
TOUCHSTONE
LOGO
VARIABLE ANNUITY
TOUCHSTONE
LOGO
VARIABLE ANNUITY
SELECT ADVISORS
VARIABLE INSURANCE TRUST
EMERGING GROWTH LOGO
INTERNATIONAL EQUITY LOGO
INCOME OPPORTUNITY LOGO
VALUE PLUS LOGO
BALANCED LOGO
STANDBY INCOME LOGO
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE> 2
NOTES 2
<PAGE> 3
3
SCHEDULE OF INVESTMENTS
December 31, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 91.9%
AUTOMOTIVE -- 2.4%
8,700 Bandag, Class A $ 303,413
26,600 Exide 432,250
- ----------------------------------------------------------------------------------
735,663
- ----------------------------------------------------------------------------------
BANKING -- 2.1%
5,000 Bank United, Class A 196,250
7,900 Dime Bancorp 208,856
15,200 Golden State Bancorp* 252,700
- ----------------------------------------------------------------------------------
657,806
- ----------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 1.8%
39,200 DiMon 291,550
15,000 Ralcorp Holdings* 273,750
- ----------------------------------------------------------------------------------
565,300
- ----------------------------------------------------------------------------------
BUILDING MATERIALS -- 4.8%
16,700 Calmat 515,613
44,900 Dal-Tile International* 465,838
8,400 Martin Marietta Materials 522,375
- ----------------------------------------------------------------------------------
1,503,826
- ----------------------------------------------------------------------------------
CHEMICALS -- 0.6%
25,300 Calgon Carbon 189,750
- ----------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 14.0%
17,200 Administaff* 430,000
17,000 Advance Paradigm* 594,987
14,000 Apollo Group, Class A 474,250
10,500 A.C. Nielson* 296,625
15,000 Career Education* 450,000
12,100 CDI* 244,269
9,000 DeVry* 275,625
27,000 FirstService* 322,313
10,000 ITT Educational Services* 340,000
12,000 Stewart Enterprises 267,000
14,900 Unova* 270,063
15,800 Wallace Computer Services 416,725
- ----------------------------------------------------------------------------------
4,381,857
- ----------------------------------------------------------------------------------
COMMUNICATIONS -- 4.7%
18,200 DSP Communications* 278,688
11,400 Geotel Communications* 424,650
19,000 Powerwave Technologies* 353,875
6,000 Tellabs* 411,375
- ----------------------------------------------------------------------------------
1,468,588
- ----------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 6.3%
22,900 Carreker-Antinori* 153,144
26,700 CBT Group, ADR* 397,163
4,400 Earthlink Network* 250,800
7,500 Equant* 508,594
4,600 Policy Management Systems* 232,300
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
4
Schedule of Investments continued
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMPUTER SOFTWARE & PROCESSING Continued
1,600 PRI Automation* $ 41,600
7,500 Transaction Systems Architects, Class A* 375,000
- ----------------------------------------------------------------------------------
1,958,601
- ----------------------------------------------------------------------------------
COMPUTERS & INFORMATION -- 5.0%
4,000 EMC* 340,000
10,200 Gerber Scientific 242,888
29,800 Intergraph* 171,350
15,000 Saville Systems, ADR* 285,000
33,600 Scitex* 394,800
2,500 Sterling Commerce* 112,500
- ----------------------------------------------------------------------------------
1,546,538
- ----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.1%
29,100 Magnetek* 336,469
- ----------------------------------------------------------------------------------
ELECTRONICS -- 6.4%
30,000 Aeroflex* 453,750
21,500 Commscope* 361,469
15,500 Galileo Technology* 418,500
10,000 Maxwell Technologies* 402,500
15,000 Power Integrations* 375,938
- ----------------------------------------------------------------------------------
2,012,157
- ----------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE -- 3.0%
17,000 Cinar Films, Class B* 431,375
9,000 SFX Entertainment, Class A* 493,875
- ----------------------------------------------------------------------------------
925,250
- ----------------------------------------------------------------------------------
FINANCIAL SERVICES -- 1.0%
23,000 Life USA Holdings 296,125
- ----------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 1.0%
42,300 Unisource Worldwide 306,675
- ----------------------------------------------------------------------------------
HEALTH CARE PROVIDERS -- 2.5%
14,700 IDEXX Laboratories* 395,523
14,000 Syncor International* 381,500
- ----------------------------------------------------------------------------------
777,023
- ----------------------------------------------------------------------------------
HEAVY CONSTRUCTION -- 0.8%
18,900 Foster Wheeler 249,244
- ----------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.2%
4,500 Flowserve 74,531
- ----------------------------------------------------------------------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 1.1%
5,800 Herman Miller 155,875
11,400 LA-Z-Boy Chair 203,063
- ----------------------------------------------------------------------------------
358,938
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
5
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
INSURANCE -- 2.7%
13,100 HCC Insurance Holdings $ 230,888
8,350 HSB Group 342,872
28,000 Provident American* 280,000
- ----------------------------------------------------------------------------------
853,760
- ----------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 7.2%
16,000 American Tower Systems, Class A* 473,000
16,000 Capstar Broadcasting, Class A* 366,000
5,700 Central Newspapers, Class A 407,194
22,600 Hollinger International 314,988
25,000 Information Holdings* 393,750
9,400 Lee Enterprises 296,100
- ----------------------------------------------------------------------------------
2,251,032
- ----------------------------------------------------------------------------------
MEDICAL SUPPLIES -- 4.4%
15,600 Arthocare* 339,300
8,200 EG&G 228,063
12,300 Haemonetics* 279,825
13,000 OEC Medical Systems* 408,688
5,700 Roper Industries 116,138
- ----------------------------------------------------------------------------------
1,372,014
- ----------------------------------------------------------------------------------
METALS -- 0.5%
5,400 Harsco 164,363
- ----------------------------------------------------------------------------------
OIL & GAS -- 2.0%
10,300 Equitable Resources 299,988
23,000 Nabors Industries* 311,938
- ----------------------------------------------------------------------------------
611,926
- ----------------------------------------------------------------------------------
PHARMACEUTICALS -- 3.5%
9,000 Anesta* 239,625
18,000 Jean Coutu Group, Class A 386,433
18,500 King Pharmaceuticals* 483,313
- ----------------------------------------------------------------------------------
1,109,371
- ----------------------------------------------------------------------------------
RESTAURANTS -- 1.5%
16,000 The Cheesecake Factory* 474,501
- ----------------------------------------------------------------------------------
RETAILERS -- 3.4%
34,000 Charming Shoppes* 146,625
10,000 Duane Reade* 385,000
9,000 Enesco Group 209,250
12,500 Guitar Center* 307,813
- ----------------------------------------------------------------------------------
1,048,688
- ----------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 2.4%
6,000 Exodus Communications* 385,500
7,500 Qwest Communications International* 375,000
- ----------------------------------------------------------------------------------
760,500
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
6
Schedule of Investments continued
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
TEXTILES, CLOTHING & FABRICS -- 1.5%
12,347 Albany International $ 233,823
28,000 Stride Rite 245,000
- ----------------------------------------------------------------------------------
478,823
- ----------------------------------------------------------------------------------
TRANSPORTATION -- 4.0%
37,200 Fritz Companies* 402,225
38,300 Halter Marine Group* 186,713
8,900 Newport News Shipbuilding 297,594
19,500 Yellow* 372,938
- ----------------------------------------------------------------------------------
1,259,470
- ----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $26,209,953) 28,728,789
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
UNITS
<C> <S> <C>
WARRANTS -- 0.1%
BANKING -- 0.1%
5,700 Golden State Bancorp* 26,006
- -----------------------------------------------------------------------------------
TOTAL WARRANTS (COST $21,258) 26,006
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 92.0% (COST $26,231,211)(a) 28,754,795
CASH AND OTHER ASSETS NET OF LIABILITIES -- 8.0% $ 2,509,108
- -----------------------------------------------------------------------------------
NET ASSETS -- 100.0% $31,263,903
- -----------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$26,235,332, resulting in gross unrealized appreciation and depreciation of
$5,284,907 and $2,765,444, respectively, and net unrealized appreciation of
$2,519,463.
ADR -- American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
7
SCHEDULE OF INVESTMENTS
December 31, 1998
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 92.7%
FINLAND -- 2.0%
5,464 Nokia OYJ, Series A $ 664,388
- -----------------------------------------------------------------------------------
FRANCE -- 16.7%
4,080 AXA 590,380
4,191 Banque National De Paris 344,549
1,353 Canal Plus 368,599
1,548 Cap Gemini 248,056
5,694 Casino Guichard-Perrachon 592,007
1,672 Vivendi 433,103
1,789 Dexia France 275,169
2,225 Groupe Danone 635,970
4,962 Rhone Poulenc 254,937
4,096 Sanofi 673,185
4,394 Suez Lyonnaise Des Eaux-Dumex 901,129
3,380 Total S.A., Series B 341,759
- -----------------------------------------------------------------------------------
5,658,843
- -----------------------------------------------------------------------------------
GERMANY -- 7.7%
941 Allianz Holdings 345,057
3,394 Bayerische Vereinsbank 265,817
5,028 Mannesmann 576,353
6,159 Metro 491,611
11,878 RWE 650,483
4,170 Siemens 269,032
- -----------------------------------------------------------------------------------
2,598,353
- -----------------------------------------------------------------------------------
GREAT BRITAIN -- 17.9%
12,198 Allied Zurich* 181,546
20,790 Bank of Scotland 247,469
46,562 BG 293,160
25,874 British Petroleum 385,519
55,752 Compass Group 637,253
20,566 Dixons Group, ADR 288,676
61,500 Gallaher Group 416,054
9,826 Glaxo Wellcome 337,345
28,565 Lloyds TSB Group 405,460
60,584 National Grid Group 482,525
22,712 Orange* 263,372
22,718 Prudential 342,266
18,196 Railtrack Group 474,569
30,668 SmithKline Beecham 427,673
16,665 Unilever 186,472
42,385 Vodafone Group 686,767
- -----------------------------------------------------------------------------------
6,056,126
- -----------------------------------------------------------------------------------
IRELAND -- 1.9%
35,831 Allied Irish Banks 636,488
1 Bank of Ireland 21
- -----------------------------------------------------------------------------------
636,509
- -----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 8
8
Schedule of Investments continued
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
ITALY -- 10.8%
14,746 Assicurazione Generali $ 614,431
118,034 Credito Italiano 695,726
21,140 Istituto Bancario San Paolo di Torino* 372,986
182,877 Olivetti* 636,642
785,673 Seat Pagine Gialle* 736,801
31,480 Telecom Italia Mobile 231,974
60,067 Telecom Italia 375,888
- -----------------------------------------------------------------------------------
3,664,448
- -----------------------------------------------------------------------------------
JAPAN -- 14.3%
2,600 Acom 166,705
3,000 Ajinomoto 31,794
3,000 Asahi Breweries 44,114
5,000 Bridgestone 113,265
4,000 Canon 85,313
20,000 Casio Computer 147,311
22,000 Citizen Watch 132,120
12,000 Daiichi Pharmaceutical 202,314
12 East Japan Railway 66,873
5,200 Familymart 259,013
5,000 Fuji 185,463
3,900 ITO Yokado 272,101
7,000 Kirin Brewery 89,022
66 Merrill Lynch (Honda Motor), CPS 67,082
7,000 Minebea 79,996
24,000 Mitsubishi Heavy Industries 93,262
6,000 Mitsubishi 34,443
32,500 Mitsui Chemicals 112,801
90 Morgan Stanley Deanwitter (Canon Inc), CPS* 73,913
70 Morgan Stanley Deanwitter (Sony Corp), CPS 87,238
1,700 Nintendo 163,649
28,000 Nippon Express 157,273
23,000 Nippon Paper Industries 104,407
40 Nippon Telegraph & Telephone 154,023
2,710 Promise 140,729
3,000 Rohm Company 272,631
7,000 Sankyo 152,698
24,000 Sekisui House 253,290
1,200 Sony 87,221
10,000 Sumitomo 48,574
3,400 TDK 310,183
4,000 Terumo 93,968
6,400 Tokyo Electric Power 157,697
17,000 Toppan Printing 207,189
7,000 Toyota Motor 189,791
- -----------------------------------------------------------------------------------
4,837,466
- -----------------------------------------------------------------------------------
NETHERLANDS -- 6.0%
9,250 Heineken 556,280
4,465 Koninklijke 223,369
6,295 Nutreco Holding 247,914
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 9
9
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
NETHERLANDS Continued
1,153 STMicroelectronics* $ 90,629
900 STMicroelectronics, ADR* 70,256
4,844 Verenigde Nederlandse 182,520
3,094 Wolters Kluwer 661,612
- -----------------------------------------------------------------------------------
2,032,580
- -----------------------------------------------------------------------------------
PORTUGAL -- 0.5%
3,080 Brisa-Auto Estradas de Portugal 181,383
- -----------------------------------------------------------------------------------
SPAIN -- 3.9%
27,577 Argentaria 714,455
18,454 Iberdrola 345,403
5,380 Telefonica De Espana 239,322
- -----------------------------------------------------------------------------------
1,299,180
- -----------------------------------------------------------------------------------
SWEDEN -- 0.9%
12,480 Ericsson 296,457
- -----------------------------------------------------------------------------------
SWITZERLAND -- 10.1%
192 Nestle 417,361
406 Novartis 805,153
40 Roche Holding 487,386
84 Swiss Reinsurance 218,687
1,280 Swisscom* 535,078
1,281 Union Bank of Switzerland 393,008
760 Zuerich Allied 561,919
- -----------------------------------------------------------------------------------
3,418,592
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $26,545,659) 31,344,325
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 92.7% (COST $26,545,659)(a) 31,344,325
CASH AND OTHER ASSETS NET OF LIABILITIES -- 7.3% 2,468,701
- -----------------------------------------------------------------------------------
NET ASSETS -- 100.0% $33,813,026
- -----------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$26,852,674, resulting in gross unrealized appreciation and depreciation
of $4,918,105 and $426,454, respectively, and net unrealized appreciation
of $4,491,651.
ADR -- American Depositary Receipt
CPS -- Currency Protected Security
The accompanying notes are an integral part of the financial statements.
<PAGE> 10
SCHEDULE OF INVESTMENTS 10
December 31, 1998
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 67.6%
AEROSPACE & DEFENSE -- 2.5%
$ 500,000 Pacific Aerospace, 144A 11.25% 08/01/05 $ 375,000
500,000 Transdigm, 144A 10.375% 12/01/08 502,500
- -------------------------------------------------------------------------------------------------
877,500
- -------------------------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 2.4%
700,000 Compania Alimentos Fargo, 144A 13.25% 08/01/08 532,000
400,000 Richmont Marketing Special, 144A 10.125% 12/15/07 300,000
- -------------------------------------------------------------------------------------------------
832,000
- -------------------------------------------------------------------------------------------------
CHEMICALS -- 3.2%
600,000 Climachem 10.75% 12/01/07 603,000
500,000 Trans-Resources 10.75% 03/15/08 495,000
- -------------------------------------------------------------------------------------------------
1,098,000
- -------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 1.4%
500,000 Nationsrent, 144A 10.375% 12/15/08 495,000
- -------------------------------------------------------------------------------------------------
COMMUNICATIONS -- 3.4%
450,000 Dobson Wireline 12.25% 06/15/08 416,250
450,000 Northeast Optic Network 12.75% 08/15/08 441,000
600,000 Paging Network Do Brasil, Euro-Dollar 13.50% 06/06/05 312,000
- -------------------------------------------------------------------------------------------------
1,169,250
- -------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 2.2%
750,000 Primark, 144A 9.25% 12/15/08 753,750
- -------------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE -- 3.9%
450,000 Bell Sports, 144A 11.00% 08/15/08 456,750
400,000 Regal Cinemas 9.50% 06/01/08 416,000
500,000 TVN Entertainment, 144A 14.00% 08/01/08 440,000
- -------------------------------------------------------------------------------------------------
1,312,750
- -------------------------------------------------------------------------------------------------
ENVIRONMENTAL -- 0.4%
300,000 ATC Group Services 12.00% 01/15/08 153,000
- -------------------------------------------------------------------------------------------------
FOOD RETAILERS -- 1.5%
500,000 Pantry 10.250% 10/15/07 523,750
- -------------------------------------------------------------------------------------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 4.1%
750,000 Imperial Home Decor Group, Series B 11.00% 03/15/08 667,500
750,000 Salton/Maxim Housewares, 144A 10.75% 12/15/05 754,688
- -------------------------------------------------------------------------------------------------
1,422,188
- -------------------------------------------------------------------------------------------------
INDUSTRIAL -- DIVERSIFIED -- 14.4%
450,000 Aqua Chem, 144A 11.25% 07/01/08 432,000
500,000 Axia 10.75% 07/15/08 507,500
500,000 Derby Cycle, 144A 10.00% 05/15/08 430,000
450,000 Evenflo, 144A 11.75% 08/15/06 463,500
500,000 FSW International, Yankee-Dollar+ 12.50% 11/01/06 125,000
700,000 Generac Portable Products, 144A 11.25% 07/01/06 707,000
250,000 Neenah, 144A 11.125% 05/01/07 256,875
500,000 Penhall Acquisition, 144A 12.00% 08/01/06 470,000
880,000 Pen-Tab Industries 10.875% 02/01/07 778,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 11
11
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
INDUSTRIAL -- DIVERSIFIED Continued
$ 800,000 SF Holdings Group (zero coupon until 03/15/03,
12.75% thereafter), (c)(d) 0.00% 03/15/08 $ 280,000
500,000 Simonds, 144A 10.25% 07/01/08 510,000
- -------------------------------------------------------------------------------------------------
4,960,675
- -------------------------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 2.8%
500,000 Perry-Judd 10.625% 12/15/07 525,000
600,000 Source Media 12.00% 11/01/04 450,000
- -------------------------------------------------------------------------------------------------
975,000
- -------------------------------------------------------------------------------------------------
METALS -- 5.9%
500,000 Commonwealth Aluminum 10.75% 10/01/06 502,500
575,000 Doe Run Resources, Series B 11.25% 03/15/05 442,750
750,000 Golden Northwest Aluminum, 144A 12.00% 12/15/06 753,750
500,000 Nippon Denro Ispat 3.00% 04/01/01 175,000
1,000,000 NTS Steel Group Public, Euro-Dollar+ 4.00% 12/16/08 160,000
- -------------------------------------------------------------------------------------------------
2,034,000
- -------------------------------------------------------------------------------------------------
OIL & GAS -- 4.6%
500,000 Eagle Geophysical, Series B 10.75% 07/15/08 415,000
500,000 Elgin National Industries 11.00% 11/01/07 502,500
300,000 Panaco 10.625% 10/01/04 210,000
500,000 Parker Drilling, Series D 9.75% 11/15/06 445,000
- -------------------------------------------------------------------------------------------------
1,572,500
- -------------------------------------------------------------------------------------------------
REAL ESTATE -- 1.2%
850,000 GS Superhighway Holdings, Yankee-Dollar 10.25% 08/15/07 425,000
- -------------------------------------------------------------------------------------------------
RETAILERS -- 4.6%
500,000 Big 5 10.875% 11/15/07 505,000
300,000 Frank's Nursery & Crafts 10.25% 03/01/08 295,500
800,000 Home Interiors & Gifts, 144A 10.125% 06/01/08 792,000
- -------------------------------------------------------------------------------------------------
1,592,500
- -------------------------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 6.4%
500,000 AMSC Acquisition(d) 12.25% 04/01/08 310,000
400,000 Conecel, Euro-Dollar 14.00% 05/01/02 208,000
750,000 Conecel Holdings, Euro-Dollar, 144A(d) 14.00% 10/01/00 273,750
400,000 Orion Network 11.25% 01/15/07 392,000
500,000 Tricom 11.375% 09/01/04 410,000
600,000 Winstar Equipment 12.50% 03/15/04 609,000
- -------------------------------------------------------------------------------------------------
2,202,750
- -------------------------------------------------------------------------------------------------
TRANSPORTATION -- 2.7%
450,000 American Commercial Lines, 144A 10.25% 06/30/08 456,750
500,000 Stena Line 10.625% 06/01/08 450,000
- -------------------------------------------------------------------------------------------------
906,750
- -------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $27,246,946) 23,306,363
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 12
12
Schedule of Investments continued
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
SOVEREIGN GOVERNMENT OBLIGATIONS -- 27.4%
ARGENTINA -- 5.1%
$2,068,025 Republic of Argentina(b) 6.187% 03/31/05 $ 1,757,821
- -------------------------------------------------------------------------------------------------
BRAZIL -- 3.4%
1,177,620 Republic of Brazil, Brady Bond (Payment-in-kind) 8.00% 04/15/14 700,684
800,000 Republic of Brazil, Brady Bond(b) 6.125% 04/15/24 468,000
- -------------------------------------------------------------------------------------------------
1,168,684
- -------------------------------------------------------------------------------------------------
BULGARIA -- 4.1%
1,000,000 Government of Bulgaria, Brady Bond(b) 6.688% 07/28/24 700,000
1,050,000 Government of Bulgaria, Brady Bond, IAB(b) 6.688% 07/28/11 703,500
- -------------------------------------------------------------------------------------------------
1,403,500
- -------------------------------------------------------------------------------------------------
COLOMBIA -- 2.9%
1,200,000 Republic of Colombia 8.625% 04/01/08 1,020,000
- -------------------------------------------------------------------------------------------------
MEXICO -- 4.5%
700,000 Mexican Discount Bond, Series B, Brady Bond(b) 6.039% 12/31/19 568,750
1,250,000 Mexico Par Series B Cumulative, Brady Bond 6.250% 12/31/19 973,438
- -------------------------------------------------------------------------------------------------
1,542,188
- -------------------------------------------------------------------------------------------------
NIGERIA -- 1.4%
750,000 Nigeria -- PAR, Brady Bond 6.250% 11/15/20 472,500
- -------------------------------------------------------------------------------------------------
PANAMA -- 2.7%
1,250,000 Panama, Brady Bond, IRB(b)(c) 4.00% 07/17/14 931,250
- -------------------------------------------------------------------------------------------------
PERU -- 1.6%
1,000,000 Government of Peru, Brady Bond, FLIRB 3.25% 03/07/17 566,250
- -------------------------------------------------------------------------------------------------
RUSSIA -- 0.5%
800,000 Russian Federation 8.750% 07/24/05 185,000
44,735 Russian Vnesheconombank, Brady Bond, IAN(b) 5.969% 12/15/15 4,837
- -------------------------------------------------------------------------------------------------
189,837
- -------------------------------------------------------------------------------------------------
VENEZUELA -- 1.2%
642,855 Republic of Venezuela, Brady Bond, DCB(b) 5.938% 12/18/07 407,409
- -------------------------------------------------------------------------------------------------
TOTAL SOVEREIGN GOVERNMENT OBLIGATIONS (COST $10,175,719) 9,459,439
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 13
13
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
<C> <S> <C> <C> <C>
WARRANTS -- 0.0%
MEXICO -- 0.0%
1,076,000 United Mexican States* --
- -------------------------------------------------------------------------------------------------
NIGERIA -- 0.0%
750 Central Bank of Nigeria* --
- -------------------------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 0.0%
400 Loral Space & Communications* $ 4,400
300 Primus Telecommunications* 3,750
- -------------------------------------------------------------------------------------------------
8,150
- -------------------------------------------------------------------------------------------------
TOTAL WARRANTS (COST $0) 8,150
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 95.0% (COST $37,422,665)(a) 32,773,952
CASH AND OTHER ASSETS NET OF LIABILITIES -- 5.0% 1,720,061
- -------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $34,494,013
- -------------------------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
+ Security currently in default of interest payment. The portfolio is not
accruing stated interest.
(a) The aggregate identified cost for federal income tax purposes is
$37,463,946, resulting in gross unrealized appreciation and depreciation of
$328,349 and $5,018,343, respectively, and net unrealized depreciation of
$4,689,994.
(b) Interest rate shown reflects current rate on instrument with variable or
floating rates.
(c) Zero or step coupon bond.
(d) Security issued with detachable warrants. The current value of each warrant
is zero.
144A -- Securities restricted for resale to Qualified Institutional Buyers with
registration rights.
Brady Bond -- U.S. dollar denominated bonds of developing countries that were
exchanged, in a restructuring, for commercial bank loans in
default. The bonds are collateralized by U.S. Treasury zero-coupon
bonds to ensure principal.
DCB -- Debt Conversion Bond
Euro-Dollar -- Bonds issued offshore that pay interest and principal in U.S.
dollars.
FLIRB -- Front-Load Interest Reduction Bonds
IAB -- Interest Arrears Bond
IAN -- Interest Arrears Note
IRB -- Interest Reduction Bond
Yankee-Dollar -- U.S. dollar denominated bonds issued by non-U.S. companies in
the U.S.
The accompanying notes are an integral part of the financial statements.
<PAGE> 14
SCHEDULE OF INVESTMENTS 14
December 31, 1998
VALUE PLUS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 89.9%
AEROSPACE & DEFENSE -- 1.0%
675 Allied Signal $ 29,911
- ---------------------------------------------------------------------------------
AUTOMOTIVE -- 1.0%
525 Magna International, Class A 32,550
- ---------------------------------------------------------------------------------
BANKING -- 6.8%
1,182 Bank One 60,356
1,225 First American 54,359
650 Mellon Bank 44,688
1,575 North Fork Bancorporation 37,702
625 St. Paul Bancorp 17,012
- ---------------------------------------------------------------------------------
214,117
- ---------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 7.4%
525 General Mills 40,819
425 McDonald's 32,566
1,775 Pepsico 72,664
1,425 Ralston-Ralston Purina Group 46,134
1,525 Sysco 41,842
- ---------------------------------------------------------------------------------
234,025
- ---------------------------------------------------------------------------------
CHEMICALS -- 1.1%
650 Du Pont (E.I.) De Nemours 34,491
- ---------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 3.8%
800 Ceridian* 55,850
1,500 Computer Associates International 63,938
- ---------------------------------------------------------------------------------
119,788
- ---------------------------------------------------------------------------------
COMPUTERS & INFORMATION -- 4.3%
1,625 Compaq Computer 68,148
800 Sun Microsystems* 68,500
- ---------------------------------------------------------------------------------
136,648
- ---------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.9%
600 CMS Energy 29,063
- ---------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.9%
625 Thomas & Betts 27,070
- ---------------------------------------------------------------------------------
ELECTRONICS -- 3.6%
700 Intel 82,994
475 Xilinx* 30,934
- ---------------------------------------------------------------------------------
113,928
- ---------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.6%
1,225 Citigroup 60,638
1,025 Federal National Mortgage Association 75,850
850 SLM Holding 40,800
- ---------------------------------------------------------------------------------
177,288
- ---------------------------------------------------------------------------------
FOOD RETAILERS -- 0.9%
800 American Stores 29,550
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 15
15
VALUE PLUS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
FOREST PRODUCTS & PAPER -- 4.4%
1,100 Kimberly-Clark $ 59,950
1,375 Mead 40,305
1,100 Tenneco 37,469
- ---------------------------------------------------------------------------------
137,724
- ---------------------------------------------------------------------------------
HEALTH CARE PROVIDERS -- 3.1%
2,025 HCR Manor Care* 59,484
2,550 Healthsouth* 39,366
- ---------------------------------------------------------------------------------
98,850
- ---------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.4%
325 Applied Materials* 13,873
- ---------------------------------------------------------------------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 5.4%
800 General Electric 81,650
550 Johnson Controls 32,450
1,400 Newell 57,750
- ---------------------------------------------------------------------------------
171,850
- ---------------------------------------------------------------------------------
INSURANCE -- 4.9%
475 Aetna 37,347
900 Equitable Companies 52,088
475 Ohio Casualty 19,534
1,000 Reliastar Financial 46,125
- ---------------------------------------------------------------------------------
155,094
- ---------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 0.5%
800 A.H. Belo, Class A 15,950
- ---------------------------------------------------------------------------------
MEDICAL SUPPLIES -- 1.4%
1,075 Becton Dickinson & Company 45,889
- ---------------------------------------------------------------------------------
OFFICE EQUIPMENT -- 2.6%
700 Xerox 82,597
- ---------------------------------------------------------------------------------
OIL & GAS -- 8.1%
600 Chevron 49,763
1,750 Conoco, Class A* 36,531
875 Mobil 76,234
550 Schlumberger 25,369
2,200 Williams Companies 68,613
- ---------------------------------------------------------------------------------
256,510
- ---------------------------------------------------------------------------------
PHARMACEUTICALS -- 5.3%
950 Abbott Laboratories 46,550
600 Amgen* 62,738
400 Merck 59,075
- ---------------------------------------------------------------------------------
168,363
- ---------------------------------------------------------------------------------
RETAILERS -- 3.6%
1,025 Consolidated Stores* 20,692
875 Federated Department Stores* 38,117
675 Wal-Mart Stores 54,970
- ---------------------------------------------------------------------------------
113,779
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 16
16
Schedule of Investments continued
VALUE PLUS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
TELEPHONE SYSTEMS -- 10.6%
1,375 Alltel $ 82,242
800 Bell Atlantic 45,450
1,875 Frontier 63,750
1,100 MCI Worldcom* 78,925
1,225 SBC Communications 65,691
- ---------------------------------------------------------------------------------
336,058
- ---------------------------------------------------------------------------------
TRANSPORTATION -- 2.3%
675 Trinity Industries 25,988
875 US Freightways 25,484
1,250 Wisconsin Central Transport* 21,484
- ---------------------------------------------------------------------------------
72,956
- ---------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $2,591,965) 2,847,922
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 89.9% (COST $2,591,965)(a) 2,847,922
CASH AND OTHER ASSETS NET OF LIABILITIES -- 10.1% 319,752
- ---------------------------------------------------------------------------------
NET ASSETS -- 100.0% $3,167,674
- ---------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is $2,783,997,
resulting in gross unrealized appreciation and depreciation of $118,237 and
$54,312, respectively, and net unrealized appreciation of $63,925.
The accompanying notes are an integral part of the financial statements.
<PAGE> 17
17
SCHEDULE OF INVESTMENTS
December 31, 1998
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 55.1%
ADVERTISING -- 2.3%
15,100 WPP Group $ 932,425
- --------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.6%
7,000 Lockheed Martin 593,250
11,700 Rockwell International 470,194
- --------------------------------------------------------------------------------------
1,063,444
- --------------------------------------------------------------------------------------
AIRLINES -- 2.1%
14,800 AMR* 878,750
- --------------------------------------------------------------------------------------
AUTOMOTIVE -- 2.2%
27,700 Lucasvarity, ADR 927,950
- --------------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 0.9%
7,916 Diageo, ADR 366,115
- --------------------------------------------------------------------------------------
CHEMICALS -- 2.6%
22,400 Monsanto 1,064,000
- --------------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 2.1%
20,800 Computer Associates International 886,600
- --------------------------------------------------------------------------------------
COMPUTERS & INFORMATION -- 1.1%
11,000 Compaq Computer 461,313
- --------------------------------------------------------------------------------------
ELECTRONICS -- 5.2%
48,900 Adaptec* 858,806
6,500 Avnet 393,250
8,700 Motorola 531,244
3,800 Solectron* 353,163
- --------------------------------------------------------------------------------------
2,136,463
- --------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE -- 1.1%
24,600 Polaroid 459,713
- --------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.2%
15,500 Citigroup 767,250
17,000 Countrywide Credit 853,188
8,300 Federal Home Loan Mortgage Corporation 534,831
- --------------------------------------------------------------------------------------
2,155,269
- --------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS -- 0.9%
14,100 Tenet Healthcare* 370,125
- --------------------------------------------------------------------------------------
INDUSTRIAL -- DIVERSIFIED -- 1.3%
8,900 Armstrong World Industries 536,781
- --------------------------------------------------------------------------------------
INSURANCE -- 3.3%
31,729 Conseco 969,718
10,300 Renaissancere Holdings 377,238
- --------------------------------------------------------------------------------------
1,346,956
- --------------------------------------------------------------------------------------
LODGING -- 1.2%
111,700 Homestead Village Property* 502,650
- --------------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 0.7%
9,300 Reed International, ADR 292,950
- --------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 18
18
Schedule of Investments continued
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
METALS -- 1.3%
26,900 Allegheny Teledyne $ 549,769
- --------------------------------------------------------------------------------------
OIL & GAS -- 2.0%
26,500 Anadarko Petroleum 818,188
- --------------------------------------------------------------------------------------
PHARMACEUTICALS -- 2.6%
26,400 Teva Pharmaceutical Industries, ADR 1,074,150
- --------------------------------------------------------------------------------------
REAL ESTATE -- 5.3%
35,700 Oakwood Homes 542,194
20,500 Prologis Trust, REIT 425,375
88,600 Security Capital Group, Class B* 1,201,638
- --------------------------------------------------------------------------------------
2,169,207
- --------------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 2.6%
11,100 Sprint 933,788
5,550 Sprint PCS* 128,344
- --------------------------------------------------------------------------------------
1,062,132
- --------------------------------------------------------------------------------------
TEXTILES, CLOTHING & FABRICS -- 2.0%
34,200 Shaw Industries 829,350
- --------------------------------------------------------------------------------------
TRANSPORTATION -- 4.5%
35,900 Air Express International 780,825
23,600 Sabre Group Holdings* 1,050,200
- --------------------------------------------------------------------------------------
1,831,025
- --------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $22,629,277) 22,715,325
- --------------------------------------------------------------------------------------
PREFERRED STOCKS -- 1.6%
ENTERTAINMENT & LEISURE -- 1.6%
27,200 News Corporation Limited (The), ADR 671,500
- --------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $692,711) 671,500
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES -- 0.0%
$ 12,718 Merrill Lynch Mortgage Investment 7.65% 01/15/12 $ 12,692
- --------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $13,004) 12,692
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 14.1%
BANKING -- 3.2%
750,000 Associates Corporation of North America 5.75% 11/01/03 755,357
250,000 BB&T 7.25% 06/15/07 271,203
250,000 Chase Manhattan 7.25% 06/01/07 273,322
743 Nykredit 6.00% 10/01/26 117
- --------------------------------------------------------------------------------------------------
1,299,999
- --------------------------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 0.4%
160,000 Coca-Cola Femsa 8.95% 11/01/06 156,295
- --------------------------------------------------------------------------------------------------
CHEMICALS -- 0.2%
100,000 Belo 6.875% 06/01/02 102,841
- --------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 1.0%
400,000 Computer Associates International 6.375% 04/15/05 398,338
- --------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 19
19
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
ELECTRIC UTILITIES -- 2.3%
$ 215,000 Financiera Energy 9.375% 06/15/06 $ 186,085
750,000 Tennessee Valley Authority 5.00% 12/18/03 744,389
- --------------------------------------------------------------------------------------------------
930,474
- --------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.4%
20,000 Access Financial 7.10% 05/15/21 20,641
750,000 AT&T Capital 7.50% 11/15/00 762,500
500,000 GMAC 7.125% 05/01/01 516,626
120,000 Paine Webber Group 7.00% 03/01/00 121,056
- --------------------------------------------------------------------------------------------------
1,420,823
- --------------------------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 1.2%
500,000 CSC Holdings 7.625% 07/15/18 490,300
- --------------------------------------------------------------------------------------------------
METALS -- 0.8%
300,000 AK Steel 9.125% 12/15/06 312,000
- --------------------------------------------------------------------------------------------------
MULTIPLE UTILITIES -- 0.8%
300,000 New Brunswick 7.125% 10/01/02 318,720
- --------------------------------------------------------------------------------------------------
OIL & GAS -- 0.3%
150,000 Petroleos Mexicanos 8.85% 09/15/07 132,000
- --------------------------------------------------------------------------------------------------
RETAILERS -- 0.5%
200,000 Rite Aid 7.125% 01/15/07 213,342
- --------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $5,782,435) 5,775,132
- --------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 6.5%
35,000 Federal National Mortgage Association 6.15% 10/25/07 35,164
500,000 Federal National Mortgage Association 6.00% 05/15/08 527,586
500,000 Federal National Mortgage Association 6.247% 06/25/16 514,270
711,091 Federal National Mortgage Association 6.50% 07/18/28 713,082
40,000 General Electric Capital Mortgage Service 6.50% 11/25/23 39,598
44,500 General Electric Capital Mortgage Service 6.50% 03/25/24 44,797
750,000 Government National Mortgage Association 4.00% 10/20/25 717,007
40,000 Merrill Lynch Mortgage Investment 7.089% 12/26/25 42,684
50,000 Prudential Home Mortgage Securities 6.25% 04/25/24 47,329
- --------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $2,651,506) 2,681,517
- --------------------------------------------------------------------------------------------------
MUNICIPAL BONDS -- 0.4%
40,000 Baltimore Community Development Financing 8.20% 08/15/07 46,379
40,000 New York State Housing Finance Agency Service 7.50% 09/15/03 42,139
50,000 Ohio Housing Financial Agency 7.90% 10/01/14 51,688
30,000 Oklahoma City Airport 9.40% 11/01/10 36,600
- --------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $161,340) 176,806
- --------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT OBLIGATIONS -- 2.3%
BRAZIL -- 0.6%
441,608 Republic of Brazil, Brady Bond 8.00% 04/15/14 263,308
- --------------------------------------------------------------------------------------------------
GREAT BRITAIN -- 0.6%
105,000 United Kingdom Treasury 8.00% 12/07/15 247,810
GBP
- --------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 20
20
Schedule of Investments continued
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
SOUTH AFRICA -- 1.1%
3,180,000 Republic of South Africa 13.00% 08/31/10 $ 458,060
ZAR
- --------------------------------------------------------------------------------------------------
TOTAL SOVEREIGN GOVERNMENT OBLIGATIONS (COST $1,191,790) 969,178
- --------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 15.8%
$1,455,000 U.S. Treasury Bond 6.25% 04/30/01 1,506,373
975,000 U.S. Treasury Bond 7.25% 08/15/22 1,215,399
375,000 U.S. Treasury Bond 6.75% 08/15/26 449,414
1,295,000 U.S. Treasury Note 5.75% 10/31/00 1,319,687
550,000 U.S. Treasury Note 5.625% 05/15/01 563,063
700,000 U.S. Treasury Note 5.75% 08/15/03 730,625
90,000 U.S. Treasury Note 7.25% 08/15/04 101,222
550,000 U.S. Treasury Note 7.00% 07/15/06 626,313
- --------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $6,316,994) 6,512,096
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 95.8% (COST $39,439,057)(a) 39,514,246
CASH AND OTHER ASSETS NET OF LIABILITIES -- 4.2% 1,735,473
- --------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $41,249,719
- --------------------------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$39,477,402, resulting in gross unrealized appreciation and depreciation of
$3,366,548 and $3,329,704, respectively, and net unrealized appreciation of
$36,844.
(b) Interest rate shown reflects current rate on instrument with variable or
floating rates.
ADR -- American Depositary Receipt
Brady Bond -- U.S. dollar denominated bonds of developing countries that were
exchanged, in a restructuring, for commercial bank loans in
default. The bonds are collateralized by U.S. Treasury zero-coupon
bonds to ensure principal.
REIT -- Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
<PAGE> 21
21
SCHEDULE OF INVESTMENTS
December 31, 1998
STANDBY INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES -- 36.1%
$1,005,626 Arcadia Automobile Receivables Trust 5.737% 07/16/01 $ 1,009,528
1,241,652 Auto Finance Group Receivables Trust 6.35% 10/15/02 1,252,206
1,200,000 Capital Asset Research Funding, Class A, 144A 5.905% 12/15/05 1,200,000
1,300,000 Chase Credit Card Master Trust 5.787% 09/15/04 1,300,767
1,000,000 Chase Manhattan Auto Owner Trust 6.00% 12/15/04 1,006,190
1,100,000 MBNA Master Credit Card Trust 5.906% 12/15/05 1,100,110
680,000 Standard Credit Card Master Trust 7.00% 04/07/01 682,338
786,669 Summit Acceptance Auto Trust 7.01% 07/15/02 793,061
1,200,000 UCFC Home Equity Loan 6.105% 04/15/13 1,200,000
- -------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $9,528,090) 9,544,200
- -------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 33.2%
1,300,000 Case 6.20% 01/20/99 1,295,746
650,000 Coca-Cola 5.14% 01/15/99 648,701
800,000 Crown Cork & Seal 5.88% 01/25/99 796,864
700,000 MCI Worldcom 5.70% 01/22/99 697,672
1,300,000 Safeway 5.83% 01/15/99 1,297,053
1,300,000 Service Corporation International 6.00% 02/25/99 1,288,084
700,000 Toyota 5.16% 01/19/99 698,194
1,300,000 Union Pacific Resources 6.27% 01/15/99 1,296,831
780,000 Williams Holdings 6.05% 02/26/99 772,659
- -------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST $8,791,804) 8,791,804
- -------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 15.6%
BANKING -- 8.7%
1,200,000 Banco Latinoamericano 6.70% 10/08/99 1,206,684
1,100,000 MBNA 5.763% 07/07/03 1,091,363
- -------------------------------------------------------------------------------------------------
2,298,047
- -------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 4.2%
1,100,000 Texas Utilities Electric 9.50% 08/01/99 1,118,316
- -------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.7%
700,000 Credit Lyonnais, VR 6.875% 09/19/49 698,250
- -------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $4,129,871) 4,114,613
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 14.4%
2,700,000 Federal Home Loan Bank 4.50% 01/04/99 2,698,986
1,100,000 Federal Home Loan Bank 6.096% 05/13/03 1,105,280
- -------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $3,798,986) 3,804,266
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 99.3% (COST $26,248,751)(a) 26,254,883
CASH AND OTHER ASSETS NET OF LIABILITIES -- 0.7% 195,057
- -------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $26,449,940
- -------------------------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
(a) The aggregate identified cost for federal income tax purposes is
$26,248,751, resulting in gross unrealized appreciation and depreciation of
$28,116 and $21,984, respectively, and net unrealized appreciation of
$6,132.
144A -- Securities restricted for resale to Qualified Institutional Buyers with
registration rights.
VR -- Variable Rate Security -- maturity dates on these type of securities
reflect the next interest rate reset date or, when applicable, the final
maturity date. Interest rate shown reflects current rate.
The accompanying notes are an integral part of the financial statements.
<PAGE> 22
SELECT ADVISORS VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS AND LIABILITIES 22
December 31, 1998
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME VALUE STANDBY
GROWTH EQUITY OPPORTUNITY PLUS BALANCED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(b) PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note
1)(a) $28,754,795 $31,344,325 $32,773,952 $2,847,922 $39,514,246 $26,254,883
Cash 2,264,966 2,547,063 850,528 270,949 1,543,440 --
Foreign currency -- -- -- -- 6,977(c) --
Receivables for:
Investments sold 532,144 -- -- -- 96,357 --
Fund shares sold 9,161 19,279 28,503 -- 43,787 170,190
Dividends 14,735 17,780 -- 3,291 11,589 --
Foreign tax reclaims -- 33,986 -- 17 -- --
Unrealized appreciation on
foreign forward currency
contracts (Note 1) -- -- -- -- 2,329 --
Interest 7,462 7,870 1,015,869 681 233,199 137,737
Deferred organization expenses
(Note 1) 3,467 3,467 3,467 -- 3,467 3,496
Reimbursement receivable from
Sponsor (Note 4) -- -- -- 66,315 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total assets 31,586,730 33,973,770 34,672,319 3,189,175 41,455,391 26,566,306
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Investments purchased 127,890 -- -- -- -- --
Unrealized depreciation on
foreign forward currency
contracts (Note 1) -- -- -- -- 5,657 --
Fund shares redeemed -- -- -- 102 -- --
Due to custodian -- -- -- -- -- 97,164
Payable to Sponsor (Note 4) 168,860 127,391 150,087 -- 175,865 326
Other accrued expenses 26,077 33,353 28,219 21,399 24,150 18,876
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 322,827 160,744 178,306 21,501 205,672 116,366
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:(d) $31,263,903 $33,813,026 $34,494,013 $3,167,674 $41,249,719 $26,449,940
- ------------------------------------------------------------------------------------------------------------------------------
Shares outstanding 2,038,737 2,421,891 3,971,175 311,304 2,955,100 2,642,337
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value $ 15.33 $ 13.96 $ 8.69 $ 10.18 $ 13.96 $ 10.01
- ------------------------------------------------------------------------------------------------------------------------------
(a) Cost of investments $26,231,211 $26,545,659 $37,422,665 $2,591,965 $39,439,057 $26,248,751
</TABLE>
(b) The Portfolio commenced operations on May 1, 1998.
(c) The cost of foreign currency is $6,721.
(d) See the Statements of Changes in Net Assets for components of net assets.
The accompanying notes are an integral part of the financial statements.
<PAGE> 23
SELECT ADVISORS VARIABLE INSURANCE TRUST
23
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME VALUE STANDBY
GROWTH EQUITY OPPORTUNITY PLUS BALANCED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(a) PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1):
Interest $ 133,513 $ 106,869 $ 3,762,184 $ 5,934 $ 957,009 $1,358,522
Dividends (b) 195,612 387,564 -- 16,202 241,554 --
- -----------------------------------------------------------------------------------------------------------------------
Total investment income 329,125 494,433 3,762,184 22,136 1,198,563 1,358,522
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 204,486 270,100 217,105 9,223 267,938 56,841
Custody, administration and fund
accounting fees 93,751 192,611 93,667 64,925 94,507 89,474
Sponsor fees (Note 3) 51,120 56,862 66,800 2,460 66,983 45,472
Auditing fees 17,106 18,626 19,054 15,000 15,048 11,420
Printing Fees 3,355 4,627 6,803 191 6,093 2,783
Legal fees 3,533 3,378 4,708 64 180 2,477
Amortization of organization
expenses (Note 1) 3,906 3,906 3,906 -- 3,906 3,931
Trustee fees (Note 3) 2,545 2,531 3,060 150 2,903 1,993
Miscellaneous 893 2,325 2,608 128 2,913 1,279
- -----------------------------------------------------------------------------------------------------------------------
Total expenses 380,695 554,966 417,711 92,141 460,471 215,670
Waiver of Sponsor fee (Note 3) (51,120) (56,862) (66,800) (2,460) (66,983) (45,472)
Reimbursement from Sponsor
(Note 4) (35,626) (142,709) (67,018) (75,538) (92,075) (56,515)
- -----------------------------------------------------------------------------------------------------------------------
Net expenses 293,949 355,395 283,893 14,143 301,413 113,683
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 35,176 139,038 3,478,291 7,993 897,150 1,244,839
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 993,434 849,718 (4,037,107) (239,885) 1,388,987 12,585
Written Options -- -- 32,130 -- -- --
Foreign currency -- (101,508) -- -- 62,437 --
- -----------------------------------------------------------------------------------------------------------------------
993,434 748,210 (4,004,977) (239,885) 1,451,424 12,585
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation) on:
Investments (296,091) 3,383,197 (4,419,252) 255,957 (1,113,545) 6,334
Written Options -- -- -- -- -- --
Foreign currency -- (1,418) 279 -- (21,020) --
- -----------------------------------------------------------------------------------------------------------------------
(296,091) 3,381,779 (4,418,973) 255,957 (1,134,565) 6,334
- -----------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS): 697,343 4,129,989 (8,423,950) 16,072 316,859 18,919
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 732,519 $4,269,027 $(4,945,659) $ 24,065 $ 1,214,009 $1,263,758
- -----------------------------------------------------------------------------------------------------------------------
(a) Portfolio commenced operations on May 1, 1998
(b) Net of foreign tax withholding $ -- $ 51,814 $ -- $ -- $ 433 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 24
SELECT ADVISORS VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS 24
<TABLE>
<CAPTION>
EMERGING GROWTH INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 35,176 $ 33,227 $ 139,038 $ 101,104
Net realized gain (loss) 993,434 1,327,486 748,210 1,133,852
Net change in unrealized appreciation
(depreciation) (296,091) 2,197,739 3,381,779 577,604
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 732,519 3,558,452 4,269,027 1,812,560
- ------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (49,174) (30,394) (164,384) (70,264)
Realized capital gains (1,035,008) (1,012,609) (845,182) (995,634)
Distribution in excess of net
investment income -- -- (106,570) --
Distribution in excess of realized
capital gains -- -- -- --
Return of capital distributions -- -- -- --
- ------------------------------------------------------------------------------------------------------
Total dividends and distributions (1,084,182) (1,043,003) (1,116,136) (1,065,898)
- ------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from shares sold 13,916,105 12,538,066 12,081,975 10,372,680
Reinvestment of dividends 1,084,183 1,043,003 1,116,136 1,065,898
Cost of shares redeemed (2,801,672) (2,450,901) (2,240,707) (1,240,789)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) from share
transactions 12,198,616 11,130,168 10,957,404 10,197,789
- ------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 11,846,953 13,645,617 14,110,295 10,944,451
- ------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 19,416,950 5,771,333 19,702,731 8,758,280
- ------------------------------------------------------------------------------------------------------
End of period $31,263,903 $19,416,950 $33,813,026 $19,702,731
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $28,584,379 $16,385,765 $29,242,515 $18,285,104
Undistributed (distribution in excess of)
net investment income -- 3,217 (186,882) (56,246)
Accumulated net realized gain (loss) on
investments 155,940 208,293 (39,788) 58,471
Net unrealized appreciation
(depreciation) on investments 2,523,584 2,819,675 4,797,181 1,415,402
- ------------------------------------------------------------------------------------------------------
Net assets applicable to shares
outstanding $31,263,903 $19,416,950 $33,813,026 $19,702,731
- ------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING (NOTE 1):
Shares sold 892,493 892,720 869,535 858,524
Reinvestment of dividends 73,504 69,673 79,724 89,196
- ------------------------------------------------------------------------------------------------------
965,997 962,393 949,259 947,720
Shares redeemed (188,219) (174,447) (168,341) (98,268)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) 777,778 787,946 780,918 849,452
Beginning of period 1,260,959 473,013 1,640,973 791,521
- ------------------------------------------------------------------------------------------------------
End of period 2,038,737 1,260,959 2,421,891 1,640,973
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio commenced operations on May 1, 1998.
The accompanying notes are an integral part of the financial statements.
<PAGE> 25
SELECT ADVISORS VARIABLE INSURANCE TRUST
25
<TABLE>
<CAPTION>
INCOME OPPORTUNITY VALUE PLUS
PORTFOLIO PORTFOLIO
--------------------------- -----------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 3,478,291 $ 1,832,004 $ 7,993
Net realized gain (loss) (4,004,977) 191,074 (239,885)
Net change in unrealized appreciation
(depreciation) (4,418,973) (528,803) 255,957
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (4,945,659) 1,494,275 24,065
- ----------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (3,478,834) (1,814,515) (8,332)
Realized capital gains -- (227,491) --
Distribution in excess of net
investment income -- -- --
Distribution in excess of realized
capital gains -- (496,586) --
Return of capital distributions (96,964) -- --
- ----------------------------------------------------------------------------------------------
Total dividends and distributions (3,575,798) (2,538,592) (8,332)
- ----------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from shares sold 17,222,143 19,127,540 5,347,995
Reinvestment of dividends 3,575,798 2,538,593 8,332
Cost of shares redeemed (4,661,882) (2,010,537) (2,204,386)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) from share
transactions 16,136,059 19,655,596 3,151,941
- ----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 7,614,602 18,611,279 3,167,674
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 26,879,411 8,268,132 --
- ----------------------------------------------------------------------------------------------
End of period $34,494,013 $26,879,411 $ 3,167,674
- ----------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $43,631,963 $27,592,868 $ 3,151,602
Undistributed (distribution in excess of)
net investment income -- 543 --
Accumulated net realized gain (loss) on
investments (4,489,001) (484,024) (239,885)
Net unrealized appreciation
(depreciation) on investments (4,648,949) (229,976) 255,957
- ----------------------------------------------------------------------------------------------
Net assets applicable to shares
outstanding $34,494,013 $26,879,411 $ 3,167,674
- ----------------------------------------------------------------------------------------------
SHARES OUTSTANDING (NOTE 1):
Shares sold 1,636,452 1,651,438 563,284
Reinvestment of dividends 369,671 224,056 852
- ----------------------------------------------------------------------------------------------
2,006,123 1,875,494 564,136
Shares redeemed (474,021) (174,262) (252,832)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) 1,532,102 1,701,232 311,304
Beginning of period 2,439,073 737,841 --
- ----------------------------------------------------------------------------------------------
End of period 3,971,175 2,439,073 311,304
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BALANCED STANDBY INCOME
PORTFOLIO PORTFOLIO
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 897,150 $ 349,650 $ 1,244,839 $ 745,080
Net realized gain (loss) 1,451,424 1,435,996 12,585 (8,448)
Net change in unrealized appreciation
(depreciation) (1,134,565) 475,638 6,334 (382)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,214,009 2,261,284 1,263,758 736,250
- -------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (922,633) (350,429) (1,244,085) (745,079)
Realized capital gains (1,163,140) (1,314,627) -- --
Distribution in excess of net
investment income (10,746) (5,844) -- --
Distribution in excess of realized
capital gains -- -- -- --
Return of capital distributions -- -- -- --
- -------------------------------------------------------------------------------------------------------
Total dividends and distributions (2,096,519) (1,670,900) (1,244,085) (745,079)
- -------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from shares sold 21,290,408 13,559,392 22,250,007 19,020,895
Reinvestment of dividends 2,096,506 1,670,900 1,246,263 743,655
Cost of shares redeemed (3,541,752) (228,301) (14,628,204) (11,298,653)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) from share
transactions 19,845,162 15,001,991 8,868,066 8,465,897
- -------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 18,962,652 15,592,375 8,887,739 8,457,068
- -------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 22,287,067 6,694,692 17,562,201 9,105,133
- -------------------------------------------------------------------------------------------------------
End of period $41,249,719 $22,287,067 $ 26,449,940 $ 17,562,201
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $40,767,171 $20,922,008 $ 26,440,029 $ 17,571,962
Undistributed (distribution in excess of)
net investment income 20,627 14,838 3,709 1,366
Accumulated net realized gain (loss) on
investments 394,283 148,018 70 (10,925)
Net unrealized appreciation
(depreciation) on investments 67,638 1,202,203 6,132 (202)
- -------------------------------------------------------------------------------------------------------
Net assets applicable to shares
outstanding $41,249,719 $22,287,067 $ 26,449,940 $ 17,562,201
- -------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING (NOTE 1):
Shares sold 1,468,902 967,476 2,223,752 1,900,755
Reinvestment of dividends 150,809 120,806 124,567 74,322
- -------------------------------------------------------------------------------------------------------
1,619,711 1,088,282 2,348,319 1,975,077
Shares redeemed (257,510) (16,607) (1,461,706) (1,129,387)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,362,201 1,071,675 886,613 845,690
Beginning of period 1,592,899 521,224 1,755,724 910,034
- -------------------------------------------------------------------------------------------------------
End of period 2,955,100 1,592,899 2,642,337 1,755,724
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
SELECT ADVISORS VARIABLE INSURANCE TRUST
FINANCIAL HIGHLIGHTS 26
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING GROWTH PORTFOLIO
----------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING: FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.40 $ 12.20 $11.27 $10.10 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 0.03 0.04 0.11 0.04
Net realized and unrealized gain (loss) on
investments 0.46 4.06 1.22 1.87 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.48 4.09 1.26 1.98 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.03) (0.03) (0.04) (0.15) --
Realized capital gains (0.52) (0.86) (0.29) (0.66) --
Return of capital -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.55) (0.89) (0.33) (0.81) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.33 $ 15.40 $12.20 $11.27 $10.10
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(c) 3.28% 33.67% 11.16% 19.57% 1.00%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $31,264 $19,417 $5,771 $2,615 $2,020
Ratios to average net assets:
Net expenses 1.15% 1.15% 1.15% 1.15% 1.15%(d)
Net investment income (loss) 0.14% 0.27% 0.50% 1.09% 3.67%(d)
Expenses, without waiver and reimbursement 1.49% 2.19% 3.22% 3.73% 11.08%(d)
Portfolio Turnover 66% 88% 89% 101% 0%
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE BALANCED PORTFOLIO
------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING: FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.99 $ 12.84 $11.48 $10.17 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.35 0.31 0.30 0.32 0.05
Net realized and unrealized gain (loss) on
investments 0.40 2.05 1.60 2.15 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.75 2.36 1.90 2.47 0.17
- ---------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.37) (0.32) (0.30) (0.37) --
Realized capital gains (0.41) (0.89) (0.24) (0.79) --
Return of capital -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.78) (1.21) (0.54) (1.16) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.96 $ 13.99 $12.84 $11.48 $10.17
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(c) 5.44% 18.61% 16.78% 24.56% 1.70%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $41,250 $22,287 $6,695 $2,895 $2,034
Ratios to average net assets:
Net expenses 0.90% 0.90% 0.90% 0.90% 0.90%(d)
Net investment income (loss) 2.67% 2.61% 2.76% 2.87% 4.26%(d)
Expenses, without waiver and reimbursement 1.37% 2.04% 2.72% 3.46% 8.97%(d)
Portfolio Turnover 51% 86% 75% 124% 3%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on November 21, 1994.
(b) The Fund commenced operations on May 1, 1998.
(c) Total return would have been lower had certain expenses not been reimbursed
or waived during the period shown. (Note 4)
(d) Ratios are annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE> 27
SELECT ADVISORS VARIABLE INSURANCE TRUST
27
<TABLE>
<CAPTION>
TOUCHSTONE INTERNATIONAL EQUITY PORTFOLIO
---------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.01 $ 11.07 $10.00 $ 9.51 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.06 0.07 0.06 0.04 --
Net realized and unrealized gain (loss) on
investments 2.37 1.56 1.08 0.48 (0.49)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.43 1.63 1.14 0.52 (0.49)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.10) (0.05) (0.07) (0.03) --
Realized capital gains (0.38) (0.64) -- -- --
Return of capital -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.48) (0.69) (0.07) (0.03) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.96 $ 12.01 $11.07 $10.00 $ 9.51
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(c) 20.21% 14.76% 11.47% 15.45% (4.90)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $33,813 $19,703 $8,758 $5,215 $ 4,757
Ratios to average net assets:
Net expenses 1.25% 1.25% 1.25% 1.25% 1.25%(d)
Net investment income (loss) 0.49% 0.71% 0.86% 0.46% 1.23%(d)
Expenses, without waiver and reimbursement 1.95% 3.19% 3.03% 3.69% 5.58%(d)
Portfolio Turnover 141% 149% 90% 86% 0%
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE INCOME OPPORTUNITY PORTFOLIOTO
------------------------------------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.02 $ 11.21 $10.09
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.02 1.20 1.17
Net realized and unrealized gain (loss) on
investments (2.30) 0.11 1.45
- ------------------------------------------------------------------------------------------------
Total from investment operations (1.28) 1.31 2.62
- ------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (1.02) (1.19) (1.17)
Realized capital gains -- (0.31) (0.33)
Return of capital (0.03) -- --
- ------------------------------------------------------------------------------------------------
Total dividends and distributions (1.05) (1.50) (1.50)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.69 $ 11.02 $11.21
- ------------------------------------------------------------------------------------------------
Total return(c) (12.27)% 12.03% 27.37%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $34,494 $26,879 $8,268
Ratios to average net assets:
Net expenses 0.85% 0.85% 0.85%
Net investment income (loss) 10.40% 10.93% 11.85%
Expenses, without waiver and reimbursement 1.25% 1.72% 2.85%
Portfolio Turnover 175% 189% 213%
</TABLE>
[CAPTION]
<TABLE>
TOUCHSTONE
VALUE PLUS
TOUCHSTONE INCOME OPPORTUNITY PORTFOLIO PORTFOLIO
--------------------------------------- ---------------
FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED(a) PERIOD ENDED(b)
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1998
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.42 $ 10.00 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.22 0.12 0.03
Net realized and unrealized gain (loss) on
investments 0.79 (0.70) 0.18
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.01 (0.58) 0.21
- ----------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (1.34) -- (0.03)
Realized capital gains -- -- --
Return of capital -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (1.34) -- (0.03)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.09 $ 9.42 $ 10.18
- ----------------------------------------------------------------------------------------------------------------------
Total return(c) 23.35% (5.80)% 2.11%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $2,602 $ 1,883 $ 3,168
Ratios to average net assets:
Net expenses 0.85% 0.85%(d) 1.15%(d)
Net investment income (loss) 12.81% 11.24%(d) 0.65%(d)
Expenses, without waiver and reimbursement 3.54% 11.56%(d) 7.49%(d)
Portfolio Turnover 104% 45% 100%
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE STANDBY INCOME PORTFOLIO
---------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.01 $10.02 $10.03 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.55 0.54 0.52 0.56 0.05
Net realized and unrealized gain (loss) on
investments 0.01 (0.01) (0.01) (0.01) 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.56 0.53 0.51 0.55 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.55) (0.54) (0.52) (0.56) (0.05)
Realized capital gains -- -- -- -- --
Return of capital -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.55) (0.54) (0.52) (0.56) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.01 $ 10.00 $10.01 $10.02 $ 10.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(c) 5.71% 5.41% 5.18% 5.90% 0.30%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $26,450 $17,562 $9,105 $5,790 $ 5,013
Ratios to average net assets:
Net expenses 0.50% 0.50% 0.50% 0.50% 0.50%(d)
Net investment income (loss) 5.47% 5.42% 5.15% 5.59% 4.90%(d)
Expenses, without waiver and reimbursement 0.95% 1.48% 1.54% 1.73% 3.67%(d)
Portfolio Turnover 328% 251% 143% 159% 56%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS 28
1. Organization and Significant Accounting Policies
Select Advisors Variable Insurance Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company, and was organized as a Massachusetts business trust on February 7,
1994. The Trust consists of six Portfolios: Emerging Growth Portfolio,
International Equity Portfolio, Income Opportunity Portfolio, Value Plus
Portfolio, Balanced Portfolio and Standby Income Portfolio ("Portfolios").
The Declaration of Trust permits the Trust to issue an unlimited number of
shares of beneficial interest. The Trust offers shares of beneficial interest of
each portfolio to separate accounts of Western-Southern Life Assurance Company
("Western-Southern") as a funding vehicle for certain variable annuity contracts
issued by Western-Southern through the separate accounts.
As of December 31, 1998, Touchstone Advisors, Inc., a subsidiary of
Western-Southern, and Western-Southern owned 100% of the outstanding shares of
the Trust.
The accounting policies are in conformity with generally accepted accounting
principles ("GAAP") for investment companies. The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the related amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of the significant accounting policies of the
Portfolios:
INVESTMENT VALUATION. Securities for which market quotations are readily
available are valued at 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 quoted in foreign currencies are translated into U.S. Dollars at the
current exchange rate. 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 good faith in accordance with procedures established by the Trustees
using 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 debt securities with a remaining maturity of less than 60
days are valued at amortized cost, which approximates market.
<PAGE> 29
SELECT ADVISORS VARIABLE INSURANCE TRUST
29
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 currency 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 statements 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.
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date except
that certain dividends from foreign securities where the ex-dividend date has
passed are recorded upon notification 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.
DIVIDENDS AND DISTRIBUTIONS. Distributions to shareholders for the Emerging
Growth Portfolio, International Equity Portfolio, Balanced Portfolio, Income
Opportunity Portfolio, and Value Plus 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 GAAP. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to paid in capital. These differences which may result in
distribution reclassifications are primarily due to differing treatments for
foreign currency transactions, passive foreign investment companies (PFIC), and
losses deferred due to wash sales, paydown gains and losses on certain
securities and excise tax regulations. Undistributed net investment income and
accumulated net realized gains and losses may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
<PAGE> 30
SELECT ADVISORS VARIABLE INSURANCE TRUST
30
Notes to Financial Statements continued
FEDERAL TAXES. Each Portfolio of the Trust is treated as a separate 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. At
December 31, 1998, the following Portfolios had a capital loss carryforward
expiring in December 2006:
<TABLE>
<S> <C>
Income Opportunity Portfolio $3,801,099
Value Plus Portfolio $ 30,846
- --------------------------------------------------------------------------
</TABLE>
Additionally, at December 31, 1998, the International Equity Portfolio had a net
currency loss of $46 and the following Portfolios had net capital losses, as
specified below, attributable to security transactions incurred after October
31, 1998, which are treated as arising on the first day of the Portfolio's next
taxable year.
<TABLE>
<S> <C>
Income Opportunity Portfolio $646,621
Value Plus Portfolio $ 17,007
- ------------------------------------------------------------------------
</TABLE>
WRITTEN OPTION. Each Portfolio may enter into written option agreements. The
premium received for a written option is recorded as an asset with an equivalent
liability. The liability is marked-to-market based on the option's quoted daily
settlement price. When an option expires or the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security
and the liability related to such option is eliminated. When a written call
option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the Fund
purchased.
FORWARD FOREIGN 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 foreign
currency contract is an agreement to buy or sell currencies of different
countries on a specified future date at a specified rate.
<PAGE> 31
SELECT ADVISORS VARIABLE INSURANCE TRUST
31
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 Trust
and the change in the market value is recorded by the Portfolios as unrealized
appreciation or depreciation of forward foreign currency contracts. As of
December 31, 1998, the following Portfolio had the following open forward
foreign currency contracts:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION/
PORTFOLIO NAME MATURITY DELIVER/RECEIVE FOR VALUE DEPRECIATION
<S> <C> <C> <C> <C> <C>
Balanced Portfolio
Sales 3/22/99 GBP 117,800 $197,433 $195,104 $ 2,329
1/11/99 ZAR 2,321,000 388,384 394,041 (5,657)
------------------------------------------------------------------------------------------
$(3,328)
------------------------------------------------------------------------------------------
</TABLE>
GBP -- Great British Pound
ZAR -- South African Rand
ORGANIZATION EXPENSE. Organization expenses were deferred and are being
amortized by each Portfolio except the Value Plus Portfolio, on a straight-line
basis over a five-year period from commencement of operations. 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.
REPURCHASE AGREEMENTS. Each Portfolio 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 Trust's Board of Trustees. The Portfolio, through its
custodian, receives as collateral, delivery of the underlying securities, whose
market value is required to be at least 102% of the resale price at the time of
purchase. The resale price reflects the purchase price plus an agreed upon rate
of interest. In the event of counterparty default the Portfolio has the right to
use the collateral to offset losses incurred.
SECURITIES TRANSACTIONS. 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.
<PAGE> 32
SELECT ADVISORS VARIABLE INSURANCE TRUST
32
Notes to Financial Statements continued
2. Risks Associated with Foreign Investments
Some of the Portfolios may invest in the securities of foreign issuers.
Investing in securities issued by companies whose principal business activities
are outside the U.S. may involve significant risks not present in domestic
investments. For example, there is generally less publicly available information
about foreign companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Portfolio, political or financial instability or diplomatic
and other developments which could affect such investments. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the U.S., and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the U.S.
3. Transactions with Affiliates
SPONSOR. Touchstone Advisors, Inc. ("Sponsor" or "Advisor"), 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. The Sponsor reserves the
right to receive a sponsor fee from each Portfolio on an annual basis up to
0.20% of average daily net assets of that Portfolio. The Sponsor Agreement may
be terminated by the Sponsor or by the Trust on not less than 30 days prior
written notice.
INVESTMENT ADVISOR. The Trust also has an investment advisory agreement with the
Sponsor. Under the terms of the investment advisory agreement, each Portfolio
pays a fee that is computed daily and paid monthly. For the period ended
December 31, 1998, each Portfolio incurred 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 VALUE STANDBY
GROWTH EQUITY OPPORTUNITY PLUS BALANCED INCOME
<S> <C> <C> <C> <C> <C> <C>
Rate 0.80% 0.95% 0.65% 0.75% 0.80% 0.25%
- ------------------------------------------------------------------------------------------------
</TABLE>
Subject to review and approval by the Board of Trustees, the Advisor may enter
into certain sub-advisory agreements for the investment advisory services in
connection with the management of each of the Portfolios. The Advisor pays each
sub-advisor a fee for services provided using an annual rate, as specified
below, that is computed daily and paid monthly based on
<PAGE> 33
SELECT ADVISORS VARIABLE INSURANCE TRUST
33
average daily net assets. As of December 31, 1998, the following sub-advisory
agreements were in place:
<TABLE>
<S> <C>
EMERGING GROWTH PORTFOLIO
David L. Babson & Company, Inc......... 0.05%
Westfield Capital Management Company... 0.45% on the first $10 million
0.40% on the next $40 million
0.35% thereafter
INTERNATIONAL EQUITY PORTFOLIO
Credit Suisse Asset Management......... 0.85% on the first $30 million
0.80% on the next $20 million
0.70% on the next $20 million
0.60% thereafter
INCOME OPPORTUNITY PORTFOLIO
Alliance Capital Management LP......... 0.40% on the first $50 million
0.35% on the next $20 million
0.30% on the next $20 million
0.25% thereafter
VALUE PLUS PORTFOLIO
Fort Washington Investment Advisors, 0.45%
Inc..................................
BALANCED PORTFOLIO
OpCap Advisors 0.60% on the first $20 million*
0.50% on the next $30 million*
0.40% thereafter*
STANDBY INCOME PORTFOLIO
Fort Washington Investment Advisors, 0.15%
Inc..................................
</TABLE>
* Includes assets of the Balanced Portfolio of the Select Advisors Variable
Insurance Trust and the Balanced Portfolio of the Select Advisors Portfolio,
(for which OpCap Advisors also acts in an investment advisory capacity).
Fort Washington Investment Advisors, Inc., is an affiliate of the Sponsor.
TRUSTEES. Each Trustee who is not an "interested person," (as defined in the
Act), of the Trust, receives an aggregate of $5,000 annually, plus $1,000 per
meeting attended, as well as reimbursement for reasonable out-of-pocket
expenses, from the Trust and from Select Advisors Trust A, Select Advisors Trust
C, and Select Advisors Portfolios, which are included in separate reports. For
the year ended December 31, 1998, the Trust incurred $13,182 in Trustee fees.
4. Expense Reimbursements
The Sponsor has agreed to waive fees and reimburse each Portfolio so that,
following such waiver of fees and reimbursement, the aggregate total operating
expenses (excluding interest, taxes, brokerage commissions and extraordinary
expenses) of each Portfolio are not greater, on an annualized
<PAGE> 34
SELECT ADVISORS VARIABLE INSURANCE TRUST
34
Notes to Financial Statements continued
basis, than the percentage of average daily net assets of the Portfolio listed
below.
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME VALUE STANDBY
GROWTH EQUITY OPPORTUNITY PLUS BALANCED INCOME
<S> <C> <C> <C> <C> <C> <C>
Voluntary expense limit 1.15% 1.25% 0.85% 1.15% 0.90% 0.50%
Amount of Reimbursement $35,626 $142,709 $67,018 $75,538 $92,075 $56,515
- ------------------------------------------------------------------------------------------------
</TABLE>
The Sponsor has advised the Trust that it will continue to waive fees and
reimburse each Portfolio as described above through December 31, 1999.
5. Purchases and Sales of Investment Securities
Investment transactions (excluding purchases and sales of U.S. government
obligations, U.S. government agency obligations and short-term investments) for
the year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME VALUE STANDBY
GROWTH EQUITY OPPORTUNITY PLUS BALANCED INCOME
<S> <C> <C> <C> <C> <C> <C>
Cost of purchases $26,777,375 $45,292,886 $70,328,057 $4,707,578 $25,718,908 $22,928,829
Proceeds from sales $15,120,406 $37,064,146 $55,046,123 $1,875,695 $11,926,313 $13,813,076
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Purchase and sales of U.S. government obligations for the year ended December
31, 1998 were as follows:
<TABLE>
<CAPTION>
STANDBY
BALANCED INCOME
<S> <C> <C>
Cost of purchases $8,495,669 $ 8,774,275
Proceeds from sales $4,337,484 $ 7,668,650
- ----------------------------------------------------------------------------------
</TABLE>
6. Written Options
The Income Opportunity Portfolio's activity in written options during year ended
December 31, 1998, was as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONTRACTS
(000'S OMITTED) PREMIUMS
<S> <C> <C>
Options Outstanding at December 31, 1997 -- $ --
Options Written 2,550 32,130
Options Canceled in Closing Transactions (2,550) --
- --------------------------------------------------------------------------------------
Options Outstanding at December 31, 1998 -- $32,130
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 35
SELECT ADVISORS VARIABLE INSURANCE TRUST
35
7. Subsequent Event
Effective immediately after the close of business on December 31, 1998, two new
portfolios, namely Touchstone Growth & Income Fund and Touchstone Bond Fund were
established in the Select Advisors Variable Insurance Trust. Effective after the
close of business on December 31, 1998, Select Advisors Variable Insurance Trust
was renamed Touchstone Variable Series Trust ("VST"). The shares of the newly
established VST: Touchstone Growth & Income Fund and VST: Touchstone Bond Fund,
(collectively "VST Funds") were substituted for shares of the Select Advisors
Portfolios: Growth & Income Portfolio II and the Select Advisors Portfolios:
Bond Portfolio II respectively, (collectively "SAP Funds") held by Western-
Southern Life Assurance Company Separate Account 1 and Separate Account 2 and
The Western and Southern Life Insurance Company Separate Account A. This
transaction was achieved through an in-kind redemption from the SAP Funds and a
corresponding in-kind contribution to the VST Funds of the net assets of the SAP
Funds. As a result of this transaction, the SAP Funds ceased to be available as
investment options for Separate Accounts 1, 2 and A. The VST Funds have
substantially identical investment objectives, policies and risk as those of the
respective SAP Funds. In addition, the VST Funds will employ the same investment
advisor and investment techniques as those employed by the respective SAP Funds.
The SAP Funds will be dissolved and terminated as soon as practicable.
Federal Tax Information (unaudited)
For corporate shareholders, a portion of the ordinary dividends paid during the
Portfolio's year ended December 31, 1998 qualified for the dividends received
deduction, as follows:
<TABLE>
<S> <C>
Emerging Growth Portfolio 100%
Balanced Portfolio 18%
-------------------------------------------------------------------
</TABLE>
Pursuant to Section 852 of the Internal Revenue Code, the Portfolios designated
the following capital gain dividends for the year ended December 31, 1998:
<TABLE>
<CAPTION>
LONG TERM CAPITAL GAINS
DISTRIBUTIONS PER SHARE CAPITAL GAIN DIVIDENDS
<S> <C> <C>
Emerging Growth Portfolio $0.513 $1,005,881
International Equity Portfolio 0.309 772,132
Balanced Portfolio 0.148 420,115
--------------------------------------------------------------------------------------
</TABLE>
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS
REPORT OF INDEPENDENT ACCOUNTANTS 36
To Investors and Trustees of
the Select Advisors Variable Insurance Trust:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and financial highlights present fairly, in all material
respects, the financial position of Touchstone Emerging Growth Portfolio,
Touchstone International Equity Portfolio, Touchstone Income Opportunity
Portfolio, Touchstone Value Plus Portfolio, Touchstone Balanced Portfolio and
Touchstone Standby Income Portfolio, (the "Funds") at December 31, 1998, the
results of their operations, the changes in their net assets and their financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
