<PAGE>
[LOGO]
T O U C H S T O N E
-------------------------------------------------------
TOUCHSTONE VARIABLE ANNUITY
( EMERGING GROWTH
( INTERNATIONAL EQUITY
( GROWTH & INCOME
( BALANCED
( INCOME OPPORTUNITY
( BOND
( STANDBY INCOME
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1996
<PAGE>
THIS BOOKLET CONTAINS THE SEMIANNUAL REPORTS WHICH REFLECT THE RESULTS OF THE
TOUCHSTONE VARIABLE ANNUITY, A FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE
ANNUITY CONTRACT, ISSUED BY WESTERN-SOUTHERN LIFE ASSURANCE COMPANY
("WESTERN-SOUTHERN"). INCLUDED IN THIS BOOKLET ARE THE SEMIANNUAL REPORTS FOR
WESTERN-SOUTHERN'S SEPARATE ACCOUNT 1 AND THE INVESTMENT PORTFOLIOS UNDERLYING
THE TOUCHSTONE VARIABLE ANNUITY. THESE SEMIANNUAL REPORTS ARE BOUND TOGETHER FOR
YOUR CONVENIENCE.
1
<PAGE>
Dear Fellow Contract Owner:
After posting many excellent gains through year-end and well into January,
the stock market has, as of this writing, contracted a case of the jitters. An
important contributor has been uncertainty about the direction of interest rates
with a growing bias toward the upside. The financial markets thought they
noticed signs of vigor in the overall economy and were increasingly concerned
about the effect rising commodity prices might have on future inflation. Gross
domestic product, which measures our economy's momentum, gained strength.
Despite some instability in equity prices, dips in the market have remained
modest by historical standards. Although market buoyancy can cause sleeplessness
for some investors, it can also afford opportunities that can add value to our
funds.
The economy is growing and inflation appears to be in check, which is an
encouraging climate for financial markets. Stocks should continue to provide
decent returns for investors with a long-term perspective, but it is important
to remember that the financial markets do not often go straight up as they did
in 1995. As of this date, it is difficult to tell if the market correction has
run its course. However, good markets never continue forever without some
unexpected, temporary interruption.
On July 1st we launched our new Internet Web site at
"WWW.TOUCHSTONEFUNDS.COM" to help keep Touchstone shareholders, contract owners,
investment professionals and potential investors better informed. With the click
of a mouse, Internet users can explore specific Touchstone mutual fund or
variable annuity products (including prices), read about portfolio managers, and
even begin to create hypothetical investment strategies and model portfolios.
The site also allows users to become familiar with Touchstone through reprints
of news articles from major financial publications.
Providing easy-to-use navigation tools, quick-loading graphics and valuable
information, the site incorporates the best aspects of a Web site. Touchstone
believes that technology is a valuable tool for our clients, and a Web site is a
natural tool for Touchstone to create to ensure we our meeting our clients'
needs.
Thank you for your continued confidence and investment in the Touchstone
Family of Funds and Variable Annuities.
Sincerely,
/s/ EDWARD G. HARNESS
Edward G. Harness
President and Chief Executive Officer
Touchstone Family of Funds
2
<PAGE>
[LOGO]
T O U C H S T O N E
-------------------------------------------------------
WESTERN-SOUTHERN LIFE
ASSURANCE COMPANY
-------------------------------------------------------
SEPARATE ACCOUNT 1
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1996
<PAGE>
TOUCHSTONE EMERGING GROWTH SUB-ACCOUNT
Over the course of the six months ended June 30, 1996, several investment
management strategies and techniques materially affected Touchstone Emerging
Growth Sub-Account's performance. Small capitalization stocks, as measured by
the Russell 2000, rose 10.4% while the total return (net of fees and expenses,
but excluding surrender charges) for the Touchstone Emerging Growth Sub-Account
was 9.1%.
As the value-style manager of the Touchstone Emerging Growth Portfolio, David L.
Babson's value oriented expertise yielded solid performance during the very
strong growth market that occurred in the first half of 1996. While several of
their holdings fell temporarily out of favor with Wall Street, Babson still
liked the fundamentals of these stories and has used these opportunities to add
to their positions. Babson believed the portfolio was well positioned should the
market experience any slow down or correction.
As the growth-style manager of the Touchstone Emerging Growth Portfolio,
Westfield Capital Management continued to find companies with good growth
prospects selling at less than one times their growth rate. Their emphasis on
growth stocks has been consistent with their long held belief that over the
longer term emerging growth stocks outperform their larger cap counterparts.
Current market conditions have enabled Westfield to buy high quality growth
stocks of individual companies that are still at reasonable valuations.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOUCHSTONE VARIABLE RUSSELL 2000 CDA/WIESENBERGER
ANNUITY EMERGING INDEX SMALL COMPANY
GROWTH SUB-ACCOUNT GROWTH AVG. - VA
<S> <C> <C> <C>
2/95 10,000 10,000 10,000
3/95 10,076 10,171 10,213
4/95 10,193 10,397 10,342
5/95 10,239 10,577 10,498
6/95 10,675 11,125 11,185
7/95 11,401 11,766 12,080
8/95 11,553 12,010 12,285
9/95 11,579 12,224 12,568
10/95 11,031 11,677 12,166
11/95 11,669 12,167 12,491
12/95 11,666 12,488 12,540
1/96 11,508 12,475 12,536
2/96 11,981 12,864 13,038
3/96 12,205 13,125 13,248
4/96 12,677 13,828 14,134
5/96 13,093 14,373 14,640
6/96 12,730 13,782 14,071
Total Return
Six Months Ended
6/30/96 (unaudited) 9.10%
Inception to
6/30/96 (unaudited) 27.50%
</TABLE>
Past performance is not predictive of future performance
TOUCHSTONE INTERNATIONAL EQUITY SUB-ACCOUNT
Over the course of the six months ended June 30, 1996, several investment
management strategies and techniques materially affected the Touchstone
International Equity Sub-Account's performance. International equity stocks, as
measured by the MSCI EAFE Index, rose 4.7% while the total return (net of fees
and expenses, but excluding surrender charges) for the Touchstone International
Equity Sub-Account was 7.9%.
As the international equity manager of the Touchstone International Equity
Portfolio, BEA Associates attributes the Portfolio's performance to two factors:
(1) strong stock selection in Europe, especially in France, Italy, Sweden and
the United Kingdom, and (2) the allocation of fund assets to emerging markets
such as Latin America and Israel.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOUCHSTONE VARIABLE MSCI CDA/WIESENBERGER
ANNUITY INTERNATIONAL
INTERNATIONAL EAFE EQUITY
EQUITY SUB-ACCOUNT INDEX AVG. - VA
<S> <C> <C> <C>
2/95 10,000 10,000 10,000
3/95 10,410 10,626 10,241
4/95 10,820 11,029 10,563
5/95 10,955 10,900 10,728
6/95 10,829 10,711 10,780
7/95 11,361 11,382 11,310
8/95 11,167 10,950 11,133
9/95 11,280 11,167 11,289
10/95 10,894 10,869 11,047
11/95 10,983 11,174 11,138
12/95 11,310 11,628 11,454
1/96 11,748 11,679 11,792
2/96 11,724 11,721 11,867
3/96 11,971 11,973 12,053
4/96 12,206 12,324 12,453
5/96 12,112 12,100 12,488
6/96 12,201 12,171 12,552
Total Return
Six Months Ended
6/30/96 (unaudited) 7.90%
Inception to
6/30/96 (unaudited) 21.20%
</TABLE>
Past performance is not predictive of future performance
4
<PAGE>
TOUCHSTONE GROWTH & INCOME SUB-ACCOUNT
Over the course of the six months ended June 30, 1996, several investment
management strategies and techniques materially affected the Touchstone Growth &
Income Sub-Account's performance. Growth & Income stocks, as measured by the S&P
500 Index, rose 10.1% while the total return (net of fees and expenses, but
excluding surrender charges) for the Touchstone Growth & Income Sub-Account was
9.1%.
As the growth and income manager of the Touchstone Growth & Income Portfolio II,
Fort Washington Investment Advisors continued to employ a strategy of staying
fully invested in a highly diversified portfolio. The stock picking emphasis was
on out-of-favor stocks with stable to improving fundamentals. Throughout the
semiannual period, the portfolio consisted primarily of large capitalization
stocks, but also contained some representation of mid and small capitalization
stocks that met their out-of-favor screen. Areas of emphasis were (1) financial
services, which were thought to have attractive valuations, good dividend
support and good earnings prospects relative to the market, (2) health care,
which was out-of-favor as investors focused on more economically sensitive
issues, and (3) restructuring companies with significant stock buyback plans.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOUCHSTONE VARIABLE S&P 500 CDA/WIESENBERGER
ANNUITY GROWTH & INCOME INDEX GROWTH & CURRENT
SUB-ACCOUNT INCOME AVG. - VA
<S> <C> <C> <C>
2/95 10,000 10,000 10,000
3/95 10,233 10,296 10,263
4/95 10,402 10,607 10,518
5/95 10,780 11,015 10,848
6/95 10,978 11,273 11,092
7/95 11,370 11,653 11,448
8/95 11,475 11,671 11,523
9/95 11,792 12,162 11,872
10/95 11,694 12,125 11,780
11/95 12,153 12,648 12,221
12/95 12,468 12,893 12,421
1/96 12,923 13,337 12,733
2/96 13,151 13,455 12,854
3/96 13,319 13,586 12,975
4/96 13,583 13,793 13,124
5/96 13,856 14,133 13,357
6/96 13,599 14,190 13,353
Total Return
Six Months Ended
6/30/96 (unaudited) 9.10%
Inception to
6/30/96 (unaudited) 36.20%
</TABLE>
Past performance is not predictive of future performance
TOUCHSTONE BALANCED SUB-ACCOUNT
Over the course of the six months ended June 30, 1996, several investment
management strategies and techniques materially affected the Touchstone Balanced
Sub-Account's performance. Growth and value stocks, as measured by the S&P 500
Index, rose 10.1% and government and corporate bonds, as measured by the Lehman
Brothers Government/Corporate Index declined 1.9% while the total return (net of
fees and expenses, but excluding surrender charges) for the Touchstone Balanced
Sub-Account was 4.1%.
As the core equity manager of the Touchstone Balanced Portfolio, Harbor Capital
Management continued to focus on the technology and financial sectors. In both
sectors the largest holdings have been in high-quality, multi-national market
leader growth companies such as Intel and Microsoft and value stocks such as
Citicorp, Chase Manhattan and Travelers.
As the fixed income manager of the Touchstone Balanced Portfolio, Morgan
Grenfell Capital Management remained focused on issue selection, believing this
to be the best way to consistently add value in the fixed income markets over
time. The portfolio was well diversified among sectors, issues and maturities
and was comprised of high quality securities that Morgan Grenfell believed
offered superior total return prospects over a variety of market scenarios.
Their holdings were in well structured mortgage-backed securities that have
particularly benefited during this semiannual period of rising interest rates.
Morgan Grenfell continued to favor taxable municipal bonds over generic
corporate issues, believing that they offer superior return prospects.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOUCHSTONE VARIABLE S&P 500 LEHMAN BROTHERS CDA/WIESENBERGER
ANNUITY BALANCED INDEX GOVERNMENT/ BALANCED
SUB-ACCOUNT CORPORATE INDEX AVG. - VA
<S> <C> <C> <C> <C>
2/95 10,000 10,000 10,000 10,000
3/95 10,255 10,296 10,067 10,179
4/95 10,486 10,607 10,207 10,338
5/95 10,846 11,015 10,635 10,654
6/95 11,228 11,273 10,720 10,867
7/95 11,514 11,653 10,678 11,118
8/95 11,674 11,671 10,815 11,204
9/95 11,884 12,162 10,925 11,419
10/95 11,559 12,125 11,085 11,363
11/95 11,934 12,648 11,268 11,665
12/95 11,931 12,893 11,434 11,803
1/96 12,249 13,337 11,506 12,007
2/96 12,277 13,455 11,261 12,029
3/96 12,306 13,586 11,167 12,055
4/96 12,282 13,793 11,090 12,152
5/96 12,412 14,133 11,071 12,276
6/96 12,420 14,190 11,219 12,278
Total Return
Six Months Ended
6/30/96 (unaudited) 4.10%
Inception to
6/30/96 (unaudited) 24.50%
</TABLE>
Past performance is not predictive of future performance
5
<PAGE>
TOUCHSTONE INCOME OPPORTUNITY SUB-ACCOUNT
Over the course of the six months ended June 30, 1996, several investment
management strategies and techniques materially affected the Touchstone Income
Opportunity Sub-Account's performance. Corporate high yield bonds, as measured
by the CDA/ Wiesenberger Corporate High Yield Variable Annuity Average, rose
4.4%; international bonds, as measured by the CDA/Wiesenberger International
Bond Variable Annuity Average rose 1.1% while corporate bonds in general, as
measured by the Lehman Brothers Corporate Bond Index, declined 2.1%. Total
return (net of fees and expenses, but excluding surrender charges) for the
Touchstone Income Opportunity Sub-Account was 11.6%.
As the manager of the Touchstone Income Opportunity Portfolio, Alliance Capital
Management continued to concentrate its investment activity on U.S. high yield
bonds, emerging markets "Brady" bonds and emerging markets corporate debt during
the first half of 1996. However, investments in U.S. high yield corporate bonds
were increased at the expense of emerging markets corporate debt as the yield to
maturity differential between the two asset classes declined significantly. In a
related move, emerging markets sovereign debt was emphasized at the expense of
emerging markets corporate debt due to continued spread tightening.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOUCHSTONE VARIABLE LEHMAN BROTHERS CDA/WIESENBERGER CDA/WIESENBERGER
ANNUITY INCOME CORPORATE BOND INTERNATIONAL BOND CORPORATE HIGH
OPPORTUNITY SUB-ACCOUNT INDEX AVG. - VA YIELD AVG. - VA
<S> <C> <C> <C> <C>
2/95 10,000 10,000 10,000 10,000
3/95 9,771 10,082 10,222 10,087
4/95 10,513 10,251 10,474 10,350
5/95 11,098 10,734 10,742 10,601
6/95 11,237 10,831 10,763 10,630
7/95 11,447 10,784 10,830 10,807
8/95 11,670 10,830 10,755 10,843
9/95 11,909 11,087 10,924 10,976
10/95 12,039 11,231 11,007 11,080
11/95 12,111 11,446 11,129 11,155
12/95 12,504 11,635 11,296 11,309
1/96 13,350 11,710 11,366 11,548
2/96 13,023 11,432 11,222 11,641
3/96 13,173 11,334 11,228 11,588
4/96 13,591 11,241 11,319 11,675
5/96 13,714 11,221 11,360 11,774
6/96 13,957 11,386 11,424 11,805
Total Return
Six Months Ended
6/30/96 (unaudited) 11.60%
Inception to
6/30/96 (unaudited) 39.70%
</TABLE>
Past performance is not predictive of future performance
TOUCHSTONE BOND SUB-ACCOUNT
Over the course of the six months ended June 30, 1996, several investment
management strategies and techniques materially affected the Touchstone Bond
Sub-Account's performance. Corporate bonds, as measured by the Lehman Brothers
Aggregate Index, declined 1.2% while the return of the CDA/ Wiesenberger
Corporate Bond Variable Annuity Average declined 1.4%. Total return (net of fees
and expenses, but excluding surrender charges) for the Touchstone Bond
Sub-Account was (2.6%).
As the core fixed income manager of the Touchstone Bond Portfolio II, Fort
Washington Investment Advisors continued its strategy of maintaining a very high
quality portfolio with a bias towards high current yield. In order to create
this defensive posture within the portfolio, high grade corporate and asset
backed securities continued to be over-weighted versus the index. Maturities
were concentrated in the intermediate part of the yield curve, and the portfolio
continued to be fully invested with cash levels of approximately 5%.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOUCHSTONE VARIABLE LEHMAN BROTHERS CDA/WIESENBERGER
ANNUITY BOND AGGREGATE CORPORATE BOND
SUB-ACCOUNT INDEX AVG. - VA
<S> <C> <C> <C>
2/95 10,000 10,000 10,000
3/95 10,008 10,061 10,063
4/95 10,168 10,201 10,193
5/95 10,551 10,596 10,561
6/95 10,622 10,675 10,631
7/95 10,563 10,651 10,592
8/95 10,680 10,779 10,700
9/95 10,767 10,884 10,794
10/95 10,905 11,025 10,919
11/95 11,054 11,191 11,068
12/95 11,195 11,347 11,212
1/96 11,254 11,423 11,283
2/96 11,016 11,224 11,093
3/96 10,909 11,146 11,015
4/96 10,862 11,084 10,963
5/96 10,803 11,061 10,951
6/96 10,907 11,210 11,053
Total Return
Six Months Ended
6/30/96 (unaudited) -2.60%
Inception to
6/30/96 (unaudited) 9.70%
</TABLE>
Past performance is not predictive of future performance
6
<PAGE>
TOUCHSTONE STANDBY INCOME SUB-ACCOUNT
Over the course of the six months ended June 30, 1996, several investment
management strategies and techniques materially affected the Touchstone Standby
Income Sub-Account's performance. Cash equivalents, as measured by the Merrill
Lynch 91-Day Treasury Index, rose 2.5% while the return of the IBC Donoghue
Money Market Index rose equally by 2.5%. Total return (net of fees and expenses,
but excluding surrender charges) for the Touchstone Standby Income Sub-Account
was 1.8%.
As the ultra-short fixed income manager of the Touchstone Standby Income
Portfolio, Fort Washington Investment Advisors maintained its core strategy
throughout the semiannual period. In response to rising interest rates, Fort
Washington cut the average duration of its holdings from 0.5 years to 0.2 years.
This shortening was accomplished by selling longer dated corporate and asset
backed securities and rotating into the commercial paper sector. This strategy
protected principal, made the portfolio more liquid and allowed Fort Washington
to reinvest at higher rates as they became available.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOUCHSTONE VARIABLE MERRILL LYNCH IBC DONOGHUE CDA/WIESENBERGER
ANNUITY STANDBY INCOME 91-DAY TREASURY MONEY MARKET MONEY MARKET
SUB-ACCOUNT INDEX INDEX AVG. - VA
<S> <C> <C> <C> <C>
2/95 10,000 10,000 10,000 10,000
3/95 10,047 10,051 10,046 10,038
4/95 10,062 10,097 10,092 10,073
5/95 10,072 10,150 10,138 10,111
6/95 10,109 10,201 10,185 10,148
7/95 10,135 10,250 10,231 10,184
8/95 10,170 10,302 10,276 10,220
9/95 10,184 10,347 10,321 10,252
10/95 10,232 10,395 10,366 10,288
11/95 10,266 10,442 10,411 10,322
12/95 10,311 10,499 10,457 10,356
1/96 10,358 10,547 10,501 10,393
2/96 10,379 10,589 10,544 10,423
3/96 10,400 10,628 10,586 10,454
4/96 10,430 10,673 10,628 10,486
5/96 10,467 10,721 10,670 10,520
6/96 10,498 10,765 10,712 10,550
Total Return
Six Months Ended
6/30/96 (unaudited) 1.80%
Inception to
6/30/96 (unaudited) 5.10%
</TABLE>
Past performance is not predictive of future performance
- --------------------------------------------------------------------------------
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT 1
STATEMENT OF NET ASSETS
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at current market value:
Select Advisors Variable Insurance Trust
Emerging Growth Portfolio (70,233 shares, cost $846,208) $ 869,485
International Equity Portfolio (88,525 shares, cost $927,151) 961,380
Balanced Portfolio (105,619 shares, cost $1,261,700) 1,254,759
Income Opportunity Portfolio (116,628 shares, cost
$1,220,501) 1,257,246
Standby Income Portfolio (99,315 shares, cost $994,794) 994,144
Select Advisors Portfolios
Growth & Income Portfolio II (11.510384% beneficial interest
$1,862,298) 1,934,764
Bond Portfolio II (8.559391% beneficial interest $1,088,612) 1,101,212
----------
Total assets 8,372,990
----------
LIABILITIES:
Accounts payable 72
----------
Total net assets $8,372,918
----------
----------
NET ASSETS:
Variable annuity contracts 8,372,053
Retained in the variable account by Western-Southern Life
Assurance Company 865
----------
Total net assets $8,372,918
----------
----------
</TABLE>
7
<PAGE>
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT 1
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD FROM JANUARY 1, 1996 TO JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY GROWTH &
GROWTH EQUITY BALANCED OPPORTUNITY INCOME INCOME
TOTAL SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends $ 62,226 -- -- $ 11,805 $ 29,817 $ 20,604 --
Miscellaneous income (loss) 5,940 $ 1,098 $ 330 (428) 389 (310) $ 5,004
EXPENSES:
Mortality and expense risk, and
administrative charge 28,384 2,751 2,912 4,106 3,571 5,352 6,048
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss) 39,782 (1,653) (2,582) 7,271 26,635 14,942 (1,044)
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net unrealized appreciation
(depreciation) on investments:
Beginning of period 24,058 (6,269) 2,576 (17,568) 6,174 109 24,742
End of period 171,723 23,276 34,228 (6,941) 36,745 (650) 72,466
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net change in unrealized
appreciation (depreciation) on
investments 147,665 29,545 31,652 10,627 30,571 (759) 47,724
Realized gain (loss) on
investments 5,085 1,277 1,033 530 2,563 (318) --
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain
(loss) on investments 152,750 30,822 32,685 11,157 33,134 (1,077) 47,724
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations 192,532 29,169 30,103 18,428 59,769 13,865 46,680
--------- ------------ ------------ ------------ ------------ ------------ ------------
Contract owners activity:
Payments received from contract
owners 6,143,924 598,120 685,943 885,485 958,113 832,615 1,426,992
Net transfers between subaccounts -- 73,197 75,854 12,284 (4,875) (292,550) 110,048
Withdrawals and surrenders (31,517) (5,929) (6,222) (1,347) (6,257) (3,386) (7,309)
Contract maintenance charge (232) (53) (9) (20) (7) (7) (128)
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net increase from contract
activity 6,112,175 665,335 755,566 896,402 946,974 536,672 1,529,603
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets 6,304,707 694,504 785,669 914,830 1,006,743 550,537 1,576,283
Net assets, at beginning of period 2,068,211 174,982 175,704 339,933 250,493 443,543 358,485
--------- ------------ ------------ ------------ ------------ ------------ ------------
Net assets, at end of period 8,372,918 869,486 961,373 1,254,763 1,257,236 994,080 1,934,768
--------- ------------ ------------ ------------ ------------ ------------ ------------
--------- ------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
BOND
SUB-ACCOUNT
------------
<S> <C>
INCOME:
Dividends --
Miscellaneous income (loss) $ (143)
EXPENSES:
Mortality and expense risk, and
administrative charge 3,644
------------
Net investment income (loss) (3,787)
------------
Net unrealized appreciation
(depreciation) on investments:
Beginning of period 14,294
End of period 12,599
------------
Net change in unrealized
appreciation (depreciation) on
investments (1,695)
Realized gain (loss) on
investments --
------------
Net realized and unrealized gain
(loss) on investments (1,695)
------------
Net increase (decrease) in net
assets resulting from operations (5,482)
------------
Contract owners activity:
Payments received from contract
owners 756,656
Net transfers between subaccounts 26,042
Withdrawals and surrenders (1,067)
Contract maintenance charge (8)
------------
Net increase from contract
activity 781,623
------------
Net increase in net assets 776,141
Net assets, at beginning of period 325,071
------------
Net assets, at end of period 1,101,212
------------
------------
</TABLE>
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD FROM FEBRUARY 23, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER
31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends & capital gains $ 52,003 $ 11,286 $ 491 $ 24,992 $ 9,264 $ 5,970 --
Miscellaneous income (loss) 77 193 141 (227) 61 (129) $ 35
EXPENSES:
Mortality and expense risk, and
administrative charge 6,841 509 581 1,133 846 1,417 1,136
--------- ------------ ----------- ------------ ----------- ------------ ------------
Net investment income (loss) 45,239 10,970 51 23,632 8,479 4,424 (1,101)
--------- ------------ ----------- ------------ ----------- ------------ ------------
Net change in unrealized
appreciation (depreciation) on
investments 24,058 (6,269) 2,576 (17,568) 6,174 109 24,742
Realized gain (loss) on
investments 556 427 30 91 50 (42) --
--------- ------------ ----------- ------------ ----------- ------------ ------------
Net realized and unrealized gain
(loss) on investments 24,614 (5,842) 2,606 (17,477) 6,224 67 24,742
--------- ------------ ----------- ------------ ----------- ------------ ------------
Net increase in net assets resulting
from operations 69,853 5,128 2,657 6,155 14,703 4,491 23,641
--------- ------------ ----------- ------------ ----------- ------------ ------------
Contract owners activity:
Payments received from contract
owners 2,006,075 166,635 166,202 331,426 232,585 470,827 324,719
Net transfers between subaccounts -- 7,875 6,845 2,352 3,205 (31,775) 10,125
Withdrawals and surrenders (7,717) (4,656) -- -- -- -- --
--------- ------------ ----------- ------------ ----------- ------------ ------------
Net increase from contract
activity 1,998,358 169,854 173,047 333,778 235,790 439,052 334,844
--------- ------------ ----------- ------------ ----------- ------------ ------------
Net increase in net assets 2,068,211 174,982 175,704 339,933 250,493 443,543 358,485
Net assets, beginning of period -- -- -- -- -- -- --
--------- ------------ ----------- ------------ ----------- ------------ ------------
Net assets, end of period $2,068,211 $ 174,982 $ 175,704 $ 339,933 $ 250,493 $ 443,543 $ 358,485
--------- ------------ ----------- ------------ ----------- ------------ ------------
--------- ------------ ----------- ------------ ----------- ------------ ------------
<CAPTION>
INCOME:
<S> <C>
Dividends & capital gains --
Miscellaneous income (loss) $ 3
EXPENSES:
Mortality and expense risk, and
administrative charge 1,219
------------
Net investment income (loss) (1,216)
------------
Net change in unrealized
appreciation (depreciation) on
investments 14,294
Realized gain (loss) on
investments --
------------
Net realized and unrealized gain
(loss) on investments 14,294
------------
Net increase in net assets resulting
from operations 13,078
------------
Contract owners activity:
Payments received from contract
owners 313,681
Net transfers between subaccounts 1,373
Withdrawals and surrenders (3,061)
------------
Net increase from contract
activity 311,993
------------
Net increase in net assets 325,071
Net assets, beginning of period --
------------
Net assets, end of period $ 325,071
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
WESTERN-SOUTHERN LIFE ASSURANCE COMPANY SEPARATE ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Western-Southern Life Assurance Company Separate Account 1 (the "Account")
is a unit investment trust registered under the Investment Company Act of 1940
(the "1940 Act"), established by Western-Southern Life Assurance Company (the
"Company"), a life insurance company which is a wholly-owned subsidiary of The
Western and Southern Life Insurance Company. The Account is a funding vehicle
for individual variable annuity contracts, and commenced operations on February
23, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
The Account has seven investment Sub-Accounts each of which invests in the
corresponding portfolio (a "Portfolio") of Select Advisors Variable Insurance
Trust or of Select Advisors Portfolios, each of which is an open-ended
diversified management investment company. A contractholder may also allocate
funds to the Fixed Account, which is part of the general account of the Company.
Due to exemptive and exclusionary provisions, interests in the Fixed Account
have not been registered under the Securities Act of 1933 and the Company's
general account has not been registered as an investment company under the 1940
Act. Sub-Account transactions are recorded on the trade date and income from
dividends is recorded on the ex-dividend date. Realized gains and losses on the
sales of investments are computed on the basis of specific identification.
3. CONTRACT CHARGES
Certain deductions for administrative and risk charges are deducted from the
contract value, in order to compensate the Company for administrative expenses
and for the assumption of mortality and expense risks. These charges are made
daily at an annual effective rate of 1.35%.
The Company also deducts an annual contract maintenance charge from the
contract value on each contract anniversary and upon any full surrender. The
contract maintenance charge is $35 for the first ten Contract Years and the
lesser of $35 and 0.17% of the Contract Value after the tenth Contract
Anniversary.
Since no deduction for a sales charge is made from the payments received
from contract owners, a surrender charge is imposed on certain surrenders and
partial withdrawals to cover expenses relating to promotion, sale and
distribution of the contracts. The surrender charge is assessed on each payment
received, except for certain amounts excluded from charges under the contract.
This charge ranges from 7% to 0% depending on age of premium.
4. TAXES
For federal income tax purposes, the Account's operations are included with
those of the Company. The Company intends to make appropriate charges against
the Account in the future if and when tax liabilities arise.
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares and beneficial interests
purchased and proceeds from sales of each Sub-Account for the six months ended
June 30, 1996.
<TABLE>
<CAPTION>
PURCHASES SALES
----------- --------
<S> <C> <C>
Emerging Growth Portfolio $ 682,031 $ 18,300
International Equity Portfolio 767,418 14,399
Balanced Portfolio 919,504 15,850
Income Opportunity Portfolio 1,005,845 32,251
Standby Income Portfolio 1,018,568 467,065
Growth & Income Portfolio II 1,556,653 28,112
Bond Portfolio II 808,297 30,473
</TABLE>
6. UNIT VALUES
The following table shows a summary of units outstanding for variable
annuity contracts for the six months ended June 30, 1996:
<TABLE>
<CAPTION>
TRANSFERS
BEGINNING UNITS UNITS BETWEEN ENDING UNIT ENDING
UNITS PURCHASED REDEEMED SUB-ACCOUNTS UNITS VALUE VALUE
--------- --------- -------- ----------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging Growth Sub-Account 14,972 47,786 (477) 5,898 68,179 $12.752990 $ 869,486
International Equity Sub-Account 15,645 57,850 (522) 6,377 79,350 12.115654 961,373
Balanced Sub-Account 28,416 71,450 (110) 999 100,755 12.453613 1,254,763
Income Opportunity Sub-Account 20,015 70,821 (467) (373) 89,996 13.969925 1,257,236
Standby Income Sub-Account 42,991 80,006 (324) (28,041) 94,632 10.504725 994,080
Growth & Income Sub-Account 28,701 105,740 (547) 8,125 142,019 13.623316 1,934,768
Bond Sub-Account 28,863 69,218 (98) 2,382 100,365 10.972046 1,101,212
----------
$8,372,918
----------
----------
</TABLE>
9
<PAGE>
[LOGO]
T O U C H S T O N E
-------------------------------------------------------
TOUCHSTONE VARIABLE ANNUITY
-------------------------------------------------------
SELECT ADVISORS VARIABLE
INSURANCE TRUST
( EMERGING GROWTH PORTFOLIO
( INTERNATIONAL EQUITY PORTFOLIO
( BALANCED PORTFOLIO
( INCOME OPPORTUNITY PORTFOLIO
( STANDBY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1996
<PAGE>
EMERGING GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS (84.2%)
<TABLE>
<C> <S> <C>
AIRLINES (2.0%)
1,600 America West Airlines Class B... $ 35,200
600 Continental Airlines, Inc. Class
B............................. 37,050
---------
72,250
---------
BANKING & FINANCE (2.1%)
1,550 First Security Corp............. 37,200
2,100 Glendale Federal Bank, FSB...... 38,063
---------
75,263
---------
BROADCAST & MEDIA (3.9%)
1,000 Central Newspapers Class A...... 37,500
1,500 Lee Enterprises, Inc............ 35,437
1,500 Sinclair Broadcast Group,
Inc.*......................... 65,250
---------
138,187
---------
CHEMICALS (0.8%)
1,350 M.A. Hanna Co................... 28,181
---------
COMPUTER EQUIPMENT & DATA
PROCESSING (12.2%)
700 3Com Corp....................... 32,025
4,200 Alpha Industries, Inc.*......... 37,275
1,500 Axent Technologies, Inc......... 24,750
800 Cisco Systems, Inc.............. 45,300
2,300 Computervision Corp.*........... 23,000
1,800 EG&G............................ 38,475
1,000 Fiserv, Inc..................... 30,000
2,000 Gerber Scientific, Inc.......... 32,250
2,200 Intergraph Corp.*............... 26,675
2,400 Scitex Corp.*................... 41,400
2,000 Trident International, Inc...... 43,500
700 Wallace Computer Services,
Inc........................... 41,825
400 Xylan Corp...................... 18,600
---------
435,075
---------
CONSUMER & OFFICE PRODUCTS
(4.4%)
800 Alberto Culver Co. Class A...... 32,000
2,000 Armor All Products Corp......... 29,750
800 Corporate Express, Inc.......... 32,000
1,200 First Brands, Inc............... 32,400
300 Resound Corp.................... 3,825
1,000 Stanhome, Inc................... 26,500
---------
156,475
---------
ELECTRICAL EQUIPMENT (4.7%)
3,000 AMX Corp........................ 23,625
1,400 Elsag Bailey.................... 37,450
1,200 LSI Logic....................... 31,200
900 National Service Industries..... 35,213
900 Verifone, Inc................... 38,025
---------
165,513
---------
FOODS & BEVERAGES (1.8%)
1,100 Dean Foods Co................... 27,225
1,100 Quality Dining, Inc.*........... 36,025
---------
63,250
---------
HEALTHCARE (7.0%)
1,060 Apria Healthcare Group*......... 33,258
1,000 Bard............................ 34,000
600 HCIA, Inc.*..................... $ 37,800
2,000 Osteotech, Inc.................. 14,500
1,500 Quorum Health Group, Inc.*...... 39,563
1,500 Summit Care Corp.*.............. 33,000
2,300 Transcend Services, Inc......... 24,438
1,000 Vertex Pharmaceuticals, Inc.*... 30,375
---------
246,934
---------
HEAVY INDUSTRY (9.2%)
1,500 Albany International Corp....... 33,938
700 Bandag, Inc..................... 32,813
1,900 BW/IP, Inc...................... 36,100
3,000 Calgon Carbon Corp.............. 40,500
2,100 Calmat, Inc..................... 38,063
600 Harsco Corp..................... 40,350
1,600 Martin Marietta Materials,
Inc.*......................... 38,800
1,300 Southdown, Inc.*................ 30,550
1,100 Trinity Industries, Inc......... 37,400
---------
328,514
---------
INSURANCE (3.7%)
800 Arthur J. Gallagher & Co........ 25,600
700 Hartford Steam Boiler
Insurance..................... 34,387
2,100 Western National Corp........... 38,587
2,900 Willis Corroon Group ADR........ 34,438
---------
133,012
---------
MOTOR VEHICLES & EQUIPMENT
(2.1%)
900 Danaher Corp.................... 39,150
1,500 Standard Products Co............ 34,875
---------
74,025
---------
OIL SERVICE (4.3%)
900 BJ Services Co.................. 31,612
1,200 Coflexip ADR.................... 20,850
500 Halliburton, Inc................ 27,750
2,700 Nabors Industries, Inc.*........ 43,875
1,000 Weatherford Enterra, Inc........ 30,000
---------
154,087
---------
PETROLEUM & NATURAL GAS (3.8%)
2,100 Cabot Oil & Gas Corp. Class A... 36,487
900 Equitable Resources, Inc........ 25,425
2,400 Natural Gas Clearinghouse....... 36,000
2,500 Quaker State Corp............... 37,500
---------
135,412
---------
RETAIL (9.4%)
4,800 Charming Shoppes, Inc........... 33,900
2,100 DiMon, Inc...................... 38,850
2,300 Fingerhut Companies, Inc........ 35,937
1,300 Fred Meyer, Inc................. 38,187
1,000 LA-Z-Boy Chair Co............... 30,125
1,200 Herman Miller, Inc.............. 36,750
3,200 Stride Rite Corp................ 26,400
900 Sunglass Hut, Inc............... 21,937
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
EMERGING GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS--CONTINUED
RETAIL--CONTINUED
1,200 Waban, Inc.*.................... $ 28,650
2,500 Zale Corp.*..................... 42,187
---------
332,923
---------
SERVICES (3.2%)
1,000 CRA Managed Care, Inc........... 44,750
800 Healthcare Compare Corp.*....... 39,000
1,000 Republic Industries, Inc........ 29,125
---------
112,875
---------
TELECOMMUNICATIONS (7.0%)
300 Ascend Communications, Inc...... 16,875
4,200 Compression Labs................ 24,150
1,300 Metricom, Inc................... 20,475
300 Netscape Communications Corp.... 18,675
1,400 Octel Communication Corp.*...... 27,650
160 Premiere Technologies........... 5,040
500 Premisys Communications, Inc.... 30,500
1,600 USCS International, Inc......... 30,800
1,300 Videoserver, Inc................ 50,700
1,000 Winstar Communications, Inc..... 24,938
---------
249,803
---------
TRANSPORTATION (2.6%)
1,300 Alexander & Baldwin, Inc........ $ 31,362
1,700 J.B. Hunt Transportation
Services, Inc................. 35,488
1,300 Overseas Shipholding Group,
Inc........................... 23,562
---------
90,412
---------
TOTAL COMMON STOCKS (COST $2,641,935)...... 2,992,191
---------
TOTAL INVESTMENTS AT VALUE (84.2%) (COST
$2,641,935)(A)............................. 2,992,191
CASH AND OTHER ASSETS
NET OF LIABILITIES (15.8%)................. 560,112
---------
NET ASSETS (100.0%)........................ $3,552,303
---------
---------
- --------------------------
* Non-income producing security.
(a) The aggregate cost for federal income
tax purposes is $2,641,935, the
aggregate gross unrealized appreciation
is $460,286, and the aggregate gross
unrealized depreciation is $110,030,
resulting in net unrealized
appreciation of $350,256.
ADR: American Depository Receipt
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS (90.2%)
<TABLE>
<C> <S> <C>
AUSTRALIA (1.7%)
2,029 Broken Hill Proprietary
(Mining)...................... $ 28,012
1,720 CRA Ltd. (Mining)............... 26,442
1,100 News Corp Ltd. ADR
(Publishing).................. 25,850
4,000 Western Mining Corp., Ltd.
(Mining)...................... 28,609
---------
108,913
---------
BRAZIL (4.2%)
400 Centrais Electricas Brasileiras
ADR* (Electric Utilities)..... 5,816
2,150 Companhia Vale do Rio Doce S.A.
(Mining)...................... 43,163
2,100 Companhia Siderugica Nacional
ADR (Steel)................... 54,600
2,300 Refrigeracao Parana S.A. ADR
(Consumer Goods).............. 28,634
900 Telecomunicacoes Brasileiras ADR
(Telecommunications).......... 62,535
6,700 Usinas Siderugicas de Minas
Gerais S.A. ADR 144A
(Steel)....................... 72,733
---------
267,481
---------
CANADA (0.5%)
700 Magna International Inc. Class A
(Plastics & Metals)........... $ 32,200
---------
DENMARK (0.9%)
1,400 Tele Danmark A/S ADR
(Telecommunications).......... 35,525
475 Unidanmark A/S (Banking)........ 22,051
---------
57,576
---------
FINLAND (1.0%)
1,540 Kymmene (Forest Products &
Paper)........................ 32,076
800 Nokia Corp. ADR
(Telecommunications).......... 29,600
---------
61,676
---------
FRANCE (8.2%)
200 Accor (Services)................ 28,010
100 Air Liquide (Chemicals)......... 17,681
464 AXA (Insurance)................. 25,416
1,000 Bertrand Faure (Motor Vehicles &
Equipment).................... 33,067
300 Bic (Consumer Products)......... 42,656
150 Carrefour Super Marche (Grocery
Stores)....................... 84,146
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS--CONTINUED
FRANCE--CONTINUED
265 Christian Dior S.A. (Consumer
Goods)........................ $ 34,536
361 Companie Generale des Eaux
(Utilities)................... 40,430
693 Credit Local de France
(Financial Services).......... 56,677
230 Groupe Danone (Consumer
Products)..................... 34,851
550 GTM Entrerpose S.A.
(Engineering)................. 35,732
79 Legrand (Electronics)........... 14,137
325 Michelin Class B (Rubber &
Plastic Products)............. 15,905
440 Technip S.A. (Construction)..... 40,568
460 Valeo S.A. (Motor Vehicles &
Equipment).................... 24,651
---------
528,463
---------
GERMANY (4.1%)
60 CommerzBank AG (Banking)........ 12,428
130 Degussa AG (Plastics &
Metals)....................... 44,171
550 Deutsche Bank AG (Banking)...... 26,041
1,470 Hoechst AG (Chemicals).......... 49,936
90 MAN AG (Engineering)............ 22,419
400 RWE AG (Utilities).............. 15,598
27 Sandoz AG (Pharmaceuticals...... 30,887
195 SAP AG (Data Processing)........ 28,916
89 Volkswagen AG (Motor Vehicles &
Equipment).................... 33,096
---------
263,492
---------
GREAT BRITAIN (10.4%)
3,730 British Petroleum Co. PLC
(Petroleum & Natural Gas)..... 32,702
800 British Sky Broadcasting PLC ADR
(Publishing).................. 32,500
10,000 Burton Group PLC (Retail)....... 24,073
2,400 Dixons Group PLC (Retail)....... 19,644
2,600 General Cable PLC ADR*
(Telecommunications).......... 39,975
7,000 General Cable PLC*
(Telecommunications).......... 21,200
1,200 Glaxo Wellcome PLC ADR
(Pharmaceuticals)............. 32,100
1,333 International Cabletel, Inc.*
(Telecommunications).......... 39,324
3,000 Land Securities PLC (Financial
Services)..................... 29,027
3,700 Rank Organisation PLC
(Entertainment)............... 28,589
1,650 Reuters Holdings PLC ADR
(Publishing).................. 119,625
18,000 Rolls Royce PLC (Motor Vehicles
& Equipment).................. 62,621
4,000 Scottish Newcastle Breweries PLC
(Beverages)................... 40,909
7,366 Standard Chartered Bank PLC
(Banking)..................... $ 73,331
21,500 WPP Group PLC (Publishing)...... 72,460
---------
668,080
---------
HONG KONG (3.0%)
5,000 Cheung Kong Holdings, Ltd. (Real
Estate)....................... 36,011
9,000 Citic Pacific, Ltd. (Real
Estate)....................... 36,392
3,312 HSBC Holdings PLC (Banking)..... 50,060
7,000 New World Development Co. (Real
Estate)....................... 32,465
4,000 Sun Hung Kai Properties, Ltd.
(Real Estate)................. 40,435
---------
195,363
---------
INDIA (1.5%)
8,400 Morgan Stanley India Investment
Fund, Inc. (Investment Co.)... 94,500
---------
INDONESIA (0.9%)
7,000 PT Astra International (Motor
Vehicles & Equipment)......... 10,150
27,500 PT Telecomunikasion
(Telecommunications).......... 41,649
300 PT Telecomunikasion ADR
(Telecommunications).......... 8,925
---------
60,724
---------
ISRAEL (0.8%)
2,400 Geotek Communications, Inc.
(Telecommunications).......... 32,850
550 Teva Pharmaceutical Inds. Ltd.
ADR (Pharmaceuticals)......... 20,831
---------
53,681
---------
ITALY (3.3%)
3,500 Edison SpA (Electric
Utilities).................... 21,122
10,000 ENI SpA* (Petroleum & Natural
Gas).......................... 49,917
9,500 Istituto Mobiliare Italiano*
(Banking)..................... 79,884
14,800 Telecom Italia Mobile SpA
(Telecommunications).......... 33,180
12,800 Telicom Italia SpA
(Telecommunications).......... 27,551
---------
211,654
---------
JAPAN (24.4%)
1,000 Aoyama Trading Co. (Consumer
Goods)........................ 26,165
2,400 Bank of Tokyo, Ltd (Banking).... 55,771
30 Chubu Electric Power Company,
Inc. (Electric Utilities)..... 681
1,000 Chugai Parmaceutical Co., Ltd.
(Pharmaceuticals)............. 9,654
1,000 Chugoku Bank, Ltd. (Banking).... 18,755
2,000 Dai Nippon Printing Company
(Publishing).................. 38,791
2,000 Dai-ichi Kangyo Bank, Ltd.
(Banking)..................... 37,327
3,000 Daiichi Pharmaceutical, Ltd
(Pharmaceuticals)............. 46,384
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS--CONTINUED
JAPAN--CONTINUED
1,000 Daito Trust Construction
(Construction)................ $ 15,004
1,000 Daiwa House Industry Co., Ltd.*
(Construction)................ 15,553
2,000 Daiwa Securities Company, Ltd.
(Financial Services).......... 25,799
3,000 Fuji Photo Film Company, Ltd.
(Photographic Equipment &
Supplies)..................... 94,964
2,000 Fugitsu, Ltd. (Business
Equipment).................... 18,297
2,000 Higo Bank (Banking)............. 16,010
5,000 Hitachi, Ltd. (Electronics)..... 46,658
1,000 House Foods Industry (Food &
Beverages).................... 19,029
1,000 Industrial Bank of Japan, Ltd.
(Banking)..................... 24,884
1,000 Kinden Corp. (Engineering)...... 15,736
2,000 Kyushu Electric Power (Electric
Utilities).................... 45,195
2,000 Maruichi Steel Tube (Steel)..... 36,046
4,000 Matsushita Electric Industrial
Co., Ltd. (Capital
Equipment).................... 43,548
4,000 Mitsubishi Electric Industrial
Co., Ltd. (Capital
Equipment).................... 27,958
2,000 Mitsubishi Estate Company, Ltd.
(Real Estate)................. 27,629
2,000 Mitsubishi Steel Manufacturing
Co. (Steel)................... 11,747
2,000 Mitsubishi Trust and Banking
Corp. (Banking)............... 33,850
1,000 Mitsui Petrochemical Industries
(Chemicals)................... 8,051
1,000 Murata Mfg. Co. (Consumer
Goods)........................ 38,059
2,000 NEC Corp. (Electronics)......... 21,774
2,000 Nichicon Corp. (Electronics).... 29,093
2,000 Nippon Meat Packers (Food &
Beverages).................... 28,544
2,000 Nippon Oil Co. (Energy)......... 13,595
3,000 Nisshin Steel Co., Ltd
(Steel)....................... 11,665
3,000 Nitto Denko Corp (Capital
Equipment).................... 52,971
2,000 Ricoh Corp., Ltd. (Business
Equipment).................... 21,394
500 Rinnai Corp. (Consumer Goods)... 11,893
5,000 Sakura Bank, Ltd. (Banking)..... 55,807
2,000 Sanwa Bank (Banking)............ 37,144
2,000 Seino Transportation Co., Ltd.
(Transportation).............. 31,655
5,000 Sekisui House, Ltd.
(Construction)................ 57,179
2,000 Sharp Corp. (Electronics)....... 35,131
2,000 Shionogi & Co., Ltd.
(Pharmaceuticals)............. 17,236
1,000 Sumitomo Bank, Ltd.(Banking).... 19,395
3,000 Suzuki Motor Corp. (Motor
Vehicles & Equipment)......... 39,522
2,000 SXL Corp. (Construction)........ 19,761
3,000 Taiyo Yuden Co., Ltd. (Capital
Equipment).................... 37,876
2,030 Tohoku Electric Power Company
(Electric Utilities).......... $ 45,501
2,000 Tokio Marine and Fire Insurance
(Insurance)................... 26,714
3,000 Toppan Printing Co.
(Printing).................... 43,914
2,000 Toshiba Corp. (Electronics)..... 14,272
1,000 Uny Company, Ltd. (Retail)...... 19,853
1,000 Yakult Honsha (Beverages)....... 14,181
2,000 Yamaguchi Bank (Banking)........ 34,033
1,000 Yamanouchi Pharmaceutical Co.,
Ltd. (Pharmaceutical)......... 21,774
1,000 Yamato Transport Co., Ltd.
(Transportation).............. 11,802
---------
1,571,224
---------
KOREA (1.3%)
2,900 Korea Fund, Inc. (Investment
Co.).......................... 82,388
---------
MALAYSIA (2.3%)
12,000 Diversified Resources Bhd.
(Motor Vehicles &
Equipment).................... 41,371
4,000 Malayan Banking Bhd.
(Banking)..................... 38,484
9,000 Petronas Gas Bhd. (Petroleum &
Natural Gas).................. 38,604
4,000 YTL Corp. Bhd. (Construction)... 31,269
---------
149,728
---------
MEXICO (1.3%)
11,000 Cemex S.A. Class B
(Construction)................ 23,738
7,000 Grupo Modelo S.A. Series C
(Beverages)................... 9,440
5,000 Kimberly Clark Mexico (Consumer
Products)..................... 18,194
1,700 Sanluis Corp. S.A. (Motor
Vehicles & Equipment)......... 30,719
---------
82,091
---------
NETHERLANDS (2.9%)
800 Koninklijke PTT Nederland NV*
(Telecommunications).......... 30,302
2,200 Unilever NV (Consumer Goods).... 43,735
1,000 Wolters Kluwer NV
(Publishing).................. 113,691
---------
187,728
---------
PHILIPPINES (1.0%)
19,000 Ayala Corp Class B (Real
Estate)....................... 35,897
500 Philippine Long Distance
Telephone
(Telecommunications).......... 29,063
---------
64,960
---------
PORTUGAL (0.3%)
800 Portugal Telecom S.A.
(Telecommunications).......... 20,923
---------
SINGAPORE (2.3%)
3,000 Overseas Chinese Banking Corp.,
Ltd.* (Banking)............... 35,082
2,400 Singapore Press Holdings, Ltd.
(Publishing).................. 47,116
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS--CONTINUED
SINGAPORE--CONTINUED
9,000 Straits Steamship Land
(Transportation).............. $ 30,106
4,000 United Overseas Bank, Ltd.
(Banking)..................... 38,271
---------
150,575
---------
SOUTH AFRICA (2.2%)
4,000 Amalgamated Banks of South
Africa (Banking).............. 22,156
720 Anglo America Industrial Corp.
(Mining)...................... 24,975
7,000 General Minning Union Corp.*
(Mining)...................... 25,848
1,600 South African Breweries, Ltd.
(Food & Beverages)............ 23,580
804 South African Breweries, Ltd.
ADR (Food & Beverages)........ 46,896
---------
143,455
---------
SPAIN (1.6%)
146 Banco Popular (Banking)......... 26,051
300 BankInter S.A. (Banking)........ 33,585
1,190 Repsol S.A. ADR (Petroleum &
Natural Gas).................. 41,276
---------
100,912
---------
SWEDEN (3.8%)
1,500 Astra AB Fria (Healthcare)...... 66,363
1,000 Autoliv AB (Motor Vehicles &
Equipment).................... 30,501
2,000 Ericsson Telephone Co. ADR Class
B (Telecommunications)........ 43,000
510 Hennes & Mauritz Fria
(Textiles).................... 47,360
1,120 Mo och Domsjo AB (Paper & Forest
Products)..................... 28,750
2,000 Stora Kopparbergs Bergslags AB
Class A (Paper & Forest
Products)..................... 26,424
---------
242,398
---------
SWITZERLAND (4.1%)
38 Asea Brown Boveri AG
(Electronics)................. 47,025
33 Ciba Geigy AG (Chemicals)....... 40,231
50 Holderbank Financial AG Class B
(Banking)..................... $ 39,971
6 Roche Holding AG
(Pharmaceuticals)............. 45,782
60 Swiss Reinsurance Co.
(Insurance)................... 61,636
29 Union Bank of Switzerland Class
B (Banking)................... 28,400
---------
263,045
---------
THAILAND (2.2%)
1,500 Advanced Information Systems*
(Telecommunications).......... 22,218
5,000 Krung Thai Bank, Ltd.
(Banking)..................... 22,848
8,900 Thai Farmers Bank, Ltd.
(Banking)..................... 97,467
---------
142,533
---------
TOTAL COMMON STOCKS (COST $5,282,559)...... 5,805,763
---------
PRINCIPAL
- ---------
BONDS (0.3%)
$ 50 HKR International Ltd., 6.0%,
6/26/00 (Tourism)............. 6
20,000 Italy INA Convertible, 5%,
6/28/01 (Real Estate)......... 20,457
---------
TOTAL BONDS (COST $20,005)................. 20,463
---------
TOTAL INVESTMENTS AT VALUE (90.5%)
(COST $5,302,564)(A)....................... $5,826,226
CASH AND OTHER ASSETS
NET OF LIABILITIES (9.5%).................. 611,775
---------
NET ASSETS (100.0%)........................ $6,438,001
---------
---------
- --------------------------
* Non-income producing security.
(a) The aggregate cost for federal income
tax purposes is $5,302,564, the
aggregate gross unrealized appreciation
is $672,495, and the aggregate gross
unrealized depreciation is $148,833,
resulting in net unrealized
appreciation of $523,662.
ADR: American Depositary Receipt.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
<TABLE>
<C> <S> <C>
COMMON STOCKS (51.4%)
AIRCRAFT/DEFENSE MANUFACTURING
(3.0%)
800 Boeing Co..................... $ 69,700
800 General Dynamics.............. 49,600
-----------
119,300
-----------
AIRLINES (1.6%)
1,000 Continental Airlines Class
B*.......................... $ 61,750
-----------
AUTOMOTIVE (1.3%)
400 Chrysler Corp................. 24,800
600 Magna International Class A... 27,600
-----------
52,400
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS--CONTINUED
BANKING & FINANCE (5.2%)
1,100 Chase Manhattan Corp.......... $ 77,688
900 Citicorp...................... 74,363
1,600 Federal National Mortgage
Association................. 53,600
-----------
205,651
-----------
CHEMICALS (1.6%)
2,000 Monsanto Co................... 65,000
-----------
COMPUTER EQUIPMENT & DATA
PROCESSING (8.4%)
400 America Online, Inc.*......... 17,500
300 BMC Software*................. 17,925
200 Hewlett Packard, Inc.......... 19,925
800 Intel Corp.................... 58,750
700 International Business
Machines.................... 69,300
400 Microsoft Corp.*.............. 48,050
1,100 Seagate Technology, Inc.*..... 49,500
2,900 System Software Associates,
Inc......................... 49,300
-----------
330,250
-----------
CONSUMER PRODUCTS (5.3%)
800 General Electric.............. 69,200
800 Illinois Tool Works, Inc...... 54,100
1,000 Johnson & Johnson............. 49,500
1,200 Mattel, Inc................... 34,350
-----------
207,150
-----------
FOODS & BEVERAGES (0.5%)
400 Coca-Cola Company............. 19,550
-----------
GOLD AND SILVER ORES (0.4%)
600 Barrick Gold Corp............. 16,275
-----------
HEALTHCARE (0.6%)
400 Medtronic, Inc................ 22,400
-----------
INDUSTRIAL ENGINEERING (1.4%)
200 Harsco Corp................... 13,450
1,050 Thermo Electron Corp.*........ 43,706
-----------
57,156
-----------
INSURANCE (4.3%)
2,100 Allmerica Financial Corp...... 62,475
450 American International Group,
Inc......................... 44,381
500 SunAmerica, Inc............... 28,250
750 Travelers Group, Inc.......... 34,219
-----------
169,325
-----------
LEISURE & ENTERTAINMENT (2.5%)
1,400 Viacom Class B*............... 54,425
700 Walt Disney Co................ 44,012
-----------
98,437
-----------
PAPER & FOREST PRODUCTS (3.5%)
600 Alco Standard Corp............ 27,150
900 Kimberly-Clark Corp........... 69,525
800 Mead Corp..................... 41,500
-----------
138,175
-----------
PETROLEUM & NATURAL GAS (4.7%)
600 Amoco Corp.................... $ 43,425
1,000 Enron Corp.................... 40,875
1,000 Triton Energy, Inc.*.......... 48,625
1,500 Unocal Corp................... 50,625
-----------
183,550
-----------
PHARMACEUTICALS (2.9%)
700 Bristol-Myers Squibb Co....... 63,000
700 Pfizer, Inc................... 49,962
-----------
112,962
-----------
RETAIL (2.0%)
1,200 Home Depot.................... 64,800
600 OfficeMax, Inc.*.............. 14,325
-----------
79,125
-----------
TELECOMMUNICATIONS (2.3%)
1,320 Ericsson Telephone Co. ADR
Class B..................... 28,380
1,800 Network Equipment
Technology*................. 38,250
600 Nokia Corp. ADR............... 22,200
-----------
88,830
-----------
TOTAL COMMON STOCKS (COST $1,793,511)..... 2,027,286
-----------
PRINCIPAL
- ---------
CORPORATE BONDS (7.8%)
$ 20,000 Access Financial Corp., 7.1%,
5/15/21..................... 19,281
40,000 G.E. Capital Management
Service, 6.5%, 11/25/23..... 33,973
44,500 G.E. Capital Management
Service, 6.5%, 3/25/24...... 41,255
19,135 Merrill Lynch Mortgage Inv.
Inc., 9.7%, 7/15/10......... 20,254
45,221 Merrill Lynch Mortgage Inv.
Inc., 7.65%, 1/15/12........ 45,595
40,000 Merrill Lynch Mortgage Inv.
Inc., 7.09% 12/26/25........ 38,731
50,000 Prudential Home Mortgage Sec.,
6.25%, 4/25/24.............. 40,628
40,000 Storage Technology, 7%,
3/15/08..................... 66,100
-----------
TOTAL CORPORATE BONDS (COST $287,070)..... 305,817
-----------
MUNICIPAL BONDS (11.1%)
40,000 Baltimore Community
Development Financing, 8.2%,
8/15/07..................... 41,700
15,000 Colorado Housing Finance
Authority Series B, 8%,
8/1/02...................... 15,005
50,000 Miami Florida Revenue, 7.25%,
12/1/00..................... 51,000
20,000 Michigan State Job Development
Authority MFM, 7.1%,
5/1/98...................... 20,200
65,000 New York City, 10.5%,
11/15/14.................... 46,462
10,000 New York City Taxable, 9.75%,
8/5/12...................... 11,100
40,000 New York State HFA Service,
7.5%, 9/15/03............... 39,450
40,000 New York State Job Development
Authority Series A, 7.625%,
3/1/97...................... 40,250
50,000 Ohio Housing Financial Agency,
7.9%, 10/1/14............... 51,812
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
PRINCIPAL (NOTE 1)
- --------- -----------
<TABLE>
<C> <S> <C>
MUNICIPAL BONDS--CONTINUED
$ 30,000 Oklahoma City Airport
Taxable, 9.4%, 11/1/10..... $ 30,713
40,000 Oregon State General
Obligation, 6.9%, 1/1/00... 39,850
50,000 Rosecliff Department of
Energy GSA, 8%, 11/15/08... 51,938
---------
TOTAL MUNICIPAL BONDS (COST $434,785)... 439,480
---------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (17.9%)
50,000 Federal Home Loan Mortgage
Corp., 5.5%, 9/15/02....... 49,633
Federal National Mortgage Association:
35,000 6.15%, 10/25/07.............. 33,707
40,000 5%, 10/25/03................. 39,388
25,000 U.S. Treasury Bonds, 8.125%,
8/15/19.................... 28,056
U.S. Treasury Notes:
170,000 7.25%, 5/15/04............... 176,150
87,000 6.875%, 8/31/99.............. 88,255
40,000 6.25%, 2/15/03............... 39,313
$ 110,000 6.25%, 8/31/00............... $ 109,206
155,000 5.75%, 8/15/03............... 147,580
---------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (COST $715,106)............. 711,288
---------
TOTAL INVESTMENTS AT VALUE (88.3%)
(COST $3,230,472)(A).................... 3,483,871
CASH AND OTHER ASSETS
NET OF LIABILITIES (11.7%).............. 459,787
---------
NET ASSETS (100.0%)..................... $3,943,658
---------
---------
- --------------------------
* Non-income producing security.
(a) The aggregate cost for federal
income tax purposes is $3,230,472,
the aggregate gross unrealized
appreciation is $326,104, and the
aggregate gross unrealized
depreciation is $72,705, resulting
in net unrealized appreciation of
$253,399.
ADR: American Depository Receipt
</TABLE>
- --------------------------------------------------------------------------------
INCOME OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
VALUE (NOTE
PRINCIPAL 1)
- --------- -----------
<TABLE>
<C> <S> <C>
CORPORATE BONDS (38.6%)
$ 250,000 Alliance Gaming, 12.875%, 6/30/03
(United States).................. $ 249,375
200,000 Hayes Wheels, 11%, 7/15/06 (United
States).......................... 202,500
80,000 International Wire Group, 11.75%,
6/1/05 (United States)........... 79,400
141,700 MCII Holdings (USA), Zero Coupon,
11/15/02 (United States)......... 110,526
100,000 Mesa Operating Co., 10.625%, 7/1/06
(United States).................. 101,125
100,000 Owens & Minor, 10.875%, 6/1/06
(United States).................. 103,500
80,000 Showboat Marina Casino, 13.5%,
3/15/03 (United States).......... 86,400
100,000 Specialty Foods, 11.125%, 10/1/02
(United States).................. 94,750
80,000 Stena AB, 10.5%, 12/15/05
(Sweden)......................... 79,400
100,000 Sweetheart Cup, 9.625%, 9/1/00
(United States).................. 98,875
100,000 Trans Texas Gas, 11.5%, 6/15/02
(United States).................. 99,750
75,000 Trump Atlantic City, 11.25%, 5/1/06
(United States).................. 75,375
125,000 Unisys Corp., 12%, 4/15/03 (United
States).......................... 127,500
-----------
TOTAL CORPORATE BONDS (COST $1,462,708)........ 1,508,476
-----------
EUROBONDS (8.8%)
$ 150,000 Empresas Ica Sociedad, 11.875%,
5/30/01 (Mexico)................. $ 151,125
90,000 Hidroelectrica Alicura, 8.375%,
3/15/99 (Argentinal)............. 87,300
100,000 RBS Participacoes S.A., 14%,
12/15/03 (Brazil)................ 104,500
-----------
TOTAL EUROBONDS (COST $333,369)................ 342,925
-----------
FOREIGN GOVERNMENT (7.6%)
314,000 Argentina Bocon Pre 4, 5.42%,
9/1/02 (Argentina) (Cost
$280,457)........................ 297,908
-----------
YANKEE BOND (14.5%)
250,000 APP International Finance, 11.75%,
10/1/05 (Indonesia).............. 255,625
100,000 Grupo Televisa, 11.875%, 5/15/06
(Mexico)......................... 102,000
150,000 Tolmex S.A., 8.375%, 11/1/03
(Mexico)......................... 125,062
80,000 Trizec Finance, 10.875%, 10/15/05
(Canada)......................... 82,000
-----------
TOTAL YANKEE BONDS (COST $565,818)............. 564,687
-----------
BRADY BONDS (25.0%)
250,000 Central Bank of Nigeria, 6.25%,
11/15/20 (Nigeria)............... 130,313
200,000 Government of Bulgaria, 6.25%,
7/28/11 (Bulgaria)............... 94,750
150,000 Government of Bulgaria, 6.25%,
7/28/24 (Bulgaria)............... 77,437
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
INCOME OPPORTUNITY PORTFOLIO
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
PRINCIPAL (NOTE 1)
- --------- -----------
BRADY BONDS--CONTINUED
$ 250,000 Mexican Discount Bond Series B,
6.39%, 12/31/19 (Mexico)......... $ 196,250
150,000 National Government of Jordan, 4%,
12/23/23 (Jordan)................ 78,000
185,712 Republic of Brazil, 8%, 4/15/14
(Brazil)......................... 114,677
187,000 Republic of Ecuador, 6.0625%,
2/28/25 (Ecuador)................ 106,824
250,000 Republic of Venezuela, 6.625%,
12/18/07 (Venezuela)............. 176,875
-----------
TOTAL BRADY BONDS (COST $924,996).............. 975,126
-----------
UNITS
- ---------
WARRANTS (0.0%)
Central Bank of Nigeria Warrants,
expires 11/15/20*................. 0
250 United Mexican States Warrants,
384,000 expires 6/30/03*.................. 0
------------
TOTAL WARRANTS................................. 0
------------
TOTAL INVESTMENTS AT VALUE
(COST $3,567,348)(A) (94.4%)................... $ 3,689,122
CASH AND OTHER ASSETS
NET OF LIABILITIES (5.6%)...................... 218,240
------------
NET ASSETS (100.0%)............................ $ 3,907,362
------------
------------
- --------------------------
* Non-income producing security
(a) The aggregate cost for federal income tax
purposes is $3,567,348, the aggregate gross
unrealized appreciation is $139,027, and
the aggregate gross unrealized depreciation
is $17,253, resulting in net unrealized
appreciation of $121,774.
- ------------------------------------------------------------------------------
STANDBY INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
VALUE
PRINCIPAL (NOTE 1)
- --------- -----------
<TABLE>
<C> <S> <C>
ASSET BACKED SECURITIES (14.4%)
$205,081 Advanta Mortgage Loan Trust, 6.14%,
10/25/08......................... $ 204,440
141,403 Daimler Benz Grantor Trust, 3.9%,
10/15/98......................... 140,737
110,000 Federal Home Loan Marketing Assn.,
5.35%, 7/31/96................... 109,476
166,423 Honda Auto Receivables Grantor
Trust, 6.2%, 12/15/00............ 166,742
315,173 Premier Auto Trust, 6.85%,
10/4/97.......................... 315,822
----------
TOTAL ASSET-BACKED SECURITIES (COST
$936,629)..................................... 937,217
----------
CORPORATE BONDS (17.5%)
250,000 BNP Canada, 5.05%, 9/27/96......... 246,638
315,000 Commonwealth Edison, 8.93%,
8/15/96.......................... 316,221
250,000 Corporate Assn. of Tractor Dealers,
5.35%, 8/28/96................... 247,763
125,000 Merrill Lynch, 5%, 12/15/96........ 124,575
200,000 Student Loan Marketing Assn.,
5.425%, 11/27/96................. 200,280
----------
TOTAL CORPORATE BONDS (COST $1,133,834)....... 1,135,477
----------
COMMERCIAL PAPER (67.8%)
250,000 Boston Edison Corp., 5.46%,
7/9/96........................... 248,711
320,000 Comdisco, Inc., 5.55%, 8/15/96..... 317,089
320,000 ConAgra Inc., 5.5%, 7/9/96......... 318,973
315,000 Crown Cork & Seal Co., Inc., 5.6%,
7/25/96.......................... 313,579
$315,000 Hanson Financial, 5.5%, 7/8/96..... $ 313,652
315,000 IES Diversified, Inc., 5.5%,
7/22/96.......................... 312,738
320,000 JB Hunt Transport, 5.59%, 7/3/96... 319,652
300,000 PacifiCorp, 5.48%, 7/8/96.......... 298,128
235,000 Pennsylvania Power & Light, 5.6%,
7/29/96.......................... 233,867
300,000 Public Service Electric & Gas,
5.53%, 7/17/96................... 298,387
250,000 Ryder Systems, Inc., 5.48%,
7/2/96........................... 249,163
320,000 Texas Utilities Corp., 5.55%,
7/12/96.......................... 318,915
240,000 Textron Financial, 5.48%,
7/10/96.......................... 238,465
305,000 Torchmark Corporation, 5.43%,
7/8/96........................... 303,436
320,000 UOP, 5.5%,7/3/96................... 318,387
----------
TOTAL COMMERCIAL PAPER (COST $4,403,142)...... 4,403,142
----------
TOTAL INVESTMENTS AT VALUE (99.7%) (COST
$6,473,605)(A)................................ 6,475,836
CASH AND OTHER ASSETS
NET OF LIABILITIES (0.3%)..................... 19,110
----------
NET ASSETS (100.0%)........................... $6,494,946
----------
----------
- --------------------------
(a) The aggregate cost for federal income tax
purposes is $6,473,605, the aggregate
gross unrealized appreciation is $3,101,
and the aggregate gross unrealized
depreciation is $870, resulting in net
unrealized appreciation of $2,231.
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 1) (a) $2,992,191 $5,826,226 $3,483,871 $3,689,122 $ 6,475,836
Cash 597,628 843,610 484,396 457,756 1,136
Receivables for:
Investments sold -- 193,703 -- -- --
Fund shares sold 631 803 391 732 --
Dividends 3,090 14,351 1,674 -- --
Interest 1,555 2,274 23,154 63,112 24,349
Foreign tax reclaim 20 9,355 16 -- --
Open forward foreign currency contract (Note 1) -- 35 -- -- --
Deferred organization expenses (Note 1) 13,269 13,269 13,269 13,269 13,361
Reimbursement receivable from Advisor (Note 3) -- 2,848 -- -- --
---------- ------------- ---------- ----------- -----------
Total assets 3,608,384 6,906,474 4,006,771 4,223,991 6,514,682
---------- ------------- ---------- ----------- -----------
LIABILITIES:
Payable for investments purchased 39,641 456,132 46,858 300,000 --
Payable to Advisor (Note 2) 5,773 -- 6,016 5,835 2,686
Payable for fund shares repurchased -- -- -- -- 4,232
Payable to Administrator (Note 2) 2,521 3,505 2,521 2,439 2,201
Other accrued expenses 8,146 8,836 7,718 8,355 10,617
---------- ------------- ---------- ----------- -----------
Total liabilities 56,081 468,473 63,113 316,629 19,736
---------- ------------- ---------- ----------- -----------
NET ASSETS: $3,552,303 $6,438,001 $3,943,658 $3,907,362 $ 6,494,946
---------- ------------- ---------- ----------- -----------
---------- ------------- ---------- ----------- -----------
Shares outstanding 287,031 593,050 332,046 362,381 649,094
---------- ------------- ---------- ----------- -----------
---------- ------------- ---------- ----------- -----------
Net asset value $ 12.38 $ 10.86 $ 11.88 $ 10.78 $ 10.01
---------- ------------- ---------- ----------- -----------
---------- ------------- ---------- ----------- -----------
(a) Cost of investments $2,641,935 $5,302,564 $3,230,472 $3,567,348 $ 6,473,605
---------- ------------- ---------- ----------- -----------
---------- ------------- ---------- ----------- -----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1)
Interest $ 7,246 $ 10,244 $ 46,301 $ 181,364 $ 173,061
Dividends (a) 15,393 66,979 13,087 -- --
---------- ------------- ---------- ----------- ----------
TOTAL INVESTMENT INCOME 22,639 77,223 59,388 181,364 173,061
---------- ------------- ---------- ----------- ----------
EXPENSES:
Administration and fund accounting fees (Note 2) 13,339 12,777 14,322 13,298 12,504
Investment advisory fees (Note 2) 11,688 28,841 11,176 9,738 7,634
Auditing fees 6,378 6,701 3,586 9,697 6,392
Custody fees 4,866 16,256 3,305 3,193 2,900
Sponsor fee (Note 2) 2,922 5,651 3,193 2,996 6,107
Amortization of organization expenses (Note 1) 1,926 1,926 1,926 1,926 1,939
Trustee fees (Note 2) 428 808 465 433 876
Miscellaneous 2,016 4,256 2,209 1,974 4,698
---------- ------------- ---------- ----------- ----------
Total expenses 43,563 77,216 40,182 43,255 43,050
Waiver of Sponsor fee (Note 2) (2,922) (5,651) (3,193) (2,996) (6,107)
Reimbursement from Advisor (Note 3) (23,834) (36,251) (22,620) (27,524) (21,675)
---------- ------------- ---------- ----------- ----------
Net expenses 16,807 35,314 14,369 12,735 15,268
---------- ------------- ---------- ----------- ----------
NET INVESTMENT INCOME 5,832 41,909 45,019 168,629 157,793
---------- ------------- ---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments (b) 183,465 211,655 102,064 165,652 1,475
Net change in unrealized appreciation (depreciation) on
investments 80,564 209,060 (2,935) 19,245 (12,505)
---------- ------------- ---------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS): 264,029 420,715 99,129 184,897 (11,030)
---------- ------------- ---------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 269,861 $ 462,624 $ 144,148 $ 353,526 $ 146,763
---------- ------------- ---------- ----------- ----------
---------- ------------- ---------- ----------- ----------
</TABLE>
- ------------------------------
(a) Net of foreign tax withholding of $68 for the Touchstone Emerging Growth
Portfolio and $9,285 for the Touchstone International Equity Portfolio.
(b) Includes foreign currency transaction losses of $7,939 for Touchstone
International Equity Portfolio.
19
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING GROWTH
PORTFOLIO
------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
1996 DECEMBER 31,
(UNAUDITED) 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,832 $ 24,559
Net realized gain (loss) on investments 183,465 120,237
Net change in unrealized appreciation (depreciation) on
investments 80,564 258,146
------------ ------------
Net increase (decrease) in net assets resulting from
operations 269,861 402,942
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (32,317)
Realized capital gains -- (142,245)
------------ ------------
Total dividends and distributions -- (174,562)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 719,208 199,651
Reinvestment of dividends -- 174,562
Cost of shares redeemed (51,443) (7,420)
------------ ------------
Net increase from investor's transactions 667,765 366,793
------------ ------------
TOTAL CHANGES IN NET ASSETS 937,626 595,173
------------ ------------
NET ASSETS
Beginning of period 2,614,677 2,019,504
------------ ------------
End of period $3,552,303 $2,614,677
------------ ------------
------------ ------------
NET ASSETS CONSIST OF:
Paid-in capital $3,034,163 $2,366,398
Undistributed net investment income 6,427 595
Accumulated net realized gain on investments 161,457 (22,008)
Net unrealized appreciation of investments 350,256 269,692
------------ ------------
Net assets applicable to shares outstanding $3,552,303 $2,614,677
------------ ------------
------------ ------------
SHARES OUTSTANDING (NOTE 4):
Shares sold 59,404 17,137
Reinvestment of dividends -- 15,452
------------ ------------
Net increase from investor's transactions 59,404 32,589
Shares redeemed (4,291) (663)
------------ ------------
Net increase 55,113 31,926
Beginning of period 231,918 199,992
------------ ------------
End of period 287,031 231,918
------------ ------------
------------ ------------
</TABLE>
- ------------------------------
(a) Includes foreign currency transaction losses of $7,939.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INCOME OPPORTUNITY STANDBY INCOME
PORTFOLIO BALANCED PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- --------------------------- ---------------------------
FOR THE SIX FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1996 DECEMBER 31, 1996 DECEMBER 31, 1996 DECEMBER 31, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 41,909 $ 22,179 $ 45,019 $ 69,070 $ 168,629 $ 271,025 $ 157,793 $ 295,090
211,655(a) (315,865) 102,064 209,370 165,652 18,334 1,475 (2,779)
209,060 554,467 (2,935) 229,338 19,245 170,448 (12,505) 2,114
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
462,624 260,781 144,148 507,778 353,526 459,807 146,763 294,425
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- (14,558) (45,345) (78,513) (155,073) (296,140) (157,847) (295,796)
-- -- -- (185,230) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- (14,558) (45,345) (263,743) (155,073) (296,140) (157,847) (295,796)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
792,668 199,905 963,018 355,130 1,016,211 261,593 1,051,473 473,149
-- 14,558 45,433 263,743 155,073 296,140 157,847 329,384
(31,922) (3,472) (58,356) (2,298) (63,975) (3,177) (493,226) (24,010)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
760,746 210,991 950,095 616,575 1,107,309 554,556 716,094 778,523
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,223,370 457,214 1,048,898 860,610 1,305,762 718,223 705,010 777,152
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,214,631 4,757,417 2,894,760 2,034,150 2,601,600 1,883,377 5,789,936 5,012,784
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$6,438,001 $5,214,631 $3,943,658 $2,894,760 $3,907,362 $2,601,600 $6,494,946 $5,789,936
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$5,967,342 $5,206,596 $3,566,226 $2,616,131 $3,660,835 $2,553,526 $6,494,537 $5,778,443
47,526 5,617 (127) 199 13,625 69 14 68
(100,529) (312,184) 124,160 22,096 111,128 (54,524) (1,836) (3,311)
523,662 314,602 253,399 256,334 121,774 102,529 2,231 14,736
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$6,438,001 $5,214,631 $3,943,658 $2,894,760 $3,907,362 $2,601,600 $6,494,946 $5,789,936
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
4,697 20,307 80,991 29,352 95,881 26,665 104,973 47,228
-- 1,456 3,834 23,008 14,665 31,633 15,761 32,806
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
74,697 21,763 84,825 52,360 110,546 58,298 120,734 80,034
(3,041) (361) (4,932) (199) (6,117) (338) (49,268) (2,398)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
71,656 21,402 79,893 52,161 104,429 57,960 71,466 77,636
521,394 499,992 252,153 199,992 257,952 199,992 577,628 499,992
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
593,050 521,394 332,046 252,153 362,381 257,952 649,094 577,628
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOUCHSTONE INTERNATIONAL
TOUCHSTONE EMERGING GROWTH EQUITY TOUCHSTONE BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- ----------------------------- -----------------------------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
FOR THE NOVEMBER FOR THE NOVEMBER FOR THE NOVEMBER
SIX FOR THE 21, SIX FOR THE 21, SIX FOR THE 21,
MONTHS YEAR 1994(A) MONTHS YEAR 1994(A) MONTHS YEAR 1994(A)
ENDED ENDED TO ENDED ENDED TO ENDED ENDED TO
JUNE 30, DECEMBER DECEMBER JUNE 30, DECEMBER DECEMBER JUNE 30, DECEMBER DECEMBER
1996 31, 31, 1996 31, 31, 1996 31, 31,
(UNAUDITED) 1995 1994 (UNAUDITED) 1995 1994 (UNAUDITED) 1995 1994
-------- -------- ------- -------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 11.27 $10.10 $10.00 $ 10.00 $ 9.51 $10.00 $ 11.48 $10.17 $10.00
-------- -------- ------- -------- ------- -------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) 0.02 0.11 0.04 0.07 0.04 -- 0.15 0.32 0.05
Net realized and unrealized
gain on investments 1.09 1.87 0.06 0.79 0.48 (0.49) 0.40 2.15 0.12
-------- -------- ------- -------- ------- -------- -------- -------- -------
TOTAL FROM INVESTMENT
OPERATIONS 1.11 1.98 0.10 0.86 0.52 (0.49) 0.55 2.47 0.17
-------- -------- ------- -------- ------- -------- -------- -------- -------
LESS: DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income -- (0.15) -- -- (0.03) -- (0.15) (0.37) --
Realized capital gains -- (0.66) -- -- -- -- -- (0.79) --
-------- -------- ------- -------- ------- -------- -------- -------- -------
TOTAL DIVIDENDS AND
DISTRIBUTIONS -- (0.81) -- -- (0.03) -- (0.15) (1.16) --
-------- -------- ------- -------- ------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 12.38 $11.27 $10.10 $ 10.86 $10.00 $ 9.51 $ 11.88 $11.48 $10.17
-------- -------- ------- -------- ------- -------- -------- -------- -------
-------- -------- ------- -------- ------- -------- -------- -------- -------
TOTAL RETURN (B) 9.85% 19.57% 1.00% 8.60% 5.45% (4.90%) 4.80% 24.56% 1.70%
RATIOS AND SUPPLEMENTAL DATA
(C):
Net assets at end of period
(000's) $ 3,552 $2,615 $2,020 $ 6,438 $5,215 $4,757 $ 3,944 $2,895 $2,034
Ratios to average net assets:
Expenses 1.15% 1.15% 1.15% 1.25% 1.25% 1.25% 0.90% 0.90% 0.90%
Net investment income 0.40% 1.09% 3.67% 1.48% 0.46% 1.23% 2.81% 2.87% 4.26%
Expenses, without waiver and
reimbursement 2.97% 3.73% 11.08% 2.73% 3.69% 5.58% 2.51% 3.46% 8.97%
Portfolio Turnover 51% 101% 0% 47% 86% 0% 47% 124% 3%
Average commission rate (d) $0.0556 $0.0231 $0.0694
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE INCOME
OPPORTUNITY TOUCHSTONE STANDBY INCOME
PORTFOLIO PORTFOLIO
---------------------------- ---------------------------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD
SIX NOVEMBER SIX NOVEMBER
MONTHS FOR THE 21, MONTHS FOR THE 21,
ENDED YEAR 1994(A) ENDED YEAR 1994(A)
JUNE ENDED TO JUNE ENDED TO
30, DECEMBER DECEMBER 30, DECEMBER DECEMBER
1996 31, 31, 1996 31, 31,
(UNAUDITED) 1995 1994 (UNAUDITED) 1995 1994
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.09 $ 9.42 $10.00 $10.02 $10.03 $10.00
------- ------- -------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) 0.56 1.22 0.12 0.26 0.56 0.05
Net realized and unrealized
gain on investments 0.66 0.79 (0.70) (0.01) (0.01) 0.03
------- ------- -------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS 1.22 2.01 (0.58) 0.25 0.55 0.08
------- ------- -------- ------- ------- -------
LESS: DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income (0.53) (1.34) -- (0.26) (0.56) (0.05)
Realized capital gains -- -- -- -- -- --
------- ------- -------- ------- ------- -------
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.53) (1.34) -- (0.26) (0.56) (0.05)
------- ------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.78 $10.09 $ 9.42 $10.01 $10.02 $10.03
------- ------- -------- ------- ------- -------
------- ------- -------- ------- ------- -------
TOTAL RETURN (B) 12.37% 23.35% (5.80%) 2.48% 5.90% 0.30%
RATIOS AND SUPPLEMENTAL DATA
(C):
Net assets at end of period
(000's) $3,907 $2,602 $1,883 $6,495 $5,790 $5,013
Ratios to average net assets:
Expenses 0.85% 0.85% 0.85% 0.50% 0.50% 0.50%
Net investment income 11.22% 12.81% 11.24% 5.15% 5.59% 4.90%
Expenses, without waiver and
reimbursement 2.88% 3.54% 11.56% 1.41% 1.73% 3.67%
Portfolio Turnover 108% 104% 45% 121% 159% 56%
</TABLE>
- ------------------------------
(a) Commencement of operations.
(b) Total return is not annualized. Total return is calculated assuming a
purchase of shares on the first day and a sale of the shares on the last day
of the period, and reinvestment of all dividends and distributions.
(c) Ratios are annualized. Portfolio turnover is not annualized.
(d) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary between periods and
funds depending on the volume and character of trades executed in various
markets where trading practices and comission rate structures may differ.
22
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 organized as a Massachusetts business trust on February 7,
1994. The Trust consists of five Portfolios: Emerging Growth Portfolio,
International Equity Portfolio, Balanced Portfolio, Income Opportunity Portfolio
and Standby Income Portfolio ("Portfolios").
The initial capital contributions of $1,999,920 to the Emerging Growth
Portfolio, the Balanced Portfolio, and the Income Opportunity Portfolio, and the
initial capital contributions of $4,999,920 to the International Equity
Portfolio and the Standby Income Portfolio were made by Western-Southern Life
Assurance Company ("Western-Southern").
The Trust offers shares of beneficial interest of each portfolio to separate
accounts of Western-Southern as a funding vehicle for certain variable annuity
contracts issued by Western-Southern through the separate accounts.
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:
a) INVESTMENT VALUATION. The value of each security for which readily
available market quotations exist is based on a decision as to the broadest and
most representative market for such security. The value of such security will be
based either on the last sale price on a national securities exchange, or, in
the absence of recorded sales, at the readily available closing bid price on
such exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on foreign exchanges are valued at the last quoted sale price
available before the net assets are valued. Unlisted securities are valued at
the average of the quoted bid and asked prices in the over-the-counter market.
Debt securities are valued by a pricing service which determines valuations
based upon market transactions for normal, institutional-size trading units of
similar securities. Securities or other assets for which market quotations are
not readily available are valued at fair value in good faith in accordance with
procedures established by the Trustees. Such procedures include the use of
independent pricing services, which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. All debt securities with a
remaining maturity of less than 60 days are valued at amortized cost, which
approximates market.
b) FOREIGN CURRENCY TRANSLATION. The accounting records of the Portfolios
are maintained in U.S. dollars. The market value of investment securities, other
assets and liabilities and forward contracts denominated in foreign currencies
are translated into U.S. dollars at the prevailing exchange rates at the end of
the period. Purchases and sales of securities, income receipts, and expense
payments are translated at the exchange rate prevailing on the respective dates
of such transactions. Reported net realized gains and losses on foreign currency
transactions represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions and
the difference between the amount of net investment income accrued and the U.S.
dollar amount actually received. The effects of changes in foreign currency
exchange rates on investments in securities are not segregated in the Statement
of Operations from the effects of changes in market prices of these securities,
but are included with the net realized and unrealized gain or loss on
investments.
c) INVESTMENT INCOME. Dividend income is recorded on ex-dividend date
except that certain dividends from foreign securities where ex-dividend date has
passed are recorded as soon as the fund is informed of the ex-dividend date.
Interest income, which includes the amortization of premium and accretion of
discount, if any, is recorded on an accrual basis. Dividend and interest income
is recorded net of foreign taxes where recovery of such taxes is not assured.
d) DIVIDENDS AND DISTRIBUTIONS. Distributions to shareholders for the
Emerging Growth Portfolio, International Equity Portfolio, Balanced Portfolio,
and Income Opportunity Portfolio are recorded by the Portfolio on the
ex-dividend date. It is the policy of the Standby Income Portfolio to record
income dividends daily and distribute them monthly. Distributions to
shareholders of net realized capital gains, if any, are declared and paid
annually.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital. Undistributed
net investment income may include temporary book and tax basis differences which
will reverse in a subsequent period.
23
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
e) 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. The
following Portfolios have capital loss carryforwards expiring December 2003.
<TABLE>
<S> <C>
International Equity Portfolio $ 179,311
Income Opportunity Portfolio 54,524
Standby Income Portfolio 3,311
</TABLE>
f) FORWARD CURRENCY CONTRACTS. Each Portfolio may enter into forward
foreign currency contracts to protect securities and related receivables and
payables against fluctuations in foreign currency rates. A forward contract is
an agreement to buy or sell currencies of different countries on a specified
future date at a specified rate.
Risks associated with such contracts include the movement in the value of
the foreign currency relative to the U.S. dollar and the ability of the
counterparty to perform. The market value of the contract will fluctuate with
changes in currency exchange rates. Contracts are valued daily based on
procedures established by and under the general supervision of the Trustees of
the Portfolio Trust and the change in the market value is recorded by the
Portfolios as unrealized appreciation or depreciation of forward foreign
currency contracts. As of June 30, 1996, the Touchstone International Equity
Portfolio had an open forward foreign currency contract to deliver $17,824 on
July 2, 1996, in exchange for L11,499. As of June 30, 1996, the market value of
this contract was $17,859, resulting in unrealized appreciation of $35.
g) ORGANIZATION EXPENSE. Organization expenses were deferred and are being
amortized by each Portfolio on a straight-line basis over a five-year period
from commencement of operations. Each Portfolio's organizational fees payable
includes fees and expenses payable to Touchstone Advisors, Inc., a subsidiary of
Western-Southern, of $18,141 ($18,271 for Standby Income Portfolio). 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.
h) OTHER. Securities transactions are recorded on a trade date basis. For
financial and tax reporting purposes, realized gains and losses are determined
on the basis of specific lot identification.
2. TRANSACTIONS WITH AFFILIATES
a) SPONSOR. Touchstone Advisors, Inc. ("Sponsor"), a subsidiary of
Western-Southern, as sponsor to the Trust, pursuant to a Sponsor Agreement
provides oversight of the various service providers to the Trust, including the
Trust's Administrator, Custodian and Transfer Agent. As Sponsor to the Trust,
Touchstone Advisors reserves the right to receive a sponsor fee from each
portfolio on an annual basis up to 0.20% of average daily net assets of that
Portfolio for its then-current fiscal year. The Sponsor Agreement may be
terminated by the Sponsor or by the Trust on not less than 30 days prior written
notice. The Sponsor has advised the Trust that it will waive all fees under the
Sponsor Agreement through April 30, 1997.
b) INVESTMENT ADVISOR. The Trust has an investment advisory agreement with
the Sponsor. Under the terms of the investment advisory agreement, each
Portfolio pays an investment advisory fee that is computed daily and paid
monthly. For the six months ended June 30, 1996, each Portfolio incurred the
following investment advisory fees equal on an annual basis to the following
percentages of the average daily net assets of the Portfolio.
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rate 0.80% 0.95% 0.70% 0.65% 0.25%
</TABLE>
Fort Washington Investment Advisors, Inc., an affiliate of the Sponsor, is
the sub-advisor for the Standby Income Portfolio.
24
<PAGE>
SELECT ADVISORS VARIABLE INSURANCE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
c) ADMINISTRATOR AND FUND ACCOUNTANT. The Trust retains Signature
Financial Services, Inc. ("Signature") to serve as administrator and fund
accountant. Certain officers of Signature serve as officers of the Portfolios.
Signature provides administrative services necessary for the operations of the
Portfolios, including the preparation and filing of all documents required by
the Trust for compliance with applicable laws and regulations; arranging for the
maintenance of books, records and custody of the Portfolios; and paying the
compensation of the Portfolios' officers affiliated with Signature. For these
services, Signature receives from each Portfolio a fee that is computed daily
and paid monthly, equal on an annual basis to 0.16% of the aggregate average
daily net assets of all the Portfolios. Rates are reduced on a sliding scale
when combined average net assets of all Portfolios exceed $100 million. In
addition, each Portfolio is subject to a minimum annual fee of $25,000 plus
out-of-pocket expenses.
d) TRUSTEES. Each Trustee who is not an "interested person," (as defined
in the Act), of the Trust, receives in aggregate $5,000 annually plus $1,000 per
meeting attended, as well as reimbursement for reasonable out-of-pocket
expenses, from the Trust and from Select Advisors Trust A, Select Advisors Trust
C, and Select Advisors Portfolios, which are included in separate reports.
3. 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 basis, than the
percentage of average daily net assets of the Portfolio listed below.
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Voluntary expense limit 1.15% 1.25% 0.90% 0.85% 0.50%
</TABLE>
4. 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 six months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME STANDBY
GROWTH EQUITY BALANCED OPPORTUNITY INCOME
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cost of purchases $1,818,453 $2,766,216 $1,245,424 $4,400,236 $1,112,811
Proceeds from sales 1,384,977 2,538,031 983,605 3,487,875 1,290,783
</TABLE>
Purchase and sales of U.S. government obligations for the six months ended
June 30, 1996 were as follows:
<TABLE>
<CAPTION>
BALANCED INCOME OPPORTUNITY
---------- ------------------
<S> <C> <C>
Cost of purchases $ 860,360 $ 89,874
Proceeds from sales 447,890 85,624
</TABLE>
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trust to issue an unlimited number of
full and fractional shares of beneficial interest.
25
<PAGE>
[LOGO]
T O U C H S T O N E
-------------------------------------------------------
TOUCHSTONE VARIABLE ANNUITY
-------------------------------------------------------
SELECT ADVISORS PORTFOLIOS
( GROWTH & INCOME PORTFOLIO II
( BOND PORTFOLIO II
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1996
<PAGE>
GROWTH & INCOME PORTFOLIO II
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- ------------
COMMON STOCKS (95.6%)
<TABLE>
<C> <S> <C>
BANKING & FINANCE (20.3%)
5,700 Bank of New York............... $ 292,125
20,000 Bank of Rhode Island........... 200,000
Federal National Mortgage
7,900 Association.................. 264,650
7,500 First Chicago NBD Corp......... 293,437
6,500 First Colorado Bancorp......... 86,125
2,000 Franklin Resources, Inc........ 122,000
5,000 Glendale Federal Bank FSB...... 90,625
8,100 Great Western Financial........ 193,388
8,000 HomeCorp, Inc.*................ 143,375
Household International,
1,000 Inc.......................... 76,000
6,000 Imperial Bancorp*.............. 144,000
20,000 Mercury Financial Co........... 255,000
4,500 National City Corp............. 158,062
7,500 Northfork Bancorp.............. 195,937
2,500 Summit Bancorp................. 87,813
Texas Regional Bancshares Class
10,500 A............................ 262,500
3,000 UnionBanCal Corp............... 158,625
5,000 ValliCorp Holdings, Inc........ 85,625
5,650 Webster City Federal Savings... 70,625
10,000 WFS Financial, Inc.*........... 225,000
----------
3,404,912
----------
CHEMICALS (1.8%)
7,000 Englehard Corp................. 161,000
2,500 Hercules, Inc.................. 138,125
----------
299,125
----------
COMPUTER EQUIPMENT & DATA
PROCESSING (12.8%)
7,500 AMP Inc........................ 300,937
Automatic Data Processing,
6,800 Inc.......................... 262,650
3,000 Computer Sciences Corp.*....... 224,250
10,000 Durion, Inc.................... 240,000
Electronic Data Systems
5,000 Corp......................... 268,750
2,800 First Data Corp................ 222,950
2,000 Motorola, Inc.................. 125,750
National Semiconductor
9,000 Corp.*....................... 139,500
3,000 Thomas & Betts Corp............ 112,500
20,000 Ultradata Corp.*............... 155,000
7,000 VLSI Technology, Inc.*......... 97,125
----------
2,149,412
----------
CONSUMER & OFFICE PRODUCTS
(4.6%)
2,000 Alco Standard Corp............. 90,500
4,310 General Electric Co............ 372,815
3,500 Proctor & Gamble Co............ 317,188
----------
780,503
----------
FOODS & BEVERAGES (4.7%)
2,700 Anheuser Busch................. 202,500
3,000 CPC International, Inc......... 216,000
5,000 H. J. Heinz Co................. 151,875
Nabisco Holdings Corp. Class
6,100 A............................ 215,788
----------
786,163
----------
HEALTHCARE (9.3%)
9,000 Caremark International, Inc.... 227,250
Columbia/HCA Healthcare
6,000 Corp......................... 320,250
9,000 Coventry Corporation*.......... 141,750
20,000 Metra Biosystems, Inc.*........ 110,000
14,000 Physician Corp. of America*.... $ 185,500
Physician Health Services,
6,500 Inc.*........................ 147,875
8,500 St. Jude Medical, Inc.......... 284,750
United American Healthcare
10,000 Corp.*....................... 105,000
Wellcare Management Group,
5,000 Inc.*........................ 46,875
----------
1,569,250
----------
HEAVY INDUSTRY (4.0%)
10,000 Goulds Pumps, Inc.............. 256,250
4,723 Tenneco, Inc................... 241,463
4,000 Trinity Industries............. 136,000
15,000 Weirton Steel*................. 45,000
----------
678,713
----------
INSURANCE (3.5%)
3,700 Aetna Life & Casualty.......... 264,550
2,250 American International Group... 221,906
2,000 St. Paul Cos................... 107,000
----------
593,456
----------
LEISURE & ENTERTAINMENT (2.9%)
4,410 Gaylord Entertainment.......... 124,582
Readers Digest Association,
4,000 Inc.......................... 170,000
5,000 Viacom, Inc. Class B*.......... 194,375
----------
488,957
----------
OIL SERVICE (1.9%)
6,100 USX-Marathon Group............. 122,763
Union Texas Petroleum
10,000 Holdings..................... 195,000
----------
317,763
----------
PHARMACEUTICALS (8.9%)
6,900 Abott Laboratories............. 300,150
3,000 Amgen, Inc.*................... 162,000
4,000 Merck & Co., Inc............... 258,500
7,000 Pharmacia & Upjohn, Inc.*...... 310,625
3,000 Schering-Plough Corp........... 188,250
5,000 SmithKline Beecham PLC ADR..... 271,875
----------
1,491,400
----------
SERVICES (3.4%)
2,000 Dun & Bradstreet Corp.......... 125,000
15,000 Katz Media Group*.............. 215,625
6,000 Manpower, Inc.................. 235,500
----------
576,125
----------
TELECOMMUNICATIONS (13.3%)
7,000 360 Communications Co.*........ 168,000
3,000 AT&T Corp...................... 186,000
25,000 American Paging, Inc.*......... 185,938
10,000 Atlantic Tele-Network*......... 240,000
3,800 Cincinnati Bell, Inc........... 198,075
9,500 Comcast Corp................... 175,750
2,500 SBC Communications, Inc........ 123,125
Tele-Communications Inc. Class
17,500 A*........................... 317,188
Telephone & Data System,
5,700 Inc.......................... 256,500
Western Wireless Corp. Class
10,000 A*........................... 213,750
3,000 Worldcom, Inc.*................ 166,931
----------
2,231,257
----------
TRANSPORTATION (1.2%)
7,000 Illinois Central Corp.......... 198,625
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
GROWTH & INCOME PORTFOLIO II
SCHEDULE OF INVESTMENTS--CONTINUED
JUNE 30, 1996 (UNAUDITED)
VALUE
SHARES (NOTE 1)
- --------- -----------
COMMON STOCKS--CONTINUED
UTILITIES (3.0%)
8,100 CINergy Corp................... $ 259,200
15,500 Southwest Gas Co............... 248,000
----------
507,200
----------
TOTAL COMMON STOCKS (COST $13,800,019).... 16,072,861
----------
PREFERRED STOCK (1.0%)
Allstate Corp., 6.76%
Convertible (Cost
$149,600).................... 173,800
4,400
----------
PRINCIPAL
$---------
CONVERTIBLE BONDS (1.5%)
238,500
---------
Softkey 144A, 5.5% 11/1/00
(Cost $271,317)...........
300,000
TOTAL INVESTMENTS AT VALUE $16,485,161
(COST $14,220,936)(A) (98.1%).......... ---------
CASH AND OTHER ASSETS NET OF
LIABILITIES (1.9%)..................... 322,859
NET ASSETS............................. $---------
- --------------------------
*Non-income producing security. 16,808,020
---------
---------
- --------------------------------------------------------------------------------
BOND PORTFOLIO II
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
(a) The aggregate cost for federal income tax
purposes is $14,220,936, the aggregate gross
unrealized appreciation is $2,912,035, and the
aggregate gross unrealized depreciation is
$647,810, resulting in net unrealized
appreciation of $2,264,225.
ADR: American Depository Receipt VALUE
PRINCIPAL (NOTE 1)
- --------- ---------
ASSET BACKED SECURITIES (19.7%)
$ 500,000 Advanta Mortgage Loan,
6.03%, 8/25/11............ $ 486,405
432,881 Chase Manhattan Grantor
Trust, 5.2%, 4/15/02...... 427,002
500,000 Ford Credit Auto Loan Master
Trust, 6.5%, 8/15/02...... 496,564
250,000 General Motors Acceptance
Corp., 6.3%, 9/10/97...... 250,294
500,000 Navistar Financial, 6.35%,
5/30/96................... 499,770
400,000 Standard Credit Card Master
Trust, 5.95%, 10/7/04..... 376,316
---------
TOTAL ASSET BACKED SECURITIES
(COST $2,559,875)...................... 2,536,351
---------
CORPORATE BONDS (19.1%)
BANKING & FINANCE (9.2%)
500,000 Bank of New York, 8.5%,
12/15/04.................. 538,490
500,000 Ford Motor Credit Co.,
6.25%, 11/8/00............ 487,931
105,603 Mercantile Safe Deposit,
12.125%, 1/2/01+.......... 117,978
42,857 Star Banc Corp., 9.25%,
7/15/01+.................. 42,900
---------
1,187,299
---------
BROADCAST & MEDIA (2.2%)
250,000 News America Holdings, Inc.,
10.125%, 10/15/12......... 282,467
---------
CHEMICALS (3.8%)
500,000 Praxair, 6.7%, 4/15/01...... 495,679
---------
INSURANCE (3.9%)
500,000 Travelers/Aetna P&C, 6.75%,
4/15/01................... 496,824
---------
TOTAL CORPORATE BONDS (COST
$2,451,418)............................ 2,462,269
---------
YANKEE BONDS (2.9%)
400,000 Province of Ontario, 6%,
2/21/06 (Cost $369,252)... 366,883
---------
MORTGAGE BACKED SECURITIES (17.5%)
Federal Home Loan Mortgage
Corporation:
495,988 7%, 12/1/25............... 477,557
487,101 7%, 10/1/25............... 469,000
494,903 7%, 4/1/03................ 493,201
Government National Mortgage
Association:
$ 65,832 10.25%, 7/15/12........... $ 65,831
652,676 7%, 2/15/09............... 647,897
100,000 Morgan Stanley Mortgage
Trust, 9.8%, 11/1/18...... 101,197
---------
TOTAL MORTGAGE BACKED SECURITIES
(COST $2,268,777)...................... 2,254,683
---------
U.S. TREASURY OBLIGATIONS (28.4%)
U.S. Treasury Bonds:
350,000 7.25%, 5/15/16........... 358,531
500,000 6.125%, 9/30/00.......... 494,218
U.S. Treasury Notes:
750,000 7.5%, 11/15/01........... 782,812
500,000 6.75%, 4/30/00........... 505,312
300,000 6.75%, 5/31/99........... 303,468
250,000 6.25%, 2/15/03........... 245,469
600,000 6.125%, 3/31/98.......... 600,656
375,000 5.125%, 2/28/98.......... 369,492
---------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $3,637,221)...................... 3,659,958
---------
AGENCY FOR INTERNATIONAL DEVELOPMENT
BONDS (7.0%)+
Central America:
150,000 Series F, 10%, 12/1/11.... 170,816
150,000 Series G, 10%, 12/1/11.... 170,816
150,000 Series H, 10%, 12/1/11.... 170,816
Republic of Honduras:
92,683 Series B, 13%, 6/1/01..... 104,322
100,000 Series C, 13%, 6/1/06..... 129,815
100,000 Series D, 13%, 6/1/11..... 139,925
---------
TOTAL AGENCY FOR INTERNATIONAL
DEVELOPMENT BONDS (COST $742,682)...... 886,510
---------
TOTAL INVESTMENTS AT VALUE (94.6%)
(COST $12,029,225)(A).................. 12,166,654
CASH AND OTHER ASSETS NET OF
LIABILITIES (5.4%)..................... 698,063
---------
NET ASSETS (100.0%).................... $12,864,717
---------
---------
- --------------------------
(a) The aggregate cost for federal income tax
purposes is $12,029,225, the aggregate gross
unrealized appreciation is $281,176, and the
aggregate gross unrealized depreciation is
$143,747, resulting in net unrealized
appreciation of $137,429.
+ Restricted and Board valued security (Note 5).
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
SELECT ADVISORS PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH &
INCOME BOND
PORTFOLIO II PORTFOLIO II
------------ ------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1)* $ 16,485,161 $ 12,166,654
Cash 237,735 806,398
Receivables for:
Securities sold 367,783 886,292
Mortgage-backed security principal -- 3,150
Dividends 19,735 --
Interest 3,772 140,552
Deferred organization expenses 27,670 27,670
------------ ------------
Total assets 17,141,856 14,030,716
------------ ------------
LIABILITIES:
Payable for securities purchased 274,063 1,134,418
Payable to Advisor (Note 2) 45,680 18,560
Payable to Administrator (Note 2) 4,989 4,779
Other accrued expenses 9,104 8,242
------------ ------------
Total liabilities 333,836 1,165,999
------------ ------------
NET ASSETS:
Applicable to investors' beneficial interests $ 16,808,020 $ 12,864,717
------------ ------------
------------ ------------
*Cost of investments $ 14,220,936 $ 12,029,225
------------ ------------
------------ ------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1):
Interest $ 19,390 $ 425,183
Dividends 122,170 --
------------ ------------
TOTAL INVESTMENT INCOME 141,560 425,183
------------ ------------
EXPENSES:
Investment advisory fees (Note 2) 56,725 33,350
Administration and fund accounting fees (Note 2) 30,584 30,076
Sponsor fee (Note 2) 15,127 33,350
Printing 7,376 6,755
Auditing fees 6,636 9,143
Amortization of organization expenses (Note 1) 4,016 4,016
Custody fees 2,638 1,899
Trustee fees (Note 2) 2,204 1,723
Miscellaneous 3,480 3,211
------------ ------------
Total expenses 128,786 123,523
Waiver of Sponsor fee (Note 2) (15,127) (33,350)
Reimbursement from Advisor (Note 3) (49,372) (44,696)
------------ ------------
Net expenses 64,287 45,477
------------ ------------
NET INVESTMENT INCOME 77,273 379,706
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 1,902,460 54,343
Net change in unrealized appreciation (depreciation) (596,834) (667,802)
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS): 1,305,626 (613,459)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,382,899 $ (233,753)
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
SELECT ADVISORS PORTFOLIOS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME BOND
PORTFOLIO II PORTFOLIO II
--------------------------- ---------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1996 DECEMBER 31, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
------------ ------------ ------------ ------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income 77,273 150,761 379,706 773,047
Net realized gain on investments 1,902,460 1,554,207 54,343 315,080
Net change in unrealized appreciation on
investments (596,834) 1,902,447 (667,802) 777,621
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 1,382,899 3,607,415 (233,753) 1,865,748
------------ ------------ ------------ ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTEREST:
Contributions 1,719,595 363,297 851,521 335,196
Withdrawals (188,011) -- (57,541) --
------------ ------------ ------------ ------------
Net increase from investors' transactions 1,531,584 363,297 793,980 335,196
------------ ------------ ------------ ------------
TOTAL CHANGES IN NET ASSETS 2,914,483 3,970,712 560,227 2,200,944
NET ASSETS
Beginning of period 13,893,537 9,922,825 12,304,490 10,103,546
------------ ------------ ------------ ------------
End of period $16,808,020 $13,893,537 $12,864,717 $12,304,490
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTARY DATA
- -----------------------------------------------------------------------------------------------------------------------------
GROWTH & INCOME BOND
PORTFOLIO II PORTFOLIO II
------------------------------------------------------ ------------------------------------
FOR THE PERIOD
FOR THE SIX NOVEMBER 21, FOR THE SIX
MONTHS ENDED FOR THE 1994 (A) MONTHS ENDED FOR THE
JUNE 30, 1996 YEAR ENDED TO DECEMBER 31, JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995 1994 (UNAUDITED) DECEMBER 31, 1995
-------------- ----------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
(B):
Expenses 0.85% 0.85% 0.85% 0.75% 0.75%
Net investment income 1.02% 1.27% 2.06% 6.24% 6.91%
Expenses, without waiver and
reimbursement 1.70% 1.77% 2.94% 2.03% 1.58%
Portfolio turnover 50% 96% 0% 49% 80%
Average commission rate (c) $ 0.0576
<CAPTION>
SUPPLEMENTARY DATA
- -------------------------------
FOR THE PERIOD
NOVEMBER 21,
1994 (A)
TO DECEMBER 31,
1994
-------------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
(B):
Expenses 0.75%
Net investment income 6.76%
Expenses, without waiver and
reimbursement 2.67%
Portfolio turnover 0%
Average commission rate (c)
</TABLE>
- ------------------------
(a) Commencement of operations.
(b) Ratios are annualized. Portfolio turnover is not annualized.
(c) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary between periods and
funds depending on the volume and character of trades executed in various
markets where trading practices and comission rate structures may differ.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
SELECT ADVISORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Select Advisors Portfolios (the "Portfolio Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company organized as a New York master trust fund on February 7, 1994. There are
nine subtrusts of the Portfolio Trust (each a "Portfolio"), each having distinct
investment objectives and policies. The Portfolios are Emerging Growth
Portfolio, International Equity Portfolio, Growth & Income Portfolio, Balanced
Portfolio, Income Opportunity Portfolio, Bond Portfolio, Municipal Bond
Portfolio, Growth & Income Portfolio II, and Bond Portfolio II. Only Growth &
Income Portfolio II and Bond Portfolio II are included in this report. The other
portfolios are included in a separate report.
The initial capital contributions of $10,000,000 to the Growth & Income
Portfolio II and the Bond Portfolio II were made by Western-Southern Life
Assurance Company ("Western-Southern").
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:
a) INVESTMENT VALUATION. The value of each security for which readily
available market quotations exists is based on a decision as to the broadest and
most representative market for such security. The value of such security is
based either on the last sale price on a national securities exchange, or, in
the absence of recorded sales, at the readily available closing bid price on
such exchanges, or at the quoted bid price in the over-the-counter market.
Securities listed on foreign exchanges are valued at the last quoted sale price
available before the net assets are valued. Unlisted securities are valued at
the average of the quoted bid and asked prices in the over-the-counter market.
Debt securities are valued by a pricing service which determines valuations
based upon market transactions for normal, institutional-size trading units of
similar securities. Securities or other assets for which market quotations are
not readily available are valued at fair value in good faith in accordance with
procedures established by the Trustees of the Portfolio Trust. Such procedures
include the use of independent pricing services, which use prices based upon
yields or prices of securities of comparable quality, coupon, maturity and type,
indications as to values from dealers; and general market conditions. All debt
securities with a remaining maturity of less than 60 days are valued at
amortized cost, which approximates market.
b) FOREIGN CURRENCY TRANSLATION. The accounting records of the Portfolios
are maintained in U.S. dollars. The market value of investment securities, other
assets and liabilities and forward contracts denominated in foreign currencies
are translated into U.S. dollars at the prevailing exchange rates at the end of
the period. Purchases and sales of securities, income receipts, and expense
payments are translated at the exchange rate prevailing on the respective dates
of such transactions. Reported net realized gains and losses on foreign currency
transactions represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions and
the difference between the amount of net investment income accrued and the U.S.
dollar amount actually received.
The effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statement of Operations from the effects of
changes in market prices of these securities, but are included with the net
realized and unrealized gain or loss on investments.
c) INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date
except that certain dividends from foreign securities where the ex-dividend date
has passed are recorded as soon as the Portfolio Trust is informed of the
ex-dividend date. Interest income, which includes the amortization of premium
and accretion of discount, if any, is recorded on an accrual basis. Dividend and
interest income is recorded net of foreign taxes where recovery of such taxes is
not assured.
d) FEDERAL TAXES. Each Portfolio is treated as a partnership for federal
income tax purposes. As such, each investor in each Portfolio is subject to
taxation on its share of that Portfolio's ordinary income and capital gains.
Accordingly, no provision has been made for federal income taxes. It is intended
that each Portfolio's assets will be managed in such a way that an investor in
the Portfolio will be able to satisfy the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended.
e) FORWARD CURRENCY CONTRACTS. Each Portfolio may enter into forward
foreign currency contracts to protect securities and related receivables and
payables against fluctuations in foreign currency rates. A forward contract is
an agreement to buy or sell currencies of different countries on a specified
future date at a specified rate.
Risks associated with such contracts include the movement in the value of
the foreign currency relative to the U.S. dollar and the ability of the
counterparty to perform. The market value of the contract will fluctuate with
31
<PAGE>
SELECT ADVISORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
changes in currency exchange rates. Contracts are valued daily based on
procedures established by and under the general supervision of the Trustees of
the Portfolio Trust and the change in the market value is recorded by the
Portfolio as unrealized appreciation or depreciation of forward foreign currency
contracts.
f) ORGANIZATION EXPENSE. Organization expenses were deferred and are being
amortized by each Portfolio on a straight-line basis over a five-year period
from commencement of operations. Each Fund's organizational fees payable
includes fees and expenses payable to Touchstone Advisors, Inc. of $39,924. The
amount paid by the Trust on any withdrawal by Touchstone Advisors, Inc. or any
other then-current holder of the Initial Interests in the Portfolio will be
reduced by a portion of any unamortized organization expenses of the Portfolio,
determined by the proportion of the amount of the Initial Interests in the
Portfolio withdrawn to the amount of the Initial Interests in the Portfolio then
outstanding after taking into account any prior withdrawals of the Initial
Interests in the Portfolio.
g) OTHER. Securities transactions are recorded on a trade date basis. For
financial and tax reporting purposes, realized gains and losses are determined
on the basis of specific lot identification.
2. TRANSACTIONS WITH AFFILIATES
a) SPONSOR. Touchstone Advisors, Inc. ("Sponsor"), a subsidiary of
Western-Southern, as sponsor to the Trust, pursuant to a Sponsor Agreement
provides oversight of the various service providers to the Trust, including the
Trust's Administrator, Custodian and Transfer Agent. As Sponsor to the Trust,
Touchstone Advisors reserves the right to receive a sponsor fee from each
portfolio equal on an annual basis to 0.20% of average daily net assets of that
Portfolio for its then-current fiscal year. The Sponsor Agreement may be
terminated by the Sponsor or by the Trust on not less than 30 days prior written
notice. The Sponsor has advised the Trust that it will waive all fees under the
Sponsor Agreement through April 30, 1997.
(b) INVESTMENT ADVISOR. The Portfolio Trust has an investment advisory
agreement with Touchstone Advisors, Inc. ("Advisor"), a subsidiary of
Western-Southern. Under the terms of the investment advisory agreement, each
Portfolio pays an investment advisory fee that is computed daily and paid
monthly. Investment advisory fees to Growth & Income Portfolio II and Bond
Portfolio II are equal on an annual basis to 0.75% and 0.55%, respectively, of
the average daily net assets of each Portfolio.
Fort Washington Investment Advisors, Inc., an affiliate of the Advisor, is
the sub-advisor for the Growth & Income Portfolio II and the Bond Portfolio II.
(c) ADMINISTRATOR AND FUND ACCOUNTANT. The Portfolio Trust retains
Signature Financial Services, Inc. ("Signature") to serve as administrator and
fund accountant. Certain officers of Signature serve as officers of the
Portfolios. Signature provides administrative services necessary for the
operations of the Portfolios, including the preparation and filing of all
documents required by the Portfolio Trust for compliance with applicable laws
and regulations; arranging for the maintenance of books, records and custody of
the Portfolios; and paying the compensation of the Portfolio Trust's officers,
affiliated with Signature. For these services, Signature receives from each
Portfolio a fee that is computed daily and paid monthly equal on an annual basis
to 0.20% of the aggregate average daily net assets of the Portfolio Trust. Rates
are reduced on a sliding scale when the combined average net assets of the
Portfolio Trust exceed $100 million. In addition, each Portfolio is subject to a
minimum annual fee of $60,000 plus out-of-pocket expenses.
(d) TRUSTEES. Each Trustee who is not an "interested person," (as defined
in the Act), of the Portfolio Trust, receives in aggregate $5,000 annually plus
$1,000 per meeting attended, as well as, reimbursement for reasonable
out-of-pocket expenses from the Portfolio and from Select Advisors Trust A,
Select Advisors Trust C and Select Advisors Variable Insurance Trust.
3. EXPENSE REIMBURSEMENT
The Sponsor has agreed to reimburse each Portfolio so that, following such
reimbursement the aggregate total operating expenses (excluding interest, taxes,
brokerage commission and extraordinary expenses) of each Portfolio are not
greater, on an annualized basis, than 0.85% and 0.75% of average daily net
assets of Growth & Income Portfolio II and Bond Portfolio II, respectively.
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
For the period ended June 30, 1996, the cost of investment securities
purchased was $8,952,933 and $3,838,846, and the proceeds from sales of
investment securities sold were $7,540,149 and $3,353,400, for Growth & Income
Portfolio II and Bond Portfolio II, respectively, excluding U.S. government
obligations and short-term investments. Purchases and sales of U.S. government
obligations were $2,264,488 and $2,146,617, respectively, for Bond Portfolio II.
32
<PAGE>
SELECT ADVISORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
5. RESTRICTED SECURITIES
As of June 30, 1996, Bond Portfolio II held restricted securities valued at
$1,047,386, representing 8.1% of net assets. Acquisition date and cost of each
are as follows:
<TABLE>
<CAPTION>
ACQUISITION
DATE COST
-------------- ----------
<S> <C> <C>
Mercantile Safe Deposit.......................................... 3/28/85 $ 105,508
Central America, Series F........................................ 8/1/86 150,000
Central America, Series G........................................ 8/1/86 150,000
Central America, Series H........................................ 8/1/86 150,000
Republic of Honduras, Series B................................... 5/1/88 92,683
Republic of Honduras, Series C................................... 5/1/88 100,000
Republic of Honduras, Series D................................... 5/1/88 100,000
Star Banc Corporation............................................ 7/23/91 42,857
</TABLE>
Bond Portfolio II received these securities from Western-Southern on
November 21, 1994 in exchange for a proportionate interest in the portfolio.
33
<PAGE>
DISTRIBUTOR
Touchstone Securities, Inc.
311 Pike Street
Cincinnati, Ohio 45202
(800) 669-2796
INVESTMENT ADVISOR OF EACH PORTFOLIO
Touchstone Advisors, Inc.
311 Pike Street
Cincinnati, Ohio 45202
ADMINISTRATOR OF THE SEPARATE ACCOUNT
Continuum-Vantage
301 West 11th Street
Kansas City, Missouri 64105
ADMINISTRATOR OF EACH PORTFOLIO
Signature Financial Services, Inc.
6 St. James Avenue
Boston, Massachusetts, 02116
TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
LEGAL COUNSEL
Frost & Jacobs
2500 PNC Center
201 East 5th Street
Cincinnati, Ohio 45202
- --------------------------------------------------------------------------------
T O U C H S T O N E
---------------------------------------------
FORM 7141-9606 THE MARK OF EXCELLENCE IN INVESTMENT MANAGEMENT-SM-
