LETTER FROM THE PRESIDENT
Dear Fellow Touchstone Contract Owner:
As evidenced by the performance reflected in this semi-annual report, a
robust domestic economy and healing economies abroad marked the first six months
of 1999. Among the forces influencing the investment climate were modest price
inflation overall, strong corporate earnings, continued consumer confidence and
accelerating recoveries in many regions of the world, despite rising oil prices.
Expectations of an eventual boost in interest rates drove the price of the
bellwether 30-year Treasury bond downward and were fulfilled by a hike in the
federal funds rate of 1/4 of 1 percent on June 30.
Historical trends show that the performance of investment sectors and styles
runs in cycles. The cycles of different sector and style classes often move in
opposite directions and alternately lead and lag one another. When one is up,
the other is flat or down, and vice versa. We require that our managers possess
the experience to stay the course through these cycles and the expertise to take
advantage of the various opportunities presented over the course of these
cycles. In the first six months of 1999, some sectors and styles that lagged in
1998 have exhibited a resurgence in performance and a subsequent return to
favor. Small capitalization stocks and value stocks have been among the leading
examples. The performance of a number of Touchstone's investment options reflect
that rebound. Please see the following pages for details.
ENHANCED INVESTMENT OPTIONS
Because we feel strongly that a wise investor needs to maintain a good mix of
differing styles of funds, we were proud to introduce 10 new investment options
to our Touchstone variable annuity products effective May 17. The managers of
these new options from AIM Advisors, Inc., Fred Alger Management, Inc., MFS(R)
Investment Management, Pacific Investment Management Co., Fort Washington
Investment Advisors, Inc. and Todd Investment Advisors, Inc. offer you a wider
array of choices and additional opportunity for diversification within your
Touchstone contract.* Please call Touchstone at 800.669.2796 to confirm the
availability of these options in your state. As always, please read a current
prospectus carefully before investing or sending money.
YEAR 2000 READINESS
We have now passed the mid-point of 1999. We are confident that January 1, 2000,
will be like any other day when it comes to providing Touchstone contract owners
prompt and reliable service. We are taking every step to assure the readiness of
our computer systems for Year 2000. Even though we don't expect any problems, as
is our usual practice, we will have backup of all critical information on
December 31, 1999.
I'd like to take this opportunity to thank you for your investment in Touchstone
Variable Annuities.1 We appreciate your continued confidence and pledge every
effort to continue to merit your trust.
Sincerely,
/s/ Jill T. McGruder
Jill T. McGruder
President and Chief Executive Officer
Touchstone Family of Funds and Variable Annuities
* THIS IS A TWO-PART SEMI-ANNUAL REPORT. FOR THOSE WHO HAVE NOT SELECTED THE
AIM, ALGER, MFS, AND PIMCO OPTIONS BUT WOULD LIKE TO RECEIVE FINANCIAL
INFORMATION FOR THESE NEW INVESTMENT OPTIONS, PLEASE CALL TOUCHSTONE AT
800.669.2796.
1 TOUCHSTONE VARIABLE ANNUITIES ARE UNDERWRITTEN BY WESTERN-SOUTHERN LIFE
ASSURANCE COMPANY, CINCINNATI, OHIO. THE TOUCHSTONE FAMILY OF FUNDS AND
VARIABLE ANNUITIES ARE DISTRIBUTED BY TOUCHSTONE SECURITIES, INC., MEMBER
NASD AND SIPC. FOR A PROSPECTUS CONTAINING MORE INFORMATION, INCLUDING ALL
FEES AND EXPENSES, CALL 800.669.2796. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING OR SENDING MONEY.
<PAGE>
NOTES
2
<PAGE>
WESTERN-SOUTHERN LIFE ASSURANCE
COMPANY SEPARATE ACCOUNT 1
STATEMENT OF NET ASSETS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments at current market value:
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth Fund ( 167,262 shares, cost $ 4,442,126 ) $4,669,956
AIM V.I. Government Securities Fund ( 30,516 shares, cost $ 332,994 ) 334,154
The Alger American Fund
Alger American Small Capitalization Portfolio ( 6,382 shares, cost $ 257,653 ) 278,145
Alger American Growth Portfolio ( 122,166 shares, cost $ 6,402,708 ) 6,821,726
MFS Variable Insurance Trust
MFS VIT Emerging Growth Series ( 40,683 shares, cost $ 944,342 ) 985,336
MFS VIT Growth with Income Series ( 146,774 shares, cost $ 3,027,820 ) 3,102,796
PIMCO Variable Insurance Trust
PIMCO Long-Term U.S. Gov't. Bond Portfolio ( 97,333 shares, cost $ 942,993 ) 942,187
Touchstone Variable Series Trust
Touchstone Small Cap Value Fund ( 6,297 shares, cost $ 63,575 ) 67,439
Touchstone Emerging Growth Fund (1,575,722 shares, cost $24,334,273 ) 27,843,016
Touchstone International Equity Fund (1,823,168 shares, cost $24,130,849 ) 25,797,825
Touchstone Income Opportunity Fund (3,233,263 shares, cost $34,313,915 ) 27,870,723
Touchstone High Yield Fund ( 66,519 shares, cost $ 655,871 ) 653,886
Touchstone Value Plus Fund ( 682,107 shares, cost $ 7,066,480 )
Touchstone Growth & Income Fund (4,896,400 shares, cost $51,277,194 ) 57,238,921
Touchstone Enhanced 30 Fund ( 56,064 shares, cost $ 546,944 ) 569,605
Touchstone Balanced Fund (2,499,566 shares, cost $36,103,110 ) 37,343,513
Touchstone Bond Fund (2,439,191 shares, cost $24,834,841 ) 24,294,340
Touchstone Standby Income Fund (2,222,823 shares, cost $22,227,257 ) 22,161,548
- ------------------------------------------------------------------------------------------------------------------------------
Total Invested Assets 248,689,745
Accounts Receivable 2,646
- ------------------------------------------------------------------------------------------------------------------------------
Total net assets $248,692,391
==============================================================================================================================
NET ASSETS:
Variable annuity contracts $248,688,752
Retained in the variable account by Western-Southern Life Assurance Company 3,639
- ------------------------------------------------------------------------------------------------------------------------------
Total net assets $248,692,391
==============================================================================================================================
3
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
Western-Southern Life Assurance
Company Separate Account 1
Statement of Operations and Changes in Net Assets
For the period from January 1, 1999 to June 30, 1999 (unaudited)
<CAPTION>
Alger MFS
AIM V.I. American Alger VIT
AIM V.I. Government Small American Emerging
Growth Securities Capitalization Growth Growth
Total Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ 1,323,525 $ -- $ -- $ -- $ -- $ --
Miscellaneous income (loss) 11,794 (3,858) 112 109 (1,701) (667)
Expenses:
Mortality and expense risk, and
administrative charge 1,554,498 4,085 241 215 7,571 691
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (219,179) (7,943) (129) (106) (9,272) (1,358)
- ----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 12,901,199 227,830 1,159 20,492 419,018 40,994
Realized gain (loss) on investments 977,439 -- (21) 3 (4,795) (122)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 13,878,638 227,830 1,138 20,495 414,223 40,872
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 13,659,459 219,887 1,009 20,389 404,951 39,514
- ----------------------------------------------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 24,358,090 65,590 353 11,577 39,018 46,830
Net transfers between sub-accounts
and/or fixed account 6,744,054 4,396,909 333,002 246,243 6,557,624 899,957
Withdrawals and surrenders (18,771,195) (12,239) (204) (58) (179,246) (955)
Contract maintenance charge (81,708) (219) (9) (4) (648) (24)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
contract activity 12,249,241 4,450,041 333,142 257,758 6,416,748 945,808
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 25,908,700 4,669,928 334,151 278,147 6,821,699 985,322
Net assets, at beginning of period 222,783,691 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, at end of period $248,692,391 $4,669,928 $334,151 $278,147 $6,821,699 $985,322
============================================================================================================================
4
<PAGE>
<CAPTION>
MFS PIMCO
VIT Long-Term Touchstone Touchstone Touchstone Touchstone
Growth U.S. Government Small Cap Emerging International Income
with Income Bond Value Growth Equity Opportunity
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ -- $ 2,727 $ -- $ -- $ -- $ 534,729
Miscellaneous income (loss) 896 34 (63) 6,300 3,127 3,765
Expenses:
Mortality and expense risk, and
administrative charge 3,574 658 42 178,212 175,055 202,820
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (2,678) 2,103 (105) (171,912) (171,928) 335,674
- ----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments 74,976 (806) 3,864 2,816,387 (177,680) 1,647,127
Realized gain (loss) on investments (1,238) (4) -- 1,100,313 503,394 (1,922,678)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 73,738 (810) 3,864 3,916,700 325,714 (275,551)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 71,060 1,293 3,759 3,744,788 153,786 60,123
- ----------------------------------------------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 24,358,090 41,241 376 2,107,404 2,095,142 2,827,714
Net transfers between sub-accounts
and/or fixed account 3,131,506 902,410 63,347 (2,925,819) (380,586) (4,344,869)
Withdrawals and surrenders (151,977) (2,747) (45) (2,448,222) (2,000,225) (2,085,932)
Contract maintenance charge (186) (13) -- (10,985) (9,246) (11,054)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
contract activity 3,031,794 940,891 63,678 (3,277,622) (294,915) (3,614,141)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 3,102,854 942,184 67,437 467,166 (141,129) (3,554,018)
Net assets, at beginning of period -- -- -- 27,375,814 25,938,804 31,424,661
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, at end of period $3,102,854 $942,184 $67,437 $27,842,980 $25,797,675 $27,870,643
============================================================================================================================
<CAPTION>
Touchstone Touchstone
Touchstone Touchstone Growth & Touchstone Touchstone Touchstone Standby
High Yield Value Plus Income Enhanced 30 Balanced Bond Income
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ -- $ -- $ -- $ -- $ -- $ 218,816 $ 567,253
Miscellaneous income (loss) (25) 4,510 109 126 434 541 (1,955)
Expenses:
Mortality and expense risk, and
administrative charge 560 37,229 378,805 503 257,564 168,167 138,506
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (585) (32,719) (378,696) (377) (257,130) 51,190 426,792
- ----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments (1,985) 428,746 5,961,726 22,661 2,032,120 (540,502) (74,928)
Realized gain (loss) on investments (2) 257,949 526,003 1 594,910 (69,621) (6,653)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1,987) 686,695 6,487,729 22,662 2,627,030 (610,123) (81,581)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting
from operations (2,572) 653,976 6,109,033 22,285 2,369,900 (558,933) 345,211
- ----------------------------------------------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 24,358,090 1,678,949 5,038,432 7,218 4,067,575 3,376,942 2,900,396
Net transfers between sub-accounts
and/or fixed account 656,898 3,355,154 (3,884,502) 546,035 (3,228,482) (973,555) 1,392,782
Withdrawals and surrenders (1,322) (374,904) (4,466,900) (5,970) (3,234,312) (1,602,927) (2,203,010)
Contract maintenance charge (1) (1,712) (22,836) (31) (13,068) (6,928) (4,744)
Net increase (decrease) from
contract activity 656,457 4,657,487 (3,335,806) 547,252 (2,408,287) 793,532 2,085,424
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 653,885 5,311,463 2,773,227 569,537 (38,387) 234,599 2,430,635
Net assets, at beginning of period -- 2,403,142 54,465,458 -- 37,381,794 24,059,710 19,734,308
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, at end of period $653,885 $7,714,605 $57,238,685 $569,537 $37,343,407 $24,294,309 $22,164,943
============================================================================================================================
<PAGE>
<CAPTION>
Touchstone Touchstone Touchstone Touchstone
Emerging International Income Touchstone Growth &
Growth Equity Opportunity Value Plus Income
Total Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ 7,790,557 $ 949,247 $ 855,477 $ 3,182,093 $ 6,117 --
Miscellaneous income (loss) 38,997 (2,563) 12,273 10,204 1,075 $ (2,166)
Expenses:
Mortality and expense risk, and
administrative charge 2,427,007 293,715 282,611 397,116 10,259 582,000
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 5,402,547 652,969 585,139 2,795,181 (3,067) (584,166)
- ------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments (3,978,283) (776,947) 1,667,350 (7,057,484) 219,404 1,880,378
Realized gain (loss) on investments 342,534 431,014 410,552 (659,377) (216,120) --
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (3,635,749) (345,933) 2,077,902 (7,716,861) 3,284 1,880,378
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 1,766,798 307,036 2,663,041 (4,921,680) 217 1,296,212
- ------------------------------------------------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 115,835,531 12,397,017 11,156,959 18,716,854 900,471 27,198,189
Net transfers between sub-accounts
and/or fixed account 1,426,873 1,374,341 871,994 (2,260,691) 1,574,297 2,696,317
Withdrawals and surrenders (16,702,244) (2,261,213) (1,887,141) (2,651,298) (71,597) (4,484,468)
Contract maintenance charge (91,368) (12,823) (11,413) (16,220) (246) (24,273)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
contract activity 100,468,792 11,497,322 10,130,399 13,788,645 2,402,925 25,385,765
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 102,235,590 11,804,358 12,793,440 8,866,965 2,403,142 26,681,977
Net assets, at beginning of period 120,548,101 15,571,456 13,145,364 22,557,696 -- 27,783,481
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, at end of period $222,783,691 $27,375,814 $25,938,804 $31,424,661 $2,403,142 $54,465,458
==============================================================================================================================
4
<PAGE>
<CAPTION>
For the period January 1, 1998 to December 31, 1998
Touchstone
Touchstone Touchstone Standby
Balanced Bond Income
Sub-Account Sub-Account Sub-Account
<S> <C> <C> <C>
Income:
Dividends and capital gains $ 1,889,245 -- $ 908,378
Miscellaneous income (loss) 10,320 $ 746 9,108
Expenses:
Mortality and expense risk, and
administrative charge 400,076 237,929 223,301
- -------------------------------------------------------------------------------------
Net investment income (loss) 1,499,489 (237,183) 694,185
- -------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments (1,248,671) 1,318,608 19,079
Realized gain (loss) on investments 377,228 -- (763)
- -------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (871,443) 1,318,608 18,316
- -------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 628,046 1,081,425 712,501
- -------------------------------------------------------------------------------------
Contract owners activity:
Payments received from contract
owners 19,309,239 11,285,726 14,871,076
Net transfers between sub-accounts
and/or fixed account 1,500,884 1,592,079 (5,922,348)
Withdrawals and surrenders (2,649,241) (1,258,041) (1,439,245)
Contract maintenance charge (14,359) (7,358) (4,676)
- -------------------------------------------------------------------------------------
Net increase (decrease) from
contract activity 18,146,523 11,612,406 7,504,807
- -------------------------------------------------------------------------------------
Net increase (decrease) in net assets 18,774,569 12,693,831 8,217,308
Net assets, at beginning of period 18,607,225 11,365,879 11,517,000
- -------------------------------------------------------------------------------------
Net assets, at end of period $37,381,794 $24,059,710 $19,734,308
=====================================================================================
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Supplementary Information
Touchstone Gold Variable Annuity
(Selected data for an accumulation unit outstanding for each period)
Alger MFS MFS
AIM V.I. American Alger VIT VIT
AIM V.I. Government Small American Emerging Growth
Growth Securities Capitalization Growth Growth with Income
Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account*
----------------------------------------------------------------------------------------
For the For the For the For the For the For the
Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30, June 30,
1999 1999 1999 1999 1999 1999
<S> <C> <C> <C> <C> <C> <C>
Investment income $ -- $ -- $ -- $ -- $ -- $ --
Expenses 0.015900 0.016043 0.016328 0.015873 0.016176 0.016160
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.015900) (0.016043) (0.016328) (0.015873) (0.016176) (0.016160)
Net realized and
unrealized gain (loss)
on investments 0.397607 (0.063535) 0.872046 0.538681 0.561704 0.301674
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.381707 (0.079578) 0.855718 0.522808 0.545528 0.285514
Beginning of period 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
- -----------------------------------------------------------------------------------------------------------------------
End of period $10.381707 $ 9.920422 $10.855718 $10.522808 $10.545528 $10.285514
=======================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.17% 0.14% 0.15% 0.22% 0.14% 0.23%
Ratio of net investment
income (loss) to
average net assets (%) (0.34)% (0.08)% (0.08)% (0.27)% (0.28)% (0.17)%
6
<PAGE>
<CAPTION>
PIMCO
Long-Term
U.S. Touchstone
Government Small Cap
Bond Value
Sub-Account* Sub-Account* Touchstone Emerging Growth Fund Sub-Account
------------ ------------ --------------------------------------------------------------------
For the For the For the For the
Period Period Period For the For the For the Period
Ended Ended Ended Year Ended Year Ended Year Ended Ended
June 30, June 30, June 30, December 31, December 31, December 31, December 31,
1999 1999 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income $ 0.065803 $ -- $ -- $ 0.599473 $ 0.914814 $ 0.334587 $ 0.786333
Expenses 0.016030 0.016235 0.115248 0.222097 0.197048 0.165347 0.123840
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.049773 (0.016235) (0.115248) 0.377376 0.717766 0.169240 0.662493
Net realized and
unrealized gain (loss)
on investments (0.142751) 0.519884 2.613462 (0.055459) 3.369931 0.961438 1.024676
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value (0.092978) 0.503649 2.498214 0.321917 4.087697 1.130678 1.687169
Beginning of period 10.000000 10.000000 17.227461 16.905544 12.817847 11.687169 10.000000
- --------------------------------------------------------------------------------------------------------------------------------
End of period $ 9.907022 $10.503649 $19.725675 $17.227461 $16.905544 $12.817847 $11.687169
================================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.14% 0.12% 0.65% 1.37% 1.32% 0.96% 0.58%
Ratio of net investment
income (loss) to
average net assets (%) 0.45% (0.31)% (0.62)% 3.04% 7.70% 4.00% 12.54%
<PAGE>
<CAPTION>
Touchstone International Equity Sub-Account
-----------------------------------------------------------------------
For the For the
Period For the For the For the Period
Ended Year Ended Year Ended Year Ended Ended
June 30, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
Investment income $ -- $ 0.549363 $ 0.759815 $ 0.083236 $ 0.033593
Expenses 0.108872 0.212322 0.179407 0.159808 0.123076
- --------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.108872) 0.337041 0.580408 (0.076572) (0.089483)
Net realized and
unrealized gain (loss)
on investments 0.223278 2.265021 1.053431 1.196627 1.320313
- --------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.114406 2.602062 1.633839 1.120055 1.230830
Beginning of period 16.586786 13.984724 12.350885 11.230830 10.000000
- --------------------------------------------------------------------------------------------------------
End of period $16.701192 $16.586786 $13.984724 $12.350885 $11.230830
========================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.45% 1.33% 0.98% 0.66%
Ratio of net investment
income (loss) to
average net assets (%) (0.66)% 2.99% 7.43% 0.18% 0.06%
* Calculation of the AIM V. I. Growth, AIM V. I. Government Securities, Alger
American Small Capitalization, Alger American Growth, MFS VIT Emerging
Growth, MFS VIT Growth with Income, PIMCO Long-Term U. S. Government Bond,
Touchstone Small Cap Value, Touchstone High Yield, and Touchstone Enhanced
30 Unit Values began May 17, 1999, when those sub-accounts commenced
operations.
7
<PAGE>
Western-Southern Life Assurance
Company Separate Account 1
Supplementary Information
Touchstone Gold Variable Annuity
(Selected data for an accumulation unit outstanding for each period)
Touchstone
High Yield
Touchstone Income Opportunity Sub-Account Sub-Account*
----------------------------------------------------------- -------------
For the For the For the
Period For the For the For the Period Period
Ended Year Ended Year Ended Year Ended Ended Ended
June 30, December 31, December 31,December 31, December 31,June 30,
1999 1998 1997 1996 1995 1999
Investment income $0.260502 $ 1.719380 $ 2.211330 $ 1.961352 $ 1.546728 $ --
Expenses 0.100524 0.222766 0.227065 0.189796 0.127882 0.016064
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.159978 1.496614 1.984265 1.771556 1.418846 (0.016064)
Net realized and
unrealized gain (loss)
on investments (0.117109) (3.848938) (0.310492) 1.440778 1.096297 (0.090670)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.042869 (2.352324) 1.673773 3.212334 2.515143 (0.106734)
Beginning of period 15.048926 17.401250 15.727477 12.515143 10.000000 10.000000
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $15.091795 $15.048926 $17.401250 $15.727477 $12.515143 $ 9.893266
====================================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.47% 1.29% 0.81% 0.68% 0.17%
Ratio of net investment
income (loss) to
average net assets (%) 1.13% 10.36% 13.57% 12.28% 6.77% (0.18)%
Touchstone Value Plus
Sub-Account**
----------------------
For the For the
Period Period
Ended Ended
June 30, December 31,
1999 1998
Investment income $ -- $ 0.029295
Expenses 0.070465 0.084536
- ---------------------------------------------------------------------------------
Net investment income (loss) (0.070465) (0.055241)
Net realized and
unrealized gain (loss)
on investments 1.119386 0.175164
- ---------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 1.048921 0.119923
Beginning of period 10.119923 10.000000
- ---------------------------------------------------------------------------------
End of period $11.168844 $10.119923
================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.74% 0.85%
Ratio of net investment
income (loss) to
average net assets (%) (0.65)% (0.26)%
Touchstone
Enhanced 30
Touchstone Growth & Income Sub-Account Sub-Account*
------------------------------------------------------------ -------------
For the For the For the
Period For the For the For the Period Period
Ended Year Ended Year Ended Year Ended Ended Ended
June 30, December 31, December 31,December 31, December 31,June 30,
1999 1998 1997 1996 1995 1999
Investment income $ -- $ -- $ -- $ -- $ -- $ --
Expenses 0.122378 0.234781 0.204446 0.181541 0.126716 0.015950
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.122378) (0.234781) (0.204446) (0.181541) (0.126716) (0.015950)
Net realized and
unrealized gain (loss)
on investments 2.098126 1.242981 2.792923 1.852780 2.616955 0.293151
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 1.975748 1.008200 2.588477 1.671239 2.490239 0.277201
Beginning of period 17.758155 16.749955 14.161478 12.490239 10.000000 10.000000
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $19.733903 $17.758155 $16.749955 $14.161478 $12.490239 $10.277201
====================================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.42% 1.21% 0.94% 0.63% 0.18%
Ratio of net investment
income (loss) to
average net assets (%) (0.68)% (1.42)% (1.19)% (0.74)% (0.61)% (0.13)%
* Calculation of the AIM V. I. Growth, AIM V. I. Government Securities, Alger American Small Capitalization, Alger American
Growth, MFS VIT Emerging Growth, MFS VIT Growth with Income, PIMCO Long-Term U. S. Government Bond, Touchstone
Small Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values began May 17, 1999, when those sub-accounts
commenced operations.
** Calculation of the Value Plus Unit Values began May 1, 1998, when that sub-account commenced operations
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Supplementary Information
Touchstone Gold Variable Annuity
(Selected data for an accumulation unit outstanding for each period)
Touchstone Balanced Sub-Account
-----------------------------------------------------------------
For the For the
Period For the For the For the Period
Ended Year Ended Year Ended Year Ended Ended
June 30, December 31, December 31,December 31, December 31,
1999 1998 1997 1996 1995
Investment income $ -- $ 0.899829 $ 1.297872 $ 0.564184 $ 1.121644
Expenses 0.114959 0.222979 0.200630 0.170051 0.127804
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.114959) 0.676850 1.097242 0.394133 0.993840
Net realized and
unrealized gain (loss)
on investments 1.174077 (0.026608) 1.250190 1.425763 0.969002
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 1.059118 0.650242 2.347432 1.819896 1.962842
Beginning of period 16.780412 16.130170 13.782738 11.962842 10.000000
- --------------------------------------------------------------------------------------------------------------------------
End of period $17.839530 $16.780412 $16.130170 $13.782738 $11.962842
==========================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.69% 1.43% 1.21% 0.99% 0.67%
Ratio of net investment
income (loss) to
average net assets (%) (0.69)% 5.36% 11.11% 4.36% 13.90%
Touchstone Bond Sub-Account
---------------------------------------------------------------
For the For the
Period For the For the For the Period
Ended Year Ended Year Ended Year Ended Ended
June 30, December 31, December 31,December 31, December 31,
1999 1998 1997 1996 1995
Investment income $ 0.114428 $ -- $ -- $ -- $ --
Expenses 0.085345 0.168619 0.156956 0.149925 0.120569
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.029083 (0.168619) (0.156956) (0.149925) (0.120569)
Net realized and
unrealized gain (loss)
on investments (0.305681) 0.991200 0.899266 0.282532 1.383093
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value (0.276598) 0.822581 0.742310 0.132607 1.262524
Beginning of period 12.960022 12.137441 11.395131 11.262524 10.000000
- -------------------------------------------------------------------------------------------------------------------------
End of period $12.683424 $12.960022 $12.137441 $11.395131 $11.262524
=========================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.70% 1.34% 1.17% 1.08% 0.75%
Ratio of net investment
income (loss) to
average net assets (%) 0.21% (1.34)% (1.17)% (1.03)% (0.75)%
Touchstone Standby Income Sub-Account
--------------------------------------------------------------
For the For the
Period For the For the For the Period
Ended Year Ended Year Ended Year Ended Ended
June 30, December 31, December 31,December 31, December 31,
1999 1998 1997 1996 1995
Investment income $ 0.319997 $ 0.622007 $ 0.586459 $ 0.546191 $ 0.482206
Expenses 0.077932 0.152566 0.146437 0.141698 0.115186
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.242065 0.469441 0.440022 0.404493 0.367020
Net realized and
unrealized gain (loss)
on investments (0.046793) 0.011393 (0.010786) (0.010269) (0.049826)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.195272 0.480834 0.429236 0.394224 0.317194
Beginning of period 11.621488 11.140654 10.711418 10.317194 10.000000
- -------------------------------------------------------------------------------------------------------------------------
End of period $11.816760 $11.621488 $11.140654 $10.711418 $10.317194
=========================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.66% 1.43% 1.40% 0.97% 0.64%
Ratio of net investment
income (loss) to
average net assets (%) 2.04% 4.44% 4.26% 2.77% 2.00%
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Supplementary Information
Touchstone Select Variable Annuity Death Benefit Option 1***
(Selected data for an accumulation unit outstanding for each period)
Alger MFS
AIM V.I. American Alger VIT
AIM V.I. Government Small American Emerging
Growth Securities Capitalization Growth Growth
Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account*
----------- ----------- ------------- ------------- -------------
For the For the For the For the For the
Period Period Period Period Period
Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30,
1999 1999 1999 1999 1999
Investment income $ -- $ -- $ -- $ -- $ --
Expenses 0.015900 0.016043 0.016328 0.015873 0.016176
- -----------------------------------------------------------------------------------------------------
Net investment income (0.015900) (0.016043) (0.016328) (0.015873) (0.016176)
Net realized and unrealized
gain (loss) on
investments 0.397607 (0.063535) 0.872046 0.538681 0.561704
- -----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.381707 (0.079578) 0.855718 0.522808 0.545528
Beginning of period 10.000000 10.000000 10.000000 10.000000 10.000000
- -----------------------------------------------------------------------------------------------------
End of period $10.381707 $ 9.920422 $10.855718 $10.522808 $10.545528
=====================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.17% 0.14% 0.15% 0.22% 0.14%
Ratio of investment income-net
to average net assets (%) (0.34)% (0.08)% (0.08)% (0.27)% (0.28)%
PIMCO
MFS Long-Term
VIT U.S. Touchstone
Growth Government Small Cap
with Income Bond Value Touchstone Emerging
Sub-Account* Sub-Account* Sub-Account*Growth Sub-Account
----------- ------------ ------------ --------------------
For the For the For the For the For the
Period Period Period Period Period
Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, December 31,
1999 1999 1999 1999 1998
Investment income $ -- $ 0.065803 $ -- $ -- $0.341604
Expenses 0.016159 0.016030 0.016235 0.065673 0.106294
- ---------------------------------------------------------------------------------------------------
Net investment income (0.016159) 0.049773 (0.016235) (0.065673) 0.235310
Net realized and unrealized
gain (loss)
on investments 0.301673 (0.142751) 0.519884 1.489255 (0.418405)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.285514 (0.092978) 0.503649 1.423582 (0.183095)
Beginning of period 10.000000 10.000000 10.000000 9.816905 10.000000
- ---------------------------------------------------------------------------------------------------
End of period $10.285514 $ 9.907022 $10.503649 $11.240487 $9.816905
===================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.23% 0.14% 0.12% 0.65% 1.37%
Ratio of investment income-net
to average net assets (%) (0.17)% 0.45% (0.31)% (0.62)% 3.04%
Touchstone
Touchstone International Touchstone Income High Yield TouchstoneValue Plus
Equity Sub-Account Opportunity Sub-Account Sub-Account* Sub-Account**
------------------------ ---------------------- ----------- ---------------------
For the For the For the For the For the For the For the
Period Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended Ended
June 30, December 31, June 30, December 31, June 30, June 30, December 31,
1999 1998 1999 1998 1999 1999 1998
Investment income $ -- $ 0.359265 $0.146284 $0.823471 $ -- $ -- $ 0.029295
Expenses 0.071199 0.118896 0.056449 0.104235 0.016064 0.070465 0.084535
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (0.071199) 0.240369 0.089835 0.719236 (0.016064) (0.070465) (0.055240)
Net realized and unrealized
gain (loss)
on investments 0.146010 0.606839 (0.065763) (2.268588) (0.090670) 1.119386 0.175163
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.074811 0.847208 0.024072 (1.549352) (0.106734) 1.048921 0.119923
Beginning of period 10.847208 10.000000 8.450648 10.000000 10.000000 10.119923 10.000000
- -------------------------------------------------------------------------------------------------------------------------
End of period $10.922019 $10.847208 $8.474720 $8.450648 $ 9.893266 $11.168844 $10.119923
=========================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.45% 0.68% 1.47% 0.17% 0.74% 0.85%
Ratio of investment income-net
to average net assets (%) (0.66)% 2.99% 1.13% 10.36% (0.18)% (0.65)% (0.26)%
<PAGE>
Touchstone
Touchstone Growth & Enhanced 30 Touchstone
Income Sub-Account Sub-Account* Balanced Sub-Account
-------------------- ----------- ---------------------
For the For the For the For the For the
Period Period Period Period Period
Ended Ended Ended Ended Ended
June 30, December 31, June 30, June 30, December 31,
1999 1998 1999 1999 1998
Investment income $ -- $ -- $ -- $ -- $ 0.540872
Expenses 0.068538 0.046866 0.015950 0.069100 0.113337
- ----------------------------------------------------------------------------------------------------
Net investment income (0.068538) (0.046866) (0.015950) (0.069100) 0.427535
Net realized and unrealized
gain (loss)
on investments 1.175064 (0.007649) 0.293151 0.705714 (0.341119)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 1.106526 (0.054515) 0.277201 0.636614 0.086416
Beginning of period 9.945485 10.000000 10.000000 10.086416 10.000000
- ----------------------------------------------------------------------------------------------------
End of period $11.052011 $ 9.945485 $10.277201 $10.723030 $10.086416
====================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.42% 0.18% 0.69% 1.43%
Ratio of investment income-net
to average net assets (%) (0.68)% (1.42)% (0.13)% (0.69)% 5.36%
Touchstone Touchstone Standby
Bond Sub-Account Income Sub-Account
------------------------ -----------------------
For the For the For the For the
Period Period Period Period
Ended Ended Ended Ended
June 30, December 31, June 30, December 31,
1999 1998 1999 1998
Investment income $ 0.093031 $ -- $ 0.285412 $ 0.470157
Expenses 0.069387 0.045636 0.069509 0.114820
- ---------------------------------------------------------------------------------
Net investment income 0.023644 (0.045636) 0.215903 0.355337
Net realized and unrealized
gain (loss)
on investments (0.248514) 0.582273 (0.041736) 0.010117
- ---------------------------------------------------------------------------------
Net increase (decrease)
in net asset value (0.224870) 0.536637 0.174167 0.365454
Beginning of period 10.536637 10.000000 10.365454 10.000000
- ---------------------------------------------------------------------------------
End of period $10.311767 $10.536637 $10.539621 $10.365454
=================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.70% 1.34% 0.66% 1.43%
Ratio of investment income-net
to average net assets (%) 0.21% (1.34)% 2.04% 4.44%
* Calculation of the AIM V. I. Growth, AIM V. I. Government Securities, Alger American Small
Capitalization, Alger American Growth, MFS VIT Emerging Growth, MFS VIT Growth with Income,
PIMCO Long-Term U. S. Government Bond, Touchstone Small Cap Value, Touchstone High Yield, and
Touchstone Enhanced 30 Unit Values began May 17, 1999, when those sub-accounts commenced operations.
** Calculation of the Value Plus Unit Values began May 1, 1998, when that sub-account commenced
operations.
*** Calculation of the Touchstone Select Variable Annuity Unit Values began March 2, 1998, when the
first contract was issued.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Supplementary Information
Touchstone Select Variable Annuity Death Benefit Option 2***
(Selected data for an accumulation unit outstanding for each period)
Alger MFS MFS
AIM V.I. American Alger VIT VIT
AIM V.I. Government Small American Emerging Growth
Growth Securities Capitalization Growth Growth with Income
Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account*
------------ ------------ ----------- ----------- ------------- -------------
For the For the For the For the For the For the
Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30, June 30,
1999 1999 1999 1999 1999 1999
Investment income $ -- $ -- $ -- $ -- $ -- $ --
Expenses 0.017067 0.017221 0.017526 0.017038 0.017364 0.017346
Net investment income (0.017067) (0.017221) (0.017526) (0.017038) (0.017364) (0.017346)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss)
on investments 0.397540 (0.063534) 0.871955 0.538598 0.561642 0.301639
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.380473 (0.080755) 0.854429 0.521560 0.544278 0.284293
Beginning of period 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
- -------------------------------------------------------------------------------------------------------------------
End of period $10.380473 $ 9.919245 $10.854429 $10.521560 $10.544278 $10.284293
===================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.17% 0.14% 0.15% 0.22% 0.14% 0.23%
Ratio of investment income-net
to average net assets (%) (0.34)% (0.08)% (0.08)% (0.27)% (0.28)% (0.17)%
PIMCO
Long-Term
U.S. Touchstone
Government Small Cap
Bond Value Touchstone Emerging Touchstone International
Sub-Account* Sub-Account* Growth Sub-Account Equity Sub-Account
----------- ----------- ---------------------- ------------------------
For the For the For the For the For the For the
Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, December 31, June 30, December 31,
1999 1999 1999 1998 1999 1998
Investment income $ 0.065799 $ -- $ -- $0.341323 $ -- $ 0.358972
Expenses 0.017207 0.017428 0.070423 0.114060 0.076349 0.127582
- ------------------------------------------------------------------------------------------------------------
Net investment income 0.048592 (0.017428) (0.070423) 0.227263 (0.076349) 0.231390
Net realized and unrealized
gain (loss)
on investments (0.142749) 0.519828 1.487337 (0.418492) 0.145774 0.606850
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value (0.094157) 0.502400 1.416914 (0.191229) 0.069425 0.838240
Beginning of period 10.000000 10.000000 9.808771 10.000000 10.838240 10.000000
- ------------------------------------------------------------------------------------------------------------
End of period $ 9.905843 $10.502400 $11.225685 $9.808771 $10.907665 $10.838240
============================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.14% 0.12% 0.65% 1.37% 0.68% 1.45%
Ratio of investment income-net
to average net assets (%) 0.45% (0.31)% (0.62)% 3.04% (0.66)% 2.99%
Touchstone
Touchstone Income High Yield TouchstoneValue Plus
Opportunity Sub-Account Sub-Account* Sub-Account**
------------------------ ----------- -----------------------
For the For the For the For the For the
Period Period Period Period Period
Ended Ended Ended Ended Ended
June 30, December 31, June 30, June 30, December 31,
1999 1998 1999 1999 1998
Investment income $0.146146 $0.823085 $ -- $ -- $ 0.029278
Expenses 0.060532 0.111851 0.017244 0.075575 0.090718
- -------------------------------------------------------------------------------------------------
Net investment income 0.085614 0.711234 (0.017244) (0.075575) (0.061440)
Net realized and unrealized
gain (loss)
on investments (0.065700) (2.267594) (0.090666) 1.118360 0.174696
- ------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.019914 (1.556360) (0.107910) 1.042785 0.113256
Beginning of period 8.443640 10.000000 10.000000 10.113256 10.000000
- ------------------------------------------------------------------------------------------------
End of period $8.463554 $8.443640 $ 9.892090 $11.156041 $10.113256
================================================================================================
Ratios
Ratio of operating expense
to average net assets (% 0.68% 1.47% 0.17% 0.74% 0.85%
Ratio of investment income-net
to average net assets (%) 1.13% 10.36% (0.18)% (0.65)% (0.26)%
<PAGE>
Touchstone
Touchstone Growth & Enhanced 30 Touchstone
Income Sub-Account Sub-Account* Balanced Sub-Account
----------------------- ----------- ---------------------
For the For the For the For the For the
Period Period Period Period Period
Ended Ended Ended Ended Ended
June 30, December 31, June 30, June 30, December 31,
1999 1998 1999 1999 1998
Investment income $ -- $ -- $ -- $ -- $ 0.540513
Expenses 0.073499 0.050305 0.017121 0.074098 0.121617
- --------------------------------------------------------------------------------------------------
Net investment income (0.073499) (0.050305) (0.017121) (0.074098) 0.418896
Net realized and unrealized
gain (loss)
on investments 1.173767 (0.012003) 0.293103 0.704956 (0.340845)
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 1.100268 (0.062308) 0.275982 0.630858 0.078051
Beginning of period 9.937692 10.000000 10.000000 10.078051 10.000000
- --------------------------------------------------------------------------------------------------
End of period $11.037960 $ 9.937692 $10.275982 $10.708909 $10.078051
==================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.42% 0.18% 0.69% 1.43%
Ratio of investment income-net
to average net assets (%) (0.68)% (1.42)% (0.13)% (0.69)% 5.36%
Touchstone Touchstone Standby
Bond Sub-Account Income Sub-Account
----------------------- -----------------------
For the For the For the For the
Period Period Period Period
Ended Ended Ended Ended
June 30, December 31, June 30, December 31,
1999 1998 1999 1998
Investment income $ 0.092949 $ -- $ 0.285107 $ 0.469961
Expenses 0.074411 0.048988 0.074538 0.123207
- ---------------------------------------------------------------------------------
Net investment income 0.018538 (0.048988) 0.210569 0.346754
Net realized and unrealized
gain (loss)
on investments (0.248272) 0.577518 (0.041695) 0.010117
- ---------------------------------------------------------------------------------
Net increase (decrease)
in net asset value (0.229734) 0.528530 0.168874 0.356871
Beginning of period 10.528530 10.000000 10.356871 10.000000
- ---------------------------------------------------------------------------------
End of period $10.298796 $10.528530 $10.525745 $10.356871
=================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.70% 1.34% 0.66% 1.43%
Ratio of investment income-net
to average net assets (%) 0.21% (1.34)% 2.04% 4.44%
* Calculation of the AIM V. I. Growth, AIM V. I. Government Securities, Alger American Small Capitalization,
Alger American Growth, MFS VIT Emerging Growth, MFS VIT Growth with Income, PIMCO Long-Term U. S. Government
Bond, Touchstone Small Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values began May 17, 1999,
when those sub-accounts commenced operations.
** Calculation of the Value Plus Unit Values began May 1, 1998, when that sub-account commenced operations.
*** Calculation of the Touchstone Select Variable Annuity Unit Values began March 2, 1998, when the first contract was issued.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Supplementary Information
Touchstone Select Variable Annuity Death Benefit Option 3***
(Selected data for an accumulation unit outstanding for each period)
Alger MFS MFS
AIM V.I. American Alger VIT VIT
AIM V.I. Government Small American Emerging Growth
Growth Securities Capitalization Growth Growth with Income
Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account*
------------ ---------- ------------- ----------- ----------- -------------
For the For the For the For the For the For the
Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30, June 30,
1999 1999 1999 1999 1999 1999
Investment income $ -- $ -- $ -- $ -- $ -- $ --
Expenses 0.018235 0.018398 0.018725 0.018203 0.018552 0.018533
- -------------------------------------------------------------------------------------------------------------------
Net investment income (0.018235) (0.018398) (0.018725) (0.018203) (0.018552) (0.018533)
Net realized and unrealized
gain (loss)
on investments 0.397475 (0.063538) 0.871867 0.538517 0.561575 0.301603
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 0.379240 (0.081936) 0.853142 0.520314 0.543023 0.283070
Beginning of period 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
- -------------------------------------------------------------------------------------------------------------------
End of period $10.379240 $ 9.918064 $10.853142 $10.520314 $10.543023 $10.283070
===================================================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.17% 0.14% 0.15% 0.22% 0.14% 0.23%
Ratio of investment income-net
to average net assets (%) (0.34)% (0.08)% (0.08)% (0.27)% (0.28)% (0.17)%
PIMCO
Long-Term
U.S. Touchstone
Government Small Cap
Bond Value Touchstone Emerging Touchstone International
Sub-Account* Sub-Account* Growth Sub-Account Equity Sub-Account
------------ ------------ ---------------------- ------------------------
For the For the For the For the For the For the
Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, December 31, June 30, December 31,
1999 1999 1999 1998 1999 1998
Investment income $ 0.065796 $ -- $ -- $0.341044 $ -- $ 0.358677
Expenses 0.018384 0.018620 0.075164 0.121821 0.081489 0.136261
- ------------------------------------------------------------------------------------------------------------
Net investment income 0.047412 (0.018620) (0.075164) 0.219223 (0.081489) 0.222416
Net realized and unrealized
gain (loss)
on investments (0.142745) 0.519775 1.485439 (0.418584) 0.145532 0.606843
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value (0.095333) 0.501155 1.410275 (0.199361) 0.064043 0.829259
Beginning of period 10.000000 10.000000 9.800639 10.000000 10.829259 10.000000
- ------------------------------------------------------------------------------------------------------------
End of period $ 9.904667 $10.501155 $11.210914 $9.800639 $10.893302 $10.829259
Ratios
Ratio of operating expense
to average net assets (%) 0.14% 0.12% 0.65% 1.37% 0.68% 1.45%
Ratio of investment income-net
to average net assets (%) 0.45% (0.31)% (0.62)% 3.04% (0.66)% 2.99%
Touchstone
Touchstone Income High Yield TouchstoneValue Plus
Opportunity Sub-Account Sub-Account* Sub-Account**
------------------------- ---------- ---------------------------
For the For the For the For the For the
Period Period Period Period Period
Ended Ended Ended Ended Ended
June 30, December 31, June 30, June 30, December 31,
1999 1998 1999 1999 1998
Investment income $0.146008 $0.822700 $ -- $ -- $ 0.029261
Expenses 0.064607 0.119462 0.018423 0.080675 0.096897
- -------------------------------------------------------------------------------------------------
Net investment income 0.081401 0.703238 (0.018423) (0.080675) (0.067636)
Net realized and unrealized
gain (loss)
on investments (0.065631) (2.266601) (0.090666) 1.117331 0.174236
Net increase (decrease)
in net asset value 0.015770 (1.563363) (0.109089) 1.036656 0.106600
Beginning of period 8.436637 10.000000 10.000000 10.106600 10.000000
End of period $8.452407 $8.436637 $9.890911 $11.143256 $10.106600
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.47% 0.17% 0.74% 0.85%
Ratio of investment income-net
to average net assets (%) 1.13% 10.36% (0.18)% (0.65)% (0.26)%
<PAGE>
Touchstone
Touchstone Growth & Enhanced 30 Touchstone
Income Sub-Account Sub-Account* Balanced Sub-Account
------------------------ ----------- ---------------------------
For the For the For the For the For the
Period Period Period Period Period
Ended Ended Ended Ended Ended
June 30, December 31, June 30, June 30, December 31,
1999 1998 1999 1999 1998
Investment income $ -- $ -- $ -- $ -- $ 0.540154
Expenses 0.078433 0.053733 0.018292 0.079086 0.129890
- ------------------------------------------------------------------------------------------------
Net investment income (0.078433) (0.053733) (0.018292) (0.079086) 0.410264
Net realized and unrealized
gain (loss)
on investments 1.172233 (0.018474) 0.293053 0.704204 (0.340558)
- ------------------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value 1.093800 (0.072207) 0.274761 0.625118 0.069706
Beginning of period 9.927793 10.000000 10.000000 10.069706 10.000000
- -----------------------------------------------------------------------------------------------
End of period $11.021593 $ 9.927793 $10.274761 $10.694824 $10.069706
===============================================================================================
Ratios
Ratio of operating expense
to average net assets (%) 0.68% 1.42% 0.18% 0.69% 1.43%
Ratio of investment income-net
to average net assets (%) (0.68)% (1.42)% (0.13)% (0.69)% 5.36%
Touchstone Touchstone Standby
Bond Sub-Account Income Sub-Account
------------------------ -------------------------
For the For the For the For the
Period Period Period Period
Ended Ended Ended Ended
June 30, December 31, June 30, December 31,
1999 1998 1999 1998
Investment income $0.092850 $ -- $ 0.284802 $ 0.469766
Expenses 0.079410 0.052327 0.079555 0.131587
- -----------------------------------------------------------------------------------
Net investment income 0.013440 (0.052327) 0.205247 0.338179
Net realized and unrealized
gain (loss)
on investments (0.247986) 0.570787 (0.041652) 0.010114
- -----------------------------------------------------------------------------------
Net increase (decrease)
in net asset value (0.234546) 0.518460 0.163595 0.348293
Beginning of period 10.518460 10.000000 10.348293 10.000000
- -----------------------------------------------------------------------------------
End of period $10.283914 $10.518460 $10.511888 $10.348293
Ratios
Ratio of operating expense
to average net assets (%) 0.70% 1.34% 0.66% 1.43%
Ratio of investment income-net
to average net assets (%) 0.21% (1.34)% 2.04% 4.44%
* Calculation of the AIM V. I. Growth, AIM V. I. Government Securities, Alger American Small Capitalization,
Alger American Growth, MFS VIT Emerging Growth, MFS VIT Growth with Income, PIMCO Long-Term U. S. Government Bond,
Touchstone Small Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values began May 17, 1999,
when those sub-accounts commenced operations.
** Calculation of the Value Plus Unit Values began May 1, 1998, when that sub-account commenced operations.
*** Calculation of the Touchstone Select Variable Annuity Unit Values began March 2, 1998, when the first contract was issued.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
WESTERN-SOUTHERN LIFE ASSURANCE
COMPANY SEPARATE ACCOUNT 1
WESTERN-SOUTHERN LIFE ASSURANCE
COMPANY SEPARATE ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
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 the 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 ("Western & Southern"). The Account
is a funding vehicle for individual variable annuity contracts, and commenced
operations on February 23, 1995 with the issuance of the first Touchstone
Variable Annuity contract now called the Touchstone Gold Variable Annuity. The
first Touchstone Select Variable Annuity contract was issued on March 2, 1998.
The variable annuity contracts are designed for individual investors and group
plans that desire to accumulate capital on a tax-deferred basis for retirement
or other long-term objectives. The variable annuity contracts are distributed
across the United States through a network of broker-dealers and wholesalers.
2. SIGNIFICANT ACCOUNTING POLICIES
The Account has eighteen investment sub-accounts, each of which invests in the
corresponding portfolio (a "Portfolio") of AIM Variable Insurance Funds, Inc.,
The Alger American Fund, MFS Variable Insurance Trust, PIMCO Variable Insurance
Trust, or Touchstone Variable Series Trust, each of which is an open-ended
diversified management investment company. Each sub-account's value fluctuates
on a day to day basis depending on the investment performance of the Portfolio
in which the sub-account is invested. 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 (the "1933 Act") 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.
Upon annuitization, the contract assets are transferred to the general account
of the Company. Accordingly, contract reserves are recorded by the Company. See
the related prospectus for a more detailed understanding of the annuity
contracts.
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% for the Touchstone Gold Variable
Annuity. For the Touchstone Select Variable Annuity, the effective rates are
1.35% for the Standard Death Benefit, (Option 1), 1.45% for the Annual Step Up
Death Benefit, (Option 2) and 1.55% for the Accumulating Death Benefit (Option
3).
The Company also deducts an annual contract maintenance charge from the
contract value on each contract anniversary and upon any full surrender. For the
Touchstone Gold Variable Annuity the contract maintenance charge is $35 for the
first ten Contract Years and the lesser of (a) $35 and (b) 0.17% of the Contract
Value after the tenth Contract Anniversary. For the Touchstone Select Variable
Annuity, the contract maintenance charge is $40 for the first ten Contract
Years, and if the Contract Value is less than $50,000 after the tenth Contract
Anniversary, the charge is the lesser of (a) $40 and (b) 0.14% of the Contract
Value.
18
<PAGE>
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 redemption, except for
certain amounts excluded from charges under the contract. For the Touchstone
Gold Variable Annuity, this charge ranges from 7% to 0% depending on the number
of years since the payment was received. For the Touchstone Select Variable
Annuity, this charge ranges from 8% to 0%, depending on the number of years
since the payment was received.
4. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
5. TAXES
The Account is not taxed separately because the operations of the Account are
part of the total operations of the Company. The Company is taxed as a life
insurance company under the Internal Revenue Code. Under existing federal income
tax law, no taxes are payable on the investment income or on the capital gains
of the Account.
6. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares of the portfolios purchased
and proceeds from shares of the portfolios sold by the corresponding
sub-accounts for the period January 1, 1999 to June 30, 1999.
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth Fund $ 4,442,126 $ --
AIM V. I. Government Securities Fund 343,088 10,074
THE ALGER AMERICAN FUND
Alger American Small Capitalization Portfolio 257,852 203
Alger American Growth Portfolio 6,481,444 73,941
MFS VARIABLE INSURANCE TRUST
MFS VIT Emerging Growth Series 952,102 7,638
MFS VIT Growth with Income Series 3,115,908 86,850
PIMCO VARIABLE INSURANCE TRUST
PIMCO Long-Term U.S. Government
Bond Portfolio 943,199 202
TOUCHSTONE VARIABLE SERIES
Touchstone Small Cap Value Fund 63,633 58
Touchstone Emerging Growth Fund 1,794,341 5,243,828
Touchstone International Equity Fund 2,251,631 2,718,380
Touchstone Income Opportunity Fund 2,477,791 5,756,213
Touchstone High Yield Fund 656,111 238
Touchstone Value Plus Fund 5,895,998 1,271,206
Touchstone Growth & Income Fund 58,818,490 62,532,746
Touchstone Enhanced 30 Fund 547,332 389
Touchstone Balanced Fund 3,034,639 5,699,991
Touchstone Bond Fund 28,020,061 27,175,288
Touchstone Standby Income Fund 5,720,798 3,208,974
</TABLE>
19
<PAGE>
7. UNIT VALUES
The following table shows a summary of units outstanding for variable annuity
contracts for the period January 1, 1999 to June 30, 1999. Eighteen unit values
are calculated for the Touchstone Gold Variable Annuity. Eighteen unit values
are calculated for each of the death benefit options in the Touchstone Select
Variable Annuity.
TOUCHSTONE GOLD VARIABLE ANNUITY
<TABLE>
<CAPTION>
Transfers
Between
Beginning Units Units Sub- Ending Unit Ending
Units Purchased Redeemed Accounts Units Value Value
<S> <C> <C> <C> <C> <C> <C>
AIM V.I.Growth* -- 6,592 (1,125) 404,023 409,490 10.381707 $ 4,251,204
AIM V.I.Government
Securities* -- 26 (12) 27,322 27,336 9.920422 271,183
Alger American Small
Capitalization* -- 1,114 (3) 20,327 21,438 10.855718 232,724
Alger American
Growth* -- 3,817 (18,354) 605,808 591,271 10.522808 6,221,826
MFS VIT Emerging
Growth* -- 4,533 (31) 75,908 80,410 10.545528 847,969
MFS VIT Growth
with Income* -- 5,146 (15,070) 281,170 271,246 10.285514 2,789,908
PIMCO Long-Term
U.S.Gov't. Bond* -- 4,127 (269) 82,245 86,103 9.907022 853,019
Touchstone Small
Cap Value* -- 28 (2) 4,295 4,321 10.503649 45,386
Touchstone Emerging
Growth 1,527,712 95,648 (141,862) (145,005) 1,336,493 19.725675 26,363,219
Touchstone
International Equity1,501,239 102,939 (122,585) (12,146) 1,469,447 16.701192 24,541,512
Touchstone Income
Opportunity 2,018,328 162,622 (137,675) (268,694) 1,774,581 15.091795 26,781,619
Touchstone
High Yield* -- 79 (129) 60,893 60,843 9.893266 601,935
Touchstone
Value Plus 221,536 145,877 (34,474) 312,910 645,849 11.168844 7,213,390
Touchstone
Growth & Income 2,973,336 238,203 (243,052) (183,736) 2,784,751 19.733903 54,954,000
Touchstone
Enhanced 30* -- 716 (605) 51,397 51,508 10.277201 529,355
Touchstone
Balanced 2,142,449 208,215 (186,274) (169,435) 1,994,955 17.839530 35,589,052
Touchstone
Bond 1,764,079 238,276 (120,598) (74,097) 1,807,660 12.683424 22,927,313
Touchstone Standby
Income 1,653,441 235,895 (188,737) 123,457 1,824,056 11.816760 21,554,435
------------
Total -Touchstone Gold Variable Annuity 236,569,049
============
* Calculation of the AIM V.I. Growth, AIM V.I. Government Securities, Alger American Small Capitalization, Alger American
Growth, MFS VIT Emerging Growth, MFS VIT Growth with Income, PIMCO Long-Term U. S. Government Bond, Touchstone Small
Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values began May 17, 1999, when those sub-accounts
commenced operations.
</TABLE>
20
<PAGE>
TOUCHSTONE SELECT VARIABLE ANNUITY-DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Transfers
Between
Beginning Units Units Sub- Ending Unit Ending
Units Purchased Redeemed Accounts Units Value Value
<S> <C> <C> <C> <C> <C> <C> <C>
AIM V.I.Growth* -- 4 -- 3,730 3,734 10.381707 38,767
AIM V.I.Government
Securities* -- 4 -- -- 4 9.920422 40
Alger American
Small Capitalization* -- 4 -- -- 4 10.855718 44
Alger American Growth* -- 4 -- 3,085 3,089 10.522808 32,507
MFS VIT Emerging
Growth* -- 4 -- 1,675 1,679 10.545528 17,711
MFS VIT Growth
with Income* -- 4 -- 926 930 10.285514 9,563
PIMCO Long-Term U.S.
Gov't. Bond* -- 4 -- -- 4 9.907022 40
Touchstone Small Cap
Value* -- 4 -- -- 4 10.503649 42
Touchstone Emerging
Growth 28,741 4,555 (150) (1,001) 32,145 11.240487 361,320
Touchstone
International Equity 9,911 5,484 (183) 1,296 16,508 10.922019 180,305
Touchstone Income
Opportunity 18,594 8,728 (228) (201) 26,893 8.474720 227,908
Touchstone High Yield* -- 4 -- -- 4 9.893266 40
Touchstone Value Plus 1,566 974 -- 1,105 3,645 11.168844 40,704
Touchstone
Growth & Income 24,000 10,275 (213) 1,109 35,171 11.052011 388,713
Touchstone
Enhanced 30* -- 4 -- -- 4 10.277201 41
Touchstone Balanced 14,419 13,931 (185) 2,240 30,405 10.723030 326,033
Touchstone Bond 10,275 9,263 (128) 2,367 21,777 10.311767 224,562
Touchstone Standby
Income 9,529 4,686 (37) (5,044) 9,134 10.539621 96,264
---------
Total -Touchstone Select Variable Annuity - Death Benefit Option 1 1,944,604
=========
21
<PAGE>
TOUCHSTONE SELECT VARIABLE ANNUITY - DEATH BENEFIT OPTION 2
Transfers
Between
Beginning Units Units Sub- Ending Unit Ending
Units Purchased Redeemed Accounts Units Value Value
AIM V.I. Growth * -- 53 (122) 31,530 31,461 10.380473 326,576
AIM V.I. Government
Securities* -- 3 (5) 797 795 9.919245 7,887
Alger American
Small Capitalization* -- 3 -- -- 3 10.854429 33
Alger American
Growth* -- 101 (228) 39,455 39,328 10.521560 413,793
MFS VIT Emerging
Growth* -- 99 (63) 6,801 6,837 10.544278 72,089
MFS Growth
with Income* -- 77 (187) 27,692 27,582 10.284293 283,660
PIMCO Long-Term
U.S. Gov't. Bond* -- 29 (7) 3,378 3,400 9.905843 33,675
Touchstone Small Cap
Value* -- 3 -- -- 3 10.502400 31
Touchstone Emerging
Growth 55,818 34,483 (793) (10,961) 78,547 11.225685 881,756
Touchstone
lnternational Equity 56,762 23,315 (884) (17,532) 61,661 10.907665 672,582
Touchstone Income
Opportunity 57,519 19,955 (772) (15,450) 61,252 8,463554 518,406
Touchstone High Yield* -- 3 -- -- 3 9.892090 30
Touchstone
Value Plus 14,257 12,919 (256) 2,690 29,610 11.156041 330,325
Touchstone
Growth & Income 97,264 42,135 (1,490) (19,971) 117,938 11.037960 1,301,791
Touchstone
Enhanced 30* -- 3 -- 253 256 10.275982 2,635
Touchstone Balanced 77,704 17,776 (1,513) (16,268) 77,699 10.708909 832,073
Touchstone Bond 63,396 13,176 (5,959) 1,525 72,138 10.298796 742,938
Touchstone Standby
Income 23,666 5,109 (723) 2,020 30,072 10.525745 316,532
---------
Total - Touchstone Select Variable Annuity - Death Benefit Option 2 6,736,812
=========
* Calculation of the AIM V.I. Growth, AIM V.I. Government Securities, Alger American Small Capitalization, Alger American
Growth, MFS VIT Emerging Growth, MFS VIT Growth with Income, PIMCO Long-Term U. S. Government Bond, Touchstone Small
Cap Value, Touchstone High Yield, and Touchstone Enhanced 30 Unit Values began May 17, 1999, when those sub-accounts
commenced operations.
22
<PAGE>
TOUCHSTONE SELECT VARIABLE ANNUITY - DEATH BENEFIT OPTION 3
Transfers
Between
Beginning Units Units Sub- Ending Unit Ending
Units Purchased Redeemed Accounts Units Value Value
AIM V.I. Growth* -- 3 (4) 5,144 5,143 10.379240 53,381
AIM V.I. Government
Securities* -- 4 (5) 5,551 5,550 9.918064 55,041
Alger American
Small Capitalization* -- 2 (3) 4,179 4,178 10.853142 45,346
Alger American
Growth* -- 3 (4) 14,599 14,598 10.520314 153,573
MFS VIT Emerging
Growth* -- 2 (3) 4,511 4,510 10.543023 47,553
MFS VIT Growth
with Income* -- 3 (3) 1,918 1,918 10.283070 19,723
PIMCO Long-Term
U.S. Gov't. Bond* -- 3 (5) 5,600 5,598 9.904667 55,450
Touchstone Small Cap
Value* -- 3 (3) 2,093 2,093 10.501155 21,978
Touchstone Emerging
Growth 23,219 9,163 (127) (11,143) 21,112 11.210914 236,685
Touchstone
International Equity 29,122 10,010 (307) (1,804) 37,021 10.893302 403,276
Touchstone Income
Opportunity 48,384 14,503 (575) (21,766) 40,546 8.452407 342,710
Touchstone High Yield* -- 2 (5) 5,248 5,245 9.890911 51,880
Touchstone Value Plus 117 -- (8) 11,574 11,683 11.143256 130,186
Touchstone
Growth & Income 46,256 13,767 (622) (5,490) 53,911 11.021593 594,181
Touchstone
Enhanced 30* -- 3 (5) 3,652 3,650 10.274761 37,506
Touchstone Balanced 49,859 12,232 (858) (5,482) 55,751 10.694824 596,249
Touchstone Bond 40,070 7,881 (323) (8,781) 38,847 10.283914 399,496
Touchstone Standby
Income 16,910 3,093 (124) (1,071) 18,808 10.511888 197,712
Total - Touchstone Select Variable Annuity - Death Benefit Option 3 3,441,926
============
TOTAL $248,692,391
============
</TABLE>
SUPPLEMENTARY INFORMATION: CHANGE IN ACCOUNTANTS
For 1998 and for previous years, PricewaterhouseCoopers LLP and its predecessor
("PWC") served as independent public accountant for the Western-Southern Life
Assurance Company Separate Accounts. Subsequent to PWC's completion of the 1998
fiscal year audit the Board of Directors of the Western-Southern Life Assurance
Company and its Separate Accounts elected to terminate the engagement with PWC
and selected Ernst & Young LLP as independent public accountant for the
Western-Southern Life Assurance Company Separate Accounts. The Board's selection
of Ernst & Young LLP did not result from any dispute between the
Western-Southern Life Assurance Company Separate Accounts and PWC, and PWC's
reports for the last two years did not contain any adverse opinion or disclaimer
of opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles. There was no disagreement between PWC and the
Western-Southern Life Assurance Company Separate Accounts on any matter of
accounting principals, practices, financial statement disclosure or auditing
scope of procedure.
23
