TOUCHSTONE VARIABLE SERIES TRUST
- Touchstone Small Cap Value
- Touchstone Emerging Growth
- Touchstone International Equity
- Touchstone Income Opportunity
- Touchstone High Yield
- Touchstone Value Plus
- Touchstone Growth & Income
- Touchstone Enhanced 30
- Touchstone Balanced
- Touchstone Bond
- Touchstone Standby Income
Semi-Annual Report
June 30, 2000
TOUCHSTONE
----------------------------------
ADVISOR
VARIABLE
ANNUITY
THIS IS ONE PART OF A TWO PART REPORT.
<PAGE>
This is one part of a two-part semi-annual report. This part contains the
financial statements and performance information for the following funds of the
Touchstone Variable Series Trust: Touchstone Small Cap Value*, Touchstone
Emerging Growth, Touchstone International Equity, Touchstone Income
Opportunity**, Touchstone High Yield*, Touchstone Value Plus, Touchstone Growth
& Income, Touchstone Enhanced 30*, Touchstone Balanced, Touchstone Bond, and
Touchstone Standby Income. The other part of the report contains financial
statements and performance information for the following funds: AIM V.I.
Growth*, AIM V.I. Government Securities*, Alger American Small Capitalization*,
Alger American Growth*, Deutsche VIT Equity 500 Index*, MFS VIT Emerging
Growth*, MFS VIT Growth with Income*, and PIMCO Long-Term U.S. Government Bond*.
Please call Touchstone at 800.669.2796 (press 2) for additional information.
Separate Account II of Western-Southern Life Assurance Company holds assets
allocated to its sub-accounts by the owners of the variable annuity contracts.
The assets of these sub-accounts are invested in the corresponding funds listed
above. The financial statements and performance returns in this annual report
are those of the corresponding funds, rather than those of the Separate Account.
The performance returns do not reflect any expenses or fees of the variable
annuity contract. The returns would therefore be somewhat lower after the
deduction of these expenses and fees.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus. Touchstone Variable
Annuities are distributed by Touchstone Securities, Inc.*** and underwritten by
the Western-Southern Life Assurance Company, Cincinnati, Ohio. For more
information about any Touchstone annuity or investment option, including charges
and expenses, call Touchstone for a free prospectus. Read it carefully before
you invest.
* These investment options may not be available in your state at this time.
** Touchstone Income Opportunity is closed to new investments other than
investments through an automatic investment program or automatic asset
allocation program established before May 1, 2000.
*** A registered broker-dealer and member of the NASD and SIPC.
<PAGE>
LETTER FROM THE PRESIDENT
--------------------------------------------------------------------------------
Dear Fellow Touchstone Contract Owner:
Thank you for owning a Touchstone variable annuity. We are pleased to provide
you with this update of the investment activity and performance of the
Touchstone Variable Series Trust for the six months ended June 30, 2000.
LOOKING BACK
After finishing 1999 in record territory, most major U.S. stock market indices
surrendered ground in the first half of 2000 in the face of concern over
inflation pressures and higher interest rates. Internationally, stock market
results were mixed, with major indices declining overall. Fixed-income markets
meanwhile rallied on signs of economic moderation. Movements in the various
financial markets came as the Federal Reserve continued to tighten financial
market conditions by hiking the Federal Funds interest rate 100 basis points.
THE VALUE OF PROFESSIONAL MANAGEMENT
As noted above, the year so far has been a challenging one for investors. The
investment outlook has been difficult to ascertain amid sometimes conflicting
indicators of economic growth and market conditions. That is why we strive to
provide outstanding long-term professional investment management through the
investment options offered in your Touchstone variable annuity contract. We
carefully select managers whose resources, skills and commitment to excellence
we believe to rank among the best in their respective investment disciplines.
These professionals bring experience and expertise to bear on your behalf every
day. We believe that our exclusive lineup of retail and institutional money
managers offers you the best of both worlds. That is a considerable advantage,
especially in uncertain investment times.
YOUR NEWEST OPTION
We are proud to offer you a new investment option in your Touchstone variable
annuity contract. The Deutsche VIT Equity 500 Index Fund became available for
investment effective May 1, 2000. Managed by Bankers Trust Company, the fund
seeks to match, as closely as possible (before expenses), the performance of the
S&P 500 Index. The fund invests primarily in common stocks of companies that
apprise the S&P 500, which emphasizes large U.S. companies. Bankers Trust is a
premier index investment manager and this new option offers you the opportunity
to share in the growth potential of some of America's premier companies.
LOOKING AHEAD
The Federal Reserve continues to seek to cool the U.S. economy to a sustainable
growth level where supply and demand are balanced and inflation thereby held in
check. Advancing technology, improved productivity, higher energy prices, tight
labor markets and heightened business competition worldwide are just some of the
factors at work in the present investment climate. Regardless of what the future
holds, companies that can perform on their own merits will most likely be the
ones offering the best opportunities. As they assess the forces that drive the
financial markets, our managers will remain steadfastly focused on identifying
the opportunities and the companies capable of succeeding in any economic
environment. Their overriding goal, as well as ours, is to deliver superior
long-term performance.
<PAGE>
Thank you again for the opportunity to work on your behalf. We appreciate your
continued confidence in Touchstone and, as always, 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
P.S. Allow me to again call your attention to our enhanced presence on the web
at www.touchstonefunds.com. We continue to add improvements to make it more
convenient and useful for you. Your comments are valued.
Touchstone Variable Annuities are underwritten by Western-Southern Life
Assurance Company, Cincinnati, Ohio, and distributed by Touchstone Securities,
Inc.* 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.
*Member NASD/SIPC
<PAGE>
Underwriter
-----------
Western-Southern Life Assurance Company
400 Broadway
Cincinnati, Ohio 45202
Distributor
-----------
Touchstone Securities, Inc.
311 Pike Street
Cincinnati, Ohio 45202
800.638.8194 Broker-Dealers
800.285.2858 Financial Institutions
Investment Advisor & Sponsor
----------------------------
Touchstone Advisors, Inc.
311 Pike Street
Cincinnati, Ohio 45202
Variable Annuity Service Center
-------------------------------
Touchstone Variable Annuity Service Center
P.O. Box 2850
Cincinnati, Ohio 45201-2850
800.669.2796 (press 2)
Custodian
---------
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116-9130
Independent Accountants
-----------------------
Ernst & Young LLP
1300 Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Legal Counsel
-------------
Frost & Jacobs LLP
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
TOUCHSTONE
----------
The Mark of Excellence in Investment Management SM
Retire on Your Terms SM
Variable Annuities
<PAGE>
- AIM V.I. Growth
- AIM V.I. Government Securities
- Alger American Small Capitalization
- Alger American Growth
- Deutsche VIT Equity 500 Index
- MFS VIT Emerging Growth
- MFS VIT Growth with Income
- PIMCO Long-Term U.S. Government Bond
Semi-Annual Report
June 30, 2000
TOUCHSTONE
VARIABLE ANNUITIES
THIS IS ONE PART OF A TWO PART REPORT.
<PAGE>
This is one part of a two-part semi-annual report. This part contains the
financial statements and performance information for the following funds: AIM
V.I. Growth*, AIM V.I. Government Securities*, Alger American Small
Capitalization*, Alger American Growth*, Deutsche VIT Equity 500 Index*, MFS VIT
Emerging Growth*, MFS VIT Growth with Income*, and PIMCO Long-Term U.S.
Government Bond*. The other part of the report contains financial statements and
performance information for the following funds of the Touchstone Variable
Series Trust: Touchstone Small Cap Value*, Touchstone Emerging Growth,
Touchstone International Equity, Touchstone Income Opportunity**, Touchstone
High Yield*, Touchstone Value Plus, Touchstone Growth & Income, Touchstone
Enhanced 30*, Touchstone Balanced, Touchstone Bond, and Touchstone Standby
Income. Please call Touchstone at 800.669.2796 (press 2) for additional
information.
Separate Accounts I and II of Western-Southern Life Assurance Company hold
assets allocated to their sub-accounts by the owners of the variable annuity
contracts. The assets of these sub-accounts are invested in the corresponding
funds listed above. The financial statements and performance returns in this
annual report are those of the corresponding funds, rather than those of the
Separate Account. The performance returns do not reflect any expenses or fees of
the variable annuity contract. The returns would therefore be somewhat lower
after the deduction of these expenses and fees.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus. Touchstone Variable
Annuities are distributed by Touchstone Securities, Inc.*** and underwritten by
the Western-Southern Life Assurance Company, Cincinnati, Ohio. For more
information about any Touchstone annuity or investment option, including charges
and expenses, call Touchstone for a free prospectus. Read it carefully before
you invest.
* These investment options may not be available in your state at this time.
** Touchstone Income Opportunity is closed to new investments other than
investments through an automatic investment program or automatic asset
allocation program established before May 1, 2000.
*** A registered broker-dealer and member of the NASD and SIPC.
<PAGE>
Underwriter
-----------
Western-Southern Life Assurance Company
400 Broadway
Cincinnati, Ohio 45202
Distributor
-----------
Touchstone Securities, Inc.
311 Pike Street
Cincinnati, Ohio 45202
800.638.8194 Broker-Dealers
800.285.2858 Financial Institutions
Investment Advisor & Sponsor
----------------------------
Touchstone Advisors, Inc.
311 Pike Street
Cincinnati, Ohio 45202
Variable Annuity Service Center
-------------------------------
Touchstone Variable Annuity Service Center
P.O. Box 2850
Cincinnati, Ohio 45201-2850
800.669.2796 (press 2)
Custodian
---------
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116-9130
Independent Accountants
-----------------------
Ernst & Young LLP
1300 Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Legal Counsel
-------------
Frost & Jacobs LLP
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
TOUCHSTONE
----------------------------------------------------
THE MARK OF EXCELLENCE IN INVESTMENT MANAGEMENT SM
RETIRE ON YOUR TERMS SM
VARIABLE ANNUITIES
<PAGE>
The Semi-Annual Reports of the following investment companies are made a part
hereof and incorporated herein.
Touchstone Variable Series Trust (File No. 811-8416)
Touchstone Small Cap Value Fund
Touchstone Emerging Growth Fund
Touchstone International Equity Fund
Touchstone Income Opportunity Fund
Touchstone High Yield Fund
Touchstone Value Plus Fund
Touchstone Growth & Income Fund
Touchstone Enhanced 30 Fund
Touchstone Balanced Fund
Touchstone Bond Fund
Touchstone Standby Income Fund
AIM Variable Insurance Funds, Inc. (File No. 811-7452)
AIM V.I. Growth Fund
AIM V.I. Government Securities Fund
The Alger American Fund (File No. 811-5550)
Alger American Growth Portfolio
Alger American Small Capitalization Portfolio
Deutsche VIT Funds (File No. 811-7507)
Deutsche VIT Equity 500 Index
MFS Variable Insurance Trust (File No. 811-8326)
MFS Emerging Growth Series
MFS Growth with Income Series
PIMCO Variable Insurance Trust (File No. 811-8399)
Long-Term U.S. Government Bond Portfolio
