<PAGE> 1
LETTER FROM THE PRESIDENT
BACKGROUND ARTWORK
Dear Fellow Shareholder:
There's no doubt that we've all experienced excessive volatility in the
financial markets in 1998. The 12-month period ending December 31, 1998, has
served as a clear example of how the performance of different asset classes can
vary widely over a given time period. For example, domestic large cap stocks
made an impressive rebound in the fourth quarter to provide the highest asset
class returns for the year, even more spectacular when viewed against the
lackluster performance of small cap stocks over the past year. Similarly, the
divergence between the returns of value versus growth styles, Europe versus
Asia, and emerging versus developed markets reflects the overall volatility that
has been inherent in 1998.
Given these wild swings in performance, we think the message is clear: expect
volatility, and understand that it's extremely difficult to predict which asset
classes will be strong performers and which ones will be weak. One way to
cushion the volatility is to be sure that you're adequately diversified in your
investments and that you've properly allocated your assets based on your
investing needs and goals. By investing with Touchstone through a financial
advisor, you have already taken the important first step in building a portfolio
that can help you meet your future goals. Your financial advisor can help you
set new guidelines when life-style changes occur, and they can help you measure
your level of patience for overall market conditions.
We're proud to note that the Touchstone Standby Income Fund has been recognized
with Morningstar's highest 5-star rating for its three-year performance as of
12-31-98(1). Those familiar with Morningstar know that they are a privately
owned company that provides unbiased mutual fund information to help individual
investors make informed investment decisions. Only the top 10% of all mutual
funds in each investment class actually receive Morningstar's highest rating.
The Touchstone Standby Income Fund, classified as an Ultrashort Bond fund by
Morningstar, was ranked among 2,126 funds in Morningstar's Taxable Bond category
as of 12/31/98.
I'd like to take this opportunity to thank you for the success we've shared
together. We appreciate your continued confidence and investment in the
Touchstone Family of Funds and Variable Annuities(2).
Sincerely,
/s/ Jill McGruder
Jill T. McGruder
President and Chief Executive Officer
Touchstone Family of Funds
P.S. Please visit us on the World Wide Web at www.touchstonefunds.com
(1) Morningstar proprietary ratings reflect historical risk-adjusted
performance, and are subject to change every month. Morningstar ratings are
calculated from the fund's three-, five-, and 10-year average annual returns in
excess of 3-month Treasury bill returns with appropriate fee adjustments, and a
risk factor that reflects fund performance below 3-month Treasury bill returns.
The top 10% of funds in a category receives 5 stars; the next 22.5% receives 4
stars. Past performance is no guarantee of future results. The Advisor waived
fees and reimbursed the Fund which had a material effect on the total return.
(2) 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> 2
NOTES
2
<PAGE> 3
TABLE OF CONTENTS
3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Management Discussion & Analysis........................... 5
Select Advisors Trust C
Statements of Assets and Liabilities.................. 18
Statements of Operations.............................. 19
Statements of Changes in Net Assets................... 20
Financial Highlights.................................. 22
Notes to Financial Statements......................... 24
Report of Independent Accountants..................... 29
Supplementary Data.................................... 30
Select Advisors Portfolios
Emerging Growth.......................................... 3
International Equity..................................... 7
Income Opportunity....................................... 10
Value Plus............................................... 13
Growth & Income.......................................... 16
Balanced................................................. 20
Bond..................................................... 24
Statements of Assets and Liabilities....................... 26
Statements of Operations................................... 27
Statements of Changes in Net Assets........................ 28
Ratios and Supplementary Data.............................. 30
Notes to Financial Statements.............................. 32
Report of Independent Accountants.......................... 39
</TABLE>
<PAGE> 4
NOTES 4
<PAGE> 5
MANAGEMENT DISCUSSION & ANALYSIS
5
MANAGEMENT DISCUSSION & ANALYSIS (MD&A)
Touchstone Emerging Growth Fund C
Over the course of the annual period ended December 31, 1998, several investment
management strategies and techniques materially affected the performance of the
Touchstone Emerging Growth Fund C. Small capitalization stocks, as measured by
the Russell 2000, declined 2.5% while the total return (net of fees and
expenses) for the Touchstone Emerging Growth Fund C was 2.0%.
As the value-style manager of the Touchstone Emerging Growth Fund C, David L.
Babson's core strategy continued to stress bottom-up fundamental analysis in
identifying low risk stocks with attractive return potential. Small company
stocks continued to have a difficult time in 1998. The domestic equity markets,
overall, were marked by wild swings throughout the year. In the third quarter,
the Russell 2000 declined 20% as investors sold stocks due to fears the U.S. was
shortly headed into a recession. Not surprisingly, given Babson's low risk value
discipline, the value-style portion of the Fund held its value well during the
third quarter and bettered its benchmark.
In the fourth quarter of 1998, investors dramatically shifted course and
purchased stocks as rapidly as they were sold in the previous quarter, resulting
in the Russell 2000 increasing its value by 16%. Not surprisingly, Babson's low
risk value discipline had difficulty keeping pace with the soaring market, and
the value-style portion of the Fund trailed its benchmark for the quarter and
for the entire year.
Standout performers for the year included Elsag Bailey (+137%) due to a buyout
offer from the large European industrial conglomerate ABB, and Martin Marietta
Materials (+70%) due to continued strong demand of their primary product,
aggregates -- a fancy term for rocks, stone and gravel which are critical in
road and infrastructure building. Unfortunately, Babson's increased weighting in
the Energy sector, the worst performing sector in 1998, detracted from
performance. Babson still likes the long term outlook for the Energy sector and
continues to increase their weighting in this sector.
As the growth-style manager of the Touchstone Emerging Growth Fund C, Westfield
Capital Management continued to find companies with good growth prospects.
Unlike 1997, small cap growth did much better than small cap Value in 1998. This
pattern correlates very well with past cycles where growth outperforms
relatively as overall corporate profits peak -- an environment Westfield expects
to continue into 1999.
Technology (including telecommunications) led the growth-style portion of the
portfolio. Its impact can be seen in the performance pattern over the course of
the year with the first quarter and fourth quarter accounting for most of the
gains. Portfolio performance was achieved the old-fashioned way -- that is,
without the presence of Internet stocks. In the liquidity-driven market of 1998,
top performance portfolio managers had to speculate on unheard of valuations in
either the Internet group or the top 50 blue chips. Neither area fit Westfield's
price/earnings-to-growth valuation discipline very well. Instead, some of
Westfield's best technology stock
<PAGE> 6
MANAGEMENT DISCUSSION & ANALYSIS
6
picks were market-penetration stories. Such names as Geotel in call routing
systems, Galileo in networking ICs, and EMC in data storage are but a few.
The portfolio kept pace with its benchmarks and peers during the severe
correction of July and August, and Westfield feels that this reflects the
cushioning effect of their growth-at-a-reasonable-price style, as well as
specific portfolio sector shifts made earlier in the year. Concerns about Asian
demand caused Westfield to exit the Energy sector and several technology product
arenas. Financially-sensitive holdings were reduced as they saw signs of a
slowing economy, while service companies in the consumer and healthcare sectors
were added. The educational field was also sharply overweighted and remained a
stand-out performer.
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING WIESENBERGER SMALL CAP
GROWTH FUND C RUSSELL 2000 MAJOR INDEX MINOR INDEX
------------------- ------------------------ ----------------------
<S> <C> <C> <C>
9/94 10000 10000 10000
12/94 10252 9813 9950
3/95 10627 10265 10512
6/95 11287 11227 11450
9/95 12306 12336 12785
12/95 12421 12603 13072
3/96 12943 13246 13917
6/96 13486 13909 15025
9/96 13108 13956 15319
12/96 13620 14682 15758
3/97 13044 13923 14745
6/97 15310 16180 17262
9/97 17773 18588 20184
12/97 17800 17965 19162
3/98 19387 19772 21254
6/98 18631 18850 20421
9/98 15104 15053 16072
12/98 18148 17508 19082
</TABLE>
Average Annual Total Return
- ------------------------------
One Year Since
Ended Inception
12/31/98 10/3/94
2.0% 15.1%
- ------------------------------
Cumulative Total Return
- ------------------------------
Since Inception
10/3/94
81.5%
- ------------------------------
Past performance is not indicative of future performance.
Touchstone International Equity Fund C
Over the course of the annual period ended December 31, 1998, several investment
management strategies and techniques materially affected the performance of the
Touchstone International Equity Fund C. International equity stocks, as measured
by the MSCI EAFE Index, rose 20.3% while the total return (net of fees and
expenses) for the Touchstone International Equity Fund C was 19.0%.
As the manager of the Touchstone International Equity Fund C, Credit Suisse
Asset Management (formerly BEA Associates) attributes the Fund's performance to
three prominent drivers: the Fund's allocation to European
<PAGE> 7
MANAGEMENT DISCUSSION & ANALYSIS
7
markets, their underweight position in Japan, and their absence from the rest of
Asia.
In Europe, Credit Suisse favored several themes during the year including
companies benefiting from restructuring and businesses that help other companies
reduce costs. During the first half of the year, their positions in the auto
(Renault, Porsche, Volkswagen and BMW), business services (Cap Gemini and SAP),
and telecommunications equipment and mobile phone industries (Vodaphone and
Telefonica) added to performance.
Late in the third quarter, as the emerging markets crisis spread, they
repositioned their European allocation in favor of defensive industries and
companies whose core businesses are concentrated in Europe. This repositioning
had a negative impact in October, and was the primary cause of slight
underperformance for the year, when oversold global financials, in which they
were underweight, rallied sharply. However, their defensive positioning proved
beneficial during the end of the quarter as investors reduced their global
economic growth expectations and sought safer havens with higher earnings
visibility.
Being underweight in Japan added to performance for the year while stock
selection there hurt performance by a modest degree. For much of the year, the
portfolio was positioned in large blue chip exporters (Sony, Canon, TDK and
Honda) on the belief that their earnings would be more stable than domestic
companies that rely on Japan's domestic economy for revenues. While exporters
did well during the first part of the year, they were hurt in the third and
fourth quarters when the yen rallied sharply, thereby weakening the
profitability of exporters. Credit Suisse was also underweight in large banks in
Japan, which rallied in October causing a negative impact on performance.
Being absent from all of Asia except Japan proved to be effective on a full-
year basis. Despite the rally in the first month of the year and in the final
quarter, Asian markets were weak for most of the year, underscoring the view
that avoiding them was the most prudent approach to take.
<PAGE> 8
MANAGEMENT DISCUSSION & ANALYSIS
8
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
TOUCHSTONE INTERNATIONAL 1998 MSCI EAFE MAJOR 1998 WIESENBERGER NON-US
FUND C INDEX EQUITY MINOR INDEX
------------------------ -------------------- ------------------------
<S> <C> <C> <C>
9/94 10000 10000 10000
12/94 9100 9905 9452
3/95 8730 10097 9153
6/95 9090 10178 9585
9/95 9480 10611 10007
12/95 9520 11049 10114
3/96 10070 11377 10648
6/96 10270 11565 11047
9/96 10170 11559 10952
12/96 10540 11752 11317
3/97 10680 11576 11455
6/97 11930 13087 12691
9/97 12470 13003 12549
12/97 12093 11994 11089
3/98 14089 13767 12443
6/98 14829 13923 11847
9/98 12780 11952 10061
12/98 14389 14432 11764
</TABLE>
Average Annual Total Return
- ------------------------------
One Year Since
Ended Inception
12/31/98 10/3/94
19.0% 9.0%
- ------------------------------
Cumulative Total Return
- ------------------------------
Since Inception
10/3/94
43.9%
- ------------------------------
Past performance is not indicative of future performance.
Touchstone Income Opportunity Fund C
Over the course of the annual period ended December 31, 1998, several investment
management strategies and techniques materially affected the performance of the
Touchstone Income Opportunity Fund C. Corporate high yield bonds, as measured by
the Wiesenberger: Corporate High Yield Mutual Fund Index, declined 0.7%;
emerging market bonds, as measured by the Wiesenberger: Emerging Market Income
Mutual Fund Index, declined 22.8%, while corporate bonds in general, as measured
by the Lehman Brothers Corporate Bond Index, rose 8.5%. Total return (net of
fees and expenses) for the Touchstone Income Opportunity Fund C was -14.5%.
As the manager of the Touchstone Income Opportunity Fund C, Alliance Capital
Management continued to concentrate its portfolio strategy on investments in
emerging market corporates, emerging market sovereign and U.S. corporate high
yield debt. Alliance reports that 1998 was an extremely challenging year for
financial markets, as economic turmoil spread from Asia to encompass Russia and
Latin America, particularly Brazil. Both the high yield and emerging markets
came under pressure in the second half of the year after Russia announced a debt
moratorium in August. High yield assets also came under pressure due to these
global concerns, causing many companies to revise earning estimates downward;
liquidity in the secondary market dissipated.
<PAGE> 9
MANAGEMENT DISCUSSION & ANALYSIS
9
As emerging market assets came under pressure, several positions were more
severely impacted than others, including: Russian principal loans, overweight
positions in Indonesian corporates, a Chinese toll road, and an Ecuadorian
cellular company. The portfolio performance also suffered because of an
overweight position in emerging market corporate securities that underperformed
sovereign bonds.
During the second half of the year, Alliance decided to change the investment
strategy and began to slowly weight the portfolio with more high yield assets,
rather than emerging markets securities, reflecting their belief in the strength
of the U.S. economy. As of December 31, 1997, 60% of Touchstone Income
Opportunity was in emerging markets. By December 31, 1998, 32% of the portfolio
was in emerging market assets. They accomplished this transition by taking
advantage of positive price momentum in emerging assets. When they felt prices
reflected fair value, they sold some of the emerging market assets -- thereby
minimizing the losses on the portfolio -- and invested those assets in the
domestic high yield area.
Alliance believes that there will be continued strong demand for the high yield
asset class, which could offer price appreciation through spread tightening of
0.50% to 1.25%. Although high yield is not immune to external events such as the
Brazilian situation, the outlook for continued, albeit slower, growth in the
United States will have more of a positive impact on high yield performance.
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LEHMAN BROTHERS WIESENBERGER WIESENBERGER EMERGING
TOUCHSTONE INCOME CORPORATE BOND MAJOR CORPORATE HIGH YIELD MKT INCOME MINOR
OPPORTUNITY FUND C INDEX MINOR INDEX 2 INDEX
------------------ -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
9/94 10000 10000 10000 10000
12/94 9261 10043 9881 9155
3/95 8737 10638 10316 7945
6/95 10130 11429 10850 9305
9/95 10764 11699 11180 9834
12/95 11315 12277 11515 10643
3/96 11909 11960 11811 11072
6/96 12588 12014 12036 12215
9/96 13568 12254 12582 13736
12/96 14244 12681 13030 14770
3/97 14475 12553 13103 15060
6/97 15406 13070 13764 16479
9/97 16151 13582 14483 17368
12/97 15467 13978 14674 16421
3/98 16164 14193 15263 17217
6/98 15438 14548 15304 15861
9/98 12868 15077 14209 11357
12/98 13275 15168 14568 12685
</TABLE>
Average Annual Total Return
- ------------------------------
One Year Since
Ended Inception
12/31/98 10/3/94
(14.5%) 6.8%
- ------------------------------
Cumulative Total Return
- ------------------------------
Since Inception
10/3/94
32.2%
- ------------------------------
Past performance is not indicative of future performance.
<PAGE> 10
MANAGEMENT DISCUSSION & ANALYSIS
10
Touchstone Value Plus Fund C
Over the course of the abbreviated period ended December 31, 1998, several
investment management strategies and techniques materially affected the
performance of the Touchstone Value Plus Fund C since its inception on May 1,
1998. From the Fund's inception in May through the end of 1998, growth and value
stocks, as measured by the S&P 500 Index, rose 11.7% while value stocks, as
measured by the S&P Barra Value Index, rose 1.6%. Total return (net of fees and
expenses) for the Touchstone Value Plus Fund C was 2.6%.
As the manager of the Touchstone Value Plus Fund C, Fort Washington Investment
Advisors concentrated their efforts on mid to large cap common stocks that were
considered fundamentally undervalued. Fort Washington reports that 1998 marked
the fourth straight year of twenty plus percent returns for the S&P 500, a first
in history. The year was also characterized by several other events:
O The Asian crisis and the Long Term Capital debacle sent shock waves
through the financial markets.
O Weakening overseas economies and a defiant Iraq headlined the foreign
political landscape.
O President Clinton weathered a flurry of setbacks including charges of
sexual misconduct and a formal impeachment by members of Congress.
With all of this as a backdrop, investors encountered the type of volatility one
would expect from an unpredictable market. Valuations for stocks continued to
increase as a combination of lower interest rates and abundant liquidity pushed
stock prices higher.
The S&P 500 return was clearly dominated by the largest twenty names as they
accounted for over 36% of the index and over 75% of the total return for the
year. Growth managers continued their outperformance versus value managers for
1998 as is represented by the S&P Barra Growth and S&P Barra value indexes, up
42.2% and 14.7% respectively. In an even starker contrast, the Russell 2000
turned in a -2.5% return for the full year.
The best performing sector in the portfolio for the time period was Finance,
with Fannie Mae and Bank One contributing the most. Technology issues such as
Computer Associates International were the weakest performing sector.
<PAGE> 11
MANAGEMENT DISCUSSION & ANALYSIS
11
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
TOUCHSTONE VALUE PLUS S&P/BAR VAL|MINOR WILSHIRE|LG CAP
FUND C S&P 500|MAJOR INDEX INDEX VAL|MINOR INDEX
--------------------- ------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
5/98 10000 10000 10000 10000
6/98 9850 10227 9934 9968
9/98 8640 9210 8651 8853
12/98 10260 11171 10159 10075
</TABLE>
Average Annual Total Return
- ------------------------------
One Year Since
Ended Inception
12/31/98
n/a n/a
- ------------------------------
Cumulative Total Return
- ------------------------------
Since Inception
5/1/98
2.6%
- ------------------------------
Past performance is not indicative of future performance.
Touchstone Growth & Income Fund C
Over the course of the annual period ended December 31, 1998, several investment
management strategies and techniques materially affected the performance of the
Touchstone Growth & Income Fund C. Growth & Value stocks, as measured by the S&P
500 Index, rose 28.6% while the total return (net of fees and expenses) for the
Touchstone Growth & Income Fund C was 6.0%.
As the manager of the Touchstone Growth & Income Fund C, Scudder Kemper
Investments focused exclusively on their relative dividend yield discipline.
Scudder reports that 1998 was truly a "Jekyll and Hyde" year for the U.S. equity
market. On the one hand, the S&P 500 Index returned a remarkable 28.6%, the
fourth consecutive year of returns in excess of 20%. On the other hand, it was
an extraordinarily difficult period for value-oriented strategies, such as those
employed by the Touchstone Growth & Income Fund. The strongest returns were
limited to a narrow subset of the U.S. market, mostly the largest capitalization
growth technology stocks. Unfortunately, these returns did not percolate down to
most other stocks in the S&P 500. The lack of market breadth last year is
captured by the following statistics: fully 70% of the stocks in the S&P 500
underperformed the reported index return, and 40% of S&P 500 stocks actually
declined for the year.
<PAGE> 12
MANAGEMENT DISCUSSION & ANALYSIS
12
Other than the headwind of large cap growth stock dominance, the primary
negative influence resulted from Scudder's overweight in industrial cyclicals,
largely chemical, paper/forest products, and metals stocks. This overweight had
been in place since 1997, having been driven by the stocks' recession level
valuations. But commodity deflation, in combination with operating (and in a few
cases, financial) leverage caused such severe pressure on earnings that even
historically low valuations were not able to mitigate downside in stocks such as
Imperial Chemical, Witco, Lyondell and Oregon Steel. One bright spot in the
chemical sector was the third quarter announcement that BetzDearborn was to be
acquired by Hercules, leading to a 20% total return for the stock for the ten
months of 1998 until it was acquired. The paper stocks fared better, largely
because of their year-end rally which had each of the Fund's paper holdings
outperforming the fourth quarter S&P 500 return of 21%. This rally was driven by
a positive sentiment shift that occurred at the depths of the September market.
The global oversupply of pulp had become so severe that US companies began to
respond with meaningful closings of capacity in an attempt to stabilize pricing.
Further positive news was the surprise announcement in November that
International Paper was seeking to acquire Union Camp, which drove the entire
sector higher.
The greatest source of outperformance was the Fund's overweight in
telecommunication stocks, which in aggregate rose 48%. Standout performers were
Bellsouth (+81%), Sprint (+64%), Alltel (+50%), and Frontier (+46%). Low
relative valuations at the beginning of the year, and the increasing recognition
that the local telephone companies' earnings were being enhanced by the growth
in value-added services catalyzed the outperformance of many of these stocks.
Scudder's underweight in the consumer staple sector, as well as specific stock
selection, also added value as their value discipline enabled them to avoid the
weakness in Coca-Cola, Proctor & Gamble, and Gillette. Instead, the portfolio
was led by standout performers Avon (+47%) and Unilever (+35%). The Fund also
benefited from the fact many of its best performing stocks were top holdings.
These included Ford (+87%), Bellsouth (+81%), Sprint (+64%), Xerox (+62%),
American Home Products (+50%), Bristol-Myers Squibb (+43%), and Chase Manhattan
(+33%). And finally, the tremendous level of merger and acquisition activity in
the U.S. market helped the Fund last year. Stocks which were held that were
acquired during the year (or which are pending final completion) included
MidOcean, Mercantile Stores, Firstar, Echlin, BetzDearborn, and Mobil.
Scudder continues to focus on their relative dividend yield discipline, which
seeks to identify opportunities in undervalued and misunderstood companies.
While this discipline does not add value in every year, Scudder feels that it
has proven itself over market cycles. They cannot control the normal cyclical
shifts between growth and value, but they are confident that adhering to a time
tested stock selection discipline will prove beneficial over time.
<PAGE> 13
MANAGEMENT DISCUSSION & ANALYSIS
13
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
TOUCHSTONE GROWTH & WIESENBERGER GROWTH &
INCOME FUND C S&P 500 MAJOR INDEX INCOME MINOR INDEX
------------------- ------------------- --------------------
<S> <C> <C> <C>
9/94 10000 10000 10000
12/94 10010 9998 9837
3/95 11010 10972 10594
6/95 11811 12019 11428
9/95 12800 12974 12248
12/95 13535 13756 12823
3/96 14504 14494 13525
6/96 14914 15144 13969
9/96 15208 15612 14370
12/96 15707 16914 15415
3/97 15002 17367 15583
6/97 16701 20399 17768
9/97 18204 21927 19305
12/97 18716 22557 19484
3/98 20925 25703 21658
6/98 20407 26552 21739
9/98 17900 23911 19232
12/98 19833 29002 22457
</TABLE>
Average Annual Total Return
- ------------------------------
One Year Since
Ended Inception
12/31/98 10/3/94
6.0% 17.5%
- ------------------------------
Cumulative Total Return
- ------------------------------
Since Inception
10/3/94
98.3%
- ------------------------------
Past performance is not indicative of future performance.
Touchstone Balanced Fund C
Over the course of the annual period ended December 31, 1998, several investment
management strategies and techniques materially affected the performance of the
Touchstone Balanced Fund C. Growth and value stocks, as measured by the S&P 500
Index, rose 28.6% and government and corporate bonds, as measured by the Lehman
Brothers Aggregate Index, rose 8.7% while the total return (net of fees and
expenses) for the Touchstone Balanced Fund C was 3.3%.
As the manager of the Touchstone Balanced Fund C, OpCap Advisors employed a
disciplined, bottom-up approach to stock selection which has not changed since
they began managing the Fund in April of 1997. Their investment horizon is
long-term, with an average holding period of 3 to 4 years. OpCap reports that
the stock market was characterized in 1998 by exceptionally strong
crosscurrents, including wide performance disparities among individual stocks.
Many quality businesses that are inexpensive languished or even fell in price,
while many large cap growth stocks and technology issues with what OpCap
believed to be unsustainably high valuations became even more highly valued.
Subsequently, OpCap's equity performance suffered from the ownership of a
disproportionate number of quality mid cap companies that have reasonable
valuations. The mid cap sector, especially mid cap value stocks, lagged badly in
the year.
<PAGE> 14
MANAGEMENT DISCUSSION & ANALYSIS
14
Performance also suffered from the relatively limited holdings of technology
stocks. The stock market valued many technology companies as if they had
unlimited earnings growth potential. The most obvious example is the Internet
stocks, which rose dramatically in price in 1998 even though many Internet
companies have very limited revenues. For example, At Home Corporation with a
market capitalization of $11 billion had revenues for the year of $50 million.
While OpCap agrees that technology is revolutionary, they do not feel
comfortable paying high prices for large unknowns. Moreover, they believe that
highly priced technology stocks, including the Internet issues, may be
vulnerable to large declines when the euphoria that surrounds them subsides. For
these reasons, they sold their technology holdings when they believed they had
achieved a level of prudent valuation. For example, the EMC Corporation (EMC)
position was sold in August at a price of $59 per share, or 37 times 1998's
estimated earnings.
While technology stocks soared in 1998, many solid but less glamorous companies
with improving business results fell by the wayside. The most striking example
in the portfolio is the real estate company, Security Capital Group, which
experienced a 58% drop in its share price. This occurred even though the
company's funds from operations (the real estate equivalent to earnings per
share) are expected to rise 9% in 1998 and 20% in 1999. At year end, the
company's stock sold at less than eight times 1998 funds from operations and at
a large discount to its net asset value.
Even though OpCap's disciplined value style of investing did not produce strong
returns in 1998, they will stick to it because in their experience it has proven
itself over time. In other words, they will continue to invest carefully for the
long term, rather than chase highly valued stocks or buy companies that are in
vogue. Their objective is to control risk and generate superior returns by
acquiring stocks for substantially less than they are worth.
OpCap believes two of the most important long-term drivers of the price of a
stock are five-year average return on equity and five-year earnings per share
growth. In that regard, the companies they own have significantly higher return
on equity and comparable earnings per share growth than the average of the
stocks in the S&P 500 Index. The stocks owned by the Fund not only have
favorable business characteristics, but are also reasonably valued. Their
weighted average positive price/earnings ratio was 18.9 times at the end of the
year and their weighted average price to book ratio was 3.8 times, well below
the S&P 500 Index's levels of 26.7 times and 13.8 times, respectively. They
remain optimistic that investments in quality undervalued businesses will
generate superior returns over time.
In the second half of the year, OpCap established new positions in the common
stocks of Compaq Computer, Computer Associates International and News
Corporation Limited. Each is expected to deliver strong business results in
1999. In the case of Compaq, for instance, they believe the stock is inexpensive
because of uncertainties created by acquisitions and recent poor operating
performance. They believe management has a sound plan for integrating
acquisitions and improving core operating results. The five largest equity
holdings at December 31, 1998 were Security Capital Group (Class B), a real
estate company; Teva Pharmaceutical Industries Ltd., the
<PAGE> 15
MANAGEMENT DISCUSSION & ANALYSIS
15
leading global generic pharmaceutical company; Sabre Group Holdings, which
operates a travel reservation and information system; Monsanto Co., a life
sciences company; and Sprint Corp., a leading provider of telecommunications
services.
In addition to its holdings of common stocks, which represented 59.7% of the
Fund's net assets at year end, 34.7% of net assets were invested in fixed income
securities. The balance was invested in cash and cash equivalents. The fixed
income portion of the portfolio performed well in 1998. OpCap's fixed income
holdings include a diverse group of high-quality corporate bonds, U.S.
Government and agency securities, foreign government debt and tax-exempt
municipal bonds.
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
TOUCHSTONE BALANCED WIESENBERGER GROWTH &
FUND C S&P 500 MAJOR INDEX INCOME MINOR INDEX
------------------- ------------------- --------------------
<S> <C> <C> <C>
9/94 10000 10000 10000
12/94 10010 9998 9837
3/95 11010 10972 10594
6/95 11811 12019 11428
9/95 12800 12974 12248
12/95 13535 13756 12823
3/96 14504 14494 13525
6/96 14914 15144 13969
9/96 15208 15612 14370
12/96 15707 16914 15415
3/97 15002 17367 15583
6/97 16701 20399 17768
9/97 18204 21927 19305
12/97 18716 22557 19484
3/98 20925 25703 21658
6/98 20407 26552 21739
9/98 17900 23911 19232
12/98 19833 29002 22457
</TABLE>
Average Annual Total Return
- ------------------------------
One Year Since
Ended Inception
12/31/98 10/3/94
3.3% 13.9%
- ------------------------------
Cumulative Total Return
- ------------------------------
Since Inception
10/3/94
73.7%
- ------------------------------
Past performance is not indicative of future performance.
Touchstone Bond Fund C
Over the course of the annual period ended December 31, 1998, several investment
management strategies and techniques materially affected the performance of the
Touchstone Bond Fund C. Corporate bonds, as measured by the Lehman Brothers
Aggregate Index, rose 8.7% while the return of the Wiesenberger: Corporate Bond
(Investment Grade) Mutual Fund Index rose 7.2%. Total return (net of fees and
expenses) for the Touchstone Bond Fund C was 6.9%.
As the manager of the Touchstone Bond Fund C, Fort Washington Investment
Advisors continued to strategically rotate between government,
<PAGE> 16
MANAGEMENT DISCUSSION & ANALYSIS
16
corporate and mortgage securities throughout the year. Fort Washington reports
that the Fund generated solid returns in a market that was very unfriendly to
the average manager. The returns were the result of an above average market
yield and a portfolio duration equal to that of the Fund's overall market index.
The portfolio was overweight in corporate and asset-backed securities. A 5% cash
position and a core position (5%) in preferred stocks generated significant
current income with low market volatility. The goal of the portfolio was to find
market niches of mispriced securities that generated above average returns for
their quality or duration. The portfolio position in preferred stock was a
perfect example of this strategy.
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
LEHMAN BROS. AGGREGATE WIESENBERGER CORP-INV
TOUCHSTONE BOND FUND C MAJOR INDEX GRADE MINOR INDEX
---------------------- ---------------------- ---------------------
<S> <C> <C> <C>
9/94 10000 10000 10000
12/94 10019 10038 9985
3/95 10537 10544 10418
6/95 11070 11187 11104
9/95 11217 11406 11331
12/95 11646 11892 11867
3/96 11373 11681 11588
6/96 11402 11748 11629
9/96 11576 11965 11842
12/96 11881 12324 12223
3/97 11821 12256 12134
6/97 12163 12707 12571
9/97 12522 13131 12999
12/97 12638 13514 13302
3/98 12852 13723 13491
6/98 13069 14045 13788
9/98 13380 14638 14188
12/98 13510 14687 14257
</TABLE>
Average Annual Total Return
- ------------------------------
One Year Since
Ended Inception
12/31/98 10/3/94
6.9% 7.3%
- ------------------------------
Cumulative Total Return
- ------------------------------
Since Inception
10/3/94
35.1%
- ------------------------------
Past performance is not indicative of future performance.
<PAGE> 17
17
NOTES
<PAGE> 18
SELECT ADVISORS TRUST C
STATEMENTS OF ASSETS AND LIABILITIES 18
December 31, 1998
<TABLE>
<CAPTION>
TOUCHSTONE TOUCHSTONE TOUCHSTONE TOUCHSTONE
EMERGING INTERNATIONAL INCOME TOUCHSTONE GROWTH & TOUCHSTONE TOUCHSTONE
GROWTH EQUITY OPPORTUNITY VALUE PLUS(a) INCOME BALANCED BOND
FUND C FUND C FUND C FUND C FUND C FUND C FUND C
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in
corresponding Select
Advisors Portfolios,
at value (Note 1) $3,199,688 $5,128,940 $3,709,741 $297,683 $2,668,299 $3,282,183 $1,060,515
Receivable for fund
shares sold -- 4,404 -- 813 -- -- --
Reimbursement receivable
from Sponsor (Note 3) 110,704 122,747 119,336 44,835 116,814 110,531 103,963
- -------------------------------------------------------------------------------------------------------------------------
Total assets 3,310,392 5,256,091 3,829,077 343,331 2,785,113 3,392,714 1,164,478
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for fund shares
redeemed 635 -- 1,843 7,305 6,428 28,069 2,623
Other accrued expenses 25,737 29,986 29,071 17,841 25,499 25,186 22,269
- -------------------------------------------------------------------------------------------------------------------------
Total
liabilities 26,372 29,986 30,914 25,146 31,927 53,255 24,892
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS(b) $3,284,020 $5,226,105 $3,798,163 $318,185 $2,753,186 $3,339,459 $1,139,586
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding 251,885 417,774 511,577 31,018 193,065 286,552 113,070
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
offering and
redemption price per
share $13.04 $12.51 $7.42 $10.26 $14.26 $11.65 $10.08
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on May 1, 1998.
(b) See the Statements of Changes in Net Assets for components of net assets.
The accompanying notes are an integral part of the financial statements.
<PAGE> 19
SELECT ADVISORS TRUST C
19
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
TOUCHSTONE TOUCHSTONE TOUCHSTONE TOUCHSTONE
EMERGING INTERNATIONAL INCOME TOUCHSTONE GROWTH & TOUCHSTONE TOUCHSTONE
GROWTH EQUITY OPPORTUNITY VALUE PLUS(a) INCOME BALANCED BOND
FUND C FUND C FUND C FUND C FUND C FUND C FUND C
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME ALLOCATED FROM
CORRESPONDING PORTFOLIO (NOTE 1):
Interest income $ 8,680 $ 9,236 $ 453,070 $ 307 $ 2,637 $ 85,138 $ 56,160
Dividend income (b) 23,228 66,874 -- 2,202 63,651 23,581 3,723
- -------------------------------------------------------------------------------------------------------------------------------
Total investment income 31,908 76,110 453,070 2,509 66,288 108,719 59,883
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Allocated portfolio expenses 41,684 72,717 45,721 1,459 29,529 39,187 7,411
Sponsor fees (Note 2) 6,030 9,699 8,137 340 4,995 6,309 1,981
Transfer agent fees 35,937 38,266 37,786 17,400 39,495 35,967 33,254
Distribution fees (Note 2) 30,152 48,493 40,683 1,700 24,975 31,546 9,907
Fund accounting and
administration fees 24,732 29,102 25,296 16,667 30,482 24,732 30,308
Registration fees 12,029 10,665 12,414 25,147 12,607 12,735 11,213
Audit fees 7,794 9,077 9,048 6,150 7,639 7,866 7,963
Amortization of organization
expenses (Note 4) 16,514 16,514 16,514 -- 16,514 16,514 16,514
Printing fees 5,361 7,572 7,095 302 4,166 4,902 960
Legal fees 3,698 3,354 2,952 1,153 2,109 2,715 2,625
Trustee fees (Note 2) 290 450 386 10 228 292 88
Miscellaneous 355 496 437 32 269 322 67
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses 184,576 246,405 206,469 70,360 173,008 183,087 122,291
Waiver of sponsor fees (Note
2) (6,030) (9,699) (8,137) (340) (4,995) (6,309) (1,981)
Reimbursement from sponsor
(Note 3) (110,704) (122,748) (119,336) (66,535) (116,814) (110,530) (103,963)
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses 67,842 113,958 78,996 3,485 51,199 66,248 16,347
- -------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (35,934) (37,848) 374,074 (976) 15,089 42,471 43,536
- -------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) FROM PORTFOLIO:
Net realized gain (loss) on:
Investments 289,695 349,110 (393,619) (5,694) 135,401 180,919 18,195
Written Options -- -- 2,098 -- -- -- --
Foreign currency
transactions -- (16,829) -- -- -- 6,979 --
- -------------------------------------------------------------------------------------------------------------------------------
289,695 332,281 (391,521) (5,694) 135,401 187,898 18,195
- -------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation
(depreciation) on:
Investments (212,053) 461,956 (643,432) 19,614 (45,940) (150,209) 7,504
Written Options -- -- -- -- -- -- --
Foreign currency
transactions -- 642 79 -- -- (2,853) --
- -------------------------------------------------------------------------------------------------------------------------------
(212,053) 462,598 (643,353) 19,614 (45,940) (153,062) 7,504
- -------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) FROM PORTFOLIO 77,642 794,879 (1,034,874) 13,920 89,461 34,836 25,699
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 41,708 $ 757,031 $ (660,800) $ 12,944 $ 104,550 $ 77,307 $ 69,235
- -------------------------------------------------------------------------------------------------------------------------------
(a) The Fund commenced operations on May 1, 1998.
(b) Net of foreign tax
withholding -- $8,615 -- -- $330 $159 $14
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 20
SELECT ADVISORS TRUST C
STATEMENTS OF CHANGES IN NET ASSETS 20
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING TOUCHSTONE INTERNATIONAL TOUCHSTONE INCOME
GROWTH FUND C EQUITY FUND C OPPORTUNITY FUND C
---------------------------- ---------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS (ALLOCATED FROM
CORRESPONDING PORTFOLIO):
Net investment income (loss) $ (35,934) $ (23,727) $ (37,848) $ (20,769) $ 374,074 $ 356,979
Net realized gain (loss) 289,695 323,521 332,281 486,229 (391,521) 168,945
Net change in unrealized
appreciation (depreciation) (212,053) 307,612 462,598 30,009 (643,353) (283,790)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 41,708 607,406 757,031 495,469 (660,800) 242,134
- ---------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income -- -- -- -- (383,944) (355,645)
Realized capital gains (300,893) (225,979) (352,297) (273,265) -- (199,664)
Distributions in excess of net
investment income -- -- -- -- -- --
Distributions in excess of
realized capital gains -- -- -- -- -- (109,728)
Return of capital distributions -- -- -- -- (49,795) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions (300,893) (225,979) (352,297) (273,265) (433,739) (665,037)
- ---------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 1):
Proceeds from shares sold 851,648 713,308 1,060,681 561,135 2,147,669 1,599,237
Reinvestment of dividends and
distributions 303,779 225,679 353,640 269,287 358,774 577,162
Cost of shares redeemed (446,345) (250,359) (626,785) (175,631) (1,437,575) (562,855)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
share transactions 709,082 688,628 787,536 654,791 1,068,868 1,613,544
- ---------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 449,897 1,070,055 1,192,270 876,995 (25,671) 1,190,641
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,834,123 1,764,068 4,033,835 3,156,840 3,823,834 2,633,193
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $3,284,020 $2,834,123 $5,226,105 $4,033,835 $ 3,798,163 $3,823,834
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $2,927,388 $2,251,248 $4,388,869 $3,599,360 $ 5,099,818 $4,089,891
Undistributed (distributions in
excess of) net investment
(income) -- -- (43,181) (16,192) (44) 2,805
Accumulated net realized gain
(loss) from Portfolio 10,847 25,037 31,089 63,937 (495,815) (106,419)
Net unrealized appreciation
(depreciation) from Portfolio 345,785 557,838 849,328 386,730 (805,796) (162,443)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to shares
outstanding $3,284,020 $2,834,123 $5,226,105 $4,033,835 $ 3,798,163 $3,823,834
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING (NOTE 1):
Shares sold 60,937 52,455 81,879 49,430 238,569 145,714
Reinvestment of dividends and
distributions 24,109 16,437 28,223 24,022 42,435 56,562
- ---------------------------------------------------------------------------------------------------------------------------------
85,046 68,892 110,102 73,452 281,004 202,276
Shares redeemed (33,731) (18,070) (50,186) (15,117) (165,063) (51,460)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 51,315 50,822 59,916 58,335 115,941 150,816
Beginning of period 200,570 149,748 357,858 299,523 395,636 244,820
- ---------------------------------------------------------------------------------------------------------------------------------
End of period 251,885 200,570 417,774 357,858 511,577 395,636
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on May 1, 1998.
The accompanying notes are an integral part of the financial statements.
<PAGE> 21
SELECT ADVISORS TRUST C
21
<TABLE>
<CAPTION>
TOUCHSTONE
VALUE PLUS TOUCHSTONE TOUCHSTONE TOUCHSTONE
FUND C GROWTH & INCOME FUND C BALANCED FUND C BOND FUND C
--------------- -------------------------- -------------------------- --------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
PERIOD ENDED(a) YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS (ALLOCATED FROM
CORRESPONDING PORTFOLIO):
Net investment income (loss) $ (976) $ 15,089 $ (1,891) $ 42,471 $ 32,958 $ 43,536 $ 39,167
Net realized gain (loss) (5,694) 135,401 225,936 187,898 465,528 18,195 1,853
Net change in unrealized
appreciation (depreciation) 19,614 (45,940) 86,797 (153,062) (84,212) 7,504 8,153
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 12,944 104,550 310,842 77,307 414,274 69,235 49,173
- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income -- (15,795) (4,621) (44,637) (33,535) (44,751) (40,197)
Realized capital gains -- (164,444) (208,515) (181,978) (440,674) (16,737) --
Distributions in excess of net
investment income -- (6,823) -- (13,365) (9,083) (6,389) (6,108)
Distributions in excess of
realized capital gains -- (6,749) -- -- -- -- --
Return of capital distributions -- (2,428) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions -- (196,238) (213,136) (239,980) (483,292) (67,877) (46,305)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 1):
Proceeds from shares sold 306,191 1,464,923 1,000,440 1,140,474 876,638 1,102,643 626,324
Reinvestment of dividends and
distributions -- 193,079 190,564 235,654 460,589 67,557 46,135
Cost of shares redeemed (950) (851,906) (469,773) (680,955) (431,746) (771,238) (571,421)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
share transactions 305,241 806,096 721,231 695,173 905,481 398,962 101,038
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 318,185 714,407 818,937 532,500 836,463 400,320 103,906
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period -- 2,038,779 1,219,842 2,806,959 1,970,496 739,266 635,360
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $318,185 $2,753,186 $2,038,779 $3,339,459 $2,806,959 $1,139,586 $ 739,266
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $304,265 $2,668,782 $1,871,667 $3,253,933 $2,576,151 $1,117,789 $ 725,896
Undistributed (distributions in
excess of) net investment
(income) -- -- 706 492 1,883 1,086 1,215
Accumulated net realized gain
(loss) from Portfolio (5,694) (7,019) 29,043 37,188 28,017 79 (973)
Net unrealized appreciation
(depreciation) from Portfolio 19,614 91,423 137,363 47,846 200,908 20,632 13,128
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to shares
outstanding $318,185 $2,753,186 $2,038,779 $3,339,459 $2,806,959 $1,139,586 $ 739,266
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING (NOTE 1):
Shares sold 31,730 96,361 68,486 91,178 65,015 108,496 62,123
Reinvestment of dividends and
distributions -- 13,502 13,381 20,267 38,136 6,667 4,580
- ------------------------------------------------------------------------------------------------------------------------------------
31,730 109,863 81,867 111,445 103,151 115,163 66,703
Shares redeemed (712) (57,501) (30,951) (55,866) (31,124) (75,601) (56,366)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 31,018 52,362 50,916 55,579 72,027 39,562 10,337
Beginning of period -- 140,703 89,787 230,973 158,946 73,508 63,171
- ------------------------------------------------------------------------------------------------------------------------------------
End of period 31,018 193,065 140,703 286,552 230,973 113,070 73,508
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 22
SELECT ADVISORS TRUST C
FINANCIAL HIGHLIGHTS 22
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING GROWTH FUND C
SELECTED DATA FOR A SHARE OUTSTANDING: ----------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.13 $11.78 $11.42 $10.11 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.14) (0.12) -- (0.02) 0.13
Net realized and unrealized gain (loss) on
investments 0.37 3.70 1.10 2.16 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.23 3.58 1.10 2.14 0.25
- ---------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income -- -- -- (0.01) (0.13)
Realized capital gains (1.32) (1.23) (0.74) (0.82) (0.01)
Return of capital -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (1.32) (1.23) (0.74) (0.83) (0.14)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.04 $14.13 $11.78 $11.42 $10.11
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (c) 1.95% 30.67% 9.67% 21.15% 2.52%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $3,284 $2,834 $1,764 $1,279 $1,022
Ratios to average net assets (d):
Expenses 2.25% 2.25% 2.25% 2.25% 2.50%(f)
Net investment income (loss) (1.19)% (1.05)% (0.88)% (0.81)% 5.29%(f)
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE GROWTH & INCOME FUND C
SELECTED DATA FOR A SHARE OUTSTANDING: ------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED(e) PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.49 $13.59 $12.58 $10.01 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.12 (0.01) 0.10 (0.01) 0.82
Net realized and unrealized gain (loss) on
investments 0.74 2.59 1.92 3.51 (0.81)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.86 2.58 2.02 3.50 0.01
- ---------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.13) (0.04) (0.10) (0.42) --
Realized capital gains (0.95) (1.64) (0.91) (0.51) --
Return of capital (0.01) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (1.09) (1.68) (1.01) (0.93) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.26 $14.49 $13.59 $12.58 $10.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (c) 5.97% 19.16% 16.04% 35.22% 0.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $2,753 $2,039 $1,220 $ 328 $ 21
Ratios to average net assets (d):
Expenses 2.05% 2.05% 2.05% 2.05% 2.30%(f)
Net investment income (loss) 0.60% (0.11)% (0.21)% (0.07)% (0.15)%(f)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on October 3, 1994.
(b) The Fund commenced operations on May 1, 1998.
(c) Total returns would have been lower had certain expenses not been
reimbursed or waived during the periods shown (See Note 3).
(d) Includes the Fund's proportionate share of the corresponding Portfolio's
expenses. If the waiver and reimbursement had not been in place for the
periods listed, the ratios of expenses to average net assets would have been
higher. (Note 3)
(e) Per share amounts calculated using the average share method.
(f) Ratios are annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE> 23
SELECT ADVISORS TRUST C
23
<TABLE>
<CAPTION>
TOUCHSTONE
INCOME
OPPORTUNITY
TOUCHSTONE INTERNATIONAL EQUITY FUND C FUND C
------------------------------------------------------------------------- --------------
SELECTED DATA FOR A SHARE OUTSTANDING: FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a) YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994 1998
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.27 $10.54 $ 9.52 $ 9.10 $ 10.00 $ 9.67
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.08) (0.06) -- (0.05) -- 0.80
Net realized and unrealized gain (loss) on
investments 2.22 1.61 1.02 0.47 (0.90) (2.13)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.14 1.55 1.02 0.42 (0.90) (1.33)
- --------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
FROM:
Net investment income -- -- -- -- -- (0.81)
Realized capital gains (0.90) (0.82) -- -- -- --
Return of capital -- -- -- -- -- (0.11)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.90) (0.82) -- -- -- (0.92)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.51 $11.27 $10.54 $ 9.52 $ 9.10 $ 7.42
- --------------------------------------------------------------------------------------------------------------------------------
Total return (c) 18.99% 14.73% 10.71% 4.62% (9.00)% (14.52)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $ 5,226 $4,034 $3,157 $2,482 $ 2,274 $3,798
Ratios to average net assets (d):
Expenses 2.35% 2.35% 2.35% 2.35% 2.60%(f) 1.94%
Net investment income (loss) (0.78)% (0.56)% (0.33)% (0.63)% (1.10)%(f) 9.19%
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE
VALUE PLUS
SELECTED DATA FOR A SHARE OUTSTANDING: TOUCHSTONE INCOME OPPORTUNITY FUND C FUND C
------------------------------------------------------------ ---------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a) PERIOD ENDED(b)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1998
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.76 $ 9.80 $ 9.08 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.15 1.09 1.14 0.21 (0.03)
Net realized and unrealized gain (loss) on
investments (0.25) 1.33 0.74 (0.94) 0.29
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.90 2.42 1.88 (0.73) 0.26
- --------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (1.14) (1.09) (1.16) (0.19) --
Realized capital gains (0.85) (0.37) -- -- --
Return of capital -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (1.99) (1.46) (1.16) (0.19) --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.67 $10.76 $ 9.80 $ 9.08 $ 10.26
- --------------------------------------------------------------------------------------------------------------------------------
Total return (c) 8.59% 25.88% 22.18% (7.39)% 2.60%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $3,824 $2,633 $1,203 $ 926 $ 318
Ratios to average net assets (d):
Expenses 1.94% 1.95% 1.95% 2.20%(f) 2.05%(f)
Net investment income (loss) 10.56% 10.49% 11.70% 7.83%(f) (0.57)%(f)
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE BALANCED FUND C
SELECTED DATA FOR A SHARE OUTSTANDING: --------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.15 $12.40 $11.30 $ 9.97 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.16 0.18 0.22 0.25 0.07
Net realized and unrealized gain (loss) on
investments 0.23 2.06 1.56 1.98 (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.39 2.24 1.78 2.23 0.02
- ---------------------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.22) (0.22) (0.22) (0.27) (0.05)
Realized capital gains (0.67) (2.27) (0.46) (0.63) --
Return of capital -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.89) (2.49) (0.68) (0.90) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.65 $12.15 $12.40 $11.30 $ 9.97
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (c) 3.31% 18.37% 15.85% 22.40% 0.20%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $ 3,339 $2,807 $1,970 $1,380 $ 999
Ratios to average net assets (d):
Expenses 2.10% 2.10% 2.10% 2.10% 2.35%(f)
Net investment income (loss) 1.35% 1.32% 1.44% 1.63% 2.00%(f)
</TABLE>
<TABLE>
<CAPTION>
TOUCHSTONE BOND FUND C TOUCHSTONE BOND FUND C
----------------------------------------------------------------------
SELECTED DATA FOR A SHARE OUTSTANDING: FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED(e) PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.06 $10.06 $10.53 $ 9.91 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.44 0.52 0.66 0.54 0.87
Net realized and unrealized gain (loss) on
investments 0.24 0.11 (0.47) 1.03 (0.85)
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.68 0.63 0.19 1.57 0.02
- -----------------------------------------------------------------------------------------------------------------------
LESS: DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.51) (0.62) (0.64) (0.90) (0.11)
Realized capital gains (0.15) (0.01) (0.02) (0.05) --
Return of capital -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.66) (0.63) (0.66) (0.95) (0.11)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.08 $10.06 $10.06 $ 10.53 $ 9.91
- -----------------------------------------------------------------------------------------------------------------------
Total return (c) 6.90% 6.37% 2.01% 16.29% 0.19%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $1,140 $ 739 $ 635 $ 340 $ 22
Ratios to average net assets (d):
Expenses 1.64% 1.65% 1.65% 1.65% 1.90%(f)
Net investment income (loss) 4.36% 5.12% 5.26% 5.43% 5.12%(f)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 24
SELECT ADVISORS TRUST C
NOTES TO FINANCIAL STATEMENTS 24
1. Organization and Significant Accounting Policies
Select Advisors Trust C (the "Trust") was organized as a Massachusetts business
trust on February 7, 1994, and is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company.
The Declaration of Trust permits the Trust to issue an unlimited number of full
and fractional shares of beneficial interest of one or more series.
The Trust consists of seven funds (each a "Fund"): Touchstone Emerging Growth
Fund C (the "Emerging Growth Fund"), Touchstone International Equity Fund C (the
"International Equity Fund"), Touchstone Income Opportunity Fund C (the "Income
Opportunity Fund"), Touchstone Value Plus Fund C (the "Value Plus Fund"),
Touchstone Growth & Income Fund C (the "Growth & Income Fund"), Touchstone
Balanced Fund C (the "Balanced Fund"), and Touchstone Bond Fund C (the "Bond
Fund").
The Trust seeks to achieve the investment objectives of each Fund by investing
all the investable assets of the Fund in a corresponding Portfolio of Select
Advisors Portfolios (the "Portfolio Trust"), an open-end management investment
company. Each Portfolio has the same investment objectives as the corresponding
Fund. These Portfolios are, respectively, Emerging Growth Portfolio,
International Equity Portfolio, Income Opportunity Portfolio, Value Plus
Portfolio, Growth & Income Portfolio, Balanced Portfolio and Bond Portfolio.
The value of each Fund's investment in the corresponding Portfolio reflects the
Fund's proportionate interest in the net assets of the Portfolio at December 31,
1998.
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME VALUE GROWTH &
GROWTH EQUITY OPPORTUNITY PLUS INCOME BALANCED BOND
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage interest
in corresponding
Portfolio 28.0% 43.1% 36.2% 1.1% 6.9% 41.9% 5.3%
</TABLE>
The financial statements of each Portfolio, including the schedule of
investments, are included elsewhere in this report and should be read in
conjunction with the corresponding Fund's financial statements.
As of December 31, 1998, Touchstone Advisors, Inc., a subsidiary of
Western-Southern Life Assurance Company ("Western-Southern"), and
Western-Southern owned 54.2%, 68.4%, 34.1%, 80.6%, 7.7%, 51.0% and 12.2% of the
Emerging Growth Fund, the International Equity Fund, the Income Opportunity
Fund, the Value Plus Fund, the Growth & Income Fund, the Balanced Fund, and the
Bond Fund, respectively.
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.
<PAGE> 25
SELECT ADVISORS TRUST C
25
The following is a summary of the significant accounting policies of the Funds:
INVESTMENT VALUATION. Valuation of investments by each Portfolio is discussed in
Note 1 of the Portfolio Trust's Notes to Financial Statements which are included
elsewhere in this report.
INVESTMENT INCOME. Each Fund records its share of the corresponding Portfolio's
net investment income and realized and unrealized gains and losses and adjusts
its investment in the corresponding Portfolio each day. All the net investment
income and realized and unrealized gains and losses of each Portfolio are
allocated among the corresponding Funds and the other investors in the Portfolio
at the time of such determination.
DIVIDENDS AND DISTRIBUTIONS. Substantially all of the net investment income of
the Growth & Income Fund, the Income Opportunity Fund and the Bond Fund, are
declared as dividends and paid monthly. Substantially all of the net investment
income of the Balanced Fund and the Value Plus Fund are declared as dividends
and paid quarterly. Substantially all of the net investment income of the
Emerging Growth Fund and the International Equity Fund are declared as dividends
and paid annually. Distributions to shareholders of net realized capital gains,
if any, are declared and paid annually. Dividends and distributions are recorded
on the ex-dividend date and are reinvested at net asset value.
Income and realized capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassification, are primarily due to non-deductible organization costs,
passive foreign investment companies, foreign currency transactions, losses
deferred due to wash sales, and excise tax regulations.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital. Undistributed net
investment income and accumulated net realized gain or loss from the Portfolios,
may include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
FEDERAL TAXES. Each Fund of the Trust is treated as a separate entity for
federal income tax purposes. Each Fund'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 of its income, and net
realized capital gains, if any, within the prescribed time periods. Accordingly,
no provision for federal income tax is necessary. At December 31, 1998, the
following Funds have a capital loss carryforward expiring in December 2006:
<TABLE>
<S> <C>
Income Opportunity Fund $449,952
Value Plus Fund 4,606
</TABLE>
Additionally, at December 31, 1998, the following Funds had net capital losses
attributable to security transactions that occurred after October 31,
<PAGE> 26
SELECT ADVISORS TRUST C
26
Notes to Financial Statements
continued
1998, which are treated as arising on the first day of the Fund's next taxable
year.
<TABLE>
<S> <C>
Income Opportunity Fund $45,589
Value Plus Fund 1,087
Growth & Income Fund 6,242
</TABLE>
EXPENSES. Expenses incurred by the Trust with respect to any two or more Funds
in the Trust are prorated to each Fund in the Trust, except where allocations of
direct expenses to each Fund can otherwise be made fairly. Expenses directly
attributable to a Fund are charged to that Fund.
2. Transactions with Affiliates
DISTRIBUTION AND SERVICE PLAN. Under the Trust's Distribution and Service Plan
in accordance with Rule 12b-1 under the Act, the Trust retains Touchstone
Securities, Inc. ("Distributor"), a subsidiary of Western-Southern, as a service
agent of the Trust and as the principal underwriter of the shares of each Fund.
Each Fund will pay a distribution fee to the Distributor at an annual rate of up
to 0.75% of the Fund's average daily net assets. In addition to the distribution
fee, each Fund will pay a service fee to the Distributor equal to, on an annual
basis, up to 0.25% of that Fund's average daily net assets. The Distributor may
also use the distribution fees received from each Fund to otherwise promote the
sale of shares of the Funds to other than current shareholders and for sales
literature or other promotional activities.
SPONSOR. The Trust, on behalf of each Fund, has entered into a Sponsor Agreement
with Touchstone Advisors, Inc. (the "Sponsor"), an affiliate of the Distributor.
The Sponsor provides oversight of the various service providers to the Trust,
including the Trust's administrator, custodian and transfer agent. The Sponsor
receives a fee from each Fund equal on an annual basis to 0.20% of the average
daily net assets of that Fund. The Sponsor has advised the Trust that it will
waive all fees under the Sponsor Agreement through December 31, 1999.
TRUSTEES. Each Trustee who is not an "interested person" (as defined in the Act)
of the Trust receives an aggregate of $5,000 annually plus $1,000 per meeting
attended as well as reimbursement for reasonable out-of-pocket expenses from the
Trust and from Select Advisors Trust A, Select Advisors Portfolios and Select
Advisors Variable Insurance Trust, which are each included in separate reports.
For the year ended December 31, 1998, the Trust incurred $1,744 in Trustee fees
which were prorated to each Fund.
3. Expense Reimbursements
The Sponsor has agreed to reimburse each Fund so that, following such
reimbursement, the aggregate total operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) of each Fund, including
the Fund's proportionate share of expenses of the corresponding Portfolio, are
not greater, on an annual basis, than the percentage of
<PAGE> 27
SELECT ADVISORS TRUST C
27
average daily net assets of the Fund listed below for the year ended December
31, 1998.
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME VALUE GROWTH &
GROWTH EQUITY OPPORTUNITY PLUS INCOME BALANCED BOND
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
Voluntary Expense
Limit 2.25% 2.35% 1.95% 2.05% 2.05% 2.10% 1.65%
Amount of
Reimbursement $110,704 $122,748 $119,336 $66,535 $116,814 $110,530 $103,963
--------------------------------------------------------------------------------------------------------
</TABLE>
4. Subsequent Event
On June 18, 1998, the Board of Trustees of Select Advisors Trust C ("Trust C")
and Select Advisors Trust A ("Trust A") approved an Agreement and Plan of
Reorganization (the "Plan") and the transaction contemplated by the Plan (the
"Reorganization"). The shareholders of Trust C subsequently approved the Plan.
In the Reorganization, each series of Trust C (each, a "Trust C Fund") and each
series of Trust A (each, a "Trust A Fund") withdrew its assets (net of
liabilities) from the corresponding series of Select Advisors Portfolios (each,
a "Hub"). Each Trust A Fund then acquired all of the assets (net of liabilities)
of the corresponding Trust C Fund in exchange for Class C shares of such Trust A
Fund. Class C shares received by each Trust C Fund were distributed pro rata to
the shareholders of that Trust C Fund. In addition, where applicable, The
Western-Southern Life Insurance Company Separate Account A ("SAA") withdrew its
assets from each Hub in which it invested and reinvested such assets in Class Y
shares of the corresponding Trust A Fund. The Reorganization was effective
immediately after the close of business on December 31, 1998. The withdrawals
from each Hub were effected as redemptions in-kind where the ownership of the
Hub net assets before the redemption, was transferred to each Trust A Fund, each
Trust C Fund and SAA on a pro-rata basis.
Previously each Trust A Fund, each Trust C Fund and each Hub operated as a part
of a Hub and Spoke mutual fund structure. Under the Hub and Spoke structure,
each Trust A Fund and each Trust C Fund invested all of its investable assets in
the corresponding Hub. As a result of the Reorganization, all of the assets of
each Trust A Fund and the corresponding Trust C Fund are now held by the Trust A
Fund in a multi-class structure. The distribution system and fee structure of
Class A of each Trust A Fund are identical to that of each Trust A Fund before
the Reorganization. Likewise, the distribution system and fee structure of Class
C of each Trust A Fund are identical to that of the corresponding Trust C Fund
before the Reorganization. The investment objective and policies of each Trust A
Fund are identical to its investment objective and policies and those of the
corresponding Trust C Fund before the Reorganization. However, each Trust A Fund
attempts to achieve its objective by retaining an investment advisor and
sub-advisor to manage its assets directly, rather than investing its assets in
the corresponding Hub.
In the Reorganization each share of each Trust A Fund outstanding immediately
prior to the consummation of the Reorganization was
<PAGE> 28
SELECT ADVISORS TRUST C
28
Notes to Financial Statements
continued
redesignated as a Class A share of that Trust A Fund but was not otherwise
affected. Each shareholder of each Trust C Fund received, in exchange for the
shares of the Trust C Fund owned by such shareholder, an equal number of the
corresponding Trust A Fund's Class C shares at the same net asset value per
share. Trust A was renamed Touchstone Series Trust and each Trust A Fund was
renamed to remove the "A" designation. Select Advisors Portfolios, each Hub,
Trust C and each Trust C Fund will be terminated as soon as practicable.
The deferred organization costs of each Trust C Fund were fully expensed during
the year ended December 31, 1998 in anticipation of the above Reorganization.
Touchstone Advisors, Inc. has agreed to reimburse each Trust C Fund for these
costs. All other expenses associated with the Reorganization will be paid by
Touchstone Advisors, Inc. or one of its affiliates.
Federal Tax Information (unaudited)
For corporate shareholders, a portion of the ordinary dividends paid during the
Fund's year ended December 31, 1998 qualified for the dividends received
deductions, as follows:
<TABLE>
<S> <C>
Emerging Growth Fund 100%
Growth & Income Fund 60%
Balanced Fund 10%
</TABLE>
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following capital gain dividends for the year ended December 31, 1998:
<TABLE>
<CAPTION>
LONG TERM CAPITAL GAINS
DISTRIBUTIONS PER SHARE CAPITAL GAIN DIVIDENDS
<S> <C> <C>
Emerging Growth Fund $1.315 $299,879
International Equity Fund 0.891 348,015
Growth & Income Fund 0.570 104,207
Balanced Fund 0.322 87,896
Bond Fund 0.033 3,658
</TABLE>
The Touchstone International Equity Fund paid foreign taxes of $8,615 or $0.02
per share, and the Fund recognized $65,023 or $0.17 per share of foreign source
income during the year ended December 31, 1998.
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
29
REPORT OF INDEPENDENT ACCOUNTANTS
To Investors and Trustees of
the Select Advisors Trust C:
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets and financial
highlights present fairly, in all material respects, the financial position of
Touchstone Emerging Growth Fund C, Touchstone International Equity Fund C,
Touchstone Income Opportunity Fund C, Touchstone Value Plus Fund C, Touchstone
Growth & Income Fund C, Touchstone Balanced Fund C and Touchstone Bond Fund C,
(the "Funds") at December 31, 1998, the results of their operations, the changes
in their net assets and their financial highlights for the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
<PAGE> 30
SUPPLEMENTARY DATA
SUPPLEMENTARY DATA 30
A special meeting of the shareholders of each series of Select Advisors Trust C
(a "Trust C Fund") was held on October 29, 1998. At the meeting, the
shareholders of each Trust C Fund (other than the Touchstone Growth & Income
Fund C) voted on a proposal to approve an Agreement and Plan of Reorganization
and Liquidation and the transactions contemplated thereby, including (a) the
transfer of substantially all of the assets and liabilities of each such Trust C
Fund to the corresponding series of Select Advisors Trust A (each, a "Trust A
Fund"), in exchange for Class C shares of such Trust A Fund, and (b) the
distribution of such Trust A Fund's Class C shares to the shareholders of such
Trust C Fund. The result of the votes taken among shareholders on the proposal
is listed below:
Touchstone Emerging Growth Fund C
160,503.253 shares were represented by proxy, or 70.45% of outstanding shares of
the Fund.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES VOTED
<S> <C> <C>
Affirmative 156,451.898 97.48%
Against 3,135.783 1.95%
Abstain 915.572 0.57%
TOTAL 160,503.253 100.00%
</TABLE>
Touchstone International Equity Fund C
305,760.258 shares were represented by proxy, or 79.09% of outstanding shares of
the Fund.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES VOTED
<S> <C> <C>
Affirmative 297,910.560 97.43%
Against 6,058.907 1.98%
Abstain 1,790.791 0.59%
TOTAL 305,760.258 100.00%
</TABLE>
Touchstone Income Opportunity Fund C
249,280.031 shares were represented by proxy, or 65.45% of outstanding shares of
the Fund.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES VOTED
<S> <C> <C>
Affirmative 234,609.552 94.11%
Against 4,650.441 1.87%
Abstain 10,020.038 4.02%
TOTAL 249,280.031 100.00%
</TABLE>
<PAGE> 31
SUPPLEMENTARY DATA
31
Touchstone Value Plus Fund C
25,015.000 shares were represented by proxy, or 99.81% of outstanding shares of
the Fund.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES VOTED
<S> <C> <C>
Affirmative 25,015.000 100.00%
Against 0.000 0.00%
Abstain 0.000 0.00%
TOTAL 25,015.000 100.00%
</TABLE>
Touchstone Balanced Fund C
181,372.737 shares were represented by proxy, or 72.75% of outstanding shares of
the Fund.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES VOTED
<S> <C> <C>
Affirmative 175,808.394 96.93%
Against 2,082.821 1.15%
Abstain 3,481.522 1.92%
TOTAL 181,372.737 100.00%
</TABLE>
Touchstone Bond Fund C
71,786.785 shares were represented by proxy, or 56.82% of outstanding shares of
the Fund.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES VOTED
<S> <C> <C>
Affirmative 62,972.982 87.72%
Against 0.000 0.00%
Abstain 8,813.803 12.28%
TOTAL 71,786.785 100.00%
</TABLE>
A special meeting of shareholders of Touchstone Growth & Income Fund C (the
"Fund"), a series of Select Advisors Trust C, was held on November 19, 1998. At
the meeting, the shareholders of the Fund voted on a proposal to approve an
Agreement and Plan of Reorganization and Liquidation and the transactions
contemplated thereby, including (a) the transfer of substantially all of the
assets and liabilities of the Fund to the corresponding series of Select
Advisors Trust A (the "Trust A Fund"), in exchange for Class C shares of the
Trust A Fund, and (b) the distribution of the Trust A Fund's Class C shares to
the shareholders of the Fund. The result of the vote taken among shareholders on
the proposal is listed below:
86,891.275 shares were represented by proxy, or 53.29% of outstanding shares of
the Fund.
<TABLE>
<CAPTION>
# OF SHARES VOTED % OF SHARES VOTED
<S> <C> <C>
Affirmative 75,020.817 86.34%
Against 1,243.421 1.43%
Abstain 10,627.037 12.23%
TOTAL 86,891.275 100.00%
</TABLE>
<PAGE> 32
NOTES 32
<PAGE> 33
LOGO TOUCHSTONE
THE TOUCHSTONE FAMILY OF FUNDS
SELECT ADVISORS PORTFOLIOS
EMERGING GROWTH LOGO
INTERNATIONAL EQUITY LOGO
INCOME OPPORTUNITY LOGO
VALUE PLUS LOGO
GROWTH & INCOME LOGO
BALANCED LOGO
BOND LOGO
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE> 34
NOTES
2
<PAGE> 35
3
SCHEDULE OF INVESTMENTS
December 31, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 92.1%
AUTOMOTIVE -- 2.1%
3,200 Bandag, Class A $ 111,600
8,000 Exide 130,000
- ----------------------------------------------------------------------------------
241,600
- ----------------------------------------------------------------------------------
BANKING -- 2.0%
1,900 Bank United, Class A 74,575
2,900 Dime Bancorp 76,669
4,800 Golden State Bancorp* 79,800
- ----------------------------------------------------------------------------------
231,044
- ----------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 1.8%
11,100 DiMon 82,556
6,500 Ralcorp Holdings* 118,625
- ----------------------------------------------------------------------------------
201,181
- ----------------------------------------------------------------------------------
BUILDING MATERIALS -- 4.6%
6,100 Calmat 188,338
15,600 Dal-Tile International* 161,850
2,800 Martin Marietta Materials 174,125
- ----------------------------------------------------------------------------------
524,313
- ----------------------------------------------------------------------------------
CHEMICALS -- 0.8%
11,300 Calgon Carbon 84,750
- ----------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 13.2%
6,000 Administaff* 150,000
7,000 Advance Paradigm* 244,993
3,600 A.C. Nielson* 101,700
6,000 Career Education* 180,000
4,200 CDI* 84,788
5,000 DeVry* 153,125
10,000 FirstService* 119,375
3,800 ITT Educational Services* 129,200
5,000 Stewart Enterprises 111,250
5,400 Unova* 97,875
5,400 Wallace Computer Services 142,425
- ----------------------------------------------------------------------------------
1,514,731
- ----------------------------------------------------------------------------------
COMMUNICATIONS -- 4.8%
6,800 DSP Communications* 104,125
4,300 Geotel Communications* 160,175
7,100 Powerwave Technologies* 132,238
2,200 Tellabs* 150,838
- ----------------------------------------------------------------------------------
547,376
- ----------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 6.3%
11,500 Carreker-Antinori* 76,906
8,500 CBT Group, ADR* 126,438
1,700 Earthlink Network* 96,900
2,900 Equant* 196,656
1,600 Policy Management Systems* 80,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 36
4
Schedule of Investments continued
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMPUTER SOFTWARE & PROCESSING Continued
600 PRI Automation* $ 15,600
2,500 Transaction Systems Architects, Class A* 125,000
- ----------------------------------------------------------------------------------
718,300
- ----------------------------------------------------------------------------------
COMPUTERS & INFORMATION -- 5.6%
2,600 EMC* 221,000
3,700 Gerber Scientific 88,106
13,700 Intergraph* 78,775
2,000 Saville Systems, ADR* 38,000
10,800 Scitex* 126,900
2,016 Sterling Commerce* 90,720
- ----------------------------------------------------------------------------------
643,501
- ----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.9%
9,100 Magnetek* 105,219
- ----------------------------------------------------------------------------------
ELECTRONICS -- 6.2%
10,000 Aeroflex* 151,250
7,100 Commscope* 119,369
5,900 Galileo Technology* 159,300
4,000 Maxwell Technologies* 161,000
4,800 Power Integrations* 120,300
- ----------------------------------------------------------------------------------
711,219
- ----------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE -- 3.0%
7,000 Cinar Films, Class B* 177,625
2,900 SFX Entertainment, Class A* 159,138
- ----------------------------------------------------------------------------------
336,763
- ----------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.9%
8,300 Life USA Holdings 106,863
- ----------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.9%
14,100 Unisource Worldwide 102,225
- ----------------------------------------------------------------------------------
HEALTH CARE PROVIDERS -- 2.3%
5,500 IDEXX Laboratories* 147,985
4,200 Syncor International* 114,450
- ----------------------------------------------------------------------------------
262,435
- ----------------------------------------------------------------------------------
HEAVY CONSTRUCTION -- 0.8%
6,800 Foster Wheeler 89,675
- ----------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.2%
1,600 Flowserve 26,500
- ----------------------------------------------------------------------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 1.1%
2,000 Herman Miller 53,750
4,200 LA-Z-Boy Chair 74,813
- ----------------------------------------------------------------------------------
128,563
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 37
5
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
INSURANCE -- 2.7%
5,100 HCC Insurance Holdings $ 89,888
2,800 HSB Group 114,975
10,400 Provident American* 104,000
- ----------------------------------------------------------------------------------
308,863
- ----------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 7.6%
6,000 American Tower Systems, Class A* 177,375
7,500 Capstar Broadcasting, Class A* 171,563
1,900 Central Newspapers, Class A 135,731
8,300 Hollinger International 115,681
10,000 Information Holdings* 157,500
3,600 Lee Enterprises 113,400
- ----------------------------------------------------------------------------------
871,250
- ----------------------------------------------------------------------------------
MEDICAL SUPPLIES -- 4.2%
5,900 Arthocare* 128,325
2,900 EG&G 80,656
4,600 Haemonetics* 104,650
5,000 OEC Medical Systems* 157,188
600 Roper Industries 12,225
- ----------------------------------------------------------------------------------
483,044
- ----------------------------------------------------------------------------------
METALS -- 0.6%
2,300 Harsco 70,006
- ----------------------------------------------------------------------------------
OIL & GAS -- 1.9%
3,700 Equitable Resources 107,763
7,600 Nabors Industries* 103,075
- ----------------------------------------------------------------------------------
210,838
- ----------------------------------------------------------------------------------
PHARMACEUTICALS -- 3.7%
4,300 Anesta* 114,488
5,300 Jean Coutu Group, Class A 113,783
7,400 King Pharmaceuticals* 195,175
- ----------------------------------------------------------------------------------
423,446
- ----------------------------------------------------------------------------------
RESTAURANTS -- 1.6%
6,100 The Cheesecake Factory* 180,903
- ----------------------------------------------------------------------------------
RETAILERS -- 3.6%
17,500 Charming Shoppes* 75,469
3,500 Duane Reade* 134,750
3,600 Enesco Group 83,700
4,600 Guitar Center* 113,275
- ----------------------------------------------------------------------------------
407,194
- ----------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 3.5%
3,800 Exodus Communications* 244,150
3,000 Qwest Communications International* 150,000
- ----------------------------------------------------------------------------------
394,150
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 38
6
Schedule of Investments continued
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
TEXTILES, CLOTHING & FABRICS -- 1.5%
4,533 Albany International $ 85,841
10,200 Stride Rite 89,250
- ----------------------------------------------------------------------------------
175,091
- ----------------------------------------------------------------------------------
TRANSPORTATION -- 3.7%
11,500 Fritz Companies* 124,344
12,800 Halter Marine Group* 62,400
3,000 Newport News Shipbuilding 100,313
7,100 Yellow* 135,788
- ----------------------------------------------------------------------------------
422,845
- ----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $9,511,192) 10,523,888
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
UNITS
<C> <S> <C>
WARRANTS -- 0.1%
BANKING -- 0.1%
2,200 Golden State Bancorp* 10,038
- -----------------------------------------------------------------------------------
TOTAL WARRANTS (COST $9,438) 10,038
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 92.2% (COST $9,520,630)(a) 10,533,926
CASH AND OTHER ASSETS NET OF LIABILITIES -- 7.8% 891,807
- -----------------------------------------------------------------------------------
NET ASSETS -- 100.0% $11,425,733
- -----------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$9,571,229, resulting in gross unrealized appreciation and depreciation of
$1,968,786 and $1,006,089, respectively, and net unrealized appreciation
of $962,697.
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
<PAGE> 39
7
SCHEDULE OF INVESTMENTS
December 31, 1998
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 93.8%
FINLAND -- 2.0%
1,948 Nokia OYJ, Series A $ 236,864
- -----------------------------------------------------------------------------------
FRANCE -- 16.7%
1,490 AXA 215,604
1,468 Banque National De Paris 120,687
472 Canal Plus 128,587
540 Cap Gemini 86,531
2,004 Casino Guichard-Perrachon 208,357
588 Vivendi 152,311
637 Dexia France 97,978
791 Groupe Danone 226,091
1,744 Rhone Poulenc 89,603
1,412 Sanofi 232,065
1,549 Suez Lyonnaise Des Eaux-Dumex 317,668
1,184 Total S.A., Series B 119,717
- -----------------------------------------------------------------------------------
1,995,199
- -----------------------------------------------------------------------------------
GERMANY -- 7.7%
330 Allianz Holdings 121,008
1,209 Bayerische Vereinsbank 94,688
1,764 Mannesmann 202,205
2,162 Metro 172,571
4,155 RWE 227,543
1,465 Siemens 94,516
- -----------------------------------------------------------------------------------
912,531
- -----------------------------------------------------------------------------------
GREAT BRITAIN -- 18.0%
4,278 Allied Zurich* 63,671
7,270 Bank of Scotland 86,537
16,377 BG 103,112
9,101 British Petroleum 135,604
19,500 Compass Group 222,888
7,319 Dixons Group, ADR 102,734
21,551 Gallaher Group 145,795
3,573 Glaxo Wellcome 122,668
10,177 Lloyds TSB Group 144,455
21,245 National Grid Group 169,207
7,988 Orange* 92,630
7,862 Prudential 118,448
6,477 Railtrack Group 168,926
10,758 SmithKline Beecham 150,023
5,993 Unilever 67,058
15,120 Vodafone Group 244,990
- -----------------------------------------------------------------------------------
2,138,746
- -----------------------------------------------------------------------------------
IRELAND -- 1.9%
12,766 Allied Irish Banks 226,770
1 Bank of Ireland 13
- -----------------------------------------------------------------------------------
226,783
- -----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 40
8
Schedule of Investments continued
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
ITALY -- 10.9%
5,175 Assicurazione Generali $ 215,630
42,051 Credito Italiano 247,861
7,430 Istituto Bancario San Paolo di Torino* 131,092
64,583 Olivetti* 224,830
275,599 Seat Pagine Gialle* 258,456
10,930 Telecom Italia Mobile 80,542
21,435 Telecom Italia 134,136
- -----------------------------------------------------------------------------------
1,292,547
- -----------------------------------------------------------------------------------
JAPAN -- 15.2%
800 Acom 51,294
1,000 Asahi Breweries 14,705
600 Bank of Tokyo 6,200
2,000 Bridgestone 45,306
2,000 Canon 42,657
7,000 Casio Computer 51,559
8,000 Citizen Watch 48,044
4,000 Daiichi Pharmaceutical 67,438
2,100 Familymart 104,601
2,000 Fuji 74,185
1,400 ITO Yokado 97,677
2,000 Kirin Brewery 25,435
33 Merrill Lynch (Honda Motor), CPS 33,541
3,000 Minebea 34,284
9,000 Mitsubishi Heavy Industries 34,973
5,000 Mitsubishi 28,703
12,000 Mitsui Chemicals 41,650
30 Morgan Stanley Deanwitter (Canon Inc), CPS* 24,638
25 Morgan Stanley Deanwitter (Sony Corp), CPS 31,156
600 Nintendo 57,759
10,000 Nippon Express 56,169
11,000 Nippon Paper Industries 49,934
14 Nippon Telegraph & Telephone 53,908
960 Promise 49,853
1,300 Rohm Company 118,140
3,000 Sankyo 65,442
9,000 Sekisui House 94,984
300 Sony 21,805
1,500 TDK 136,845
2,000 Terumo 46,984
2,700 Tokyo Electric Power 66,528
6,000 Toppan Printing 73,125
2,000 Toyota Motor 54,226
- -----------------------------------------------------------------------------------
1,803,748
- -----------------------------------------------------------------------------------
NETHERLANDS -- 5.9%
3,240 Heineken 194,848
1,575 Koninklijke 78,792
2,189 Nutreco Holding 86,209
354 STMicroelectronics* 27,825
300 STMicroelectronics, ADR* 23,419
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 41
9
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
NETHERLANDS Continued
1,721 Verenigde Nederlandse $ 64,847
1,072 Wolters Kluwer 229,233
- -----------------------------------------------------------------------------------
705,173
- -----------------------------------------------------------------------------------
PORTUGAL -- 0.5%
1,080 Brisa-Auto Estradas de Portugal 63,602
- -----------------------------------------------------------------------------------
SPAIN -- 3.9%
9,825 Argentaria 254,543
6,555 Iberdrola 122,690
1,892 Telefonica De Espana 84,163
- -----------------------------------------------------------------------------------
461,396
- -----------------------------------------------------------------------------------
SWEDEN -- 0.9%
4,380 Ericsson 104,045
- -----------------------------------------------------------------------------------
SWITZERLAND -- 10.2%
67 Nestle 145,642
145 Novartis 286,565
14 Roche Holding 170,585
30 Swiss Reinsurance 78,103
456 Swisscom* 190,622
450 Union Bank of Switzerland 138,059
271 Zuerich Allied 200,369
- -----------------------------------------------------------------------------------
1,209,945
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $9,224,611) 11,150,579
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 93.8% (COST $9,224,611)(a) 11,150,579
CASH AND OTHER ASSETS NET OF LIABILITIES -- 6.2% 739,681
- -----------------------------------------------------------------------------------
NET ASSETS -- 100.0% $11,890,260
- -----------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$9,343,873, resulting in gross unrealized appreciation and depreciation of
$1,969,001 and $162,295, respectively, and net unrealized appreciation of
$1,806,706.
ADR--American Depositary Receipt
CPS--Currency Protected Security
The accompanying notes are an integral part of the financial statements.
<PAGE> 42
SCHEDULE OF INVESTMENTS 10
December 31, 1998
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 78.4%
AEROSPACE & DEFENSE -- 2.4%
$250,000 Transdigm, 144A 10.375% 12/01/08 $ 251,250
- -------------------------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 2.2%
300,000 Compania Alimentos Fargo, 144A 13.25% 08/01/08 228,000
- -------------------------------------------------------------------------------------------------
CHEMICALS -- 4.9%
200,000 Climachem 10.75% 12/01/07 201,000
300,000 Trans-Resources 10.75% 03/15/08 296,998
- -------------------------------------------------------------------------------------------------
497,998
- -------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 2.5%
250,000 Nationsrent, 144A 10.375% 12/15/08 247,500
- -------------------------------------------------------------------------------------------------
COMMUNICATIONS -- 6.7%
250,000 Dobson Wireline 12.25% 06/15/08 231,250
250,000 Northeast Optic Network 12.75% 08/15/08 245,000
400,000 Paging Network Do Brasil, Euro-Dollar 13.50% 06/06/05 208,000
- -------------------------------------------------------------------------------------------------
684,250
- -------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 2.4%
250,000 Primark, 144A 9.25% 12/15/08 251,250
- -------------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE -- 4.6%
250,000 Bell Sports, 144A 11.00% 08/15/08 253,750
250,000 TVN Entertainment, 144A 14.00% 08/01/08 220,000
- -------------------------------------------------------------------------------------------------
473,750
- -------------------------------------------------------------------------------------------------
ENVIRONMENTAL -- 1.0%
200,000 ATC Group Services 12.00% 01/15/08 102,000
- -------------------------------------------------------------------------------------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 5.1%
300,000 Imperial Home Decor Group, Series B 11.00% 03/15/08 267,000
250,000 Salton/Maxim Housewares, 144A 10.75% 12/15/05 251,563
- -------------------------------------------------------------------------------------------------
518,563
- -------------------------------------------------------------------------------------------------
INDUSTRIAL -- DIVERSIFIED -- 15.7%
250,000 Aqua Chem, 144A 11.25% 07/01/08 240,000
250,000 Evenflo, 144A 11.75% 08/15/06 257,500
500,000 FSW International, Yankee-Dollar+ 12.50% 11/01/06 125,000
250,000 Generac Portable Products, 144A 11.25% 07/01/06 252,500
250,000 Neenah, 144A 11.125% 05/01/07 256,875
250,000 Pen-Tab Industries 10.875% 02/01/07 221,250
250,000 Simonds, 144A 10.25% 07/01/08 255,000
- -------------------------------------------------------------------------------------------------
1,608,125
- -------------------------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 4.0%
250,000 Perry-Judd 10.625% 12/15/07 262,500
200,000 Source Media 12.00% 11/01/04 150,000
- -------------------------------------------------------------------------------------------------
412,500
- -------------------------------------------------------------------------------------------------
METALS -- 7.2%
300,000 Doe Run Resources, Series B 11.25% 03/15/05 231,000
250,000 Golden Northwest Aluminum, 144A 12.00% 12/15/06 251,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 43
11
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
METALS Continued
$500,000 Nippon Denro Ispat 3.00% 04/01/01 $ 175,000
500,000 NTS Steel Group Public, Euro-Dollar+ 4.00% 12/16/08 80,000
- -------------------------------------------------------------------------------------------------
737,250
- -------------------------------------------------------------------------------------------------
OIL & GAS -- 3.4%
250,000 Panaco 10.625% 10/01/04 175,000
200,000 Parker Drilling, Series D 9.75% 11/15/06 178,000
- -------------------------------------------------------------------------------------------------
353,000
- -------------------------------------------------------------------------------------------------
REAL ESTATE -- 2.4%
500,000 GS Superhighway Holdings, Yankee-Dollar 10.25% 08/15/07 250,000
- -------------------------------------------------------------------------------------------------
RETAILERS -- 1.9%
200,000 Home Interiors & Gifts, 144A 10.125% 06/01/08 198,000
- -------------------------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 6.9%
300,000 AMSC Acquisition(d) 12.25% 04/01/08 186,000
350,000 Conecel, Euro-Dollar 14.00% 05/01/02 182,000
250,000 Conecel Holdings, Euro-Dollar, 144A(d) 14.00% 10/01/00 91,250
300,000 Tricom 11.375% 09/01/04 246,000
- -------------------------------------------------------------------------------------------------
705,250
- -------------------------------------------------------------------------------------------------
TRANSPORTATION -- 5.1%
250,000 American Commercial Lines, 144A 10.25% 06/30/08 253,750
300,000 Stena Line 10.625% 06/01/08 270,000
- -------------------------------------------------------------------------------------------------
523,750
- -------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $10,157,637) 8,042,436
- -------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT OBLIGATIONS -- 16.5%
ARGENTINA -- 2.3%
282,000 Republic of Argentina(b) 6.187% 03/31/05 239,700
- -------------------------------------------------------------------------------------------------
BRAZIL -- 2.8%
294,405 Republic of Brazil, Brady Bond (Payment-in-kind) 8.00% 04/15/14 175,171
200,000 Republic of Brazil, Brady Bond(b) 6.125% 04/15/24 117,000
- -------------------------------------------------------------------------------------------------
292,171
- -------------------------------------------------------------------------------------------------
BULGARIA -- 2.3%
350,000 Government of Bulgaria, Brady Bond, IAB(b) 6.688% 07/28/11 234,500
- -------------------------------------------------------------------------------------------------
COLOMBIA -- 2.5%
300,000 Republic of Colombia 8.625% 04/01/08 255,000
- -------------------------------------------------------------------------------------------------
MEXICO -- 4.3%
300,000 Mexican Discount Bond, Series B, Brady Bond(b) 6.039% 12/31/19 243,750
250,000 Mexico Par Series B Cumulative, Brady Bond 6.250% 12/31/19 194,688
- -------------------------------------------------------------------------------------------------
438,438
- -------------------------------------------------------------------------------------------------
PANAMA -- 1.8%
250,000 Panama, Brady Bond, IRB(b)(c) 4.00% 07/17/14 186,250
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 44
12
Schedule of Investments continued
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
RUSSIA -- 0.5%
$200,000 Russian Federation 8.750% 07/24/05 $ 46,250
7,894 Russian Vnesheconombank, Brady Bond, IAN(b) 5.969% 12/15/15 854
- -------------------------------------------------------------------------------------------------
47,104
- -------------------------------------------------------------------------------------------------
TOTAL SOVEREIGN GOVERNMENT OBLIGATIONS (COST $1,796,252) 1,693,163
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
<C> <S> <C> <C> <C>
WARRANTS -- 0.0%
MEXICO -- 0.0%
461,100 United Mexican States* $ --
- ------------------------------------------------------------------------------------------------
NIGERIA -- 0.0%
250 Central Bank of Nigeria* --
- ------------------------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 0.0%
200 Primus Telecommunications* 2,500
- ------------------------------------------------------------------------------------------------
2,500
- ------------------------------------------------------------------------------------------------
TOTAL WARRANTS (COST $0) 2,500
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 94.9% (COST $11,953,889)(a) 9,738,099
CASH AND OTHER ASSETS NET OF LIABILITIES -- 5.1% 519,268
- ------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $10,257,367
- ------------------------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
+ Security currently in default of interest payment. The Portfolio is not
accruing stated interest.
(a) The aggregate identified cost for federal income tax purposes is
$11,954,631, resulting in gross unrealized appreciation and depreciation of
$78,243 and $294,033, respectively, and net unrealized depreciation of
$2,215,790.
(b) Interest rate shown reflects current rate on instrument with variable or
floating rates.
(c) Zero or step coupon bond.
(d) Security issued with detachable warrants. The current value of each warrant
is zero.
144A-- Securities restricted for resale to Qualified Institutional Buyers with
registration rights.
Brady Bond-- U.S. dollar denominated bonds of developing countries that were
exchanged, in a restructuring, for commercial bank loans in default.
The bonds are collateralized by U.S. Treasury zero-coupon bonds to
ensure principal.
Euro-Dollar-- Bonds issued offshore that pay interest and principal in U.S.
dollars.
IAB --Interest Arrears Bond
IAN--Interest Arrears Note
IRB --Interest Reduction Bond
Yankee-Dollar-- U.S. dollar denominated bonds issued by non-U.S. companies in
the U.S.
The accompanying notes are an integral part of the financial statements.
<PAGE> 45
13
SCHEDULE OF INVESTMENTS
December 31, 1998
VALUE PLUS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 96.6%
AEROSPACE & DEFENSE -- 0.5%
3,300 Allied Signal $ 146,231
- ----------------------------------------------------------------------------------
AUTOMOTIVE -- 0.8%
3,500 Magna International, Class A 217,000
- ----------------------------------------------------------------------------------
BANKING -- 7.3%
10,206 Bank One 521,144
10,500 First American 465,938
6,200 Mellon Bank 426,250
16,500 North Fork Bancorporation 394,969
6,600 St. Paul Bancorp 179,644
- ----------------------------------------------------------------------------------
1,987,945
- ----------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 8.3%
5,200 General Mills 404,300
4,500 McDonald's 344,813
17,000 Pepsico 695,938
12,300 Ralston-Ralston Purina Group 398,213
16,000 Sysco 439,000
- ----------------------------------------------------------------------------------
2,282,264
- ----------------------------------------------------------------------------------
CHEMICALS -- 1.1%
5,700 Du Pont (E.I.) De Nemours 302,456
- ----------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 4.3%
8,200 Ceridian* 572,463
14,300 Computer Associates International 609,538
- ----------------------------------------------------------------------------------
1,182,001
- ----------------------------------------------------------------------------------
COMPUTERS & INFORMATION -- 4.8%
15,500 Compaq Computer 650,031
7,700 Sun Microsystems* 659,313
- ----------------------------------------------------------------------------------
1,309,344
- ----------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.1%
6,100 CMS Energy 295,469
- ----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.0%
6,600 Thomas & Betts 285,863
- ----------------------------------------------------------------------------------
ELECTRONICS -- 4.4%
7,500 Intel 889,210
4,700 Xilinx* 306,088
- ----------------------------------------------------------------------------------
1,195,298
- ----------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.1%
9,700 Citigroup 480,150
7,100 Federal National Mortgage Association 525,400
8,100 SLM Holding 388,800
- ----------------------------------------------------------------------------------
1,394,350
- ----------------------------------------------------------------------------------
FOOD RETAILERS -- 1.1%
8,300 American Stores 306,581
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 46
14
Schedule of Investments continued
VALUE PLUS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
FOREST PRODUCTS & PAPER -- 4.3%
9,400 Kimberly-Clark $ 512,300
11,000 Mead 322,438
10,100 Tenneco 344,031
- ----------------------------------------------------------------------------------
1,178,769
- ----------------------------------------------------------------------------------
HEALTH CARE PROVIDERS -- 3.4%
17,900 HCR Manor Care* 525,813
26,600 Healthsouth* 410,638
- ----------------------------------------------------------------------------------
936,451
- ----------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.5%
3,300 Applied Materials* 140,869
- ----------------------------------------------------------------------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 5.8%
7,500 General Electric 765,469
4,400 Johnson Controls 259,600
13,500 Newell 556,875
- ----------------------------------------------------------------------------------
1,581,944
- ----------------------------------------------------------------------------------
INSURANCE -- 5.7%
5,000 Aetna 393,125
9,200 Equitable Companies 532,450
5,000 Ohio Casualty 205,625
9,100 Reliastar Financial 419,738
- ----------------------------------------------------------------------------------
1,550,938
- ----------------------------------------------------------------------------------
MEDIA - BROADCASTING & PUBLISHING -- 0.5%
7,500 A.H. Belo, Class A 149,531
- ----------------------------------------------------------------------------------
MEDICAL SUPPLIES -- 1.8%
11,300 Becton Dickinson & Company 482,369
- ----------------------------------------------------------------------------------
OFFICE EQUIPMENT -- 2.6%
6,100 Xerox 719,800
- ----------------------------------------------------------------------------------
OIL & GAS -- 8.7%
6,400 Chevron 530,800
11,800 Conoco, Class A* 246,325
8,300 Mobil 723,138
5,500 Schlumberger 253,688
19,800 Williams Companies 617,513
- ----------------------------------------------------------------------------------
2,371,464
- ----------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.5%
10,000 Abbott Laboratories 490,000
6,400 Amgen* 669,200
4,100 Merck 605,519
- ----------------------------------------------------------------------------------
1,764,719
- ----------------------------------------------------------------------------------
RETAILERS -- 3.5%
10,800 Consolidated Stores* 218,025
5,500 Federated Department Stores* 239,594
6,000 Wal-Mart Stores 488,625
- ----------------------------------------------------------------------------------
946,244
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 47
15
VALUE PLUS PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
TELEPHONE SYSTEMS -- 11.0%
9,600 Alltel $ 574,200
8,000 Bell Atlantic 454,500
17,400 Frontier 591,600
9,500 MCI Worldcom* 681,625
13,000 SBC Communications 697,125
- ----------------------------------------------------------------------------------
2,999,050
- ----------------------------------------------------------------------------------
TRANSPORTATION -- 2.5%
5,500 Trinity Industries 211,750
8,500 US Freightways 247,563
13,700 Wisconsin Central Transport* 235,469
- ----------------------------------------------------------------------------------
694,782
- ----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $24,702,293) 26,421,732
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 96.6% (COST $24,702,293)(a) 26,421,732
CASH AND OTHER ASSETS NET OF LIABILITIES -- 3.4% 932,232
- ----------------------------------------------------------------------------------
NET ASSETS -- 100.0% $27,353,964
- ----------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$24,702,293, resulting in gross unrealized appreciation and depreciation
of $3,461,353 and $1,741,914, respectively, and net unrealized
appreciation of $1,719,439.
The accompanying notes are an integral part of the financial statements.
<PAGE> 48
SCHEDULE OF INVESTMENTS 16
December 31,1998
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 94.7%
AEROSPACE & DEFENSE -- 3.2%
6,500 Lockheed Martin $ 550,875
4,500 Northrop Grumman 329,063
7,800 Rockwell International 378,788
- ----------------------------------------------------------------------------------
1,258,726
- ----------------------------------------------------------------------------------
AUTOMOTIVE -- 3.4%
11,700 Ford Motor 686,644
4,700 Goodyear Tire & Rubber 237,056
8,500 Meritor Automotive 180,094
5,000 Paccar 205,625
- ----------------------------------------------------------------------------------
1,309,419
- ----------------------------------------------------------------------------------
BANKING -- 10.4%
7,909 Bank One 403,853
12,900 BankAmerica 775,613
2,900 Bankers Trust 247,769
7,800 Chase Manhattan 530,888
13,162 First Union 800,414
12,400 Fleet Financial Group 554,125
11,600 Key 371,200
8,900 US Bancorp 315,950
- ----------------------------------------------------------------------------------
3,999,812
- ----------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 4.9%
14,900 Heinz (H. J.) 843,713
12,600 Philip Morris 674,100
4,600 Unilever, ADR 381,513
- ----------------------------------------------------------------------------------
1,899,326
- ----------------------------------------------------------------------------------
CHEMICALS -- 7.2%
9,200 Akzo, ADR 410,550
4,000 Dow Chemical 363,750
5,600 Du Pont (E.I.) De Nemours 297,150
7,200 Eastman Chemical 322,200
17,500 Imperial Chemical Industries, ADR 611,406
28,400 Lyondell Petro Chemical 511,200
5,200 Olin 147,225
8,100 Witco 129,094
- ----------------------------------------------------------------------------------
2,792,575
- ----------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 2.2%
18,000 Pacificorp 379,125
12,400 Unicom 478,175
- ----------------------------------------------------------------------------------
857,300
- ----------------------------------------------------------------------------------
COSMETICS & PERSONAL CARE -- 1.6%
14,000 Avon Products 619,500
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 49
17
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
ELECTRIC UTILITIES -- 4.1%
11,100 Allegheny Energy $ 382,950
14,700 Cinergy 505,313
5,500 Duke Energy 352,344
12,700 Southern Company 369,094
- ----------------------------------------------------------------------------------
1,609,701
- ----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.4%
4,500 Emerson Electric 272,250
6,400 Thomas & Betts 277,200
- ----------------------------------------------------------------------------------
549,450
- ----------------------------------------------------------------------------------
FINANCIAL SERVICES -- 1.7%
8,900 Federal National Mortgage Association 658,600
- ----------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 5.9%
7,200 Boise Cascade 223,200
10,100 Georgia-Pacific 591,481
7,700 Georgia-Pacific (Timber Group) 183,356
7,500 Temple-Inland 444,844
7,200 Westvaco 193,050
13,200 Weyerhauser 670,725
- ----------------------------------------------------------------------------------
2,306,656
- ----------------------------------------------------------------------------------
HEAVY MACHINERY -- 1.2%
3,400 Caterpillar 156,400
9,100 Parker Hannifin 298,025
- ----------------------------------------------------------------------------------
454,425
- ----------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.4%
29,600 Corning 1,332,000
- ----------------------------------------------------------------------------------
INSURANCE -- 2.5%
9,970 EXEL Limited, Class A 747,750
2,900 Lincoln National 237,256
- ----------------------------------------------------------------------------------
985,006
- ----------------------------------------------------------------------------------
METALS -- 2.4%
20,700 Allegheny Teledyne 423,056
21,100 Oregon Steel Mills 250,563
3,300 Phelps Dodge 167,888
2,000 Reynolds Metals 105,375
- ----------------------------------------------------------------------------------
946,882
- ----------------------------------------------------------------------------------
OFFICE EQUIPMENT -- 4.4%
14,400 Xerox 1,699,194
- ----------------------------------------------------------------------------------
OIL & GAS -- 8.8%
4,259 British Petroleum, ADR 404,605
14,600 Conoco, Class A* 304,775
6,600 Elf Aquitaine, ADR 373,725
4,500 Mobil 392,063
10,800 Texaco 571,050
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 50
Schedule of Investments continued 18
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
OIL & GAS Continued
7,100 Total S.A., ADR $ 353,225
20,300 Williams Companies 633,106
12,400 YPF Sociedad Anonima, ADR 346,425
- ----------------------------------------------------------------------------------
3,378,974
- ----------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.3%
17,500 American Home Products 985,469
5,900 Bristol-Myers Squibb 789,494
6,900 Smithkline Beecham, ADR 479,550
4,200 Zeneca Group, ADR 188,475
- ----------------------------------------------------------------------------------
2,442,988
- ----------------------------------------------------------------------------------
RETAILERS -- 1.8%
5,900 May Department Stores 356,213
8,200 Sears, Roebuck & Company 348,500
- ----------------------------------------------------------------------------------
704,713
- ----------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 12.5%
10,600 Alltel 634,013
18,200 Bell Atlantic 964,600
15,400 Bellsouth 768,075
15,700 Frontier 533,800
12,700 GTE 825,500
9,600 Sprint 807,600
13,400 Telesp Participacoes, ADR* 296,475
- ----------------------------------------------------------------------------------
4,830,063
- ----------------------------------------------------------------------------------
TRANSPORTATION -- 5.4%
15,300 Canadian Pacific 288,788
16,500 CSX 684,750
13,200 General Dynamics 773,850
11,600 Norfolk Southern 367,575
- ----------------------------------------------------------------------------------
2,114,963
- ----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $35,323,363) 36,750,273
- ----------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.6%
COMMERCIAL SERVICES -- 0.6%
5,000 Monsanto, ACES* 245,000
- ----------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $204,370) 245,000
- ----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 4.0%
REAL ESTATE -- 4.0%
5,600 Arden Realty Group 129,850
7,500 Boston Properties 228,750
11,000 Equity Office Properties 264,000
3,900 Equity Residential Properties Trust 157,706
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 51
19
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
REAL ESTATE Continued
7,000 Health Care Property Investors $ 215,250
10,400 Nationwide Health Properties 224,250
17,000 Prologis Trust 352,750
- ----------------------------------------------------------------------------------
1,572,556
- ----------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (COST $1,790,296) 1,572,556
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 99.3% (COST $37,318,029)(a) 38,567,829
CASH AND OTHER ASSETS NET OF LIABILITIES -- 0.7% 259,169
- ----------------------------------------------------------------------------------
NET ASSETS -- 100.0% $38,826,998
- ----------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$37,324,881, resulting in gross unrealized appreciation and depreciation
of $4,437,494 and $3,194,546, respectively, and net unrealized
appreciation of $1,242,948.
ACES--Adjustable Conversion-Rate Equity Security
ADR-- American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
<PAGE> 52
SCHEDULE OF INVESTMENTS 20
December 31, 1998
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 58.6%
ADVERTISING -- 2.5%
3,100 WPP Group $ 191,425
- -----------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.6%
1,400 Lockheed Martin 118,650
2,000 Rockwell International 80,375
- -----------------------------------------------------------------------------------
199,025
- -----------------------------------------------------------------------------------
AIRLINES -- 2.3%
3,000 AMR* 178,125
- -----------------------------------------------------------------------------------
AUTOMOTIVE -- 2.5%
5,800 Lucasvarity, ADR 194,300
- -----------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 0.9%
1,555 Diageo, ADR 71,919
- -----------------------------------------------------------------------------------
CHEMICALS -- 2.8%
4,600 Monsanto 218,500
- -----------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 2.3%
4,200 Computer Associates International 179,025
- -----------------------------------------------------------------------------------
COMPUTERS & INFORMATION -- 1.2%
2,300 Compaq Computer 96,456
- -----------------------------------------------------------------------------------
ELECTRONICS -- 4.2%
6,800 Adaptec* 119,425
1,300 Avnet 78,650
1,200 Motorola 73,275
600 Solectron* 55,763
- -----------------------------------------------------------------------------------
327,113
- -----------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE -- 1.2%
5,000 Polaroid 93,438
- -----------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.8%
3,050 Citigroup 150,975
3,900 Countrywide Credit 195,731
1,700 Federal Home Loan Mortgage Corporation 109,544
- -----------------------------------------------------------------------------------
456,250
- -----------------------------------------------------------------------------------
HEALTH CARE PROVIDERS -- 1.0%
3,000 Tenet Healthcare* 78,750
- -----------------------------------------------------------------------------------
INDUSTRIAL -- DIVERSIFIED -- 1.4%
1,800 Armstrong World Industries 108,563
- -----------------------------------------------------------------------------------
INSURANCE -- 3.6%
6,557 Conseco 200,398
2,200 Renaissancere Holdings 80,575
- -----------------------------------------------------------------------------------
280,973
- -----------------------------------------------------------------------------------
LODGING -- 1.3%
23,100 Homestead Village Property* 103,950
- -----------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 0.8%
2,100 Reed International, ADR 66,150
- -----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 53
21
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
METALS -- 1.4%
5,500 Allegheny Teledyne $ 112,406
- -----------------------------------------------------------------------------------
OIL & GAS -- 2.1%
5,400 Anadarko Petroleum 166,725
- -----------------------------------------------------------------------------------
PHARMACEUTICALS -- 2.9%
5,600 Teva Pharmaceutical Industries, ADR 227,850
- -----------------------------------------------------------------------------------
REAL ESTATE -- 5.6%
7,300 Oakwood Homes 110,869
4,200 Prologis Trust, REIT 87,150
17,400 Security Capital Group, Class B* 235,988
- -----------------------------------------------------------------------------------
434,007
- -----------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 2.9%
2,400 Sprint 201,900
1,200 Sprint PCS* 27,750
- -----------------------------------------------------------------------------------
229,650
- -----------------------------------------------------------------------------------
TEXTILES, CLOTHING & FABRICS -- 2.5%
8,100 Shaw Industries 196,425
- -----------------------------------------------------------------------------------
TRANSPORTATION -- 4.8%
7,300 Air Express International 158,775
4,900 Sabre Group Holdings* 218,050
- -----------------------------------------------------------------------------------
376,825
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $4,486,094) 4,587,850
- -----------------------------------------------------------------------------------
PREFERRED STOCKS -- 1.8%
ENTERTAINMENT & LEISURE -- 1.8%
5,600 News Corporation Limited (The), ADR 138,250
- -----------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $142,620) 138,250
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES -- 0.2%
$ 12,718 Merrill Lynch Mortgage Investment 7.65% 01/15/12 $ 12,692
- -------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $13,011) 12,692
- -------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 17.5%
BANKING -- 4.7%
150,000 Associates Corporation of North America 5.75% 11/01/03 151,071
100,000 BB&T 7.25% 06/15/07 108,481
100,000 Chase Manhattan 7.25% 06/01/07 109,329
331 Nykredit 6.00% 10/01/26 52
- -------------------------------------------------------------------------------------------------
368,933
- -------------------------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 0.7%
60,000 Coca-Cola Femsa 8.95% 11/01/06 58,611
- -------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & PROCESSING -- 1.3%
100,000 Computer Associates International 6.375% 04/15/05 99,585
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 54
Schedule of Investments continued 22
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
ELECTRIC UTILITIES -- 3.5%
$ 95,000 Financiera Energy 9.375% 06/15/06 $ 82,223
200,000 Tennessee Valley Authority 5.00% 12/18/03 198,504
- -------------------------------------------------------------------------------------------------
280,727
- -------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.1%
150,000 AT&T Capital 7.50% 11/15/00 152,500
100,000 GMAC 7.125% 05/01/01 103,325
69,000 Paine Webber Group 7.00% 03/01/00 69,607
- -------------------------------------------------------------------------------------------------
325,432
- -------------------------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 1.3%
100,000 CSC Holdings 7.625% 07/15/18 98,060
- -------------------------------------------------------------------------------------------------
METALS -- 1.3%
100,000 AK Steel 9.125% 12/15/06 104,000
- -------------------------------------------------------------------------------------------------
OIL & GAS -- 0.6%
50,000 Petroleos Mexicanos 8.85% 09/15/07 44,000
- -------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $1,390,395) 1,379,348
- -------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 7.0%
20,000 Federal Home Loan Mortgage Corporation 6.00% 03/15/08 20,173
45,000 Federal National Mortgage Association 6.15% 10/25/07 45,211
200,000 Federal National Mortgage Association 6.00% 05/15/08 211,034
94,812 Federal National Mortgage Association 6.50% 07/18/28 95,078
40,000 General Electric Capital Mortgage Service 6.50% 11/25/23 39,598
44,500 General Electric Capital Mortgage Service 6.50% 03/25/24 44,797
40,000 Merrill Lynch Mortgage Investment 7.089% 12/26/25 42,684
50,000 Prudential Home Mortgage Securities 6.25% 04/25/24 47,329
- -------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $528,921) 545,904
- -------------------------------------------------------------------------------------------------
MUNICIPAL BONDS -- 2.3%
40,000 Baltimore Community Development Financing 8.20% 08/15/07 46,379
5,657 Denver Colorado City & County Single Family 7.25% 12/01/10 5,841
40,000 New York State Housing Finance Agency Service 7.50% 09/15/03 42,139
50,000 Ohio Housing Financial Agency 7.90% 10/01/14 51,688
30,000 Oklahoma City Airport 9.40% 11/01/10 36,600
- -------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $166,610) 182,647
- -------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT OBLIGATIONS -- 3.0%
BRAZIL -- 0.5%
58,881 Republic of Brazil, Brady Bond 8.00% 04/15/14 35,108
- -------------------------------------------------------------------------------------------------
GREAT BRITAIN -- 1.1%
37,000 United Kingdom Treasury 8.00% 12/07/15 87,324
GBP
- -------------------------------------------------------------------------------------------------
SOUTH AFRICA -- 1.4%
774,000 Republic of South Africa 13.00% 08/31/10 111,490
ZAR
- -------------------------------------------------------------------------------------------------
TOTAL SOVEREIGN GOVERNMENT OBLIGATIONS (COST $269,977) 233,922
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 55
23
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 5.2%
$275,000 U.S. Treasury Bond 6.25% 04/30/01 $ 284,709
15,000 U.S. Treasury Note 7.25% 08/15/04 16,870
95,000 U.S. Treasury Note 7.00% 07/15/06 108,181
- -------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $404,906) 409,760
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 95.6%
(COST $7,402,534)(a) 7,490,373
CASH AND OTHER ASSETS NET OF LIABILITIES -- 4.4% 341,459
- -------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 7,831,832
- -------------------------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$7,402,534, resulting in gross unrealized appreciation and depreciation of
$794,185 and $706,346, respectively, and net unrealized appreciation of
$87,839.
(b) Interest rate shown reflects current rate on instrument with variable or
floating rates.
ADR--American Depositary Receipt
Brady Bond-- U.S. dollar denominated bonds of developing countries that were
exchanged, in a restructuring, for commercial bank loans in default.
The bonds are collateralized by U.S. Treasury zero-coupon bonds to
ensure principal.
REIT--Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
<PAGE> 56
SCHEDULE OF INVESTMENTS 24
December 31, 1998
BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
AGENCY FOR INTERNATIONAL DEVELOPMENT BONDS -- 3.8%
CENTRAL AMERICA -- 2.4%
$ 130,000 Central America International Development, Series
F+ 10.00% 12/01/11 $ 159,233
130,000 Central America International Development, Series
G+ 10.00% 12/01/11 159,233
130,000 Central America International Development, Series
H+ 10.00% 12/01/11 159,233
- ---------------------------------------------------------------------------------------------------
477,699
- ---------------------------------------------------------------------------------------------------
HONDURAS -- 1.4%
100,000 Republic of Honduras International Development,
Series D+ 13.00% 06/01/11 156,161
100,000 Republic of Honduras International Development,
Series C+ 13.00% 06/01/06 131,938
- ---------------------------------------------------------------------------------------------------
288,099
- ---------------------------------------------------------------------------------------------------
TOTAL AGENCY FOR INTERNATIONAL DEVELOPMENT BONDS (COST $590,000) 765,798
- ---------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 7.6%
90,565 Chase Manhattan Grantor Trust 5.20% 02/15/02 90,610
750,000 Chemical Credit Card Master Trust 5.98% 09/15/08 767,963
174,496 Navistar Financial 6.35% 11/15/02 175,681
499,723 World Omni Auto Lease 6.18% 11/25/03 502,596
- ---------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $1,465,497) 1,536,850
- ---------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 35.4%
BANKING -- 6.2%
500,000 Bank of New York 8.50% 12/15/04 573,306
225,000 Credit Suisse-London 7.90% 05/01/07 225,000
350,000 First Union 6.55% 10/15/35 365,091
71,396 Mercantile Safe Deposit+ 12.125% 01/02/01 71,775
- ---------------------------------------------------------------------------------------------------
1,235,172
- ---------------------------------------------------------------------------------------------------
COMMUNICATIONS -- 2.6%
500,000 Harris Corporation 6.65% 08/01/06 525,401
- ---------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 7.0%
500,000 Consumers Energy, Series B 6.50% 06/15/18 503,690
900,000 Southern California Edison 7.125% 07/15/25 911,519
- ---------------------------------------------------------------------------------------------------
1,415,209
- ---------------------------------------------------------------------------------------------------
ELECTRONICS -- 5.0%
1,000,000 Raytheon 5.70% 11/01/03 1,000,782
- ---------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.0%
750,000 Safeco Capital 8.072% 07/15/37 797,855
- ---------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 2.5%
250,000 Georgia-Pacific 9.50% 05/15/22 285,243
250,000 Sweetheart Cup 9.625% 09/01/00 225,000
- ---------------------------------------------------------------------------------------------------
510,243
- ---------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS -- 3.2%
650,000 Columbia/HCA Health 6.73% 07/15/45 652,805
- ---------------------------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 1.5%
250,000 News America Holdings 10.125% 10/15/12 297,759
- ---------------------------------------------------------------------------------------------------
OIL & GAS -- 1.2%
250,000 Husky Oil, 144A 8.90% 08/15/28 237,813
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 57
25
BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
TELEPHONE SYSTEMS -- 2.2%
$ 400,000 MCI Worldcom 8.875% 01/15/06 $ 435,751
- ---------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $6,958,144) 7,108,790
- ---------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 33.1%
1,250,000 Federal Home Loan Bank 5.625% 03/19/01 1,265,282
141,070 Federal Home Loan Mortgage Association 6.00% 05/01/09 141,858
483,533 Federal Home Loan Mortgage Association 6.00% 08/01/10 485,883
42,585 Federal Home Loan Mortgage Association 6.00% 10/01/10 42,792
1,000,000 Federal National Mortgage Association 5.75% 04/15/03 1,027,154
1,249,857 Federal National Mortgage Association 6.50% 07/01/28 1,256,888
387,828 Government National Mortgage Association 7.00% 06/15/09 399,168
369,325 Government National Mortgage Association 9.00% 08/15/19 396,146
331,463 Government National Mortgage Association 6.50% 01/15/24 334,830
91,021 Government National Mortgage Association 7.50% 12/15/27 93,837
933,680 Government National Mortgage Association 7.00% 05/15/28 954,977
250,764 Government National Mortgage Association 6.50% 09/15/28 253,193
- ---------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $6,532,604) 6,652,008
- ---------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT OBLIGATIONS -- 5.4%
CANADA -- 5.4%
1,000,000 Province of Ontario 7.375% 01/27/03 1,082,730
- ---------------------------------------------------------------------------------------------------
TOTAL SOVEREIGN GOVERNMENT OBLIGATIONS (COST $1,077,440) 1,082,730
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 8.2%
250,000 U.S. Treasury Note 4.75% 11/15/08 251,953
700,000 U.S. Treasury Note 6.125% 11/15/27 784,000
600,000 U.S. Treasury Note 5.250% 11/15/28 615,000
- ---------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $1,624,897) 1,650,953
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C> <C> <C>
PREFERRED STOCKS -- 4.9%
ELECTRIC UTILITIES -- 2.3%
9,600 Appalachian Power, 8.25% Cumulative $ 247,200
8,700 Ohio Power, Series A, 8.16% Cumulative 221,850
- ------------------------------------------------------------------------------------------------
469,050
- ------------------------------------------------------------------------------------------------
OIL & GAS -- 2.6%
20,000 TransCanada Pipelines, 8.75% Cumulative 522,500
- ------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $984,274) 991,550
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 98.4%
(COST $19,232,856) (a) 19,788,679
CASH AND OTHER ASSETS NET OF LIABILITIES -- 1.6% 316,435
- ------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $20,105,114
- ------------------------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
+ Restricted and Board valued security (Note 6).
(a) The aggregate identified cost for federal income tax purposes is
$19,232,856, resulting in gross unrealized appreciation and depreciation of
$616,681 and $60,858, respectively, and net unrealized appreciation of
$555,823.
144A--Securities restricted for resale to Qualified Institutional Buyers with
registration rights.
The accompanying notes are an integral part of the financial statements.
<PAGE> 58
SELECT ADVISORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES 26
December 31, 1998
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME GROWTH &
GROWTH EQUITY OPPORTUNITY VALUE PLUS INCOME BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(c) PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Note 1)(a) $10,533,926 $11,150,579 $ 9,738,099 $26,421,732 $38,567,829 $7,490,373
Cash 704,129 718,191 234,043 993,617 496,349 291,315
Foreign currency -- -- -- -- -- 2,459(b)
Receivables for:
Investments sold 233,128 -- -- -- -- 16,249
Unrealized
appreciation on
foreign forward
currency contracts -- -- -- -- -- 821
Dividends 5,602 5,395 -- 30,324 89,323 2,291
Foreign tax reclaims -- 14,967 -- 116 4,648 --
Interest 2,293 1,882 321,200 2,506 1,207 35,978
Receivable from
Investment Advisor
(Note 7) -- 25,906 -- -- -- 12,562
- --------------------------------------------------------------------------------------------------------------------
Total assets 11,479,078 11,916,920 10,293,342 27,448,295 39,159,356 7,852,048
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Investments purchased -- -- -- -- 36,912 --
Unrealized
depreciation on
foreign forward
currency contracts -- -- -- -- -- 1,377
Payable to Investment
Advisor (Note 7) 32,684 -- 13,556 74,940 272,727 --
Other accrued
expenses 20,661 26,660 22,419 19,391 22,719 18,839
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 53,345 26,660 35,975 94,331 332,358 20,216
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Applicable to
investors'
beneficial
interests $11,425,733 $11,890,260 $10,257,367 $27,353,964 $38,826,998 $7,831,832
- --------------------------------------------------------------------------------------------------------------------
(a) Cost of
investments $ 9,520,630 $ 9,224,611 $11,953,889 $24,702,293 $37,318,029 $7,402,534
(b) The cost of foreign currency is $2,368.
(c) The Portfolio commenced operations on May 1, 1998.
<CAPTION>
BOND
PORTFOLIO
<S> <C>
ASSETS:
Investments, at value
(Note 1)(a) $19,788,679
Cash 96,695
Foreign currency --
Receivables for:
Investments sold --
Unrealized
appreciation on
foreign forward
currency contracts --
Dividends 12,640
Foreign tax reclaims 1,094
Interest 276,428
Receivable from
Investment Advisor
(Note 7) --
- ----------------------------------
Total assets 20,175,536
- ----------------------------------
LIABILITIES:
Payable for:
Investments purchased --
Unrealized
depreciation on
foreign forward
currency contracts --
Payable to Investment
Advisor (Note 7) 49,350
Other accrued
expenses 21,072
- ----------------------------------
Total liabilities 70,422
- ----------------------------------
NET ASSETS:
Applicable to
investors'
beneficial
interests $20,105,114
- ----------------------------------
(a) Cost of
investments $19,232,856
(b) The cost of foreign currency is $2,368.
(c) The Portfolio commences operations on May 1, 1998.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 59
SELECT ADVISORS PORTFOLIOS
27
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME GROWTH &
GROWTH EQUITY OPPORTUNITY VALUE PLUS INCOME BALANCED BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(a) PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1):
Interest $ 29,470 $ 20,841 $ 1,251,189 $ 30,892 $ 39,559 $199,162 $1,171,921
Dividends (b) 77,302 150,046 -- 223,865 940,130 54,824 76,347
- --------------------------------------------------------------------------------------------------------------------------
Total investment
income 106,772 170,887 1,251,189 254,757 979,689 253,986 1,248,268
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees
(Note 3) 76,428 100,226 71,387 123,531 278,037 56,349 100,011
Custody, administration
and fund accounting
fees 72,929 155,348 77,900 54,179 86,965 72,792 68,579
Auditing fees 17,571 18,916 19,196 13,500 20,196 16,744 18,587
Amortization of
organization expenses
(Note 8) 12,382 12,382 12,382 -- 12,382 12,382 12,399
Trustee fees (Note 3) 1,006 1,054 1,265 1,200 3,243 710 1,730
Legal fees 940 827 1,548 1,650 4,715 1,017 2,431
Miscellaneous 1,014 904 454 2,769 3,175 484 1,504
- --------------------------------------------------------------------------------------------------------------------------
Total expenses 182,270 289,657 184,132 196,829 408,713 160,478 205,241
Reimbursement or
waiver from
Investment
Advisor (Note 7) (43,744) (126,131) (57,832) (48,591) (5,311) (68,910) (50,678)
- --------------------------------------------------------------------------------------------------------------------------
Net expenses 138,526 163,526 126,300 148,238 403,402 91,568 154,563
- --------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) (31,754) 7,361 1,124,889 106,519 576,287 162,418 1,093,705
- --------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss)
on:
Investments 652,852 715,847 (1,067,747) (614,534) 1,922,304 397,376 383,495
Written Options -- -- 5,670 -- -- -- --
Foreign currency
transactions -- (37,627) -- -- -- 15,952 --
- --------------------------------------------------------------------------------------------------------------------------
652,852 678,220 (1,062,077) (614,534) 1,922,304 413,328 383,495
- --------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation
(depreciation) on:
Investments (552,074) 1,105,174 (1,754,259) 1,719,439 (864,206) (329,872) 108,553
Written Options -- -- -- -- -- -- --
Foreign currency
transactions -- 905 223 -- -- (6,250) 2
- --------------------------------------------------------------------------------------------------------------------------
(552,074) 1,106,079 (1,754,036) 1,719,439 (864,206) (336,122) 108,555
- --------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss): 100,778 1,784,299 (2,816,113) 1,104,905 1,058,098 77,206 492,050
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations $ 69,024 $1,791,660 $(1,691,224) $1,211,424 $1,634,385 $239,624 $1,585,755
- --------------------------------------------------------------------------------------------------------------------------
(a) The Portfolio commenced operations on
May 1, 1998.
(b) Net of foreign tax
withholding -- $19,294 -- $173 $4,497 $396 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 60
SELECT ADVISORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS 28
<TABLE>
<CAPTION>
EMERGING GROWTH INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) (31,754) (20,051) 7,361 10,921
Net realized gain (loss) 652,852 913,915 678,220 1,010,270
Net change in unrealized appreciation (depreciation) (552,074) 846,170 1,106,079 77,380
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 69,024 1,740,034 1,791,660 1,098,571
- ------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 6,080,768 2,100,799 2,921,223 1,464,035
Withdrawals (2,324,356) (843,327) (1,416,086) (540,590)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM INVESTORS' TRANSACTIONS: 3,756,412 1,257,472 1,505,137 923,445
- ------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 3,825,436 2,997,506 3,296,797 2,022,016
NET ASSETS:
Beginning of period 7,600,297 4,602,791 8,593,463 6,571,447
- ------------------------------------------------------------------------------------------------------------------------
End of period $11,425,733 $7,600,297 $11,890,260 $8,593,463
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio commenced operations on May 1, 1998.
The accompanying notes are an integral part of the financial statements.
<PAGE> 61
SELECT ADVISORS PORTFOLIOS
29
<TABLE>
<CAPTION>
INCOME OPPORTUNITY VALUE PLUS GROWTH & INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED(a) YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1998 1997
<S> <S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) 1,124,889 1,154,944 106,519 576,287 171,081
Net realized gain (loss) (1,062,077) 410,064 (614,534) 1,922,304 4,825,120
Net change in unrealized appreciation (depreciation) (1,754,036) (742,747) 1,719,439 (864,206) (380,944)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (1,691,224) 822,261 1,211,424 1,634,385 4,615,257
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 5,799,157 9,286,451 26,379,821 15,611,600 3,534,026
Withdrawals (4,547,980) (6,560,662) (237,281) (5,792,500) (1,731,931)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM INVESTORS' TRANSACTIONS: 1,251,177 2,725,789 26,142,540 9,819,100 1,802,095
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (440,047) 3,548,050 27,353,964 11,453,485 6,417,352
NET ASSETS:
Beginning of period 10,697,414 7,149,364 -- 27,373,513 20,956,161
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $10,257,367 $10,697,414 $27,353,964 $38,826,998 $27,373,513
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCED BOND
PORTFOLIO PORTFOLIO
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) 162,418 100,544 1,093,705 958,023
Net realized gain (loss) 413,328 965,160 383,495 81,483
Net change in unrealized appreciation (depreciation) (336,122) (175,493) 108,555 96,828
- --------------------------------------------------------------------------------------------------- --------------
Net increase (decrease) in net assets resulting from
operations 239,624 890,211 1,585,755 1,136,334
- --------------------------------------------------------------------------------------------------- --------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 3,451,012 1,791,228 5,846,651 2,725,843
Withdrawals (1,778,505) (791,530) (2,589,887) (2,127,372)
- --------------------------------------------------------------------------------------------------- --------------
NET INCREASE (DECREASE) FROM INVESTORS' TRANSACTIONS: 1,672,507 999,698 3,256,764 598,471
- --------------------------------------------------------------------------------------------------- --------------
Total increase (decrease) in net assets 1,912,131 1,889,909 4,842,519 1,734,805
NET ASSETS:
Beginning of period 5,919,701 4,029,792 15,262,595 13,527,790
- --------------------------------------------------------------------------------------------------- --------------
End of period $7,831,832 $5,919,701 $20,105,114 $15,262,595
- --------------------------------------------------------------------------------------------------- ---------------
</TABLE>
<PAGE> 62
SELECT ADVISORS PORTFOLIOS
RATIOS AND SUPPLEMENTARY DATA 30
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO
----------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, end of period (000's) $11,425 $7,600 $4,603 $3,878 $2,050
Ratios to average net assets:
Net expenses 1.45% 1.55% 1.61% 1.59% 2.56%(c)
Net investment income (loss) (0.33%) (0.33%) (0.23%) (0.12%) 5.51%(c)
Expenses, without waiver and reimbursement 1.91% 2.94% 2.94% 3.59% 7.35%(c)
Portfolio turnover 78% 101% 117% 109% 150%
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO
------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, end of period (000's) $38,827 $27,374 $20,956 $15,576 $10,110
Ratios to average net assets:
Net expenses 1.16% 1.25% 1.00% 1.23% 1.20%(c)
Net investment income (loss) 1.66% 0.72% 0.87% 0.91% 1.11%(c)
Expenses, without waiver and reimbursement 1.17% 1.49% 1.34% 1.53% 1.95%(c)
Portfolio turnover 64% 170% 92% 102% 10%
</TABLE>
- ---------------
(a) The Portfolio commenced operations on October 3, 1994.
(b) The Portfolio commenced operations on May 1, 1998.
(c) Ratios are annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE> 63
SELECT ADVISORS PORTFOLIOS
31
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
---------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, end of period (000's) $11,890 $8,593 $6,571 $5,108 $4,538
Ratios to average net assets:
Net expenses 1.55% 1.66% 1.67% 1.65% 3.20%(c)
Net investment income (loss) 0.07% 0.14% 0.35% 0.09% (1.68%)(c)
Expenses, without waiver and reimbursement 2.74% 4.26% 3.12% 3.87% 4.62%(c)
Portfolio turnover 138% 151% 86% 90% 7%
<CAPTION>
VALUE PLUS
INCOME OPPORTUNITY PORTFOLIO INCOME OPPORTUNITY PORTFOLIO PORTFOLIO
------------------------------------------ ------------------------------ ---------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a) PERIOD ENDED(b)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994 1998
<S> <C> <C> <C> <C> <C> <C>
Net Assets, end of period (000's) $10,257 $10,697 $7,149 $2,581 $1,844 $27,354
Ratios to average net assets:
Net expenses 1.15% 1.30% 1.31% 1.42% 2.20%(c) 0.90%(c)
Net investment income (loss) 10.24% 11.32% 11.31% 12.53% 8.09%(c) 0.65%(c)
Expenses, without waiver and
reimbursement 1.68% 1.92% 2.74% 4.77% 7.48%(c) 1.20%(c)
Portfolio turnover 283% 270% 222% 120% 144% 34%
</TABLE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
---------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, end of period (000's) $7,832 $5,920 $4,030 $2,885 $1,996
Ratios to average net assets:
Net expenses 1.30% 1.50% 1.51% 1.51% 1.33%(c)
Net investment income (loss) 2.30% 1.99% 2.06% 2.29% 3.13%(c)
Expenses, without waiver and reimbursement 2.28% 3.14% 3.38% 4.39% 6.48%(c)
Portfolio turnover 59% 120% 88% 121% 7%
<CAPTION>
BOND PORTFOLIO
------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED(a)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, end of period (000's) $20,105 $15,263 $13,528 $12,627 $10,082
Ratios to average net assets:
Net expenses 0.85% 0.85% 0.85% 1.02% 1.21%(c)
Net investment income (loss) 6.01% 6.35% 6.18% 6.66% 6.32%(c)
Expenses, without waiver and reimbursement 1.13% 1.49% 1.32% 1.40% 1.76%(c)
Portfolio turnover 170% 88% 64% 78% 11%
</TABLE>
<PAGE> 64
SELECT ADVISORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS 32
1. Organization and Significant Accounting Policies
Select Advisors Portfolios (the "Portfolio Trust") was organized as a New York
master trust fund on February 7, 1994 and is registered under the Investment
Company Act of 1940, as amended ("the Act"), as an open-end management
investment company. The Portfolio Trust consists of nine subtrusts (each a
"Portfolio"), each having distinct investment objectives and policies: Emerging
Growth Portfolio, International Equity Portfolio, Income Opportunity Portfolio,
Value Plus Portfolio, Growth & Income Portfolio, Balanced Portfolio, Bond
Portfolio, Growth & Income Portfolio II and Bond Portfolio II. Growth & Income
Portfolio II and Bond Portfolio II are included in a separate report.
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 polices of the
Portfolios:
INVESTMENT VALUATION. Securities for which market quotations are readily
available are valued at the last sale price on a national securities exchange,
or, in the absence of recorded sales, at the readily available closing bid price
on such exchanges, or at the quoted bid price in the over-the-counter market.
Securities quoted in foreign currencies are translated into U.S. dollars at the
current exchange rate. Debt securities are valued by a pricing service which
determines valuations based upon market transactions for normal,
institutional-size trading units of similar securities. Securities or other
assets for which market quotations are not readily available are valued at fair
value in good faith under consistently applied procedures 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
portfolio securities with a remaining maturity of less than 60 days are valued
at amortized cost, which approximates market.
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
<PAGE> 65
SELECT ADVISORS PORTFOLIOS
33
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 net realized
and unrealized gain or loss on investments.
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date except
that certain dividends from foreign securities where the ex-dividend date has
passed are recorded 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.
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. Therefore, 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.
WRITTEN OPTIONS. Each Portfolio may enter into written option agreements. The
premium received for a written option is recorded as an asset with an equivalent
liability. The liability is marked-to-market based on the option's quoted daily
settlement price. When an option expires or the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security
and the liability related to such option is eliminated. When a written call
option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the Fund
purchased.
FORWARD FOREIGN CURRENCY CONTRACTS. Each Portfolio may enter into forward
foreign currency contracts to protect securities and related receivables and
payables against fluctuations in foreign currency rates. A forward 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 Portfolio
as unrealized appreciation or depreciation of
<PAGE> 66
SELECT ADVISORS PORTFOLIOS
34
Notes to Financial Statements continued
forward foreign currency contracts. As of December 31, 1998, the following
Portfolio had the following open forward foreign currency contracts.
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO APPRECIATION/
PORTFOLIO NAME MATURITY DATE DELIVER/RECEIVE IN EXCHANGE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Balanced Portfolio
Sales 3/22/99 GBP 41,520 $69,588 $68,767 $ 821
1/11/99 ZAR 565,020 $94,548 95,925 (1,377)
- -----------------------------------------------------------------------------------------------------
$ (556)
- -----------------------------------------------------------------------------------------------------
</TABLE>
GBP Great British Pound
ZAR South African Rand
REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements,
which are agreements pursuant to which securities are acquired by the Portfolio
from a third party with the commitment that they will be repurchased by the
seller at a fixed price on an agreed upon date. Each Portfolio may enter into
repurchase agreements with banks or lenders meeting the creditworthiness
standards established by the Trustees of the Portfolio Trust. The Portfolio,
through its custodian, receives as collateral, delivery of the underlying
securities, whose market value is required to be at least 102% of the resale
price at the time of purchase. The resale price reflects the purchase price plus
an agreed upon rate of interest. In the event of counterparty default, the
Portfolio has the right to use the collateral to offset losses incurred.
SECURITY TRANSACTIONS. Securities transactions are recorded on a trade date
basis. For financial and tax reporting purposes, realized gains and losses are
determined on the basis of specific lot identification.
2. Risks Associated with Foreign Investments
Some of the Portfolios may invest in securities of foreign issuers. Investing in
securities issued by companies whose principal business activities are outside
the United States may involve significant risks not present in domestic
investments. For example, there is generally less publicly available information
about foreign companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Portfolio, political or financial instability or diplomatic
and other developments which could affect such investments. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the U.S.
<PAGE> 67
SELECT ADVISORS PORTFOLIOS
35
3. Transactions with Affiliates
INVESTMENT ADVISOR. The Portfolio Trust has an investment advisory agreement
with Touchstone Advisors, Inc., (the "Advisor") a subsidiary of Western-Southern
Life Assurance Company ("Western Southern"). Under the terms of the investment
advisory agreement, each Portfolio pays an investment advisory fee that is
computed daily and paid monthly. For the year ended December 31, 1998, 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 VALUE GROWTH &
GROWTH EQUITY OPPORTUNITY PLUS INCOME BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Rate 0.80% 0.95% 0.65% 0.75% 0.80% 0.80%
<CAPTION>
BOND
PORTFOLIO
<S> <C>
Rate 0.55%
</TABLE>
Subject to review and approval by the Board of Trustees, the Advisor may enter
into certain sub-advisory agreements for the investment advisory services in
connection with the management of each of the Portfolios. The Advisor pays each
sub-advisor a fee for services provided using an annual rate, as specified
below, that is computed daily and paid monthly based on average daily net
assets. As of December 31, 1998, the following sub-advisory agreements were in
place:
<TABLE>
<S> <C>
EMERGING GROWTH PORTFOLIO
David L. Babson & Company, Inc.............. 0.50%
Westfield Capital Management Company........ 0.45% on the first $10 million
0.40% on the next $40 million
0.35% thereafter
INTERNATIONAL EQUITY PORTFOLIO
Credit Suisse Asset Management.............. 0.85% on the first $30 million
0.80% on the next $20 million
0.70% on the next $20 million
0.60% thereafter
INCOME OPPORTUNITY PORTFOLIO
Alliance Capital Management L.P. ........... 0.40% on the first $50 million
0.35% on the next $20 million
0.30% on the next $20 million
0.25% thereafter
VALUE PLUS PORTFOLIO
Fort Washington Investment Advisors, 0.45%
Inc. .....................................
GROWTH & INCOME PORTFOLIO
Scudder Kemper Investments.................. 0.50% on the first $150 million
0.45% thereafter
BALANCED PORTFOLIO
OpCap Advisors.............................. 0.60% on the first $20 million*
0.50% on the next $30 million*
0.40% thereafter*
BOND PORTFOLIO
Fort Washington Investment Advisors, 0.30%
Inc. .....................................
</TABLE>
* Includes assets of the Balanced Portfolio of the Portfolio Trust and the
Balanced Portfolio of the Select Advisors Variable Insurance Trust (for which
OpCap Advisors also acts in an investment advisory capacity).
Fort Washington Investment Advisors, Inc., is an affiliate of the Advisor.
<PAGE> 68
SELECT ADVISORS PORTFOLIOS
36
Notes to Financial Statements continued
TRUSTEES. Each Trustee who is not an "interested person", (as defined in the
Act), of the Portfolio Trust receives an aggregate of $5,000 annually plus
$1,000 per meeting attended as well as reimbursement for reasonable out-
of-pocket expenses from the Portfolio Trust and from Select Advisors Trust A,
Select Advisors Trust C, and Select Advisors Variable Insurance Trust, which are
included in separate annual reports. For the year ended December 31, 1998 the
Portfolio Trust incurred $10,208 in Trustee fees which was prorated to each
Portfolio.
4. Purchases and Sales of Investment Securities
Investment transactions (excluding purchases and sales of U.S. government agency
obligations and excluding short-term investments) for the year ended December
31, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
<S> <C> <C>
Emerging Growth Portfolio $10,691,936 $ 7,007,257
International Equity Portfolio 14,851,933 13,809,291
Income Opportunity Portfolio 31,607,506 29,586,766
Value Plus Portfolio 33,481,621 8,164,794
Growth & Income Portfolio 32,287,313 21,577,731
Balanced Portfolio 4,695,744 3,020,754
Bond Portfolio 14,043,995 13,552,940
</TABLE>
The following Portfolios had transactions in U.S. government and U.S. government
agency obligations:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
<S> <C> <C>
Balanced Portfolio $ 894,954 $ 986,048
Bond Portfolio 19,591,726 15,737,318
</TABLE>
5. Written Options
The Income Opportunity Portfolio's activity in written options during year ended
December 31, 1998 was as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONTRACTS
(000'S OMITTED) PREMIUMS
<S> <C> <C>
Options Outstanding at December 31, 1997 -- $ --
Options Written 450 5,670
Options Canceled in Closing Transactions (450) --
- ----------------------------------------------------------------------------
Options Outstanding at December 31, 1998 -- $ 5,670
</TABLE>
6. Restricted Securities
Restricted securities may be difficult to dispose of and involve time consuming
negotiation and expense. Prompt sale of these securities may involve the seller
taking a discount to the security's stated market value. As of December 31,
1998, Bond Portfolio held restricted securities valued by
<PAGE> 69
SELECT ADVISORS PORTFOLIOS
37
the trustees of the Portfolio Trust at $837,573, representing 4.2% 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 $ 71,378
Central America, Series F 8/1/86 130,000
Central America, Series G 8/1/86 130,000
Central America, Series H 8/1/86 130,000
Republic of Honduras, Series C 5/1/88 100,000
Republic of Honduras, Series D 5/1/88 100,000
</TABLE>
Bond Portfolio received these securities from Western-Southern on October 4,
1994, in exchange for a proportionate interest in the Portfolio.
7. Expense Reimbursements
For the year ended December 31, 1998, the Advisor has voluntarily agreed to
reimburse each Portfolio the following amounts:
<TABLE>
<CAPTION>
AMOUNT OF
REIMBURSEMENT
<S> <C>
Emerging Growth Portfolio $ 43,744
International Equity Portfolio 126,131
Income Opportunity Portfolio 57,832
Value Plus Portfolio 48,591
Growth & Income Portfolio 5,311
Balanced Portfolio 68,910
Bond Portfolio 50,678
</TABLE>
8. Subsequent Event
Select Advisors Portfolios was originally organized as part of a two-tiered,
master/feeder mutual fund complex known as a Hub and Spoke(R) structure. Under
the Hub and Spoke structure, each series of Select Advisors Trust A (each, a
"Trust A Fund") and each series of Select Advisors Trust C (each, a "Trust C
Fund") invested all of its investable assets in a corresponding series of Select
Advisors Portfolios (each, a "Hub"). Effective immediately after the close of
business on December 31, 1998, each Trust A Fund and each Trust C Fund withdrew
its assets (net of liabilities) from the corresponding Hub. Select Advisors
Trust A ("Trust A") and Select Advisors Trust C ("Trust C") then consummated a
series of transactions (the "Reorganization") in which each Trust A Fund
acquired all of the assets (net of liabilities) of the corresponding Trust C
Fund in exchange for Class C shares of such Trust A Fund. Class C shares
received by each Trust C Fund were distributed pro rata to the shareholders of
that Trust C Fund. In addition, where applicable, The Western and Southern Life
Insurance Company Separate Account A ("SAA") withdrew its assets from each Hub
in which it invested and reinvested such assets in Class Y shares of the
corresponding Trust A Fund. The withdrawals from each Hub were effected as
redemptions in-kind where the ownership of the Hub net assets before the
redemption, was transferred to each Trust A, each Trust C Fund and SAA on a
pro-rata basis.
<PAGE> 70
SELECT ADVISORS PORTFOLIOS
38
Notes to Financial Statements continued
Immediately after and as a result of the Reorganization, all of the portfolio
securities previously held in each Hub were held in the corresponding Trust A
Fund in a multi-class structure and were owned on an undivided basis by holders
of each Trust A Fund's Class A shares, Class C shares and, if applicable, Class
Y shares. The investment objective and policies of each Trust A Fund is
identical to its investment objective and policies and those of the
corresponding Trust C Fund before the Reorganization. However, each Trust A Fund
attempts to achieve its objective by retaining an investment advisor and
sub-advisor to manage its assets directly, rather than investing its assets in
the corresponding Hub.
All expenses associated with the Reorganization will be paid by Touchstone
Advisors, Inc. (the "Advisor") or one of its affiliates. The deferred
organization costs of each Hub have been fully expensed during the year ended
December 31, 1998 in anticipation of the Reorganization. The Advisor has agreed
to reimburse each Hub and Select Advisors Portfolios will be dissolved and
terminated as soon as practicable.
<PAGE> 71
REPORT OF INDEPENDENT ACCOUNTANTS
39
REPORT OF INDEPENDENT ACCOUNTANTS
To Investors and Trustees of
the Select Advisors Portfolios:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and ratios and supplementary data present fairly, in all
material respects, the financial position of the Emerging Growth Portfolio,
International Equity Portfolio, Income Opportunity Portfolio, Value Plus
Portfolio, Growth & Income Portfolio, Balanced Portfolio and Bond Portfolio,
(the "Funds") at December 31, 1998, the results of their operations, the changes
in their net assets and their ratios and supplementary data for the periods
indicated therein, in conformity with generally accepted accounting principles.
These financial statements and ratios and supplementary data (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
<PAGE> 72
NOTES 40
