<PAGE> 1
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> 2
NOTES
2
<PAGE> 3
3
SCHEDULE OF INVESTMENTS
December 31, 1998
EMERGING GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 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> 4
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> 5
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> 6
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> 7
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> 8
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> 9
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> 10
SCHEDULE OF INVESTMENTS 10
December 31, 1998
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 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> 11
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> 12
12
Schedule of Investments continued
INCOME OPPORTUNITY PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
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> 13
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> 14
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> 15
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> 16
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> 17
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> 18
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> 19
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> 20
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> 21
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> 22
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> 23
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> 24
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> 25
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> 26
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> 27
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> 28
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> 29
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> 30
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> 31
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> 32
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> 33
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> 34
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> 35
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> 36
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> 37
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> 38
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> 39
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> 40
NOTES 40
<PAGE> 41
LOGO
LOGO
TOUCHSTONE ADVISOR VARIABLE ANNUITY
GROWTH & INCOME PORTFOLIO II LOGO
BOND PORTFOLIO II LOGO
SELECT ADVISORS PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE> 42
NOTES
2
<PAGE> 43
3
SCHEDULE OF INVESTMENTS
December 31, 1998
GROWTH & INCOME PORTFOLIO II
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 93.4%
AEROSPACE & DEFENSE -- 3.3%
12,500 Lockheed Martin $ 1,059,375
8,500 Northrop Grumman 621,563
16,700 Rockwell International 810,994
- ----------------------------------------------------------------------------------
2,491,932
- ----------------------------------------------------------------------------------
AUTOMOTIVE -- 3.7%
26,400 Ford Motor 1,549,350
9,000 Goodyear Tire & Rubber 453,938
15,966 Meritor Automotive 338,280
10,000 Paccar 411,250
- ----------------------------------------------------------------------------------
2,752,818
- ----------------------------------------------------------------------------------
BANKING -- 10.0%
14,324 Bank One 731,419
24,800 BankAmerica 1,491,100
6,900 Bankers Trust 589,519
14,200 Chase Manhattan 966,488
23,746 First Union 1,444,054
23,200 Fleet Financial Group 1,036,750
20,800 Key 665,600
16,200 US Bancorp 575,100
- ----------------------------------------------------------------------------------
7,500,030
- ----------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO -- 5.2%
29,700 Heinz (H.J.) 1,681,763
27,700 Philip Morris 1,481,950
8,300 Unilever, ADR 688,381
- ----------------------------------------------------------------------------------
3,852,094
- ----------------------------------------------------------------------------------
CHEMICALS -- 7.1%
16,700 Akzo, ADR 745,238
7,300 Dow Chemical 663,844
10,100 Du Pont (E.I.) De Nemours 535,931
12,600 Eastman Chemical 563,850
35,300 Imperial Chemical Industries, ADR 1,233,294
54,600 Lyondell Petro Chemical 982,800
10,400 Olin 294,450
16,100 Witco 256,594
- ----------------------------------------------------------------------------------
5,276,001
- ----------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 2.1%
27,900 Pacificorp 587,644
24,700 Unicom 952,494
- ----------------------------------------------------------------------------------
1,540,138
- ----------------------------------------------------------------------------------
COSMETICS & PERSONAL CARE -- 1.7%
29,000 Avon Products 1,283,250
- ----------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 3.8%
20,500 Allegheny Energy 707,250
25,000 Cinergy 859,375
9,900 Duke Energy 634,219
22,900 Southern Company 665,531
- ----------------------------------------------------------------------------------
2,866,375
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 44
4
Schedule of Investments continued
GROWTH & INCOME PORTFOLIO II
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
ELECTRICAL EQUIPMENT -- 1.4%
8,600 Emerson Electric $ 520,300
12,100 Thomas & Betts 524,081
- ----------------------------------------------------------------------------------
1,044,381
- ----------------------------------------------------------------------------------
FINANCIAL SERVICES -- 1.7%
17,000 Federal National Mortgage Association 1,258,000
- ----------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 5.5%
12,800 Boise Cascade 396,800
18,400 Georgia-Pacific 1,077,550
13,900 Georgia-Pacific (Timber Group) 330,994
13,200 Temple-Inland 782,925
11,700 Westvaco 313,706
23,700 Weyerhauser 1,204,256
- ----------------------------------------------------------------------------------
4,106,231
- ----------------------------------------------------------------------------------
HEAVY MACHINERY -- 1.1%
5,500 Caterpillar 253,000
16,300 Parker Hannifin 533,825
- ----------------------------------------------------------------------------------
786,825
- ----------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.4%
56,900 Corning 2,560,500
- ----------------------------------------------------------------------------------
INSURANCE -- 2.5%
19,531 EXEL Limited, Class A 1,464,825
5,200 Lincoln National 425,425
- ----------------------------------------------------------------------------------
1,890,250
- ----------------------------------------------------------------------------------
METALS -- 2.3%
37,900 Allegheny Teledyne 774,581
38,100 Oregon Steel Mills 452,438
6,000 Phelps Dodge 305,250
4,000 Reynolds Metals 210,750
- ----------------------------------------------------------------------------------
1,743,019
- ----------------------------------------------------------------------------------
OFFICE EQUIPMENT -- 4.4%
27,600 Xerox 3,256,791
- ----------------------------------------------------------------------------------
OIL & GAS -- 8.4%
8,198 British Petroleum, ADR 778,810
26,600 Conoco, Class A* 555,275
12,700 Elf Aquitaine, ADR 719,138
8,500 Mobil 740,563
18,700 Texaco 988,763
13,700 Total S.A., ADR 681,575
37,000 Williams Companies 1,153,938
23,000 YPF Sociedad Anonima, ADR 642,563
- ----------------------------------------------------------------------------------
6,260,625
- ----------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.3%
35,100 American Home Products 1,976,569
11,800 Bristol-Myers Squibb 1,578,988
11,900 Smithkline Beecham, ADR 827,050
8,100 Zeneca Group, ADR 363,488
- ----------------------------------------------------------------------------------
4,746,095
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 45
5
GROWTH & INCOME PORTFOLIO II
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
RETAILERS -- 1.9%
12,600 May Department Stores $ 760,725
14,900 Sears, Roebuck & Company 633,250
- ----------------------------------------------------------------------------------
1,393,975
- ----------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 12.3%
21,100 Alltel 1,262,044
37,400 Bell Atlantic 1,982,200
27,800 Bellsouth 1,386,525
32,600 Frontier 1,108,400
22,200 GTE 1,443,000
17,200 Sprint 1,446,950
25,800 Telesp Participacoes, ADR* 570,825
- ----------------------------------------------------------------------------------
9,199,944
- ----------------------------------------------------------------------------------
TRANSPORTATION -- 5.3%
27,800 Canadian Pacific 524,725
31,300 CSX 1,298,950
25,000 General Dynamics 1,465,625
21,200 Norfolk Southern 671,775
- ----------------------------------------------------------------------------------
3,961,075
- ----------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $66,393,317) 69,770,349
- ----------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.6%
COMMERCIAL SERVICES -- 0.6%
9,700 Monsanto, ACES* 475,300
- ----------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $396,174) 475,300
- ----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 3.9%
REAL ESTATE -- 3.9%
10,000 Arden Realty Group 231,875
13,200 Boston Properties 402,600
19,900 Equity Office Properties 477,600
9,000 Equity Residential Properties Trust 363,938
12,800 Health Care Property Investors 393,600
17,500 Nationwide Health Properties 377,344
30,700 Prologis Trust 637,025
- ----------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (COST $3,254,902) 2,883,982
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 97.9% (COST $70,044,393)(a) 73,129,631
CASH AND OTHER ASSETS NET OF LIABILITIES -- 2.1% 1,531,150
- ----------------------------------------------------------------------------------
NET ASSETS -- 100.0% $74,660,781
- ----------------------------------------------------------------------------------
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$70,073,919, resulting in gross unrealized appreciation and
depreciation of $8,583,241 and $5,527,529, respectively, and net
unrealized appreciation of $3,055,712.
ACES -- Adjustable Conversion-Rate Equity Security
ADR -- American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
<PAGE> 46
SCHEDULE OF INVESTMENTS 6
December 31, 1998
BOND PORTFOLIO II
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
AGENCY FOR INTERNATIONAL DEVELOPMENT BONDS -- 1.9%
CENTRAL AMERICA -- 1.2%
$ 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 -- 0.7%
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 -- 3.7%
90,565 Chase Manhattan Grantor Trust 5.20% 02/15/02 90,610
900,000 Chemical Credit Card Master Trust 5.98% 09/15/08 921,555
174,496 Navistar Financial 6.35% 11/15/02 175,681
249,861 World Omni Auto Lease 6.18% 11/25/03 251,298
- ---------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $1,356,859) 1,439,144
- ---------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 34.0%
AUTOMOTIVE -- 0.5%
200,000 Ford Motor 6.75% 05/15/05 210,392
- ---------------------------------------------------------------------------------------------------
BANKING -- 3.9%
500,000 Bank of New York 8.50% 12/15/04 573,306
500,000 Credit Suisse London 7.90% 05/01/07 500,000
350,000 First Union 6.55% 10/15/35 365,091
71,396 Mercantile Safe Deposit+ 12.125% 01/02/01 71,775
- ---------------------------------------------------------------------------------------------------
1,510,172
- ---------------------------------------------------------------------------------------------------
COMMUNICATIONS -- 1.4%
500,000 Harris Corporation 6.65% 08/01/06 525,401
- ---------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 10.9%
1,000,000 Consumers Energy, Series B 6.50% 06/15/18 1,007,380
1,000,000 PSE&G Capital 6.74% 10/23/01 1,022,029
1,100,000 Southern California Edison 7.125% 07/15/25 1,114,079
1,000,000 Tennessee Valley Authority, Series G 5.375% 11/13/08 1,003,790
- ---------------------------------------------------------------------------------------------------
4,147,278
- ---------------------------------------------------------------------------------------------------
ELECTRONICS -- 2.6%
1,000,000 Raytheon 5.70% 11/01/03 1,000,782
- ---------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.8%
1,000,000 Safeco Capital 8.072% 07/15/37 1,063,806
- ---------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 1.6%
250,000 Georgia-Pacific 9.50% 05/15/22 285,243
350,000 Sweetheart Cup 9.625% 09/01/00 315,000
- ---------------------------------------------------------------------------------------------------
600,243
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 47
7
BOND PORTFOLIO II
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
<C> <S> <C> <C> <C>
HEALTH CARE PROVIDERS -- 2.2%
$ 850,000 Columbia/HCA Health 6.73% 07/15/45 $ 853,669
- ---------------------------------------------------------------------------------------------------
MEDIA -- BROADCASTING & PUBLISHING -- 2.1%
500,000 Cox Communications 6.375% 06/15/00 507,380
250,000 News America Holdings 10.125% 10/15/12 297,759
- ---------------------------------------------------------------------------------------------------
805,139
- ---------------------------------------------------------------------------------------------------
OIL & GAS -- 1.9%
750,000 Husky Oil, 144A 8.90% 08/15/28 713,438
- ---------------------------------------------------------------------------------------------------
RETAILERS -- 1.3%
500,000 Wal-Mart Stores 5.85% 06/01/00 505,324
- ---------------------------------------------------------------------------------------------------
TELEPHONE SYSTEMS -- 2.8%
1,000,000 MCI Worldcom 8.875% 01/15/06 1,089,377
- ---------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $12,834,037) 13,025,021
- ---------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 35.5%
330,760 Federal Government Loan Mortgage Corporation 7.00% 10/01/25 337,603
337,104 Federal Government Loan Mortgage Corporation 7.00% 12/01/25 344,078
1,000,000 Federal Home Loan Bank 5.625% 03/19/01 1,012,226
1,250,000 Federal National Mortgage Association 5.75% 04/15/03 1,283,943
500,000 Federal National Mortgage Association 5.75% 02/15/08 518,079
2,999,749 Federal National Mortgage Association 6.50% 07/01/28 3,016,619
428,713 Government National Mortgage Association 7.00% 02/15/09 441,249
4,829 Government National Mortgage Association 7.50% 07/15/23 4,978
476,093 Government National Mortgage Association 7.50% 12/15/25 490,823
800,987 Government National Mortgage Association 7.50% 12/15/27 825,770
1,400,520 Government National Mortgage Association 7.00% 05/15/28 1,432,466
481,507 Government National Mortgage Association 7.00% 07/15/28 492,490
492,438 Government National Mortgage Association 7.00% 07/15/28 503,670
2,006,108 Government National Mortgage Association 6.50% 09/15/28 2,025,548
920,000 Housing Securities 6.75% 09/25/08 884,488
- ---------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $13,527,136) 13,614,030
- ---------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT OBLIGATIONS -- 2.8%
CANADA -- 2.8%
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 -- 10.5%
1,000,000 U.S. Treasury Bond 6.375% 08/15/27 1,150,000
1,000,000 U.S. Treasury Note 4.75% 11/15/08 1,007,813
500,000 U.S. Treasury Note 6.125% 11/15/27 560,000
1,300,000 U.S. Treasury Note 5.25% 11/15/28 1,332,500
- ---------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $3,906,122) 4,050,313
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 48
8
Schedule of Investments continued
BOND PORTFOLIO II
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C> <C> <C>
PREFERRED STOCKS -- 4.9%
ELECTRIC UTILITIES -- 2.9%
9,300 Appalachian Power, 8.25% Cumulative $ 239,475
16,800 Columbus Southern Power, 8.375% Cumulative 432,600
17,500 Virginia Power Capital, 8.05% Cumulative 447,344
- ---------------------------------------------------------------------------------------------------
1,119,419
- ---------------------------------------------------------------------------------------------------
OIL & GAS -- 2.0%
29,900 Transcanada Pipelines, 8.75% Cumulative 781,138
- ---------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $1,888,618) 1,900,557
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS AT VALUE -- 93.3%
(COST $35,180,212)(a) 35,877,593
CASH AND OTHER ASSETS NET OF LIABILITIES -- 6.7% 2,573,245
- ---------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $38,450,838
- ---------------------------------------------------------------------------------------------------
</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
$35,196,462, resulting in gross unrealized appreciation and depreciation of
$854,965 and $173,834, respectively, and net unrealized appreciation of
$681,131.
144A -- Securities restricted for resale to Qualified Institutional Buyers with
registration rights.
The accompanying notes are an integral part of the financial statements.
<PAGE> 49
SELECT ADVISORS PORTFOLIOS
9
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
GROWTH &
INCOME BOND
PORTFOLIO II PORTFOLIO II
<S> <C> <C>
ASSETS:
Investments, at value (Note 1)(a) $73,129,631 $35,877,593
Cash 1,746,965 2,201,113
Receivables for:
Dividends 169,747 21,068
Interest 6,365 436,820
Foreign tax reclaims 929 1,635
- --------------------------------------------------------------------------------------------
Total assets 75,053,637 38,538,229
- --------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 56,355 --
Payable to Sponsor (Note 3) 299,788 57,000
Other accrued expenses 36,713 30,391
- --------------------------------------------------------------------------------------------
Total liabilities 392,856 87,391
- --------------------------------------------------------------------------------------------
NET ASSETS:
Applicable to investors' beneficial interests $74,660,781 $38,450,838
- --------------------------------------------------------------------------------------------
(a) Cost of investments $70,044,393 $35,180,212
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 50
SELECT ADVISORS PORTFOLIOS
STATEMENTS OF OPERATIONS 10
For the Years Ended December 31, 1998
<TABLE>
<CAPTION>
GROWTH &
INCOME BOND
PORTFOLIO II PORTFOLIO II
<S> <C> <C>
INVESTMENT INCOME (NOTE 1):
Interest $ 76,442 $1,991,899
Dividends (a) 1,686,187 121,696
- ------------------------------------------------------------------------------------------
Total investment income 1,762,629 2,113,595
- ------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 504,873 173,524
Custody, administration and fund accounting fees 177,066 133,505
Sponsor fees (Note 3) 126,217 63,099
Printing fees 5,871 4,452
Auditing fees 18,617 16,576
Legal fees 8,202 4,276
Amortization of organization expenses (Note 7) 14,812 14,812
Trustee fees (Note 3) 5,667 2,838
Miscellaneous 7,404 2,950
- ------------------------------------------------------------------------------------------
Total expenses 868,729 416,032
Waiver of Sponsor fees (Note 3) (126,217) (63,099)
Reimbursement from Advisor (Note 4) (206,085) (116,523)
- ------------------------------------------------------------------------------------------
Net expenses 536,427 236,410
- ------------------------------------------------------------------------------------------
Net investment income 1,226,202 1,877,185
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments 1,809,761 417,282
Net change in unrealized appreciation (depreciation) 244,812 116,965
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss): 2,054,573 534,247
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $3,280,775 $2,411,432
- ------------------------------------------------------------------------------------------
(a) Net of foreign tax withholding $ 3,679 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 51
SELECT ADVISORS PORTFOLIOS
11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH & INCOME BOND
PORTFOLIO II PORTFOLIO II
--------------------------- ---------------------------
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) $ 1,226,202 $ 413,468 $ 1,877,185 $ 1,179,582
Net realized gain (loss) on investments 1,809,761 5,279,721 417,282 42,062
Net change in unrealized appreciation
(depreciation) on investments 244,812 455,947 116,965 256,174
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 3,280,775 6,149,136 2,411,432 1,477,818
- ------------------------------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTEREST:
Contributions 31,339,058 21,726,669 17,376,055 8,615,620
Withdrawals (6,522,034) (3,283,783) (6,021,023) (388,462)
- ------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM INVESTORS'
TRANSACTIONS 24,817,024 18,442,886 11,355,032 8,227,158
- ------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 28,097,799 24,592,022 13,766,464 9,704,976
NET ASSETS
Beginning of period 46,562,982 21,970,960 24,684,374 14,979,398
- ------------------------------------------------------------------------------------------------------
End of period $74,660,781 $46,562,982 $38,450,838 $24,684,374
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 52
SELECT ADVISORS PORTFOLIOS
RATIOS AND SUPPLEMENTARY DATA 12
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO II
---------------------------------------------------------------------------
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).................... $74,661 $46,563 $21,971 $13,894 $ 9,923
Ratios to average net assets:
Net Expenses 0.85% 0.85% 0.85% 0.85% 0.85%(b)
Net investment income
(loss) 1.94% 1.28% 1.07% 1.27% 2.06%(b)
Expenses, without waiver
and reimbursement 1.37% 1.64% 1.74% 1.77% 2.94%(b)
Portfolio turnover 55% 153% 82% 96% 0%
</TABLE>
<TABLE>
<CAPTION>
BOND PORTFOLIO II
---------------------------------------------------------------------------
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).................... $38,451 $24,684 $14,979 $12,304 $10,104
Ratios to average net assets:
Net Expenses 0.75% 0.75% 0.75% 0.75% 0.75%(b)
Net investment income
(loss) 5.94% 6.28% 6.18% 6.91% 6.76%(b)
Expenses, without waiver
and reimbursement 1.32% 1.69% 1.76% 1.58% 2.67%(b)
Portfolio turnover 194% 79% 79% 80% 0%
</TABLE>
- ---------------
(a) The portfolios commenced operations on November 21, 1994.
(b) Ratios are annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE> 53
13
NOTES TO FINANCIAL STATEMENTS
SELECT ADVISORS PORTFOLIOS
1. Organization and Significant Accounting Policies
Select Advisors Portfolios (the "Portfolio Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company and was organized as a New York master trust fund on February 7, 1994.
There are nine subtrusts of the Portfolio Trust (each a "Portfolio"), each
having distinct investment objectives and policies. The Portfolios are Emerging
Growth Portfolio, International Equity Portfolio, Income Opportunity Portfolio,
Value Plus Portfolio, Growth & Income Portfolio, Balanced Portfolio, Bond
Portfolio, Growth & Income Portfolio II and Bond Portfolio II. Only Growth &
Income Portfolio II and Bond Portfolio II are included in this report. The other
portfolios are included in a separate report.
As of December 31, 1998, Touchstone Advisors, Inc., a subsidiary of
Western-Southern Life Assurance Company ("Western-Southern"), and
Western-Southern owned 100% of the interest in the Growth & Income Portfolio II
and Bond Portfolio II.
The accounting policies are in conformity with generally accepted accounting
principles ("GAAP") for investment companies. The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the related amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of the significant accounting policies of the
Portfolios:
INVESTMENT VALUATION. Securities for which market quotations are readily
available are valued at the last sale price on a national securities exchange,
or, in the absence of recorded sales, at the readily available closing bid price
on such exchanges, or at the quoted bid price in the over-the-counter market.
Securities quoted in foreign currencies are translated into U.S. Dollars at the
current exchange rate. Debt securities are valued by a pricing service which
determines valuations based upon market transactions for normal,
institutional-size trading units of similar securities. Securities or other
assets for which market quotations are not readily available are valued at fair
value in good faith in accordance with procedures established by the Trustees of
the Portfolio Trust using prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type, indications as to values from
dealers and general market conditions. All debt securities with a remaining
maturity of less than 60 days are valued at amortized cost, which approximates
market.
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
<PAGE> 54
14
Notes to Financial Statements continued
SELECT ADVISORS PORTFOLIOS
and maturities of forward currency contracts, disposition of foreign currencies,
currency gains and losses realized between the trade and settlement dates on
securities transactions and the difference between the amount of net investment
income accrued and U.S. dollar amount actually received.
The effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the statements of operations from the effects
of changes in market prices of these securities, but are included with the net
realized and unrealized gain or loss on investments.
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date except
that certain dividends from foreign securities where the ex-dividend date has
passed are recorded 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. Accordingly, no
provision has been made for federal income taxes. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended.
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 forward foreign currency
contracts.
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 Portfolio Trust Board of Trustees. The Portfolio, through its
custodian, receives as collateral, delivery of the underlying securities, whose
market value is required to be at least 102% of the resale price at the time of
purchase. The resale price reflects the purchase price plus an agreed upon rate
of interest. In the event of counterparty default the Portfolio has the right to
use the collateral to offset losses incurred.
<PAGE> 55
15
SELECT ADVISORS PORTFOLIOS
SECURITIES TRANSACTIONS. Securities transactions are recorded on a trade date
basis. For financial and tax reporting purposes, realized gains and losses are
determined on the basis of specific lot identification.
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 U.S. may involve significant risks not present in domestic investments. For
example, there is generally less publicly available information about foreign
companies, particularly those not subject to the disclosure and reporting
requirements of the U.S. securities laws. Foreign issuers are generally not
bound by uniform accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to domestic issuers.
Investments in foreign securities also involve the risk of possible adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, 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 U.S., and securities of some foreign issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. In general, there is less overall governmental
supervision and regulation of foreign securities markets, broker-dealers, and
issuers than in the U.S.
3. Transactions with Affiliates
SPONSOR. Touchstone Advisors, Inc. ("Sponsor" or "Advisor"), as sponsor to the
Trust, pursuant to a Sponsor Agreement provides oversight of the various service
providers to the Trust, including the Trust's administrator, custodian and
transfer agent. The Sponsor receives a sponsor fee from each portfolio equal on
an annual basis to 0.20% of average daily net assets of that Portfolio. The
Sponsor Agreement may be terminated by the Sponsor or by the Trust on not less
than 30 days prior written notice.
INVESTMENT ADVISOR. The Portfolio Trust also has an investment advisory
agreement with Touchstone Advisors, Inc. Under the terms of the investment
advisory agreement, each Portfolio pays a fee that is computed daily and paid
monthly. Investment advisory fees for Growth & Income Portfolio II and Bond
Portfolio II is equal on an annual basis to .80% and .55%, respectively, of
average daily net assets.
Subject to review and approval by the Board of Trustees, the Advisor may enter
into certain sub-advisory agreements for the investment advisory services in
connection with the management of each of the Portfolios. The Advisor pays each
sub-advisor a fee for services provided using an annual rate, as specified
below, that is computed daily and paid monthly based on
<PAGE> 56
16
Notes to Financial Statements continued
SELECT ADVISORS PORTFOLIOS
average daily net assets. As of December 31, 1998, the following sub-advisory
agreements were in place:
<TABLE>
<S> <C>
GROWTH & INCOME PORTFOLIO
Scudder Kemper Investments, Inc. ...... 0.50% on the first $150 million
0.45% thereafter
BOND PORTFOLIO
Fort Washington Investment Advisors, 0.30%
Inc. ................................
</TABLE>
Fort Washington Investment Advisors, Inc., is an affiliate of the Advisor.
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 and from Select Advisors Trust A,
Select Advisors Trust C and Select Advisors Variable Insurance Trust. For the
year ended December 31, 1998, the Growth & Income Portfolio II incurred $5,667
in Trustee Fees and the Bond Portfolio II incurred $2,838 in Trustee Fees.
4. Expense Reimbursement
The Sponsor has agreed to reimburse each Portfolio so that, following such
reimbursement the aggregate total operating expenses (excluding interest, taxes,
brokerage commission and extraordinary expenses) are not greater, on an
annualized basis, than 0.85% and 0.75% of average daily net assets of Growth &
Income Portfolio II and Bond Portfolio II, respectively. The sponsor has advised
the Trust that it will continue to waive fees and reimburse each Portfolio as
described above through December 31, 1999. For the year ended December 31, 1998,
the sponsor reimbursed $206,085 and $116,523 to the Growth & Income Portfolio II
and Bond Portfolio II, respectively.
5. Purchases and Sales of Investment Securities
For the year ended December 31, 1998, the cost of investment securities
purchased was $59,853,038 and $29,717,084, and the proceeds from sales of
investment securities sold were $33,802,717 and $24,287,635, for Growth & Income
Portfolio II and Bond Portfolio II, respectively, excluding U.S. government
obligations and US government agency obligations and short-term investments.
Purchases and sales of U.S. government obligations were $38,779,377 and
$32,330,383, respectively, for Bond Portfolio II.
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 II held restricted securities valued at
<PAGE> 57
17
SELECT ADVISORS PORTFOLIOS
$837,573 by the Trustees, representing 2.18% 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 $ 71,379
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 II received these securities from The Western and Southern Life
Insurance Company Separate Account A on November 21, 1994, in exchange for a
proportionate interest in the Portfolio.
7. Subsequent Event
Effective immediately after the close of business on December 31, 1998, two new
portfolios, namely Touchstone Growth & Income Fund and Touchstone Bond Fund were
established in the Select Advisors Variable Insurance Trust. Select Advisors
Variable Insurance Trust is registered under the Investment Company Act of 1940,
as amended, as an open-end management investment company and was organized as a
Massachusetts business trust on February 7, 1994. Effective after the close of
business on December 31, 1998, Select Advisors Variable Insurance Trust was
renamed Touchstone Variable Series Trust ("VST"). The shares of the newly
established VST: Touchstone Growth & Income Fund and VST: Touchstone Bond Fund,
(collectively "VST Funds") were substituted for shares of the Select Advisors
Portfolios: Growth & Income Portfolio II and the Select Advisors Portfolios:
Bond Portfolio II respectively, (collectively "SAP Funds") held by
Western-Southern Life Assurance Company Separate Account 1 and Separate Account
2 and The Western and Southern Life Insurance Company Separate Account A. This
transaction was achieved through an in-kind redemption from the SAP Funds and a
corresponding in-kind contribution to the VST Funds of the net assets of the SAP
Funds. As a result of this transaction, the SAP Funds ceased to be available as
investment options for Separate Accounts 1, 2 and A. The VST Funds have
substantially identical investment objectives, policies and risks as those of
the respective SAP Funds. In addition, the VST Funds will employ the same
investment advisor and investment techniques as those employed by the respective
SAP Funds. The SAP Funds will be dissolved and terminated as soon as
practicable.
<PAGE> 58
REPORT OF INDEPENDENT ACCOUNTANTS
18
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 Growth and Income Portfolio II and
Bond Portfolio II (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
