<PAGE> 1
LIFE & ANNUITY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1995
(UNAUDITED)
ASSET ALLOCATION FUND
GROWTH AND INCOME FUND
MONEY MARKET FUND
U.S. GOVERNMENT ALLOCATION FUND
15
<PAGE> 2
LIFE & ANNUITY TRUST ASSET ALLOCATION PORTFOLIO--JUNE 30, 1995
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BONDS -- 20.66 %
$ 100,000 U.S. Treasury Bonds 7.13% 02/15/23 $ 105,562
200,000 U.S. Treasury Bonds 7.25 05/15/16 212,937
200,000 U.S. Treasury Bonds 7.25 08/15/22 213,625
100,000 U.S. Treasury Bonds 7.63 02/15/25 112,812
300,000 U.S. Treasury Bonds 7.88 02/15/21 341,625
300,000 U.S. Treasury Bonds 8.00 11/15/21 346,688
200,000 U.S. Treasury Bonds 8.75 05/15/17 246,687
400,000 U.S. Treasury Bonds 8.75 08/15/20 497,250
400,000 U.S. Treasury Bonds 8.88 02/15/19 501,250
100,000 U.S. Treasury Bonds 9.00 11/15/18 126,688
-----------
TOTAL U.S. TREASURY BONDS $ 2,705,124
(Cost $2,428,083)
U.S. TREASURY BILLS -- 78.77 %
$ 486,000 U.S. Treasury Bills + 5.19%* 07/06/95 $ 485,564
582,000 U.S. Treasury Bills + 5.25* 07/27/95 579,659
653,000 U.S. Treasury Bills + 5.42* 08/10/95 649,007
1,074,000 U.S. Treasury Bills + 5.48* 08/24/95 1,065,524
327,000 U.S. Treasury Bills + 5.49* 08/17/95 324,693
2,000,000 U.S. Treasury Bills + 5.53* 08/31/95 1,982,462
4,675,000 U.S. Treasury Bills + 5.54* 09/07/95 4,628,713
584,000 U.S. Treasury Bills 5.56* 09/21/95 577,004
22,000 U.S. Treasury Bills 5.58* 09/28/95 21,711
-----------
TOTAL U.S. TREASURY BILLS $10,314,337
(Cost $10,310,265)
TOTAL INVESTMENTS IN SECURITIES
(Cost $12,738,347)** (Notes 1 & 3) 99.43% $13,019,461
Other Assets and Liabilities, Net 0.57 74,630
------ -----------
TOTAL NET ASSETS 100.00% $13,094,091
====== ===========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ These U.S. Treasury Bills are held in segregated accounts in connection with
the Fund's holdings of S&P 500 futures contracts. See Note 1.
* Yield to maturity.
** Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $281,171
Gross Unrealized Depreciation (57)
--------
NET UNREALIZED APPRECIATION $281,114
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 3
LIFE & ANNUITY TRUST GROWTH AND INCOME PORTFOLIO--JUNE 30, 1995
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
COMMON STOCKS -- 90.99 %
ADVERTISING -- 1.53 %
1,200 Omnicom Group $ 60,831 $ 72,750
APPLIANCES AND FURNITURE -- 1.34 %
2,500 Heilig-Meyers Co $ 57,297 $ 63,750
AUTOMOBILE & RELATED -- 6.39 %
2,100 Danaher Corp $ 56,334 $ 63,525
1,900 Eaton Corp 97,648 110,437
1,500 General Motors Corp 69,245 70,312
1,450 Goodyear Tire & Rubber Co 51,016 59,812
-------- ----------
$ 274,243 $ 304,086
BASIC INDUSTRIES -- 7.76 %
1,000 DuPont (E I) de Nemours $ 62,330 $ 68,750
1,700 Grace (W R) & Co 93,296 104,337
4,800 J&L Specialty Steel Inc 84,129 92,400
600 Monsanto Co 45,026 54,075
1,000 Scott Paper Co 49,576 49,500
-------- ----------
$ 334,357 $ 369,062
BUILDING MATERIALS & SERVICES -- 1.50 %
2,000 Sherwin Williams Co $ 64,867 $ 71,250
COMPUTER SOFTWARE -- 0.85 %
800 Cisco Systems Inc + $ 27,956 $ 40,450
COMPUTER SYSTEMS -- 1.33 %
1,400 Compaq Computer Corp + $ 52,716 $ 63,525
CONGLOMERATES -- 3.48 %
1,800 Harsco Corp $ 78,484 $ 94,950
600 ITT Corp 57,982 70,500
-------- ----------
$ 136,466 $ 165,450
ELECTRICAL EQUIPMENT -- 9.32 %
1,600 AMP Inc $ 58,514 $ 67,600
2,000 Honeywell Inc 81,910 86,250
1,500 Motorola Inc 89,283 100,687
1,400 Nokia Corp ADR Class A 56,183 83,475
900 Xerox Corp 96,208 105,525
-------- ----------
$ 382,098 $ 443,537
17
</TABLE>
<PAGE> 4
LIFE & ANNUITY TRUST GROWTH AND INCOME PORTFOLIO--JUNE 30, 1995
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
ELECTRONIC SEMICONDUCTORS -- 2.13 %
1,600 Intel Corp $ 48,975 $ 101,300
ENERGY & RELATED -- 11.45 %
1,800 Anadarko Petroleum Corp $ 75,092 $ 77,625
1,000 Mobil Corp 91,051 96,000
4,000 Occidental Petroleum Corp 91,600 91,500
3,380 Sonat Inc 103,031 103,090
3,500 Ultramar Corp 88,823 88,375
3,200 Unocal Corp 90,380 88,400
-------- ----------
$ 539,977 $ 544,990
FINANCE & RELATED -- 15.44 %
1,500 BankAmerica Corp $ 74,045 $ 78,938
1,300 Citicorp 57,417 75,238
1,000 Federal National Mortgage Association 82,044 94,375
1,300 Glimcher Realty Trust 26,566 26,975
3,300 Household International Inc 134,166 163,350
6,600 Mercury Financial Corp 93,106 127,050
3,000 Mid Atlantic Medical Services + 56,492 55,500
1,000 Student Loan Marketing Association 41,366 46,875
3,600 Westpac Banking Corp ADR 58,830 66,150
-------- ----------
$ 624,032 $ 734,451
FOOD & RELATED -- 3.58 %
2,000 Heinz (H J) Co $ 87,684 $ 88,750
1,100 Philip Morris Co Inc 65,472 81,813
-------- ----------
$ 153,156 $ 170,563
GENERAL BUSINESS & RELATED -- 3.83 %
1,300 Alco Standard Corp $ 89,307 $ 103,838
2,200 Loewen Group Inc 62,931 78,375
-------- ----------
$ 152,238 $ 182,213
HOSPITAL & MEDICAL SUPPLIES -- 1.68 %
1,800 Forest Labs Inc Class A + $ 83,479 $ 79,875
MANUFACTURING PROCESSING -- 3.63 %
1,700 Allied Signal Inc $ 60,369 $ 75,650
1,600 Eastman Kodak Co 85,106 97,000
-------- ----------
$ 145,475 $ 172,650
MATERIAL MANUFACTURING -- 1.93 %
1,700 Tyco International Inc $ 84,177 $ 91,800
</TABLE>
18
<PAGE> 5
LIFE & ANNUITY TRUST GROWTH AND INCOME PORTFOLIO--JUNE 30, 1995
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
PHARMACEUTICALS -- 2.36 %
1,300 Warner Lambert Co $ 101,308 $ 112,288
RETAIL STORES -- 5.63 %
2,000 Gap Inc 70,160 69,750
3,200 Lowe's Co Inc 104,490 95,600
4,000 Rite Aid Corp 96,314 102,500
-------- ----------
$ 270,964 $ 267,850
TELECOMMUNICATIONS -- 5.83 %
2,600 Alltel Corp $ 70,075 $ 65,975
4,000 Century Telephone Enterprise 115,768 113,500
5,000 Comsat Corp 99,985 98,125
-------- ----------
$ 285,828 $ 277,600
TOTAL COMMON STOCKS $3,880,440 $4,329,440
PREFERRED STOCKS -- 1.76 %
AUTOMOBILE & RELATED -- 1.43 %
700 Ford Motor Co Series A Convertible $ 62,883 $ 67,987
ENERGY & RELATED -- 0.33 %
600 Atlantic Richfield Co Convertible until 9/15/1997 $ 15,186 $ 15,525
-------- ----------
TOTAL PREFERRED STOCKS $ 78,069 $ 83,512
19
</TABLE>
<PAGE> 6
LIFE & ANNUITY TRUST GROWTH AND INCOME PORTFOLIO--JUNE 30, 1995
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<S> <C> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS -- 11.49 %
U.S. TREASURY BILLS -- 7.27 %
$ 350,000 U.S. Treasury Bills 5.56%* 09/21/95 $ 345,769
REPURCHASE AGREEMENTS -- 4.22 %
$ 201,000 Goldman Sachs Pooled Repurchase 6.10% 07/03/95 $ 201,000
Agreement 102% Collateralized by
U.S. Government Securities
TOTAL SHORT-TERM INSTRUMENTS $ 546,769
(Cost $546,704)
TOTAL INVESTMENTS IN SECURITIES
(Cost $4,505,213)** (Notes 1 & 3) 104.24% $4,959,721
Other Assets and Liabilities, Net (4.24) (201,544)
------ ----------
TOTAL NET ASSETS 100.00% $4,758,177
====== ==========
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Non-income earning securities.
* Yield to maturity.
** Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $491,310
Gross Unrealized Depreciation (36,802)
--------
NET UNREALIZED APPRECIATION $454,508
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 7
LIFE & ANNUITY TRUST MONEY MARKET PORTFOLIO--JUNE 30, 1995
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS -- 97.85 %
$ 560,000 U.S. Treasury Bills 5.31%* 08/03/95 $ 557,101
1,125,000 U.S. Treasury Bills 5.48* 08/24/95 1,115,650
100,000 U.S. Treasury Bills 5.58* 09/28/95 98,656
----------
TOTAL U.S. TREASURY BILLS $1,771,407
REPURCHASE AGREEMENTS -- 3.15 %
$ 57,000 Goldman Sachs Pooled Repurchase 6.10% 07/03/95 $ 57,000
Agreement -- 102% Collateralized by
U.S. Government Securities
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,828,407)** (Note 1) 101.00% $1,828,407
Other Assets and Liabilities, Net (1.00) (18,047)
------ ----------
TOTAL NET ASSETS 100.00% $1,810,360
====== ==========
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield to maturity.
** Cost for federal income tax purposes is the same as for financial statement
purposes.
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 8
LIFE & ANNUITY TRUST U.S. GOVERNMENT ALLOCATION PORTFOLIO--JUNE 30, 1995
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<S> <C> <C> <C> <C> <C>
U.S. TREASURY SECURITIES -- 36.54 %
U.S. TREASURY BONDS -- 24.27 %
$ 100,000 U.S. Treasury Bonds 7.50% 11/15/24 $ 110,750
150,000 U.S. Treasury Bonds 9.00 11/15/18 190,031
100,000 U.S. Treasury Bonds 13.38 08/15/01 137,031
---------
$ 437,812
U.S. TREASURY NOTES -- 12.27 %
$ 100,000 U.S. Treasury Notes 7.88% 08/15/01 $ 109,156
100,000 U.S. Treasury Notes 8.88 05/15/00 112,188
---------
$ 221,344
TOTAL U.S. TREASURY SECURITIES $ 659,156
(Cost $629,777)
SHORT-TERM INSTRUMENTS -- 63.72 %
U.S. TREASURY BILLS -- 63.72 %
$ 61,000 U.S. Treasury Bills 5.19%* 07/06/95 $ 60,945
185,000 U.S. Treasury Bills 5.25* 07/27/95 184,256
207,000 U.S. Treasury Bills 5.42* 08/10/95 205,734
99,000 U.S. Treasury Bills 5.48* 08/24/95 98,219
67,000 U.S. Treasury Bills 5.49* 08/17/95 66,528
102,000 U.S. Treasury Bills 5.54* 09/07/95 100,990
438,000 U.S. Treasury Bills 5.56* 09/21/95 432,753
---------
$1,149,425
TOTAL SHORT-TERM INSTRUMENTS $1,149,425
(Cost $1,149,179)
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,778,956)** (Notes 1 & 3) 100.26% $1,808,581
Other Assets and Liabilities, Net (0.26) (4,653)
------ ----------
TOTAL NET ASSETS 100.00% $1,803,928
====== ==========
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield to maturity.
** Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $29,632
Gross Unrealized Depreciation (7)
--------
NET UNREALIZED APPRECIATION $29,625
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 9
[THIS PAGE INTENTIONALLY LEFT BLANK]
23
<PAGE> 10
LIFE & ANNUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
U.S.
Asset Growth and Money Government
Allocation Income Market Allocation
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
In securities, at market value $13,019,461 $4,959,721 $1,828,407 $1,808,581
Cash 617 425 575 3,629
Receivables:
Dividends and interest 54,653 8,129 10 11,799
Due from administrator (Note 2) 224 0 1,527 1,385
Fund shares sold 213,369 35,817 9,503 13,196
Organization expenses, net of amortization 39,159 39,582 40,468 39,811
Prepaid expenses 13,198 7,333 3,536 3,514
TOTAL ASSETS 13,340,681 5,051,007 1,884,026 1,881,915
LIABILITIES
Variation margin of financial futures contracts 13,900 0 0 0
Payables:
Investment securities purchased 0 195,183 0 0
Distribution to shareholders 167,821 25,336 7,628 8,636
Organizational costs 52,120 52,120 52,120 52,120
Due to administrator 4,419 13,070 265 96
Due to advisor 0 4,951 0 0
Accrued expenses 8,330 2,170 13,653 17,135
TOTAL LIABILITIES 246,590 292,830 73,666 77,987
NET ASSETS $13,094,091 $4,758,177 $1,810,360 $1,803,928
Net assets consist of:
Paid-in capital $11,974,182 $4,274,087 $1,809,962 $1,764,554
Undistributed net realized gain on investments 628,070 29,582 398 9,749
Net unrealized appreciation of futures contracts 210,725 0 0 0
Net unrealized appreciation of investments 281,114 454,508 0 29,625
NET ASSETS $13,094,091 $4,758,177 $1,810,360 $1,803,928
COMPUTATION OF NET ASSET VALUE
AND OFFERING PRICE (NOTE 4):
Net assets $13,094,091 $4,758,177 $1,810,360 $1,803,928
Shares outstanding 1,181,092 399,660 1,809,963 176,248
Net asset value and offering price $11.09 $11.91 $1.00 $10.24
In securities, at identified cost (Note 3) $12,738,347 $4,505,213 $1,828,407 $1,778,956
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 11
LIFE & ANNUITY TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Growth U.S.
Asset and Money Government
Allocation Income Market Allocation
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 0 $ 36,972 $ 0 $ 0
Interest 320,981 9,071 38,245 44,873
TOTAL INCOME 320,981 46,043 38,245 44,873
EXPENSES (NOTE 2):
Advisory fees 29,274 9,432 3,004 3,672
Custody fees 0 3,002 1,004 0
Distribution fees 1,476 633 250 184
Portfolio accounting fees 0 12,974 12,369 0
Administration fees 2,501 787 334 306
Amortization of organization expenses 5,169 5,169 5,169 5,169
Legal and audit 11,658 11,406 11,406 11,406
Registration fees 0 755 0 0
Directors fees 5,579 5,579 5,579 5,579
Other 126 0 212 212
TOTAL EXPENSES 55,783 49,737 39,327 26,528
Less: Waived Fees and Reimbursed Expenses (Note 2) (42,794) (45,153) (37,711) (24,452)
Net expenses 12,989 4,584 1,616 2,076
NET INVESTMENT INCOME 307,992 41,459 36,629 42,797
REALIZED AND
UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on sale of investments 718,180 36,472 398 26,975
Net unrealized appreciation of futures contracts 210,725 0 0 0
Net unrealized appreciation of investments 355,110 435,357 0 43,516
NET GAIN ON INVESTMENTS 1,284,015 471,829 398 70,491
NET INCREASE
IN NET ASSETS RESULTING
FROM OPERATIONS $1,592,007 $513,288 $37,027 $113,288
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 12
LIFE & ANNUITY TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Asset Allocation Fund Growth and Income Fund
------------------------------- ---------------------------------
(Unaudited) From (Unaudited) From
Six Months Inception Six Months Inception
Ended on April 15, 1994 Ended on April 12, 1994
June 30, 1995 to Dec. 31, 1994 June 30, 1995 to Dec. 31, 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $307,992 $184,556 $41,459 $20,607
Net realized gain (loss) on sale of investments 718,180 (15,774) 36,472 (6,889)
Net unrealized appreciation of futures contracts 210,725 12,000 0 0
Net unrealized appreciation (depreciation)
of investments 355,110 (85,996) 435,357 19,151
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS 1,592,007 94,786 513,288 32,869
Distributions to shareholders:
From net investment income (307,992) (184,556) (41,459) (20,607)
From net realized capital gain 0 (74,335) 0 0
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 4,144,083 7,716,275 2,159,765 2,169,419
Net asset value of shares issued in reinvestment
of dividend distributions 307,992 258,893 41,459 20,607
Cost of shares redeemed (105,588) (372,474) (51,348) (90,816)
Net increase in net assets resulting from
capital share transactions (Note 4) 4,346,487 7,602,694 2,149,876 2,099,210
INCREASE IN NET ASSETS 5,630,502 7,438,589 2,621,705 2,111,472
NET ASSETS
Beginning net assets 7,463,589 25,000 2,136,472 25,000
ENDING NET ASSETS $13,094,091 $7,463,589 $4,758,177 $2,136,472
SHARES ISSUED AND REDEEMED
Shares sold 393,799 777,328 193,254 211,849
Shares issued in reinvestment of dividends and
distributions 28,728 26,593 3,590 2,007
Shares redeemed (10,358) (37,498) (4,635) (8,905)
NET INCREASE IN SHARES OUTSTANDING 412,169 766,423 192,209 204,951
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 13
LIFE & ANNUITY TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. Government
Money Market Fund Allocation Fund
---------------------------- ----------------------------
(Unaudited) From (Unaudited) From
Six Months Inception Six Months Inception
Ended on May 19, 1994 Ended on April 26, 1994
June 30, 1995 to Dec. 31, 1994 June 30, 1995 to Dec. 31, 1994
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations:
Net investment income $36,629 $24,035 $42,797 $26,658
Net realized gain (loss) on sale of investments 398 5 26,975 (17,226)
Net unrealized appreciation of futures contracts 0 0 0 0
Net unrealized appreciation (depreciation)
of investments 0 0 43,516 (13,891)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS 37,027 24,040 113,288 (4,459)
Distributions to shareholders:
From net investment income (36,629) (24,035) (42,797) (26,658)
From net realized capital gain 0 (5) 0 0
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 1,733,927 3,110,954 909,647 948,941
Net asset value of shares issued in reinvestment
of dividend distributions 36,628 24,040 42,797 26,658
Cost of shares redeemed (1,452,141) (1,668,446) (84,580) (103,909)
Net increase in net assets resulting from
capital share transactions (Note 4) 318,414 1,466,548 867,864 871,690
INCREASE IN NET ASSETS 318,812 1,466,548 938,355 840,573
NET ASSETS
Beginning net assets 1,491,548 25,000 865,573 25,000
ENDING NET ASSETS $1,810,360 $1,491,548 $1,803,928 $865,573
SHARES ISSUED AND REDEEMED
Shares sold 1,733,928 3,110,954 90,485 95,072
Shares issued in reinvestment of dividends and
distributions 36,628 24,040 4,268 2,724
Shares redeemed (1,452,141) (1,668,446) (8,369) (10,432)
NET INCREASE IN SHARES OUTSTANDING 318,415 1,466,548 86,384 87,364
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 14
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING DURING EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Asset Allocation Fund Growth and Income Fund
--------------------------------- -----------------------------------
(Unaudited) From (Unaudited) From
For the Six Inception For the Six Inception
Months Ended on April 15, 1994 Months Ended on April 12, 1994
June 30, 1995 to Dec. 31, 1994 June 30, 1995 to Dec. 31, 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, Beginning of period $ 9.71 $10.00 $10.30 $10.00
Income from investment operations:
Net investment income 0.29 0.30 0.12 0.14
Net realized and unrealized gains/(losses) on investments 1.38 (0.19) 1.61 0.30
------- ------ ------ ------
Total from investment operations 1.67 0.11 1.73 0.44
Less distributions:
Dividends from net investment income (0.29) (0.30) (0.12) (0.14)
Distributions from realized capital gains 0.00 (0.10) 0.00 0.00
------- ------ ------ ------
Total from distributions (0.29) (0.40) (0.12) (0.14)
------- ------ ------ ------
Net asset value, End of period $ 11.09 $ 9.71 $11.91 $10.30
======== ====== ====== ======
Total return (not annualized) 17.37% 1.13% 16.87% 4.47%
Ratios/supplemental data:
Net assets, end of period (000) $13,094 $7,464 $4,758 $2,136
Number of shares outstanding, end of period (000) 1,181 769 400 207
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(1) 0.26% 0.00% 0.29% 0.00%
Ratio of net investment income to average net assets(2) 6.23% 6.30% 2.61% 3.00%
Portfolio Turnover 40% 0% 38% 21%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 1.13% 2.24% 3.13% 10.18%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 5.37% 4.06% (0.23)% (7.18)%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 15
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING DURING EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. Government
Money Market Fund Allocation Fund
--------------------------------- -----------------------------------
(Unaudited) From (Unaudited) From
For the six Inception For the Six Inception
Months Ended on May 19, 1994 Months Ended on April 26, 1994
June 30, 1995 to Dec. 31, 1994 June 30, 1995 to Dec. 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, Beginning of period $ 1.00 $ 1.00 $ 9.63 $10.00
Income from investment operations:
Net investment income 0.03 0.03 0.34 0.40
Net realized and unrealized gains/(losses) on investments 0.00 0.00 0.61 (0.37)
------ ------ ------ ------
Total from investment operations 0.03 0.03 0.95 0.03
Less distributions:
Dividends from net investment income (0.03) (0.03) (0.34) (0.40)
Distributions from realized capital gains 0.00 0.00 0.00 0.00
------ ------ ------ ------
Total from distributions (0.03) (0.03) (0.34) (0.40)
------ ------ ------ ------
Net asset value, End of period (000) $ 1.00 $ 1.00 $10.24 $ 9.63
====== ====== ====== ======
Total return (not annualized) 2.75% 2.71% 9.84% 0.41%
Ratios/supplemental data:
Net assets, end of period (000) $1,810 $1,492 $1,804 $ 866
Number of shares outstanding, end of period (000) 1,810 1,492 176 90
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(1) 0.24% 0.00% 0.34% 0.00%
Ratio of net investment income to average net assets(2) 5.48% 4.63% 6.95% 7.35%
Portfolio Turnover N/A N/A 109% 130%
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
waived fees and reimbursed expenses 0.27% 11.43% 4.31% 12.73%
(2) Ratio of net investment income to average net assets
prior to waived fees and reimbursed expenses 5.46% (6.80)% 2.98% (5.38)%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 16
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Life and Annuity Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end series investment
company. The Trust was organized as a Delaware Business Trust on October 28,
1993. The Trust consists of four separate diversified funds (the "Funds"): the
Asset Allocation Fund which commenced operations on April 15, 1994, the Growth
and Income Fund which commenced operations on April 12, 1994, the Money Market
Fund which commenced operations on May 19, 1994, and the U.S. Government
Allocation Fund which commenced operations on April 26, 1994.
The Funds are available exclusively as pooled funding vehicles for certain
participating life insurance companies offering variable annuity contracts and
variable life insurance policies.
The following significant accounting policies are consistently followed by
the Trust in the preparation of its financial statements, and such policies are
in conformity with generally accepted accounting principles for investment
companies.
INVESTMENT POLICY AND SECURITY VALUATION
For all of the Funds except the Money Market Fund, investments in
securities for which the primary market is a national securities exchange or the
NASDAQ National Market System are stated at the last reported sales price on the
day of valuation. U.S. Government obligations are valued at the stated mean
between the last reported bid and ask prices. In the absence of any sale of such
securities on the valuation date and in the case of other securities, excluding
money market instruments maturing in 60 days or less, the valuations are based
on latest quoted bid prices. Debt securities maturing in 60 days or less are
valued at amortized cost, which approximates market value. Securities for which
quotations are not readily available are valued at fair value as determined by
policies set by the Board of Trustees.
The Money Market Fund uses the amortized cost method to value its portfolio
securities and attempts to maintain a constant net asset value of $1.00 per
share. The amortized cost method involves valuing a security at its cost, plus
accretion of discount or minus amortized premium over the period until maturity,
which approximates market value.
Cash or high quality money market instruments relating to firm commitment
purchase agreements and or futures contracts are segregated by the custodian and
may not be sold while the current commitment is outstanding.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Dividend income is recognized on the ex-dividend
date, and interest income is accrued daily. Realized gains or losses are
reported on the basis of identified cost of securities delivered. Bond discounts
and premiums are amortized as required by the Internal Revenue Code (the
"Code").
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in each Fund's Portfolio of Investments. The
adviser to the Funds pools the cash and
30
<PAGE> 17
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
invests in repurchase agreements entered into by the Funds. The prospectuses
require that the cash investments be fully collateralized based on values that
are marked to market daily. The collateral is held by an agent bank under a
tri-party agreement. It is the adviser's responsibility to value collateral
daily and to obtain additional collateral as necessary to maintain market value
equal to or greater than the resale price. The repurchase agreements held in the
Funds at June 30, 1995, are collateralized by U.S. Treasury or Federal Agency
obligations. The repurchase agreements were entered into on June 30, 1995.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Asset
Allocation Fund and the Growth and Income Fund are declared and distributed
quarterly. Dividends of the U.S. Government Allocation Fund are declared and
distributed monthly, and dividends of the Money Market Fund, are declared daily
and distributed monthly. Any dividends to shareholders from net realized capital
gains are declared and distributed annually.
FEDERAL INCOME TAXES
The Trust's policy is to comply with the requirements of the Code that are
applicable to regulated investment companies and to distribute substantially all
its taxable income and any net realized capital gains to its shareholders.
Accordingly, there is no provision for federal or state income taxes. The Growth
& Income Fund has a net capital loss carryforward of $1,108 which will expire in
the year 2002 and the U.S. Government Allocation Fund has a net capital loss
carryforward of $51 which will expire in the year 2002. The Board intends to
offset net capital gains with each capital loss carryforward until each
carryforward has been fully utilized or expires. No capital gain distribution
shall be made until the capital loss carryforward has been fully utilized or
expires.
FUTURES CONTRACTS
The Asset Allocation Fund and the U.S. Government Allocation Fund may
purchase futures contracts to gain exposure to market changes as this procedure
may be more efficient or cost effective than actually buying the securities. A
futures contract is an agreement between parties to buy and sell a security at a
set price on a future date. Upon entering into such a contract, a Fund is
required to pledge to the broker an amount of cash, U.S. Government securities
or other high quality debt securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the differences between the value of the contract at the time it was opened and
the value at the time it was closed. Pursuant to regulations and/or published
positions of the Securities and Exchange Commission, the Asset Allocation Fund
and the U.S. Government Allocation Fund may be required to segregate cash or
high quality money market instruments in connection with futures transactions in
an amount generally equal to the entire value of the underlying contracts. Risks
of entering into futures contracts include the possibility that there may be an
illiquid market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities. On June 30,
1995 the Asset Allocation Fund held the following futures contracts:
<TABLE>
<CAPTION>
Notional
Contract Net Unrealized
Contracts Type Expiration Date Value Appreciation
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 S&P 500 Index September 1995 $2,462,175 $154,925
14 S&P 500 Index December 1995 3,858,750 55,800
</TABLE>
31
<PAGE> 18
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Funds' administrator and distributor, has
charged the Funds for expenses incurred in connection with the organization and
initial registration of the Funds. Organizational expenses of $52,120 for each
fund are payable to Stephens as of June 30, 1995. These expenses are being
amortized by the Funds on a straight-line basis over 60 months from the date
each Fund commenced operations. In the event any of the initial shares of
beneficial interest are redeemed during the 60 month amortization period,
Stephens will reimburse the Funds for the unamortized balance of such
organizational costs in the same proportion as the number of shares of
beneficial interest reduced bears to the number of initial shares of beneficial
interest outstanding at the time of redemption.
2. AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
The Trust has entered into advisory contracts on behalf of the Funds with
Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contracts, WFB furnishes to the
Funds investment guidance and policy direction in connection with daily
portfolio management of the funds. Under the contracts with the Asset Allocation
Fund, the Growth and Income Fund and the U.S. Government Allocation Fund, WFB is
entitled to a monthly advisory fee based on an annual rate of 0.60% of average
daily net assets. Under the contract with the Money Market Fund, WFB is entitled
to a monthly advisory fee based on an annual rate of 0.45% of the average daily
net assets.
In connection with the Asset Allocation Fund and the U.S. Government
Allocation Fund, the Trust and WFB have entered into sub-advisory contracts with
Wells Fargo Nikko Investment Advisors ("WFNIA"). WFNIA is an affiliate of WFB.
Wells Fargo Institutional Trust Company, N. A. ("WFITC"), a subsidiary of WFNIA,
provides custody services for the Asset Allocation Fund and the U.S. Government
Allocation Fund. WFITC is compensated for these services from the fees paid for
its subadvisory services. Pursuant to such agreements, WFB pays WFNIA out of its
advisory fee from the Asset Allocation Fund and the U.S. Government Allocation
Fund annual sub-advisory fees equal to 0.20% and 0.15% of the average daily net
assets, respectively.
On June 21, 1995, Wells Fargo & Co. and the Nikko Securities Co. Ltd.
signed a definitive agreement to sell their joint venture interest in Wells
Fargo Nikko Investment Advisors ("WFNIA") to Barclays PLC of the U.K. The sale,
which is subject to the approval of appropriate regulatory authorities, is
expected to close in the fourth quarter of 1995.
Barclays is the largest clearing bank in the U.K. with $259 billion in
total assets. Barclays has announced its intention to combine WFNIA with the
quantitative group of BZW Asset Management ("BZWAM"), its international asset
arm. BZWAM is the largest quantitative fund manager in Europe, with
approximately $32 billion of quantitative funds under management, as of March
31, 1995. The BZW Division of Barclays, of which BZWAM forms a part, is the
investment banking arm of Barclays and offers a full range of investment
banking, capital markets and asset management services.
Under the Investment Company Act of 1940, this proposed change of control
of WFNIA would result in an assignment and termination of the current
Sub-Investment Advisory Agreements between WFNIA, Wells Fargo Bank and the
Funds. Subject to the approval of the Company's Board of Directors, it is
contemplated that a special meeting of shareholders of the Funds will be
convened to consider a new Sub-Investment Advisory Agreement with
32
<PAGE> 19
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
the new sub-advisor, which will become effective only upon the change of control
of WFNIA. It is not anticipated that the proposed change of control will change
the investment objective or overall investment strategy of the Funds.
The Trust has also entered into contracts on behalf of the Growth and
Income Fund and the Money Market Fund with WFB for custody servicing and
portfolio accounting functions. WFB is compensated for custody services based on
an annual rate of 0.0167% of the average daily net assets of the Funds, plus
transaction charges. For portfolio accounting services, WFB is compensated at a
base rate of $2,000 monthly plus 0.07% for the first $50 million, 0.045% for the
next $50 million and 0.02% for the net assets over $100 million.
The Trust has entered into a contract on behalf of each of the Funds with
WFB whereby WFB will provide transfer agent servicing functions for each of the
Funds. Under the contract, WFB is entitled to an annual rate of 0.05% of the
Funds' average daily net assets unless the net assets of each of the Funds are
under $20 million. For as long as the net assets remain under $20 million a Fund
will not be charged any transfer agent fees by WFB.
The Trust has entered into an administration agreement on behalf of the
Funds with Stephens. Under the agreement, Stephens will provide supervisory and
administrative services to the Funds. For providing supervisory and
administrative services, each Fund pays Stephens a monthly fee at the annual
rate of 0.03% of the Funds' average daily net assets.
WAIVED FEES AND REIMBURSED EXPENSES
The following amounts of fees and expenses have been waived and or
reimbursed for the six months ended June 30, 1995:
<TABLE>
<CAPTION>
Waived
Fees
and
Reimbursed
Waived Expenses
Fees by
FUND by WFB Administrator Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation $30,750 $12,044 $42,794
Growth and Income 26,195 18,958 45,153
Money Market 16,711 21,000 37,711
U.S. Government Allocation 3,978 20,474 24,452
- -------------------------------------------------------------------------------
</TABLE>
Waived fees and reimbursed expenses continue at the discretion of Wells
Fargo Bank and the administrator.
Certain officers and directors of the Trust are also officers of Stephens.
At June 30, 1995, Stephens owned 26,523 shares of the Money Market Fund, and
2,705 shares of the U.S. Government Allocation Fund.
33
<PAGE> 20
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for
each Fund for the six months ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
U.S.
Asset Growth and Government
Allocation Income Allocation
AGGREGATE PURCHASES AND SALES OF: Fund Fund Fund
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $1,596,547 $ 0 $ 864,148
Sales proceeds 3,966,021 0 1,079,537
OTHER SECURITIES:
Purchases at cost 0 3,088,606 0
Sales proceeds 0 1,111,465 0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Money Market Fund, not reflected in this schedule, trades exclusively
in short-term securities.
4. CAPITAL SHARE TRANSACTIONS
The Trust has authorized an unlimited number of no par value shares of
beneficial interest. Capital share transactions for each of the Funds for the
six months ended June 30, 1995 are disclosed in detail in the Statements of
Changes in Net Assets.
34
