<PAGE> 1
As filed with the Securities and Exchange Commission
on April 30, 1997
Registration No. 33-70988; 811-8118
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
[X]
Post-Effective Amendment No. 4
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 6 [X]
(Check appropriate box or boxes)
________________________
LIFE & ANNUITY TRUST
(Exact Name of Registrant as specified in Certificate of Trust)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
__________________________
Registrant's Telephone Number, including Area Code: (800) 643-9691
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
[X] Immediately upon filing pursuant [ ] on _________ pursuant
to Rule 485(b), or to Rule 485(b)
[ ] 60 Days after filing pursuant [ ] on _______________ pursuant
to Rule 485(a)(1), or to Rule 485(a)(1)
[ ] 75 days after filing pursuant [ ] on _______________ pursuant
to Rule 485(a)(2), or to Rule 485(a)(2)
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If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Rule 24f-2 Notice for the
fiscal year ending December 31, 1996, was filed with the Securities and
Exchange Commission on February 27, 1997.
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EXPLANATORY NOTE
This Post-Effective Amendment No. 4 to the Registration Statement of
Life & Annuity Trust (the Trust) is being filed to add to the Trust's
Registration Statement the audited financial statements and certain related
financial information for the fiscal year ended December 31, 1996 for the
Trust's Asset Allocation, Growth and Income, Money Market and U.S. Government
Allocation Funds.
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Life & Annuity Trust
Cross Reference Sheet
Form N-1A Item Number
<TABLE>
<CAPTION>
Part A Prospectus Captions
<S> <C>
1 Cover Page
2 General Information
3 Financial Highlights
4 Participating Insurance Companies; Investment Objectives and Policies;
Prospectus Appendix - Additional Investment Policies
5 Management of the Funds; Fund Expenses
6 Management of the Funds
7 Investing in the Funds; Fund Expenses
8 Investing in the Funds
9 Not Applicable
Part B Statement of Additional Information Captions
10 Cover Page
11 Cover Page
12 Management; Other
13 Investment Restrictions; Additional Permitted Investment Activities;
SAI Appendix
14 Management
15 Management
16 Management; Independent Auditors; Fund Expenses
17 Portfolio Transactions
18 Capital Stock
19 Determination of Net Asset Value; Additional Purchase and Redemption
Information
20 Federal Income Taxes
21 Management; Portfolio Transactions
22 Performance Calculations
23 Report of Independent Auditors and Financial Statements
Part C Other Information
24-32 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
</TABLE>
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LIFE & ANNUITY TRUST
PROSPECTUS
ASSET ALLOCATION FUND
GROWTH AND INCOME FUND
MONEY MARKET FUND
U.S. GOVERNMENT ALLOCATION FUND
MAY 1, 1997
LAT PROS (5/97)
<PAGE> 6
ASSET ALLOCATION FUND
GROWTH AND INCOME FUND
MONEY MARKET FUND
U.S. GOVERNMENT ALLOCATION FUND
Life & Annuity Trust is an open-end series investment company. This
Prospectus contains information about four of the series of Life & Annuity
Trust -- the Asset Allocation Fund, the Growth and Income Fund, the Money Market
Fund and the U.S. Government Allocation Fund (each, a "Fund" and collectively,
the "Funds").
The ASSET ALLOCATION FUND seeks over the long term a high level of total
return, including net realized and unrealized capital gains and net investment
income, consistent with reasonable risk.
The GROWTH AND INCOME FUND seeks to earn current income and achieve
long-term capital appreciation.
The MONEY MARKET FUND seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term instruments. The Money Market Fund seeks to maintain a stable net
asset value ("NAV") of $1.00 per share.
The U.S. GOVERNMENT ALLOCATION FUND seeks over the long term a high level
of total return, including net realized and unrealized capital gains and net
investment income, consistent with reasonable risk.
The Funds are available exclusively as pooled funding vehicles for certain
participating life insurance companies (the "Participating Insurance Companies")
offering variable annuity contracts ("VA Contracts") and variable life insurance
policies ("VLI Policies").
SHARES OF THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE MONEY MARKET FUND WILL BE ABLE TO
MAINTAIN A STABLE NAV OF $1.00 PER SHARE.
Please read this Prospectus, along with the prospectus for the VA Contract
or VLI Policy accompanying this Prospectus, before investing and retain it for
future reference. It sets forth concisely the information which a prospective
purchaser of a VA Contract or VLI Policy should know about the Funds before
making such a purchase. A Statement of Additional Information ("SAI") dated May
1, 1997 for the Funds has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference. The SAI is available free of charge by
calling (800)680-8920 or by writing to American Skandia, P.O. Box 883, Shelton,
Connecticut 06484-0883, Attn: Stagecoach Variable Annuity Administration.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK"), BARCLAYS
GLOBAL FUND ADVISERS ("BGFA") OR ANY OF THEIR RESPECTIVE AFFILIATES. SUCH SHARES
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL
AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND ADMINISTRATOR TO THE FUNDS
AND IS COMPENSATED FOR PROVIDING THE FUNDS WITH CERTAIN OTHER SERVICES. BGFA,
WHICH IS NOT AFFILIATED WITH WELLS FARGO BANK, IS THE SUB-ADVISER TO THE ASSET
ALLOCATION AND U.S. GOVERNMENT ALLOCATION FUNDS. STEPHENS INC. ("STEPHENS"),
WHICH IS NOT AFFILIATED WITH WELLS FARGO BANK OR BGFA, IS THE SPONSOR, CO-
ADMINISTRATOR AND DISTRIBUTOR FOR THE FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS DATED MAY 1, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Highlights.................................................................. 1
Participating Insurance Companies..................................................... 2
Investment Objectives and Policies.................................................... 2
Investing in the Funds................................................................ 8
Dividends and Distributions........................................................... 9
Management of the Funds............................................................... 9
Taxes................................................................................. 12
Fund Expenses......................................................................... 12
General Information................................................................... 12
Prospectus Appendix -- Additional Investment Policies................................. A-1
</TABLE>
i
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights in
the Funds' 1996 annual financial statements. The financial statements are
attached to the SAI and have been audited by KPMG Peat Marwick LLP, independent
auditors, whose report dated February 14, 1997 also is attached to the SAI. This
information should be read in conjunction with the Funds' 1996 annual financial
statements and the notes thereto. The SAI is incorporated by reference into this
Prospectus.
<TABLE>
<CAPTION>
Money
Market
Asset Allocation Fund* Growth and Income Fund** Fund***
------------------------------ ------------------------------ --------
Year Year Period Year Year Period Year
Ended Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1996 1995 1994 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value: beginning of period.......... $ 11.27 $ 9.71 $10.00 $ 12.91 $ 10.30 $10.00 $ 1.00
Income from investment operations:
Net investment income......................... 0.56 0.55 0.30 0.20 0.22 0.14 0.05
Net realized and unrealized gains/(losses) on
investments.................................. 0.69 2.21 (0.19) 2.68 2.77 0.30 0.00
------- ------- ------ ------- ------- ------ -------
Total from investment operations.............. 1.25 2.76 0.11 2.88 2.99 0.44 0.05
Less distributions:
Dividends from net investment income.......... (0.56) (0.55) (0.30) (0.20) (0.22) (0.14) (0.05)
Distributions from realized capital gains..... (0.54) (0.65) (0.10) (0.25) (0.16) 0.00 (0.05)
------- ------- ------ ------- ------- ------ -------
Total from distributions...................... (1.10) (1.20) (0.40) (0.45) (0.38) (0.14) 0.00
------- ------- ------ ------- ------- ------ -------
Net asset value: end of period................ $ 11.42 $ 11.27 $ 9.71 $ 15.34 $ 12.91 $10.30 $ 1.00
======= ======= ====== ======= ======= ====== =======
Total return (not annualized)*****............ 11.46% 28.95% 1.13% 22.44% 29.19% 4.47% 4.72%
Ratios/supplemental data:
Net assets, end of period (000)............... $ 51,797 $ 25,467 $7,464 $ 33,381 $ 10,920 $2,136 $ 12,667
Number of shares outstanding, end of period
(000)........................................ 4,537 2,259 769 2,176 846 207 12,667
Ratios to average net assets (annualized)
Ratio of expenses to average net assets(1).... 0.69% 0.41% 0.00% 0.60% 0.43% 0.00% 0.51%
Ratio of net investment income to average net
assets(2).................................. 5.34% 5.58% 6.30% 1.53% 2.05% 3.00% 4.64%
Portfolio Turnover............................ 4% 97% 0% 95% 84% 21% N/A
Average Commission Rate Paid(3)............... N/A N/A N/A $ 0.0810 N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
(1) Ratio of net expenses to average net
assets prior to waived fees and reimbursed
expenses.................................. 0.80% 1.22% 2.24% 1.12% 2.02% 10.18% 1.22%
(2) Ratio of net investment income (loss) to
average net assets prior to waived fees
and reimbursed expenses................... 5.23% 4.77% 4.06% 1.01% 0.46% (7.18)% 3.93%
(3) For fiscal years beginning on or after September 15, 1995, a fund is required to disclose its average commission rate
per share for security trades on which commissions are charged. This amount may vary from period to period and fund to
fund depending on the mix of trades executed in various markets where trading practices and commission rate structures
may differ.
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Money Market Fund*** U.S. Government Allocation Fund****
-------------------- ------------------------------------
Year Period Year Year Period
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1995 1994 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value: beginning of period.......... $ 1.00 $ 1.00 $ 10.30 $ 9.63 $10.00
Income from investment operations:
Net investment income......................... 0.05 0.03 0.56 0.60 0.40
Net realized and unrealized gains/(losses) on
investments.................................. 0.00 0.00 (0.17) 0.77 (0.37)
------ ------ ------- ------ ------
Total from investment operations.............. 0.05 0.03 0.39 1.37 0.03
Less distributions:
Dividends from net investment income.......... (0.05) (0.03) (0.56) (0.60) (0.40)
Distributions from realized capital gains..... (0.05) (0.03) (0.56) (0.60) (0.40)
------ ------ ------- ------ ------
Total from distributions...................... (0.00) 0.00 0.00 (0.10) 0.00
------ ------ ------- ------ ------
Net asset value: end of period................ $ 1.00 $ 1.00 $ 10.13 $10.30 $ 9.63
====== ====== ======= ====== ======
Total return (not annualized)*****............ 5.41% 2.71% 3.99% 14.40% 0.41%
Ratios/supplemental data:
Net assets, end of period (000)............... $5,823 $1,492 $ 13,527 $4,855 $ 866
Number of shares outstanding, end of period
(000)........................................ 5,823 1,492 1,335 471 90
Ratios to average net assets (annualized)
Ratio of expenses to average net assets(1).... 0.42% 0.00% 0.60% 0.45% 0.00%
Ratio of net investment income to average net
assets(2).................................. 5.15% 4.63% 5.75% 5.82% 7.35%
Portfolio Turnover............................ N/A N/A 222% 405% 130%
Average Commission Rate Paid(3)............... N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
(1) Ratio of net expenses to average net
assets prior to waived fees and reimbursed
expenses.................................. 3.83% 11.43% 1.18% 2.46% 12.73%
(2) Ratio of net investment income (loss) to
average net assets prior to waived fees
and reimbursed expenses................... 1.74% (6.80)% 5.17% 3.81% (5.38)%
(3) For fiscal years beginning on or after September 15, 1995, a fund is required to disclose its average commission rate
per share for security trades on which commissions are charged. This amount may vary from period to period and fund to
fund depending on the mix of trades executed in various markets where trading practices and commission rate structures
may differ.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Asset Allocation Fund commenced operations on April 15, 1994.
** The Growth and Income Fund commenced operations on April 12, 1994.
*** The Money Market Fund commenced operations on May 19, 1994.
**** The U.S. Government Allocation Fund commenced operations on April 26,
1994.
***** Total returns do not include any sales charges.
1
<PAGE> 9
PARTICIPATING INSURANCE COMPANIES
The Funds are funding vehicles for VA Contracts and VLI Policies offered by
the separate accounts of Participating Insurance Companies. Life & Annuity Trust
currently does not foresee any disadvantages to the holders of VA Contracts and
VLI Policies arising from the fact that the interests of the holders of VA
Contracts and VLI Policies may differ. Nevertheless, Life & Annuity Trust's
Board of Trustees intends to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response to such conflicts. The VA Contracts and VLI
Policies are described in the separate prospectuses issued by the Participating
Insurance Companies. Life & Annuity Trust assumes no responsibility for such
prospectuses. Individual holders of VA Contracts and VLI Policies are not the
"shareholders" of or "investors" in the Funds. Rather, the Participating
Insurance Companies and their separate accounts are the shareholders or
investors, although such companies will pass through voting rights to the
holders of VA Contracts and VLI Policies. For a discussion of the voting rights
of holders of VA Contracts and VLI Policies, please see the prospectuses of the
Participating Insurance Companies.
INVESTMENT OBJECTIVES AND POLICIES
ASSET ALLOCATION FUND
The Asset Allocation Fund's investment objective is to seek over the long
term a high level of total return, including net realized and unrealized capital
gains and net investment income, consistent with reasonable risk. The Fund seeks
to achieve its objective by pursuing an asset allocation strategy that allocates
the Fund's assets among three broad categories of investments: stocks, bonds and
money market instruments. This strategy is based upon the premise that certain
asset classes from time to time are either under- or over-valued relative to
each other by the market, and that undervalued asset classes represent
relatively better long-term, risk-adjusted investment opportunities. Timely,
low-cost shifts among common stocks, U.S. Treasury bonds and money market
instruments (as determined by their perceived relative over- or under-valuation)
can, therefore, produce attractive investment returns. The Fund is not designed
to profit from short-term market changes.
In determining the appropriate mix, BGFA uses an investment model, the
Asset Allocation Model, that was originally developed in 1973 and is continually
refined and updated. The Asset Allocation Model, which is proprietary to BGFA,
analyzes extensive financial data from numerous sources and recommends a
portfolio allocation among common stocks, U.S. Treasury bonds and money market
instruments. The Asset Allocation Model has broad latitude to allocate and
reallocate the investments in the Fund's portfolio. At any given time,
substantially all of the Fund's assets may be invested in a single asset class
and the relative allocation among the asset classes may shift significantly from
time to time. The Fund is not designed to profit from short-term market changes.
The following description illustrates the types of investments in which the
Fund may invest.
Stock Investments. In making its stock investments, the Fund invests
in a representative sample of the common stocks comprising the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index")(1) using, to the
extent feasible, the same weighting formula used by that index. The Fund
does not individually select common stocks on the basis of traditional
investment analysis.
Bond Investments. The Fund purchases U.S. Treasury bonds with
maturities greater than 20 years. The bond portion of the Fund's portfolio
is managed to attain an average maturity of
- ---------------
(1) Standard & Poor's Corporation ("S&P") does not sponsor the Fund nor is it
affiliated with the Fund, Stephens, Wells Fargo Bank or BGFA. "S&P" and "S&P
500" are trademarks of McGraw-Hill, Inc.
2
<PAGE> 10
between 22 and 28 years for the U.S. Treasury bonds held. U.S. Treasury
bonds have been selected by BGFA for this portion of the Fund's portfolio
because of their relatively low purchase and sale transaction costs and
because of the low default risk associated with them.
Money Market Investments. The money market instrument portion of the
Fund's portfolio is invested in high-quality money market instruments,
including obligations of the U.S. Government, its agencies or
instrumentalities, obligations of domestic and foreign banks, short-term
corporate debt instruments and repurchase agreements.
Other Investments. The Fund also may enter into futures and options
contracts and options on futures contracts and make margin payments in
connection with such contracts, purchase securities with put rights in
order to maintain liquidity, purchase unrated instruments that are
determined by Wells Fargo Bank to be of investment quality comparable to
other rated instruments that the Fund is permitted to purchase, and may
purchase securities on a delayed delivery or when-issued basis. The Fund is
a diversified portfolio. A more complete description of the Asset
Allocation Model, certain trading policies relating to the implementation
of the Model's recommendations, and the Fund's investments and investment
activities is contained in the "Prospectus Appendix -- Additional
Investment Policies" and in the Funds' SAI.
GROWTH AND INCOME FUND
The Growth and Income Fund seeks to earn current income and achieve
long-term capital appreciation. It seeks to achieve this objective by investing
primarily in common stocks and preferred stocks and debt securities that are
convertible into common stocks. Under normal market conditions, the Fund invests
at least 65% of its total assets in common stocks and securities which are
convertible into common stocks and at least 65% of its total assets in
income-producing securities. The Fund may invest up to 25% of its assets in
American Depositary Receipts and similar instruments.
Common Stocks. The Growth and Income Fund invests in common stocks of
issuers that exhibit a strong earnings growth trend and that are believed by
Wells Fargo Bank, as investment adviser, to have above-average prospects for
future earnings growth. The Fund maintains a portfolio of common stocks
diversified among industries and companies. The Fund may invest in common stocks
of large companies (i.e., those companies with more than $750 million in
capitalization) that Wells Fargo Bank believes offer the potential for long-term
earnings growth or above-average dividend yield. Emphasis may be placed on
common stocks which are trading at low price-to-earnings ratios, either relative
to the overall market or to the security's historic price-to-earnings
relationship, and on common stocks of issuers that have historically paid
above-average dividends. Some investments also may be made in common stocks of
medium and smaller sized companies (i.e., those companies with at least $250
million, but less than $750 million in capitalization) that appear to have the
potential to generate high levels of future revenue and earnings growth and
where the investment opportunity may not be fully reflected in the price of the
securities but that may involve greater risks than investments in larger
companies.
The Growth and Income Fund intends generally to invest less than 50% of its
assets in the securities of medium and smaller sized companies and the remainder
in securities of larger sized companies. However, the actual percentages may
vary according to changes in market conditions and the judgment of the Fund's
investment adviser of how best to achieve the Fund's investment objective.
Convertible Securities. The Growth and Income Fund may invest in
convertible securities that provide current income, are issued by companies with
the characteristics described above and have a strong earnings and credit
record. The Fund may purchase convertible securities that are fixed-income debt
instruments or preferred stocks, which may be converted at a stated price within
a specified period of time into a certain quantity of the common stock of the
same issuer. Convertible securities, while usually subordinated to similar
nonconvertible securities, are senior to common stocks in an issuer's capital
structure. Convertible securities offer flexibility by providing the investor
with a steady income stream (generally yielding a lower amount than similar
nonconvertible securities and a higher
3
<PAGE> 11
amount than common stocks) as well as the opportunity to take advantage of
increases in the price of the issuer's common stock through the conversion
feature. Fluctuations in the convertible security's price tend to correlate with
changes in the market value of the common stock. At most, 5% of the Fund's net
assets will be invested in convertible debt securities that are either rated
below the four highest rating categories (which includes securities also known
as "junk bonds") by one or more nationally recognized statistical rating
organizations ("NRSROs"), such as Moody's Investor Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P"), or unrated securities determined by
Wells Fargo Bank to be of comparable quality. Securities rated in the fourth
highest rating category (i.e., rated BBB by S&P or Baa by Moody's) are regarded
by S&P as having an adequate capacity to pay interest and repay principal, but
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make such repayments. Moody's considers such securities
as having speculative characteristics. For additional information relating to
investments in below investment-grade securities see "Additional Permitted
Investment Activities -- Unrated, Downgraded and Below Investment-Grade
Investments" in the Funds' SAI.
Other Investments. The Fund may retain cash or invest some of its assets
in high-quality money market instruments, consisting of U.S. Treasury bills,
shares of other mutual funds and repurchase agreements. The Fund also is
permitted to lend its portfolio securities.
The Fund also may purchase securities with put rights (in order to maintain
liquidity), American Depository Receipts ("ADRs"), and privately issued
securities which may be resold only in accordance with Rule 144A under the
Securities Act of 1933. The Fund is a diversified portfolio. A more complete
description of the Fund's investments and investment activities is contained in
the "Prospectus Appendix -- Additional Investment Policies" and in the Funds'
SAI.
MONEY MARKET FUND
The Money Market Fund seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investing in high-quality,
short-term securities. The Fund only invests its assets in U.S.
dollar-denominated, high-quality money market instruments, and may engage in
certain other investment activities as described in this Prospectus. Permitted
investments consist of obligations of the U.S. Government, its agencies or
instrumentalities (including government-sponsored enterprises), obligations of
domestic and foreign banks, commercial paper and repurchase agreements and other
debt obligations such as municipal obligations, asset-backed securities and
securities issued by special purpose entities. The Fund also may invest in
unrated instruments determined by Wells Fargo Bank to be of comparable quality
to other rated instruments that the Fund is permitted to purchase and otherwise
purchased in accordance with Fund procedures. The Fund is a diversified
portfolio. A more complete description of these investments and investment
activities is contained in the "Prospectus Appendix -- Additional Investment
Policies" and in the Funds' SAI.
U.S. GOVERNMENT ALLOCATION FUND
The U.S. Government Allocation Fund's investment objective is to seek over
the long term a high level of total return, including net realized and
unrealized capital gains and net investment income, consistent with reasonable
risk. The Fund seeks to achieve its objective by pursuing a strategy of
allocating and reallocating its investments among the following three classes of
debt instruments: long-term U.S. Treasury bonds, intermediate-term U.S. Treasury
notes and short-term money market instruments. This strategy is based upon the
premise that those classes of debt securities, from time to time, are either
over- or under-valued relative to each other by the market, and that
under-valued asset classes represent relatively better long-term investment
opportunities. Timely, low-cost shifts among such securities (as determined by
their perceived relative over- or under-valuation) can, therefore, produce
attractive long-term investment returns. Under normal market conditions, the
Fund invests at least 65% of the value of its total assets in U.S. Government
obligations.
4
<PAGE> 12
In determining the appropriate mix of assets in the Fund's portfolio, BGFA
uses an investment model, the U.S. Government Allocation Model, which is also
used by BGFA as a basis for managing large employee benefit trust funds and
other institutional accounts. The Model, which is proprietary to BGFA, analyzes
extensive financial data from various sources and recommends a portfolio
allocation among the three classes of debt instruments. The U.S. Government
Allocation Model has broad latitude to allocate and reallocate the investments
in the Fund's portfolio. At any given time, substantially all of the Fund's
assets may be invested in a single asset class, and the relative allocation
among the asset classes may shift significantly from time to time. The Fund is
not designed to profit from short-term market changes.
The following description illustrates the types of debt instruments in
which the Fund may invest.
Long-Term Investments. The Fund may purchase U.S. Treasury bonds with
remaining maturities of at least 20 years. Under normal market conditions, the
dollar-weighted average maturity of this portion of the Fund's portfolio is
expected to range between 22 and 28 years.
Intermediate-Term Investments. The Fund may purchase U.S. Treasury notes
and other U.S. Treasury securities with remaining maturities ranging from one to
20 years. Under normal market conditions, the dollar-weighted average maturity
of this portion of the Fund's portfolio is expected to range between three and
seven years.
Short-Term Investments. The Fund may purchase short-term money market
instruments with remaining maturities of one year or less. This portion of the
Fund's portfolio may be invested in the following types of short-term money
market instruments: U.S. Government obligations, commercial paper, bankers'
acceptances, certificates of deposit, fixed time deposits and repurchase
agreements. U.S. dollar-denominated obligations of both domestic and foreign
banks may be included.
U.S. Government obligations have been selected by Wells Fargo Bank as the
Fund's principal investments because of their relatively low purchase and sale
transaction costs and because of the low default risk associated with them
(i.e., they are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities).
Other Investments. The Fund also may enter into futures and options
contracts and options on futures contracts and make margin payments in
connection with such contracts, invest in unrated instruments determined by the
Fund's adviser to be of investment quality comparable to other rated instruments
that the Fund is permitted to purchase, and purchase securities on a delayed
delivery or when-issued basis. The Fund is a diversified portfolio. A more
complete description of the model and the Fund's investments and investment
activities is contained in the "Prospectus Appendix -- Additional Investment
Policies" and in the Funds' SAI.
PERFORMANCE
Each Fund's performance may be advertised in terms of average annual total
return and cumulative total return. In addition, the performance for the U.S.
Government Allocation Fund and the Money Market Fund may be advertised in terms
of yield. These performance figures are based on historical results calculated
under uniform SEC formulas and are not intended to indicate future performance.
The actual return of a holder of a VA Contract or VLI Policy is also affected by
charges and fees imposed by the separate accounts of Participating Insurance
Companies. Any Fund advertising is accompanied by performance information of the
related insurance company separate accounts which fund the VA Contracts or VLI
Policies or by an explanation that Fund performance information does not reflect
separate account fees and charges.
Each Fund's total return is based on the overall dollar or percentage
change in value of a hypothetical investment in the Fund and assumes that all
Fund dividends and capital gain distributions are reinvested.
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The yield for the U.S. Government Allocation Fund and the Money Market Fund
is calculated by dividing each Fund's net investment income per share earned
during a specified period (30 days for the U.S. Government Allocation Fund and
seven days or 30 days for the Money Market Fund) by its net asset value per
share on the last day of such period and annualizing the result. Each Fund's
annual report contains additional performance information and is available upon
request without charge from the Funds' distributor.
POTENTIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUNDS
An investment in the Funds is not insured or guaranteed against loss of
principal. When prices of the securities that a Fund owns decline, so does the
value of such Fund's shares and the value of an investment in a Fund may
increase or decrease. Although the Money Market Fund seeks to maintain a stable
net asset value of $1.00 per share, there is no assurance that it will be able
to do so. As with all mutual funds, there can be no assurance that a Fund will
achieve its investment objective. Investors should be prepared to accept some
risk, including possible loss of principal, with the money they invest in a
Fund.
The debt instruments in the Funds' portfolios are subject to interest-rate
risk and credit risk. Interest-rate risk is the risk that increases in market
interest rates may adversely affect the value of the intermediate- and long-term
debt securities in which a Fund invests and hence the value of an investment in
such Fund. The values of such securities generally change inversely to changes
in market interest rates. During those periods in which a high percentage of a
Fund's portfolio is invested in long-term bonds, its exposure to interest-rate
risk is greater because the longer maturity of those securities means their
value generally is more sensitive to changes in market interest rates than
shorter-term debt securities. Credit risk is the risk that issuers of the debt
instruments in which the Funds invest may default on the payment of principal
and/or interest.
The stock investments of the Funds' portfolios are subject to equity market
risk. Equity market risk is the risk that common stock prices will fluctuate or
decline over short or even extended periods. The U.S. stock market tends to be
cyclical, with periods when stock prices generally rise and periods when prices
generally decline. Throughout the first quarter of 1997, the stock market, as
measured by the S&P 500 Index and other commonly used indices, was trading at or
close to record levels. There can be no guarantee that these performance levels
will continue. The Growth and Income Fund's investments in smaller sized
companies present greater risks than investments in larger sized companies with
more established operating histories and financial capacity.
Some of the permissible investments described throughout this Prospectus
are considered "derivative" securities because their value is derived, at least
in part, from the price of another security or a specified asset, index or rate.
The futures contracts and options on futures contracts that the Allocation Funds
may purchase are considered derivatives. The Allocation Funds may only purchase
or sell these contracts or options as substitutes for comparable market
positions in the underlying securities. Also, asset-backed securities issued or
guaranteed by U.S. Government agencies or instrumentalities and certain
floating- and variable-rate instruments can be considered derivatives. Some
derivatives may be more sensitive than direct securities to changes in interest
rates or sudden market moves. Some derivatives also may be susceptible to
fluctuations in yield or value due to their structure or contract terms.
Wells Fargo Bank and BGFA use a variety of internal risk management
procedures to ensure that derivatives use is consistent with a Fund's investment
objective, does not expose the Fund to undue risk and is closely monitored.
These procedures include providing periodic reports to the Board of Trustees
concerning the use of derivatives. Also, cash maintained by each Fund for
short-term liquidity needs (e.g., to meet anticipated redemption requests) will,
as a general matter, only be invested in U.S. Treasury bills, shares of other
mutual funds and repurchase agreements.
The use of derivatives by the Funds also is subject to broadly applicable
investment policies. For example, the Funds may not invest more than a specified
percentage of their assets in "illiquid
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<PAGE> 14
securities," including those derivatives that do not have active secondary
markets. Nor may a Fund use certain derivatives without establishing adequate
"cover" in compliance with SEC rules limiting the use of leverage.
Because the Asset Allocation Fund and the U.S. Government Allocation Fund
(the "Allocation Funds") may shift their investment allocations significantly
from time to time, their performance may differ from funds which invest in one
asset class or from funds with a stable mix of assets. Further, shifts among
asset classes may result in relatively high portfolio turnover rates, which may,
in turn, result in increased brokerage and transaction costs. These costs may
not be offset by the improved performance expected from the asset allocation
strategies. A Fund's portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of securities for the fiscal year by the monthly
average of the value of a Fund's securities (with obligations having less than
one year until maturity excluded).
The Money Market Fund, under the Investment Company Act of 1940 ("1940
Act"), must comply with certain investment criteria designed to provide
liquidity, reduce risk and allow the Fund to maintain a stable net asset value
of $1.00 per share. The Fund's dollar-weighted average portfolio maturity must
not exceed 90 days. Any security that the Fund purchases must have a remaining
maturity of not more than 397 days (thirteen months). In addition, any security
that the Fund purchases must present minimal credit risks and be of high quality
(i.e., be rated in the top two rating categories by the required number of
nationally recognized statistical rating organizations or, if unrated,
determined to be of comparable quality to such rated securities). These
determinations are made by Wells Fargo Bank, as the Funds' investment adviser,
under guidelines adopted by Life & Annuity Trust's Board of Trustees.
The Money Market Fund seeks to reduce risk by investing its assets in
securities of various issuers. As such, the Money Market Fund is considered to
be diversified for purposes of the 1940 Act. In addition, the Money Market Fund,
since its inception, has emphasized safety of principal and high credit quality.
In particular, the internal investment policies of the Fund's investment
adviser, Wells Fargo Bank, have always prohibited the purchase for the Fund of
many types of floating-rate derivative securities that are considered
potentially volatile. The following types of derivative securities ARE NOT
permitted investments for the Fund:
- capped floaters (on which interest is not paid when market rates move
above a certain level);
- leveraged floaters (whose interest-rate reset provisions are based on a
formula that magnifies changes in interest rates);
- range floaters (which do not pay any interest if market interest rates
move outside of a specified range);
- dual index floaters (whose interest-rate reset provisions are tied to
more than one index so that a change in the relationship between these
indices may result in the value of the instrument falling below face
value); and
- inverse floaters (which reset in the opposite direction of their index).
Additionally, the Money Market Fund may not invest in securities whose
interest rate reset provisions are tied to an index that materially lags
short-term interest rates, such as Cost of Funds Index ("COFI") Floaters. The
Fund may only invest in floating-rate securities that bear interest at a rate
that resets quarterly or more frequently, and which resets based on changes in
standard money market rate indices such as U.S. Treasury bills, London Interbank
Offered Rate, the prime rate, published commercial paper rates, federal funds
rates, Public Securities Associates ("PSA") floaters or JJ Kenney index
floaters.
See "Prospectus Appendix -- Additional Investment Policies" for further
discussion of the Funds' investments and related risks.
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<PAGE> 15
INVESTING IN THE FUNDS
NET ASSET VALUE
The value of each Fund's share is its "net asset value," or NAV. NAV is
computed by adding the value of a Fund's portfolio investments plus cash and
other assets, deducting liabilities and then dividing the result by the number
of shares outstanding. The NAV of the Asset Allocation, Growth and Income and
U.S. Government Allocation Funds (the "Non-Money Market Funds") is expected to
fluctuate daily. As noted above, the Money Market Fund seeks to maintain a
constant $1.00 NAV share price, although there is no assurance that it will be
able to do so.
The Funds are open Monday through Friday and are closed on weekends. The
Non-Money Market Funds are closed on standard New York Stock Exchange holidays.
The Money Market Fund is closed on standard federal bank holidays. Unless
otherwise specified, the term "Business Day" when used in reference to the
Non-Money Market Funds refers only to the days such Funds are open and when used
in reference to the Money Market Fund refers only to the days the Money Market
Fund is open. Wells Fargo Bank calculates each Non-Money Market Fund's NAV as of
1:00 p.m. (Pacific time) each Business Day. Wells Fargo Bank calculates the
Money Market Fund's NAV as of 9:00 a.m. (Pacific time) each Business Day.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost (unless the Board of Trustees determines that
amortized cost does not represent fair value), the Non-Money Market Funds' other
assets are valued at current market prices, or if such prices are not readily
available, at fair value as determined in good faith by Life & Annuity Trust's
Board of Trustees. Prices used for such valuations may be provided by
independent pricing services.
The Money Market Fund's portfolio investments are valued on the basis of
amortized cost. This valuation method involves valuing a portfolio instrument at
its cost at the time of purchase and thereafter assuming a constant amortization
or accretion to maturity of any premium or discount, without regard to the
effect of fluctuating interest rates on the market value of the instrument. By
using amortized cost valuation, which reasonably approximates market value, the
Money Market Fund seeks to maintain a constant NAV of $1.00 per share.
PURCHASES AND REDEMPTIONS
The separate accounts of the Participating Insurance Companies place orders
to purchase and redeem shares of each Fund based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA Contracts
and VLI Policies issued by the Participating Insurance Companies) to be effected
on that day pursuant to VA Contracts and VLI policies.
Orders received by a Fund or a Fund's transfer agent are effected on each
Business Day. For the Non-Money Market Funds purchase and redemption orders
received before 1:00 p.m. (Pacific time) are effected at the respective NAV per
share determined as of 1:00 p.m. (Pacific time) on that same day. Orders
received after 1:00 p.m. (Pacific time) for shares of a Non-Money Market Fund
are effected on the next Business Day. With respect to the Money Market Fund, if
orders are received by the Fund or the Fund's transfer agent by 9:00 a.m.
(Pacific time), the order is executed on the same day at the NAV per share
determined as of 9:00 a.m. (Pacific time). Orders received after 9:00 a.m.
(Pacific time) for shares of the Money Market Fund generally are executed on the
next Business Day.
All orders for the purchase of shares are subject to acceptance or
rejection by Life & Annuity Trust. Payment for redemptions will be made by Life
& Annuity Trust's transfer agent on behalf of Life & Annuity Trust and the
relevant Funds within seven days after the request is received. Life & Annuity
Trust does not assess any fees, either when it sells or when it redeems its
shares. Surrender charges, mortality and expense risk fees and other charges may
be assessed by Participating Insurance
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<PAGE> 16
Companies under the VA Contracts or VLI Policies. These fees and charges are
described in the Participating Insurance Companies' prospectuses.
Should any conflict between VA Contract and VLI Policy holders arise which
would require that a substantial amount of net assets be withdrawn from a Fund
of Life & Annuity Trust, orderly portfolio management could be disrupted to the
potential detriment of the VA Contract and VLI Policy holders.
DIVIDENDS AND DISTRIBUTIONS
Each Fund is treated separately in determining the amounts of dividends of
investment income and distributions of capital gains payable to its
shareholders. Dividends and distributions are automatically reinvested on the
payment date for each shareholder's account in additional shares of the Fund
that paid the dividend or distribution at NAV or are paid in cash at the
election of the Participating Insurance Company.
The Asset Allocation and Growth and Income Funds declare and pay a
quarterly dividend, and the U.S. Government Allocation Fund declares and pays a
monthly dividend, of substantially all of their respective net investment
income. The Money Market Fund declares dividends daily and pays the dividends
monthly. The Funds generally distribute any capital gains once a year. Dividends
and distributions are invested in additional shares unless an election is made
on behalf of a separate account to receive dividends or distributions in cash.
Participating Insurance Companies will be informed about the amount and
character of dividends and distributions from the relevant Fund for federal
income tax purposes.
MANAGEMENT OF THE FUNDS
Life & Annuity Trust was organized as a Delaware Business Trust on October
28, 1993. The Board of Trustees of Life & Annuity Trust supervises each Fund's
activities, monitors its contractual arrangements with various service-providers
and decides upon matters of general policy.
Life & Annuity Trust offers shares of the Funds only to Participating
Insurance Companies, and only Participating Insurance Companies and their
separate accounts are considered shareholders of, or investors in, the Funds.
Although the Participating Insurance Companies and their separate accounts are
the shareholders or investors, such companies will pass through voting rights to
their VA Contract and VLI Policy holders. For a discussion of the voting rights
of VA Contract and VLI Policy holders, please refer to the Participating
Insurance Companies' prospectuses.
When matters are submitted for shareholder vote, shareholders of each Fund
have one vote for each full share and fractional votes for fractional shares
held. A separate vote of a Fund is required on any matter affecting the Fund on
which shareholders are entitled to vote, such as approval of a Fund's agreement
with the Fund's investment adviser. Shareholders of one Fund are not entitled to
vote on a matter that does not affect that Fund but that does require a separate
vote of the other Funds. Normally no annual meetings of shareholders will be
held unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees.
A more detailed description of the voting rights and attributes of the
shares is contained in the "Capital Stock" section of the Funds' SAI.
INVESTMENT ADVISER
The Funds are advised by Wells Fargo Bank. Wells Fargo Bank, one of the
largest banks in the United States, was founded in 1852 and is the oldest bank
in the western United States. As of December 31, 1996, Wells Fargo Bank and its
affiliates managed more than $57 billion of assets of individuals, trusts,
estates and institutions. Wells Fargo Bank is the investment adviser or
sub-adviser to five other registered, open-end management investment companies.
From time to time, each of the Funds, consistent with its investment objectives,
policies and restrictions, may invest in securities of companies with which
Wells Fargo Bank has a lending relationship. Wells Fargo Bank, a wholly owned
9
<PAGE> 17
subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street, San
Francisco, California 94104.
Wells Fargo Bank provides investment guidance and policy direction in
connection with the daily portfolio management of the Funds. Wells Fargo Bank
also furnishes the Board of Trustees with periodic reports on the Funds'
investment strategy and performance. For its services as investment adviser to
the Non-Money Market Funds, Wells Fargo Bank is entitled to a monthly advisory
fee at an annual rate equal to 0.60% of each Fund's average daily net assets.
For its services as investment adviser to the Money Market Fund, Wells Fargo
Bank is entitled to a monthly advisory fee at an annual rate equal to 0.45% of
the Fund's average daily net assets. For the year ended December 31, 1996, Wells
Fargo Bank was paid 0.54%, 0.38%, 0.16% and 0.08% of the average daily net
assets of the Asset Allocation, Growth and Income, Money Market and U.S.
Government Allocation Funds, respectively, as compensation for its advisory
services.
Wells Fargo Bank has engaged BGFA to provide sub-advisory services to the
Asset Allocation and U.S. Government Allocation Funds. Wells Fargo Bank has
retained authority over the management of each Fund and the investment and
disposition of each Fund's assets. Wells Fargo Bank has agreed to pay BGFA
monthly fees at annual rates equal to 0.20% and 0.15% of the average daily net
assets of the Asset Allocation Fund and U.S. Government Allocation Fund,
respectively, for its services as sub-adviser. For the year ended December 31,
1996, BGFA actually received payment for its sub-advisory services at the rate
of 0.20% and 0.15% of the average daily net assets of the Asset Allocation and
the U.S. Government Allocation Funds, respectively. BGFA is located at 45
Fremont Street, San Francisco, California 94105. BGFA is a wholly owned
subsidiary of BGI and is an indirect subsidiary of Barclays Bank PLC.
PORTFOLIO MANAGERS
Mr. Brian Mulligan is responsible, as co-manager, for the day-to-day
management of the portfolio of the Growth and Income Fund. Mr. Mulligan has been
co-manager since October 1, 1995. Mr. Mulligan joined Wells Fargo Bank in 1986
through its acquisition of Crocker National Bank, where he had been a portfolio
manager. He is a Vice President and Manager of the San Francisco Investment
Office, where he is primarily responsible for personal accounts including
individuals, charitable foundations and IRAs. He also covers, from a research
standpoint, the telecommunications and electric utility industries. He graduated
from Skidmore College with a B.S. degree in business management. He is a
chartered financial analyst and serves as a member of the staff of graders. In
addition, Mr. Mulligan is a former member of the Board of Governors for the Los
Angeles Society of Financial Analysts and a present member of the San Francisco
Security Analysts Society.
Ms. Kelli Hill, as co-manager, has been responsible for the day-to-day
management of the portfolio of the Growth and Income Fund since May 1, 1997. Ms.
Hill joined Wells Fargo Bank in 1987 and manages client portfolios. Prior to
joining Wells Fargo Bank, Ms. Hill worked as an institutional equity trader for
E.F. Hutton. Ms. Hill holds a B.A. from the University of Southern California in
international relations and economics and is working toward her chartered
financial analyst designation.
The Asset Allocation and U.S. Government Allocation Funds are managed based
on the recommendations of computer models, and no person is primarily
responsible for making investment decisions.
Morrison & Foerster LLP, counsel to Life & Annuity Trust and special
counsel to Wells Fargo Bank and BGFA, has advised Life & Annuity Trust, Wells
Fargo Bank and BGFA that Wells Fargo Bank, BGFA and their respective affiliates,
may perform the services contemplated by this Prospectus and the Advisory
Contracts without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. Such counsel has pointed out, however, that there
are no controlling judicial or administrative interpretations or decisions and
that future judicial or administrative interpretations
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<PAGE> 18
of, or decisions relating to, present federal or state statutes, including the
Glass-Steagall Act, and regulations relating to the permissible activities of
banks and their subsidiaries or affiliates, as well as future changes in such
statutes, regulations and judicial or administrative decisions or
interpretations could prevent Wells Fargo Bank, BGFA and their respective
affiliates from continuing to perform, in whole or in part, such services. If
Wells Fargo Bank or BGFA were prohibited from performing any such services, it
is expected that the Trustees of Life & Annuity Trust would recommend to the
Funds' shareholders that they approve a new advisory agreement or sub-advisory
agreement (as the case may be) with another entity or entities qualified to
perform such services.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the custodian for the Money Market Fund and the
Growth and Income Fund. Wells Fargo Bank performs these services at 525 Market
Street, San Francisco, California 94105. BGI serves as the custodian for the
Allocation Funds and performs these services at 45 Fremont Street, San
Francisco, California 94105.
Wells Fargo Bank serves as the Funds' transfer and dividend disbursing
agent. Wells Fargo Bank performs the transfer and dividend disbursing agency
activities at 525 Market Street, San Francisco, California 94105.
ADMINISTRATOR AND CO-ADMINISTRATOR
Wells Fargo Bank as administrator and Stephens as co-administrator provide
the Funds with administrative services, including general supervision of each
Fund's operation, coordination of the other services provided to each Fund,
compilation of information for reports to the SEC and the state securities
commissions, preparation of proxy statements and shareholder reports, and
general supervision of data compilation in connection with preparing periodic
reports to Life & Annuity Trust's Trustees and officers. Wells Fargo Bank and
Stephens also furnish office space and certain facilities to conduct each Fund's
business, and Stephens compensates Life & Annuity Trust's Trustees, officers and
employees who are affiliated with Stephens. For these administrative services,
Wells Fargo Bank and Stephens are entitled to receive monthly fees at the annual
rates of 0.04% and 0.02%, respectively, of each Fund's average daily net assets.
Wells Fargo Bank and Stephens may delegate certain of their administrative
duties to sub-administrators.
Stephens previously provided substantially the same services as sole
administrator to the Funds. For these administrative services, Stephens was
entitled to a monthly fee at the annual rate of 0.03% of each Fund's average
daily net assets.
SPONSOR AND DISTRIBUTOR
Stephens is the Funds' sponsor and distributes the Funds' shares. Stephens
is a full service broker/dealer and investment advisory firm located at 111
Center Street, Little Rock, Arkansas 72201. Stephens and its predecessor have
been providing securities and investment services for more than 60 years.
Additionally, they have been providing discretionary portfolio management
services since 1983. Stephens currently manages investment portfolios for
pension and profit sharing plans, individual investors, foundations, insurance
companies and university endowments.
Stephens, as the principal underwriter of the Funds within the meaning of
the 1940 Act, has entered into a Distribution Agreement with Life & Annuity
Trust pursuant to which Stephens has the responsibility for distributing shares
of the Funds.
Stephens, as distributor of each Fund's shares, or the Participating
Insurance companies that offer VA Contracts and VLI Policies that are funded by
the Funds, bears all of the Funds' marketing expenses. These expenses include
the cost of printing prospectuses, statements of additional information and
other sales-related materials.
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TAXES
Distributions from a Fund's net investment income and net short-term
capital gains, if any, are designated as dividend distributions and taxable to
the Fund's shareholders as ordinary income. Distributions from a Fund's net
long-term capital gains are designated as capital gain distributions and taxable
to the Fund's shareholders as long-term capital gains. In general, your
distributions will be taxable when paid, whether you take such distributions in
cash or have them automatically reinvested in additional Fund shares. However,
distributions declared in October, November and December and distributed by the
following January will be taxable as if they were paid by December 31.
The foregoing discussion regarding taxes is based on tax laws which were in
effect as of the date of this Prospectus and summarizes only some of the
important federal tax considerations generally affecting the Funds. It is not
intended as a substitute for careful tax planning; you should consult your tax
advisor with respect to your specific tax situation. Further federal tax
considerations are discussed in the SAI for each Fund. Federal income taxation
of separate accounts of life insurance companies, VA Contracts and VLI Policies
is discussed in the prospectuses of the Participating Insurance Companies.
Please see the Statement of Additional Information for further information
regarding the tax implications of investment in shares of the Funds. Prospective
purchasers of a VA Contract or VLI Policy with questions should also consult
their tax advisors.
FUND EXPENSES
From time to time Wells Fargo Bank and Stephens may waive all or a portion
of the fees payable to them and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce a Fund's expenses and, therefore, have a
favorable impact on the Fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, Life & Annuity Trust bears all costs of its
operations, including, shareholder servicing, transfer agency, custody and
administration fees, payments pursuant to any Plans, interest, fees and expenses
of independent auditors and legal counsel and any extraordinary expenses.
Expenses attributable to a Fund are charged against a Fund's assets. General
expenses of Life & Annuity Trust are allocated among all of the Funds of Life &
Annuity Trust in a manner proportionate to the net assets of each Fund, on a
transactional basis, or on such other basis as Life & Annuity Trust's Board of
Trustees deems equitable.
GENERAL INFORMATION
The Funds' SAI and this Prospectus omit certain information contained in
the Registration Statement that the Funds have filed with the SEC under the
Securities Act of 1933 and the 1940 Act, and reference is hereby made to the
Registration Statement and its exhibits and amendments for further information
about the Funds and the shares offered hereby. The Registration Statement and
its exhibits and amendments are available for public inspection at the SEC in
Washington, D.C.
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PROSPECTUS APPENDIX -- ADDITIONAL INVESTMENT POLICIES
Set forth below is additional information about the Funds' permitted
investment activities and related risks. For further information please see
"Additional Permitted Investment Activities" in the SAI.
Asset Allocation and U.S. Government Allocation Models
BGFA compares the Asset Allocation and U.S. Government Allocation Funds'
investments daily to the Asset Allocation Model's and the U.S. Government
Allocation Model's (the "Models") recommended asset allocation. Each Model has
broad latitude to allocate and reallocate the assets in the corresponding Fund's
portfolio. Each Model recommends allocations among each asset class in 5%
increments only. Each Fund's investments are compared from time to time to the
corresponding Model's recommendations. Recommended reallocations are implemented
subject to BGFA'a assessment of current economic conditions and investment
opportunities. Any recommended reallocation is implemented in accordance with
trading policies that have been designed to take advantage of market
opportunities and to reduce transaction costs. Notwithstanding any
recommendation of the appropriate Model to the contrary, each Fund will
generally maintain at least that portion of its assets in money market
instruments reasonably considered necessary to meet redemption requirements.
There is no requirement that the Fund maintain positions in any particular asset
class or classes. BGFA may change from time to time the criteria and methods it
uses to implement the recommendations of a Model. The overall management of each
Fund is based on the recommendations of the corresponding model, and no person
is primarily responsible for recommending the mix of asset classes in a Fund's
portfolio or the mix of securities within the asset classes. Decisions relating
to each Model are made by BGFA's investment committee. A key component of each
Model is a set of assumptions concerning expected risk and return and investor
attitudes toward risk, which are incorporated into the allocation decision.
Forward Commitments, When-Issued Purchases and Delay-Delivery Transactions
Each Fund may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although a Fund will generally purchase securities with the intention of
acquiring them, a Fund may dispose of securities purchased on a when-issued,
delayed-delivery or a forward commitment basis before settlement when deemed
appropriate by Wells Fargo Bank.
Floating- and Variable-Rate Instruments
The Funds may purchase debt instruments with interest rates that are
periodically adjusted at specified intervals or whenever a benchmark rate or
index changes. These adjustments generally limit the increase or decrease in the
amount of interest received on the debt instruments. The floating- and
variable-rate instruments that the Funds may purchase include certificates of
participation in such instruments. Floating- and variable-rate instruments are
subject to interest-rate risk and credit risk.
A-1
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Foreign Obligations and Securities
The Funds each may invest up to 25% of its assets in high-quality,
short-term debt obligations of foreign branches of U.S. banks or U.S. branches
of foreign banks that are denominated in and pay interest in U.S. dollars.
The Growth and Income Fund may invest up to 25% of its assets in securities
of foreign companies and foreign governmental issuers that are denominated in
and pay interest in U.S. dollars. These securities may take the form of American
Depositary Receipts ("ADRs"), Canadian Depositary Receipts ("CDRs"), European
Depositary Receipts ("EDRs"), International Depositary Receipts ("IDRs") and
Global Depositary Receipts ("GDRs") or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs (sponsored or unsponsored) are receipts typically issued by a U.
S. bank or trust company and traded on a U.S. stock exchange, and CDRs are
receipts typically issued by a Canadian bank or trust company that evidence
ownership of underlying foreign securities. Issuers of unsponsored ADRs are not
contractually obligated to disclose material information in the U.S. and,
therefore, such information may not correlate to the market value of the
unsponsored ADR. EDRs and IDRs are receipts typically issued by European banks
and trust companies, and GDRs are receipts issued by either a U.S. or non-U.S.
banking institution that evidence ownership of the underlying foreign
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and IDRs in bearer form are designed primarily for
use in Europe.
Investments in foreign securities involve certain considerations that are
not typically associated with investing in domestic securities. There may be
less publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries, taxes
may be withheld at the source under foreign tax laws, and there is a possibility
of expropriation or confiscatory taxation, political, social and monetary
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
Emerging Markets
The Growth and Income Fund may invest up to 15% of its assets in equity
securities of companies in "emerging markets." The Fund considers countries with
emerging markets to include the following: (i) countries with an emerging stock
market as defined by the International Finance Corporation; (ii) countries with
low- to middle-income economies according to the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank);
and (iii) countries listed in World Bank publications as developing. The adviser
may invest in those emerging markets that have a relatively low gross national
product per capita, compared to the world's major economies, and which exhibit
potential for rapid economic growth. The adviser believes that investment in
equity securities of emerging market issuers offers significant potential for
long-term capital appreciation.
Equity securities of emerging market issuers may include common stock,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Growth and Income Fund may invest in ADRs, CDRs, GDRs, EDRs and
IDRs of such issuers.
Emerging market countries include, but are not limited to: Argentina,
Brazil, Chile, China, the Czech Republic, Columbia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey. A company is
considered in a country, market or region if it conducts its principal business
activities
A-2
<PAGE> 22
there, namely, if it derives a significant portion (at least 50%) of its
revenues or profits from goods produced or sold, investments made, or services
performed therein or has at least 50% of its assets situated in such country,
market or region.
There are special risks involved in investing in emerging-market countries.
Most are heavily dependent on international trade and some are especially
vulnerable to recessions in other countries. Many of these countries are also
sensitive to world commodity prices. Some countries may still have obsolete
financial systems, economic problems or archaic legal systems. In addition, many
of these nations are experiencing political and social uncertainties. Many
investments in emerging markets can be considered speculative, and their prices
can be much more volatile than in the more developed nations of the world. This
difference reflects the greater uncertainties of investing in less established
markets and economies. The financial markets of emerging markets countries are
generally less well capitalized and thus securities of issuers based in such
countries may be less liquid.
Letters of Credit
Certain of the debt obligations, certificates of participation, commercial
paper and other short-term obligations which the Money Market Fund is permitted
to purchase may be backed by an unconditional and irrevocable letter of credit
of a bank, savings and loan association or insurance company which assumes the
obligation for payment of principal and interest in the event of default by the
issuer. Letter of credit-backed investments must, in the opinion of Wells Fargo
Bank, be of investment quality comparable to other permitted investments of the
Money Market Fund.
Loans of Portfolio Securities
Each Non-Money Market Fund may lend securities from its portfolio to
brokers, dealers and financial institutions (but not individuals) in order to
increase the return on such Fund's portfolio. The value of the loaned securities
may not exceed one-third of a Fund's total assets and loans of portfolio
securities are fully collateralized based on values that are marked-to-market
daily. The Non-Money Market Funds will not enter into any portfolio security
lending arrangement having a duration of longer than one year. The principal
risk of portfolio lending is potential default or insolvency of the borrower. In
either of these cases, a Fund could experience delays in recovering securities
or collateral or could lose all or part of the value of the loaned securities.
The Non-Money Market Funds may pay reasonable administrative and custodial fees
in connection with loans of portfolio securities and may pay a portion of the
interest or fee earned thereon to the borrower or a placing broker.
Money Market Instruments
The Funds may invest in the following types of high quality money market
instruments that have remaining maturities not exceeding one year: (i) U.S.
Government obligations; (ii) negotiable certificates of deposit, bankers'
acceptances and fixed time deposits and other obligations of domestic banks
(including foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured by the
FDIC; (iii) commercial paper rated at the date of purchase "P-1" by Moody's or
"A-1" or "A-1+" by S&P, or, if unrated, of comparable quality as determined by
Wells Fargo Bank, as investment adviser; and (iv) repurchase agreements. The
Funds also may invest in short-term U.S. dollar-denominated obligations of
foreign banks (including U.S. branches) that at the time of investment: (i) have
more than $10 billion, or the equivalent in other currencies, in total assets;
(ii) are among the 75 largest foreign banks in the world as determined on the
basis of assets; (iii) have branches or agencies in the United States; and (iv)
in the opinion of Wells Fargo Bank, as investment adviser, are of comparable
quality to obligations of U.S. banks which may be purchased by the Funds.
A-3
<PAGE> 23
Temporary Investments
The Funds may hold a certain portion of its assets in cash or short-term
investments in order to maintain adequate liquidity for redemption requests or
other cash management needs or for temporary defensive purposes during periods
of unusual market volatility. The short-term investments that the Funds may
purchase include, among other things, U.S. government obligations, shares of
other mutual funds, repurchase agreements, obligations of domestic banks and
short-term obligations of foreign banks, corporations and other entities.
Other Investment Companies
Each Fund may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act,
provided that any such purchase is limited to temporary investments in shares of
unaffiliated investment companies and each Fund's investment adviser waives its
advisory fees for that portion of the Fund's assets so invested, except when
such purchase is part of a plan of merger, consolidation, reorganization or
acquisition. The Funds may purchase shares of exchange-listed closed-end Funds.
Repurchase Agreements
The Funds may enter into repurchase transactions in which the seller of a
security to a Fund agrees to repurchase that security from such Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. A Fund may enter into repurchase agreements only with respect to
securities that could otherwise be purchased by the Fund, and all repurchase
transactions must be collateralized. A Fund may incur a loss on a repurchase
transaction if the seller defaults and the value of the underlying collateral
declines or is otherwise limited or if receipt of the security or collateral is
delayed. The Funds may participate in pooled repurchase agreement transactions
with other funds advised by Wells Fargo Bank.
Short-Term Corporate Debt Instruments
The Asset Allocation and U.S. Government Allocation Funds may invest in
commercial paper (including variable amount master demand notes), which refers
to short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs. Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Variable
amount master demand notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to arrangements
between the issuer and a commercial bank acting as agent for the payee of such
notes whereby both parties have the right to vary the amount of the outstanding
indebtedness on the notes. The Asset Allocation and U.S. Government Allocation
Funds also may invest in non-convertible corporate debt securities (e.g., bonds
and debentures) with no more than one year remaining to maturity at the date of
settlement. Such Funds will invest only in such corporate bonds and debentures
that are rated at the time of purchase at least "Aa" by Moody's or "AA" by S&P.
U.S. Government Obligations
The Funds may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Obligations").
Payment of principal and interest on U.S. Government Obligations (i) may be
backed by the full faith and credit of the United States ( as with U.S. Treasury
bills and GNMA certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA notes). In the
latter case investors must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
Government will provide financial support to its agencies or instrumentalities
where it is not
A-4
<PAGE> 24
obligated to do so. In addition, U.S. Government Obligations are subject to
fluctuations in market value due to fluctuations in market interest rates. As a
general matter, the value of debt instruments, including U.S. Government
Obligations, declines when market interest rates increase and rises when market
interest rates decrease. Certain types of U.S. Government Obligations are
subject to fluctuations in yield or value due to their structure or contract
terms.
Futures Transactions
To the extent permitted by applicable regulations, the Asset Allocation and
U.S. Government Allocation Funds are permitted to use futures contracts and
options on futures contracts as substitutes for comparable market positions in
the underlying securities. These contracts and options may include stock index
and interest rate futures contracts and options thereon.
A futures contract obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock or interest-rate index at
the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of the underlying stocks or instruments
in the index occurs. With respect to indexes that are permitted investments,
each Allocation Fund intends to purchase and sell futures contracts on the index
for which it can obtain the best price with consideration also given to
liquidity.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. Upon
exercise of the option, the writer/seller is required to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put). Upon exercise of the option, the assumption of
offsetting futures positions by the writer/seller and holder/buyer of the option
will be accompanied by delivery of the accumulated cash balance in the writer's
futures margin account, which represents the amount by which the market price of
the futures contract, at exercise, exceeds (in the case of a call) or is less
than (in the case of a put) the exercise price of the option on the futures
contract.
Stock Index Futures and Options on Stock Index Futures. Each Allocation
Fund may invest in stock index futures and options on stock index futures as a
substitute for a comparable market position in the underlying securities. A
stock index future obligates the seller to deliver (and the purchaser to take),
effectively, an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect to
stock indices that are permitted investments, each Fund intends to purchase and
sell futures contracts on the stock index for which it can obtain the best price
with consideration also given to liquidity.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures
Contracts. Each Allocation Fund may invest in interest-rate futures contracts
and options on interest-rate futures contracts as a substitute for a comparable
market position in the underlying securities. Each Fund may also sell options on
interest-rate futures contracts as part of closing purchase transactions to
terminate its options positions. No assurance can be given that such closing
transactions can be effected or the degree of correlation between price
movements in the options on interest rate futures and price movements in the
Fund's securities which are the subject of the transaction.
Although each Allocation Fund intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices
A-5
<PAGE> 25
could move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the relevant Allocation Fund to substantial losses. If it
is not possible, or the Allocation Fund determines not, to close a futures
position in anticipation of adverse price movements, it may be required to make
daily cash payments of variation margin.
INVESTMENT POLICIES
Each Fund's investment objective, as set forth in the "Investment
Objectives and Policies" section, is fundamental; that is, it may not be changed
without approval by the vote of a majority of a Fund's outstanding voting
securities, as described under "Capital Stock" in the Funds' SAI. In addition,
any fundamental investment policy may not be changed without such shareholder
approval. If the Board of Trustees determines, however, that a substantive
change in a non-fundamental investment policy or strategy is in the best
interests of a Fund's shareholders, the Board may make such change without
shareholder approval and will disclose any such material changes in the affected
Fund's then-current prospectus.
As matters of fundamental policy, each Fund may: (i) not purchase
securities of any issuer (except U.S. Government obligations) if as a result,
with respect to 75% of a Fund's assets, more than 5% of the value of the Fund's
total assets would be invested in the securities of such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer;
(ii) borrow from banks up to 20%, with respect to the Asset Allocation Fund and
the U.S. Government Allocation Fund, or 10%, with respect to the other Funds, of
the current value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 20%,
with respect to the Asset Allocation Fund and the U.S. Government Allocation
Fund, or 10% with respect to the other Funds, of the current value of its net
assets (but investments may not be purchased while any such outstanding
borrowing in excess of 5% of its net assets exists); and (iii) not invest 25% or
more of its assets (i.e., concentrate) in any particular industry, except that:
(a) each Fund may invest 25% or more of its assets in U.S. Government
obligations; (b) the Money Market Fund may concentrate its assets in obligations
of domestic banks (for purposes of this restriction, domestic bank obligations
do not include obligations of foreign branches of U.S. banks and obligations of
U.S. branches of foreign banks); and (c) the Asset Allocation Fund is permitted
to concentrate its assets in any industry for the same period as does the S&P
500 Index, and the Asset Allocation Fund's money market investments may be
concentrated in the banking industry. However, the Asset Allocation Fund's money
market investments in the banking industry will not represent 25% or more of its
total assets unless the SEC staff has confirmed that it does not object to the
Fund reserving freedom of action to concentrate investments in the banking
industry. In addition, as a matter of fundamental policy, the Money Market Fund
may not make loans of portfolio securities or assets, except that loans for
purposes of this restriction will not include the purchase of fixed time
deposits, repurchase agreements, commercial paper and other short-term
obligations, and other types of debt instruments commonly sold in a public or
private offering; and the other Funds may make such loans in accordance with
their investment policies.
With respect to paragraph (i), it may be possible that the aggregate
ownership by Life & Annuity Trust would exceed 10% of the outstanding voting
securities of an issuer. With respect to paragraph (ii) above, each Fund
presently does not intend to put at risk more than 5% of its assets during the
coming year. With respect to loans of portfolio securities, the Asset Allocation
Fund presently does not intend to put at risk more than 5% of its assets during
the coming year.
As a matter of non-fundamental policy, each Non-Money Market Fund may
invest up to 15% of the current value of its net assets in securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale and fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days. The Money
Market Fund may invest up to 10% of its net assets in illiquid securities.
A-6
<PAGE> 26
LIFE & ANNUITY TRUST
800-680-8920
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1997
ASSET ALLOCATION FUND
GROWTH AND INCOME FUND
MONEY MARKET FUND
U.S. GOVERNMENT ALLOCATION FUND
Life & Annuity Trust (at times, the "Trust") is an open-end series
investment company. This SAI contains information about four of the series of
Life & Annuity Trust -- the Asset Allocation Fund, the Growth and Income Fund,
the Money Market Fund and the U.S. Government Allocation Fund (each, a "Fund"
and collectively, the "Funds"). The investment objective of each Fund is
described in the Prospectus under "Investment Objectives and Policies."
This SAI is not a prospectus and should be read in conjunction with the
Funds' Prospectus, dated May 1, 1997. All terms used in this SAI that are
defined in the Prospectus will have the meanings assigned in the Prospectus. A
copy of the Prospectus may be obtained without charge by calling (800) 680-8920
or by writing to American Skandia, P.O. Box 883, Shelton, Connecticut
06484-0883, Attn: Stagecoach Variable Annuity Administration.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Restrictions................................... 1
Additional Permitted Investment Activities................ 3
Management................................................ 6
Performance Calculations.................................. 9
Determination of Net Asset Value.......................... 12
Additional Purchase and Redemption Information............ 14
Portfolio Transactions.................................... 14
Fund Expenses............................................. 16
Federal Income Taxes...................................... 17
Capital Stock............................................. 19
Other..................................................... 20
Independent Auditors...................................... 20
SAI Appendix.............................................. A-1
Report of Independent Auditors and Financial Statements... FS-1
</TABLE>
<PAGE> 27
INVESTMENT RESTRICTIONS
Fundamental Investment Policies. The Funds are subject to the following
investment restrictions, all of which are fundamental policies.
The Funds may not:
(1) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase
and as a result thereof, the value of any Fund's investments in that
industry would be 25% or more of the current value of such Fund's total
assets, provided that there is no limitation with respect to investments in
(i) obligations of the U.S. Government, its agencies or instrumentalities;
(ii) in the case of the Asset Allocation Fund, any industry in which the
S&P 500 Index becomes concentrated to the same degree during the same
period; (iii) in the case of the Asset Allocation Fund, its money market
instruments may be invested in the banking industry (but the Fund will not
do so unless the SEC staff confirms that it does not object to the Fund
reserving freedom of action to concentrate investments in the banking
industry); and (iv) in the case of the Money Market Fund, the obligations
of domestic banks (for the purpose of this restriction, domestic bank
obligations do not include obligations of U.S. branches of foreign banks or
obligations of foreign branches of U.S. banks);
(2) purchase or sell real estate or real estate limited partnerships
(other than securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein);
(3) invest in commodities, except that the Asset Allocation Fund and
the U.S. Government Allocation Fund (together, the "Allocation Funds") may
purchase and sell (i.e., write) options and futures contracts, including
those relating to indices and options on futures contracts or indices and
that the Allocation Funds and the Growth and Income Fund may purchase
securities of an issuer which invests or deals in commodities or commodity
contracts;
(4) purchase interests, leases, or limited partnership interests in
oil, gas, or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits
necessary for the clearance of transactions and, in the case of the
Allocation Funds, except for margin payments in connection with options,
futures and options on futures) or make short sales of securities;
(6) underwrite securities of other issuers, except to the extent that
the purchase of permitted investments directly from the issuer thereof or
from an underwriter for an issuer and the later disposition of such
securities in accordance with a Fund's investment program may be deemed to
be an underwriting;
(7) make investments for the purpose of exercising control or
management;
(8) issue senior securities, except that the Money Market Fund and the
Growth and Income Fund may borrow from banks up to 10% of the current value
of its net assets for temporary purposes only in order to meet redemptions,
and these borrowings may be secured by the pledge of up to 10% of the
current value of its net assets (but investments may not be purchased while
any such outstanding borrowing in excess of 5% of its net assets exists),
and except that the U.S. Government Allocation Fund and the Asset
Allocation Fund may borrow up to 20% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these
borrowings may be secured by the pledge of up to 20% of the current value
of its net assets (but investments may not be purchased while any such
outstanding borrowing in excess of 5% of its net assets exists). For
purposes of this investment restriction, an Allocation Fund's entry into
options and futures contracts including those relating to indexes and
options on futures or indexes shall not constitute borrowing to the extent
certain segregated accounts are established and maintained by an Allocation
Fund;
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<PAGE> 28
(9) write, purchase or sell puts, calls, or combinations thereof,
except as may be described in the Funds' offering documents and except that
the Money Market Fund, the Growth and Income Fund and the Asset Allocation
Fund may purchase securities with put rights in order to maintain
liquidity, and except that the Growth and Income Fund may invest up to 5%
of its net assets in warrants, in accordance with their investment policies
stated below;
(10) in the case of the Asset Allocation Fund, the Growth and Income
Fund and the U.S. Government Allocation Fund ("Non-Money Market Funds"),
purchase securities of any issuer (except securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities) if, as a
result, with respect to 75% of a Fund's assets, more than 5% of the value
of a Fund's total assets would be invested in the securities of any one
issuer or the Fund's ownership would be more than 10% of the outstanding
voting securities of such issuer; or
(11) in the case of the Money Market Fund, make loans of portfolio
securities or other assets, except that loans for purposes of this
restriction will not include the purchase of fixed time deposits,
repurchase agreements, commercial paper and other short-term obligations,
and other types of debt instruments commonly sold in public or private
offerings; the Non-Money Market Funds may lend portfolio securities to
brokers, dealers and financial institutions as described below.
Non-Fundamental Investment Policies. The Funds are subject to the
following non-fundamental policies.
The Funds may not:
(1) purchase or retain securities of any issuer if the officers or
Trustees of Life & Annuity Trust or the officers and directors of Wells
Fargo Bank (the "Investment Adviser") individually owning beneficially more
than onehalf of one percent (0.5%) of the securities of the issuer together
owned beneficially more than 5% of such securities;
(2) purchase securities of issuers who, with their predecessors, have
been in existence less than three years, unless the securities are fully
guaranteed or insured by the U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in
existence at least three years, or the securities are backed by the assets
and revenues of any of the foregoing if, by reason thereof, the value of
its aggregate investments in such securities will exceed 5% of its total
assets;
(3) invest more than 15% with respect to the Non-Money Market Funds
and 10% with respect to the Money Market Fund of the current value of its
net assets in securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale and
and fixed time deposits that are subject to withdrawal penalties and that
have maturities of more than seven days.
In addition, as provided in Rule 2a-7 under the 1940 Act, the Money
Market Fund may only purchase "Eligible Securities" (as defined in Rule
2a-7) and only if, immediately after such purchase: the Money Market Fund
would have no more than 5% of its total assets in "First Tier Securities"
(as defined in Rule 2a-7) of any one issuer, excluding government
securities and except as otherwise permitted for temporary purposes and for
certain guarantees and unconditional puts; the Money Market Fund would own
no more than 10% of the voting securities of any one issuer; the Money
Market Fund would have no more than 5% of its total assets in "Second Tier
Securities" (as defined in Rule 2a-7); and the Money Market Fund would have
no more than the greater of $1 million or 1% of its total assets in Second
Tier Securities of any one issuer.
2
<PAGE> 29
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
ASSET ALLOCATION MODEL. A key component of the Asset Allocation Model is a
set of assumptions concerning expected risk and return and investor attitudes
toward risk which are incorporated into the asset allocation decision. The
principal inputs of financial data to the Asset Allocation Model currently are
(i) consensus estimates of the earnings, dividends and payout ratios on a broad
cross-section of common stocks as reported by independent financial reporting
services which survey a broad cross-section of Wall Street analysts, (ii) the
estimated current yield to maturity on new long-term corporate bonds rated "AA"
by S&P, (iii) the present yield on money market instruments, (iv) the historical
statistical standard deviation in investment return for each class of asset, and
(v) the historical statistical correlation of investment returns among the
various asset classes in which the Asset Allocation Fund invests. Using these
data, the Asset Allocation Model is run daily to determine the recommended asset
allocation. The model's recommendations are presently made in 5% increments.
UNRATED AND DOWNGRADED INVESTMENTS. The Funds may purchase instruments
that are not rated if, in the opinion of Wells Fargo Bank, such obligations are
comparable to other rated investments that are permitted to be purchased by such
Fund. After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by such Fund. Neither
event requires an immediate sale of such security by such Fund. To the extent
the ratings given by Moody's or S&P may change as a result of changes in such
organizations or their rating systems, each Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment policies
contained in the Prospectus and in this SAI. The ratings of Moody's and S&P are
more fully described in the SAI Appendix.
WHEN-ISSUED SECURITIES. Certain of the securities in which the Non-Money
Market Funds may invest may be purchased on a when-issued basis, in which case
delivery and payment normally take place within 45 days (120 days with respect
to the Growth and Income Fund) after the date of the commitment to purchase.
These Funds will only make commitments to purchase securities on a when-issued
basis with the intention of actually acquiring the securities, but may sell them
before the settlement date if it is deemed advisable. When-issued securities are
subject to market fluctuation, and no income accrues to the purchaser during the
period prior to issuance. The purchase price and the interest rate that will be
received on debt instruments are fixed at the time the purchaser enters into the
commitment. Purchasing a security on a when-issued basis can involve a risk that
the market price at the time of delivery may be lower than the agreed-upon
purchase price, in which case there could be an unrealized loss at the time of
delivery. Each Fund currently does not intend to invest more than 5% of its
assets in when-issued securities during the coming year.
Each Fund will segregate cash, U.S. Government obligations or other
high-quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will segregate additional liquid assets on a daily basis so
that the value of the segregated assets is equal to the amount of such
commitments.
LOANS OF PORTFOLIO SECURITIES. The Non-Money Market Funds may lend
securities from their portfolios to brokers, dealers and financial institutions
(but not individuals) if cash, U.S. Government obligations or other high-quality
debt instruments equal to at least 100% of the current market value of the
securities loan (including accrued interest thereon) plus the interest payable
to such Fund with respect to the loan is maintained with the Fund. In
determining whether to lend a security to a particular broker, dealer or
financial institution, a Fund's Investment Adviser will consider all relevant
facts and circumstances, including the credit-worthiness of the broker, dealer,
or financial institution. Any loans of portfolio securities will be fully
collateralized based on values that are marked to market daily. The Non-Money
Market Funds will not enter into any portfolio security lending arrangement
having a duration of longer than one year. Any securities that a Fund may
receive as collateral do not become part of the Fund's portfolio at the time of
the loan and, in the event of a default by the borrower, the Fund will, if
permitted by law, dispose of such collateral except for such
3
<PAGE> 30
part thereof that is a security in which the Fund is permitted to invest. During
the time securities are on loan, the borrower will pay the Fund any accrued
income on those securities, and the Fund may invest the cash collateral and earn
additional income or receive an agreed-upon fee from a borrower that has
delivered cash-equivalent collateral. None of the Non-Money Market Funds will
lend securities having a value that exceeds one third of the current value of
its total assets. Loans of securities by any of the Non-Money Market Funds will
be subject to termination at the Fund's or the borrower's option. The Non-Money
Market Funds may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with Life & Annuity Trust, its Investment Adviser, or its Distributor.
FOREIGN OBLIGATIONS. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to domestic issuers. In
addition, with respect to certain foreign countries, taxes may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation of confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries. None of the Funds may
invest 25% or more of its assets in foreign obligations.
AMERICAN DEPOSITARY RECEIPTS. American Depositary Receipts ("ADRs") are
certificates evidencing ownership of shares of a foreign-based issuer held in
trust by a bank or similar financial institution. Designed for use in U.S.
securities markets, ADRs are alternatives to the purchase of the underlying
securities in their national markets and currencies.
CONVERTIBLE SECURITIES (LOWER-RATED SECURITIES). Subject to the
limitations described in the Prospectus, the Growth and Income Fund may invest
in convertible securities that are not rated in one of the four highest rating
categories by an NRSRO. The yields on such lower-rated securities (which include
securities also known as junk bonds) generally are higher than the yields
available on higher-rated securities. However, investments in lower-rated
securities and comparable unrated securities generally involve greater
volatility of price and risk of loss of income and principal, including the
probability of default by or bankruptcy of the issuers of such securities.
Lower-rated securities and comparable unrated securities (a) will likely have
some quality and protective characteristics that, in the judgment of the rating
organization, are outweighed by large uncertainties or major risk exposures to
adverse conditions and (b) are predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation. Accordingly, it is possible that these types of factors
could, in certain instances, reduce the value of securities held in the Fund's
portfolio, with a commensurate effect on the value of the Fund's interests.
Therefore, an investment in the Fund should not be considered as a complete
investment program and may not be appropriate for all investors.
While the market values of lower-rated securities and comparable unrated
securities tend to react less to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain
lower-rated securities and comparable unrated securities also tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, lower-rated securities and
comparable unrated securities generally present a higher degree of credit risk.
Issuers of lower-rated securities and comparable unrated securities often are
highly leveraged and may not have more traditional methods of financing
available to them so that their ability to service their debt obligations during
an economic downturn or during sustained periods of rising interest rates may be
impaired. The risk of loss due to default by such issuers is significantly
greater because lowerrated securities and comparable unrated securities
generally are unsecured and frequently are subordinated to the prior payment of
senior indebtedness. The Fund may incur
4
<PAGE> 31
additional expenses to the extent that it is required to seek recovery upon a
default in the payment of principal or interest on its portfolio holdings. The
existence of limited markets for lowerrated securities and comparable unrated
securities may diminish the Fund's ability to (a) obtain accurate market
quotations for purposes of valuing such securities and calculating its net asset
value and (b) sell the securities at fair value either to meet redemption
requests or to respond to changes in the economy or in financial markets.
Certain lower-rated debt securities and comparable unrated securities
frequently have call or buy-back features that permit their issuers to call or
repurchase the securities from their holders, such as the Fund. If an issuer
exercises these rights during periods of declining interest rates, the Fund may
have to replace the security with a lower-yielding security, thus resulting in a
decrease return to the Fund.
The market for certain lower-rated securities and comparable unrated
securities is relatively new and has not weathered a major economic recession.
The effect that such a recession might have on such securities is not known. Any
such recession, however, could disrupt severely the market for such securities
and affect adversely the value of such securities. Any such economic downturn
also could affect adversely the ability of the issuers of such securities to
repay principal and pay interest thereon.
PRIVATELY ISSUED SECURITIES (RULE 144A). The Growth and Income Fund may
invest in privately issued securities which may be resold only in accordance
with Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"). Rule
144A Securities are restricted securities and may not be publicly traded.
Accordingly, the liquidity of the market for specific Rule 144A Securities may
vary. The Investment Adviser, using guidelines approved by the Board of Trustees
of Life & Annuity Trust evaluates the liquidity characteristics of each Rule
144A Security proposed for purchase by the Fund on a case-by-case basis and
considers the following factors, among others, in its evaluation: (1) the
frequency of trades and quotes for the Rule 144A Security; (2) the number of
dealers willing to purchase or sell the Rule 144A Security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the Rule
144A Security; and (4) the nature of the Rule 144A Security and the nature of
the marketplace trades (e.g., the time needed to dispose of the Rule 144A
Security, the method of soliciting offers and the mechanics of transfer). The
Growth and Income Fund does not intend to invest more than 5% of its net assets
in Rule 144A Securities during the coming year.
INVESTMENT IN WARRANTS. The Growth and Income Fund may invest no more than
5% of its net assets at the time of purchase in warrants (other than those that
have been acquired in units or attached to other securities), and not more than
2% of its net assets in warrants which are not listed on the New York or
American Stock Exchange. Warrants represent rights to purchase securities at a
specific price valid for a specific period of time. The prices of warrants do
not necessarily correlate with the prices of the underlying securities. The
Growth and Income Fund may only purchase warrants on securities in which the
Fund may invest directly. The Growth and Income Fund does not presently intend
to invest in warrants.
5
<PAGE> 32
MANAGEMENT
Trustees And Officers. The principal occupations during the past five years
of the Trustees and executive officers of Life & Annuity Trust are listed below.
The address of each, unless otherwise indicated, is 111 Center Street, Little
Rock, Arkansas 72201. Trustees deemed to be "interested persons" of Life &
Annuity Trust for purposes of the 1940 Act are indicated by an asterisk.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE POSITION DURING PAST 5 YEARS
--------------------- -------- --------------------
<S> <C> <C>
Jack S. Euphrat, 74......... Director Private Investor.
415 Walsh Road
Atherton, CA 94207
*R. Greg Feltus, 45......... Trustee, Chairman and Senior Vice President of
President Stephens; Manager of Financial
Services Group; President of
Stephens Insurance Services
Inc.; Senior Vice President of
Stephens Sports Management Inc.;
and President of Investor
Brokerage Insurance Inc.
Thomas S. Goho, 54.......... Trustee T.B. Rose Faculty
321 Beechcliff Court Fellow-Business, Wake Forest
Winston-Salem, NC 27104 University Calloway School of
Business and Accountancy;
Associate Professor of Finance
of the School of Business and
Accounting at Wake Forest
University since 1983.
Joseph N. Hankin, 55........ Trustee President Westchester Community
75 Grasslands Road College since 1971; President of
Valhalla, NY 10595 Hartfor Junior College from 1967
to 1971; Adjunct Professor of
Columbia University Teachers
College since 1976.
*W. Rodney Hughes, 70....... Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 78......... Trustee Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 52........ Trustee Private Investor; Real Estate
10 Legrae Street Developer; Chairman of
Charleston, SC 29401 Renaissance Properties Ltd.;
President of Morse Investment
Corporation; and Co-Managing
Partner of Main Street Ventures.
Richard H. Blank, Jr., 40... Chief Operating Officer, Associate of Financial Services
Secretary and Treasurer Group of Stephens; Director of
Stephens Sports Management Inc.;
and Director of Capo Inc.
</TABLE>
6
<PAGE> 33
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM REGISTRANT
NAME AND POSITION FROM REGISTRANT AND FUND COMPLEX
----------------- ---------------------- ------------------
<S> <C> <C>
Jack S. Euphrat $10,500 $31,500
Trustee
*R. Greg Feltus 0 0
Trustee
Thomas S. Goho 10,500 31,500
Trustee
Joseph N. Hankin 500 1,500
Trustee
*Zoe Ann Hines 0 0
Trustee
(resigned as of September 6, 1996)
*W. Rodney Hughes 8,750 26,250
Trustee
Robert M. Joses 10,500 31,500
Trustee
*J. Tucker Morse 8,750 26,250
Trustee
</TABLE>
Trustees of the Trust who are officers or employees of Stephens or Wells
Fargo Bank are not compensated by the Trust for their services but are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. Trustees who are affiliated with Stephens or Wells Fargo Bank also do
not receive compensation from the Trust and also are reimbursed for all
out-of-pocket expenses relating to attendance at board meetings. The Trust,
Overland Express Funds, Inc., Stagecoach Funds, Inc., Stagecoach Trust and
Master Investment Trust are considered to be members of the same fund complex as
such term is defined in Form N-1A under the 1940 Act (the "Wells Fargo Fund
Complex"). MasterWorks Funds Inc., Master Investment Portfolio, and Managed
Series Investment Trust together form a separate fund complex (the "BGFA Fund
Complex"). Each of the Trustees and Officers of the Trust serves in the
identical capacity as directors and officers or as trustees and/or officers of
each registered open-end management investment company in both the Wells Fargo
and BGFA Fund Complexes, except for Joseph N. Hankin, who only serves the
aforementioned members of the Wells Fargo Fund Complex, and Zoe Ann Hines who,
after September 6, 1996, only serves the aforementioned members of the BGFA Fund
Complex. The Trustees are compensated by other companies and trusts within the
fund complex for their services as directors/trustees to such companies and
trusts. Currently the Trustees do not receive any retirement benefits or
deferred compensation from the Trust or any other member of each fund complex.
As of the date of this SAI, Trustees and officers of Life & Annuity Trust
as a group beneficially owned less than 1% of the outstanding interests of Life
& Annuity Trust.
INVESTMENT ADVISER. Each of the Funds is advised by Wells Fargo Bank
pursuant to an Advisory Contract. BGFA serves as subadviser to the U.S.
Government Allocation Fund and the Asset Allocation Fund. The Advisory Contracts
provide that Wells Fargo Bank shall furnish to the Funds investment guidance and
policy direction in connection with the daily portfolio management of each Fund.
Under the Advisory Contracts, Wells Fargo Bank furnishes to the Board of
Trustees periodic reports on the investment strategy and performance of each
Fund. Wells Fargo Bank has agreed to provide to the Funds, among other things,
money market and fixed-income research, analysis and
7
<PAGE> 34
statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and, in the
case of the Money Market Fund, the U.S. Government Allocation Fund and the Asset
Allocation Fund, average maturities of the portfolios of each Fund. For the
period ended December 31, 1994 and the years ended December 31, 1995 and 1996,
each Fund paid to Wells Fargo Bank as compensation for its advisory services the
amounts indicated below and Wells Fargo Bank waived the indicated amounts.
<TABLE>
<CAPTION>
1994* 1995 1996
FEES FEES FEES FEES FEES FEES
FUND PAID WAIVED PAID WAIVED PAID WAIVED
---- ---- ------- ---- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Asset Allocation $0 $17,516 $0 $85,107 $213,961 $ 24,043
Growth and Income 0 4,064 0 19,169 81,759 46,059
Money Market 0 2,309 0 9,854 15,620 27,451
U.S. Government Allocation 0 2,149 0 12,949 6,751 42,413
</TABLE>
- ---------------
* The Asset Allocation Fund commenced operations on April 15, 1994, the
Growth and Income Fund on April 12, 1994, the Money Market Fund on May 19,
1994 and the U.S. Government Allocation Fund on April 26, 1994.
Each Advisory Contract will continue in effect for more than two years
provided the continuance is approved annually (i) by the holders of a majority
of the respective Fund's outstanding voting securities or by Life & Annuity
Trust's Board of Trustees and (ii) by a majority of the Trustees of Life &
Annuity Trust who are not parties to the Advisory Contract or "interested
persons" (as defined in the 1940 Act) of any such party. Each Advisory Contract
may be terminated on 60 days' written notice by either party and terminates
automatically if assigned.
SUB-INVESTMENT ADVISER. Barclays Global Fund Advisors ("BGFA") serves as
sub-adviser to the Asset Allocation and U.S. Government Allocation Funds
pursuant to a Sub-Advisory Contract (the "Sub-Advisory Contract") among Life &
Annuity Trust, on behalf of the Asset Allocation and U.S. Government Allocation
Funds, Wells Fargo Bank and BGFA. Subject to the direction of the Trust's Board
of Trustees and the overall supervision and control of Wells Fargo Bank and the
Trust, BGFA makes recommendations regarding the investment and reinvestment of
the Asset Allocation and U.S. Government Allocation Funds' assets. BGFA is
responsible for implementing and monitoring the performance of the asset
allocation model employed with respect to these Funds. BGFA furnishes to Wells
Fargo Bank periodic reports on the investment activity and performance of these
Funds and such additional reports and information as Wells Fargo Bank and the
Trust's Board of Trustees and officers may reasonably request. BGFA was created
by the reorganization of Wells Fargo Nikko Investment Advisors ("WFNIA"), a
former affiliate of Wells Fargo Bank, with and into an affiliate of Wells Fargo
Institutional Trust Company, N.A. ("WFITC"). Prior to January 1, 1996, WFNIA
provided sub-advisory services directly to the Asset Allocation and U.S.
Government Allocation Funds.
For the period ended December 31, 1994 and the years ended December 31,
1995 and 1996, Wells Fargo Bank paid to WFNIA / BGFA the amounts indicated below
for its services as sub-adviser to the Asset Allocation and U.S. Government
Allocation Funds. WFNIA / BGFA did not waive any sub-advisory fees.
<TABLE>
<CAPTION>
1994* 1995 1996
FUND FEES PAID FEES PAID FEES PAID
---- --------- --------- ---------
<S> <C> <C> <C>
Asset Allocation $5,767 $28,442 $79,587
U.S. Government Allocation 540 3,251 12,320
</TABLE>
- ---------------
* The Asset Allocation Fund commenced operations on April 15, 1994, and the
U.S. Government Allocation Fund commenced operations on April 26, 1994.
ADMINISTRATOR AND CO-ADMINISTRATOR. The Trust has retained Wells Fargo
Bank as administrator and Stephens as coadministrator on behalf of each Fund.
The Administration Agreement between Wells Fargo and each Fund, and the
CoAdministration Agreement among Wells Fargo Bank,
8
<PAGE> 35
Stephens and each Fund, state that Wells Fargo Bank and Stephens shall provide
as administrative services, among other things: (i) general supervision of the
operation of each Fund, including coordination of the services performed by the
Fund's investment adviser, transfer agent, custodian, shareholder servicing
agent(s), independent public accountants and legal counsel, regulatory
compliance, including the compilation of information for documents such as
reports to, and filings with, the SEC and state securities commissions; and
preparation of proxy statements and shareholder reports for the Fund; and (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Trust's officers and Board of
Directors. Wells Fargo Bank and Stephens also furnish office space and certain
facilities required for conducting the business of each Fund together with
ordinary clerical and bookkeeping services. Stephens pays the compensation of
the Trust's Trustees, officers and employees who are affiliated with Stephens.
The administrator and co-administrator are entitled to receive a monthly fee of
0.04% and 0.02%, respectively, of the average daily net assets of each Fund.
For the period ended December 31, 1994 and the years ended December 31,
1995 and 1996, Stephens served as sole administrator to the Funds and was
entitled to monthly administration fees at the annual rate of 0.03% of each
Fund's average daily net assets. Stephens was paid administrative fees as
follows:
<TABLE>
<CAPTION>
FUND 1994 1995 1996
---- ---- ---- -------
<S> <C> <C> <C>
Asset Allocation $0 $0 $16,872
Growth and Income 0 0 6,291
Money Market 0 0 0
U.S. Government Allocation 0 0 0
</TABLE>
CUSTODIAN. Wells Fargo Bank has been retained to act as Custodian for the
Growth and Income and Money Market Funds. Barclays Global Investors, N.A.
("BGI"; formerly, WFITC) acts as Custodian for the Asset Allocation and U.S.
Government Allocation Funds. The Custodian, among other things, maintains a
custody account or accounts in the name of each Fund; receives and delivers all
assets for each Fund upon purchase and upon sale or maturity; collects and
receives all income and other payments and distributions on account of the
assets of each Fund and pays all expenses of each Fund. For its services as
Custodian to the Growth and Income and Money Market Funds, Wells Fargo Bank is
entitled to an asset-based fee and transaction charges. BGI is not entitled to
receive compensation for its services as Custodian to the Allocation Funds so
long as its subsidiary, BGFA, is entitled to receive fees for providing
investment advisory services to such Funds. BGI is entitled to compensation from
the fees paid to BGFA for sub-advisory services.
TRANSFER AND DIVIDEND DISBURSING AGENT. Wells Fargo Bank has been retained
to act as Transfer and Dividend Disbursing Agent for the Funds. For its services
as transfer and dividend disbursing agent to the Funds, Wells Fargo Bank is
entitled to receive monthly payments at the annual rate of 0.10% of the Money
Market Fund's average daily net assets and 0.14% of each other Fund's average
daily net assets. Under the transfer agency agreement in place for the year
ended December 31, 1996, Wells Fargo Bank was entitled to be compensated at an
annual rate of 0.05% of each Fund's average daily net assets when the assets of
each Fund exceeded $20 million.
For the years ended December 31, 1995, and 1996, Wells Fargo Bank waived
all fees and expenses payable to it under the transfer agency and custody
agreements with the Funds.
PERFORMANCE CALCULATIONS
As indicated in the Prospectus, the Funds may advertise certain yield and
total return information computed in the manner described in the Prospectus. Any
Fund advertising would be accompanied by performance information of the related
insurance company separate accounts or by an explanation that Fund performance
information does not reflect separate account fees and charges. As and to the
extent required by the SEC, an average annual total rate of return ("T") is
computed by
9
<PAGE> 36
using the redeemable value at the end of a specified period ("E-V") of a
hypothetical initial investment of $1,000 ("P") over a period of years ("n")
according to the following formula: P(1+T)n = ERV.
The Funds may advertise cumulative total return of shares. Cumulative total
return of shares is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Cumulative total return of shares generally is
expressed as a percentage rate which is calculated by combining the income and
principal charges for a specified period and dividing by the net asset value per
share at the beginning of the period. Advertisements may include the percentage
rate of total return of shares or may include the value of a hypothetical
investment in shares at the end of the period which assumes the application of
the percentage rate of total return.
For the periods ended December 31, 1996, the following chart provides the
average annual and cumulative total returns for the Funds listed below:
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL CUMULATIVE
TOTAL RETURN: TOTAL RETURN: TOTAL RETURN:
YEAR ENDED INCEPTION TO INCEPTION TO
FUND 12/31/96 12/31/96* 12/31/96*
---- -------------- -------------- --------------
<S> <C> <C> <C>
Asset Allocation 11.46% 14.57% 45.35%
Growth and Income 22.44% 20.04% 65.25%
U.S. Government Allocation 3.99% 6.68% 19.45%
</TABLE>
- ---------------
* The Asset Allocation Fund commenced operations on April 15, 1994, the
Growth and Income Fund on April 12, 1994 and the U.S. Government
Allocation Fund on April 26, 1994.
YIELD. As indicated in the Prospectus, the U.S. Government Allocation Fund
may advertise certain yield information. As and to the extent required by the
SEC, yield is calculated based on a 30-day (or one month) period, computed by
dividing the net investment income per share earned during the period by the net
asset value per share on the last day of the period, according to the following
formula: YIELD = 2[((a-b/cd)+1)6-1], where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the net asset value per share on the last
day of the period. The net investment income of the U.S. Government Allocation
Fund includes actual interest income, plus or minus amortized purchase discount
(which may include original issue discount) or premium, less accrued expenses.
Realized and unrealized gains and losses on portfolio securities are not
included in the Fund's net investment income. The Fund's 30-day yield for the 30
days ended December 31, 1996 was 5.23%.
In addition, as indicated in the Prospectus, the Money Market Fund may
advertise certain yield information. Current yield for the Money Market Fund is
calculated based on the net changes, exclusive of capital changes, over a
seven-day period, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
(365/7) with the resulting yield figure carried to at least the nearest
hundredth of one percent. The Fund's seven-day and 30-day yields for the periods
ended December 31, 1996 were 4.82% and 4.70%, respectively.
The yields for the U.S. Government Allocation Fund and the Money Market
Fund will fluctuate from time to time, unlike bank deposits or other investments
that pay a fixed yield for a stated period of time, and do not provide a basis
for determining future yields since they are based on historical data. Yield is
a function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to the Fund.
In addition, investors should recognize that changes in the net asset value
of shares of the U.S. Government Allocation Fund will affect the yield of the
Fund for any specified period, and such changes should be considered together
with the Fund's yield in ascertaining the Fund's total return to
10
<PAGE> 37
shareholders for the period. Yield information for the Funds may be useful in
reviewing the performance of the Funds and for providing a basis for comparison
with investment alternatives. The yield of a Fund, however, may not be
comparable to the yields from investment alternatives because of differences in
the foregoing variables and differences in the methods used to value portfolio
securities, compute expenses and calculate yield.
From time to time, and only to the extent the comparison is appropriate for
a Fund, Life & Annuity Trust may quote the Fund's performance or price-earning
ratio in advertising and other types of literature as compared to the
performance of the S&P 500 Index, the Dow Jones Industrial Average, the Wilshire
5000 Equity Index, the Lehman Brothers 20+ Treasury Index, the Lehman Brothers
5-7 Year Treasury Index, Donoghue's Money Fund Averages, Real Estate Investment
Averages (as reported by the National Association of Real Estate Investment
Trusts), Gold Investment Averages (provided by the World Gold Council), Bank
Averages (which is calculated from figures supplied by the U.S. League of
Savings Institutions based on effective annual rates of interest on both
passbook and certificate accounts), average annualized certificate of deposit
rates (from the Federal Reserve G-13 Statistical Releases or the Bank Rate
Monitor), the Salomon One Year Treasury Benchmark Index, the Consumer Price
Index (as published by the U.S. Bureau of Labor Statistics), Ten Year U.S.
Government Bond Average, S&P's Corporate Bond Yield Averages, Schabacter
Investment Management Indices, Salomon Brothers High Grade Bond Index, Lehman
Brothers Long-Term High Quality Government/Corporate Bond Index, other managed
or unmanaged indices or performance data of bonds, stocks or government
securities (including data provided by Ibbotson Associates), or by other
services, companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P 500 Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. Unmanaged indices
may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Managed indices
generally do reflect such deductions.
The Fund's performance also may be compared to those of other mutual funds
having similar objectives. This comparative performance could be expressed as a
ranking prepared by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Bloomberg Financial Markets or Morningstar, Inc.,
independent services which monitor the performance of mutual funds. The Funds'
performance is calculated by relating net asset value per share at the beginning
of a stated period to the net asset value of the investment, assuming
reinvestment of all gains distributions and dividends paid, at the end of the
period. The Money Market Fund's comparative performance will be based on a
comparison of yields, as described above, or total return, as reported by
Lipper, Survey Publications, Donoghue or Morningstar, Inc.
Any such comparisons may be useful to investors who wish to compare a
Fund's past performance with that of its competitors. Of course, past
performance cannot be a guarantee of future results. Life & Annuity Trust also
may include, from time to time, a reference to certain marketing approaches of
the Distributor, including, for example, a reference to a potential holder being
contacted by a selected broker or dealer. General mutual fund statistics
provided by the Investment Company Institute may also be used.
Life & Annuity Trust also may disclose, in advertising and other types of
literature, information and statements that Wells Capital Management, Inc.
("WCM" formerly, WFIM), a division of Wells Fargo Bank, is listed in the top 100
by Institutional Investor magazine in its July 1996 survey "America's Top 300
Money Managers." This survey ranks money managers in several asset categories.
Life & Annuity Trust also may disclose in advertising and other types of sales
literature the assets and categories of assets under management by its
investment adviser or sub-adviser and the total amount of assets and mutual fund
assets managed by Wells Fargo Bank. As of April 1, 1997, Wells Fargo Bank and
its affiliates provided investment advisory services for approximately $54
billion of assets of individuals, trusts, estates and institutions and $20
billion of mutual fund assets.
11
<PAGE> 38
In addition, Life & Annuity Trust also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. Life &
Annuity Trust also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and the
related "Tax Freedom Day."
Life & Annuity Trust also may use the following information in
advertisements and other types of literature, only to the extent the information
is appropriate for a Fund: (i) the Consumer Price Index may be used to assess
the real rate of return from an investment in a Fund; (ii) other government
statistics, including, but not limited to, The Survey of Current Business, may
be used to illustrate investment attributes of a Fund or the general economic,
business, investment, or financial environment in which a Fund operates; (iii)
the effect of tax-deferred compounding on the investment returns of a Fund, or
on returns in general, may be illustrated by graphs, charts, etc., where such
graphs or charts would compare, at various points in time, the return from an
investment in a Fund (or returns in general) on a taxdeferred basis (assuming
reinvestment of capital gains and dividends and assuming one or more tax rates)
with the return on a taxable basis; and (iv) the sectors or industries in which
a Fund invests may be compared to relevant indices of stocks or surveys (e.g.,
S&P Industry Surveys) to evaluate a Fund's historical performance or current or
potential value with respect to the particular industry or sector.
From time to time, Life & Annuity Trust also may include in advertisements
or other marketing materials a discussion of certain of the objectives of the
investment strategy of the U.S. Government Allocation Fund and the Asset
Allocation Fund and a comparison of this strategy with other investment
strategies. In particular, the responsiveness of these Funds to changing market
conditions may be discussed. For example, Life & Annuity Trust may describe the
benefits derived by having Wells Fargo Bank, as Investment Adviser, and BGFA, as
investment sub-adviser, monitor and reallocate investments among the three asset
categories described in the Funds' Prospectus. Life & Annuity Trust's
advertising or other marketing material also might set forth illustrations
depicting examples of recommended allocations in different market conditions. It
may state, for example, that when the model indicates that stocks represent a
better value than bonds or money market instruments, the Asset Allocation Fund
might consist of 70% stocks, 25% bonds and 5% money market instruments and that
when the model indicates that bonds represent a better value than stocks or
money market instruments, the balance of assets might shift to 60% bonds, 20%
stocks and 20% money market instruments.
Life & Annuity Trust also may discuss in advertising and other types of
literature that a Fund has been assigned a rating by an NRSRO, such as Standard
& Poor's Corporation. Such rating would assess the creditworthiness of the
investments held by a Fund. The assigned rating would not be a recommendation to
purchase, sell or hold a Fund's shares since the rating would not comment on the
net asset value of the Fund's shares or the suitability of the Fund for a
particular investor. In addition, the assigned rating would be subject to
change, suspension or withdrawal as a result of changes in, or unavailability
of, information relating to the Fund or its investments. Life & Annuity Trust
may compare a Fund's performance with other investments which are assigned
ratings by NRSROs. Any such comparisons may be useful to investors who wish to
compare the Fund's past performance with other rated investments.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each of the Non-Money Market Funds is
determined by the custodian of the Fund on each day the NYSE is open for
trading. Net asset value per share for the
12
<PAGE> 39
Money Market Fund is determined by the Custodian on each day Wells Fargo Bank is
open for business.
NON-MONEY MARKET FUNDS. Securities of a Non-Money Market Fund for which
market quotations are available are valued at latest prices. Securities for
which the primary market is a national securities exchange or the National
Association of Securities Dealers Automated Quotations National Market System
are valued at last sale prices. In the absence of any sale of such securities on
the valuation date and in the case of other securities, including U.S.
Government obligations but excluding debt instruments maturing in 60 days or
less, the valuations are based on latest quoted bid prices. Debt instruments
maturing in 60 days or less are valued at amortized cost. Futures contracts are
marked to market daily at their respective settlement prices determined by the
relevant exchange. These prices are not necessarily final closing prices but are
intended to represent prices prevailing during the final 30 seconds of the
trading day. Options listed on a national exchange are valued at the last sale
price on the exchange on which they are traded at the close of the NYSE, or, in
the absence of any sale on the valuation date, at latest quoted bid prices.
Options not listed on a national exchange are valued at latest quoted bid
prices. In all cases, bid prices are furnished by a reputable independent
pricing service approved by the Board of Trustees. Prices provided by an
independent pricing service may be determined without exclusive reliance on
quoted prices and may take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. All other securities and other assets of the Funds for which current
market quotations are not readily available are valued at fair value as
determined in good faith by Life & Annuity Trust's Trustees and in accordance
with procedures adopted by the Trustees.
MONEY MARKET FUND. As indicated under "Investing in the Funds" in the
Prospectus, the Money Market Fund uses the amortized cost method to determine
the value of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act.
The amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity, regardless of the impact
of fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
that the Money Market Fund would receive if the security were sold. During these
periods, the yield to a shareholder may differ somewhat from that which could be
obtained from a similar fund that uses a method of valuation based upon market
prices. Thus, during periods of declining interest rates, if the use of the
amortized cost method resulted in a lower value of the Money Market Fund's
portfolio on a particular day, a prospective investor in the Fund would be able
to obtain a somewhat higher yield than would result from investment in a fund
using solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, a fund must maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase securities having remaining maturities (as defined
in Rule 2a-7) of thirteen months or less and invest only in those high-quality
securities that are determined by the Board of Trustees to present minimal
credit risks. The maturity of an instrument is generally deemed to be the period
remaining until the date when the principal amount thereof is due or the date on
which the instrument is to be redeemed. However, Rule 2a-7 provides that the
maturity of an instrument may be deemed shorter in the case of certain
instruments, including certain variable and floating rate instruments subject to
demand features. Pursuant to the Rule, the Board is required to establish
procedures designed to stabilize, to the extent reasonably possible, a fund's
price per share as computed for the purpose of sales and redemptions at $1.00.
Such procedures include review of the Money Market Fund's portfolio holdings by
the Board of Trustees, at such intervals as it may deem appropriate, to
determine whether the Money Market Fund's net asset value calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation is examined by the Board of Trustees. If such
deviation exceeds 1/2 of 1%, the Board will promptly consider what action, if
any,
13
<PAGE> 40
will be initiated. In the event the Board determines that a deviation exists
that may result in material dilution or other unfair results to investors or
existing shareholders, the Board will take such corrective action as it regards
as necessary and appropriate, including the sale of portfolio instruments prior
to maturity to realize capital gains or losses or to shorten average portfolio
maturity.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payment for shares may, in the discretion of the adviser, be made in the
form of securities that are permissible investments for the Funds as described
in the Prospectuses. For further information about this form of payment please
contact Stephens. In connection with an in-kind securities payment, the Funds
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by a Fund and that such
Fund receives satisfactory assurances that (i) it will have good and marketable
title to the securities received by it; (ii) that the securities are in proper
form for transfer to the Fund; and (iii) adequate information will be provided
concerning the basis and other matters relating to the securities.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings, or during
which trading is restricted, or during which as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such periods as the
SEC may permit.
The Trust may suspend redemption rights or postpone redemption payments for
such periods as are permitted under the 1940 Act. The Trust may also redeem
shares involuntarily or make payment for redemption in securities or other
property if it appears appropriate to do so in light of the Trust's
responsibilities under the 1940 Act.
In addition, the Trust may redeem shares involuntarily to reimburse the
Funds for any losses sustained by reason of the failure of a shareholders to
make full payment for shares purchased or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
shares of a Fund as provided from time to time in the Prospectus.
PORTFOLIO TRANSACTIONS
Purchases and sales of equity securities on a securities exchange are
effected through brokers who charge a negotiated commission for their services.
Orders may be directed to any broker including, to the extent and in the manner
permitted by applicable law, Stephens or Wells Fargo Securities Inc. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount.
Purchases and sales of non-equity securities are usually principal
transactions. Non-equity securities normally are purchased or sold from or to
dealers serving as market makers for the securities at a net price. Each of the
Funds also may purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market securities
are traded on a net basis and do not involve brokerage commissions. The cost of
executing non-equity securities transactions consists primarily of dealer
spreads and underwriting commissions. Under the 1940 Act, persons affiliated
with Life & Annuity Trust are prohibited from dealing with Life & Annuity Trust
as principals in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the SEC or an exemption is otherwise
available.
Life & Annuity Trust has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by Life & Annuity Trust's Board
14
<PAGE> 41
of Trustees, Wells Fargo Bank, as adviser, or BGFA, as sub-adviser, is
responsible for each Fund's portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of Life & Annuity Trust to
obtain the best results taking into account the dealer's general execution and
operational facilities, the type of transaction involved and other factors such
as the dealer's risk in positioning the securities involved. Wells Fargo Bank
and BGFA generally seek reasonably competitive spreads or commissions.
In assessing the best overall terms available for any transaction, Wells
Fargo Bank and BGFA consider factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing basis.
As a result, the Master Portfolio may pay a broker/dealer which furnishes
brokerage and research services a higher commission than that which may be
charged by another broker/dealer for effecting the same transaction. Such
brokerage and research services might consist of reports and statistics relating
to specific companies or industries, general summaries of groups of stocks or
bonds and their comparative earnings and yields, or broad overviews of the
stock, bond and government securities markets and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by Wells Fargo Bank and BGFA and
does not reduce the advisory fees payable by a Fund. The Board of Trustees will
periodically review the commissions paid by each Fund to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Fund. It is possible that certain of the
supplementary research or other services received will primarily benefit one or
more other investment companies or other accounts for which investment
discretion is exercised. Conversely, a Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.
Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), an adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Fund in any transaction may be less favorable than that available
from another broker/dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered.
Broker/dealers may furnish statistical, research and other information or
services which are deemed to be beneficial to a Fund's investment programs.
Research services received from brokers supplement the advisers' own research
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities, market,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services with respect to the performance, investment
activities and fees and expenses of other mutual funds. Such information may be
communicated electronically, orally or in written form. Research services may
also include the providing of equipment used to communicate research
information, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information.
The outside research assistance may be useful, since the brokers utilized
by the funds as a group may follow a broader universe of securities and other
matters than the staff of Wells Fargo Bank
15
<PAGE> 42
and/or BGFA can follow. In addition, this research may provide Wells Fargo Bank
and/or BGFA with a diverse perspective on financial markets. Research services
which are provided to Wells Fargo Bank and/or BGFA by brokers are available for
the benefit of all accounts managed or advised by Wells Fargo Bank and/or BGFA.
It is the opinion of Wells Fargo Bank that this material is beneficial in
supplementing their research and analysis; and, therefore, it may benefit the
Funds by improving the qualify of Wells Fargo Bank's investment advice. The
advisory fees paid by the Funds are not reduced because Wells Fargo Bank and
BGFA may receive such services.
BROKERAGE COMMISSIONS. For the year ended December 31, 1996, the Asset
Allocation and Growth and Income Funds paid brokerage commissions in the amount
of $2,682 and $85,137, respectively. For the year ended December 31, 1995, the
Asset Allocation and the Growth and Income Funds paid brokerage commissions in
the amount of $656 and $31,290, respectively. The other Funds did not pay
brokerage commissions during these periods.
SECURITIES OF REGULAR BROKER/DEALERS. On December 31, 1996, the Funds
owned securities (repurchase agreements) of their "regular brokers or dealers,"
as defined in the 1940 Act, or their parents as follows:
<TABLE>
<CAPTION>
FUND AMOUNT REGULAR BROKER/DEALER
---- ---------- ---------------------
<S> <C> <C>
Growth and Income $ 795,000 Goldman Sachs & Co
Money Market $ 815,000 Goldman Sachs & Co
Money Market $1,747,000 HSBC Securities
Money Market $1,102,000 J P Morgan
Money Market $1,500,000 Morgan Stanley
</TABLE>
The other Funds did not own securities of their "regular brokers or
dealers" on December 31, 1996.
PORTFOLIO TURNOVER. For the year ended December 31, 1996, the portfolio
turnover rates for the Asset Allocation Fund, the Growth and Income Fund and the
U.S. Government Allocation Fund were 4%, 95% and 222%, respectively. The higher
portfolio turnover rates for the U.S. Government Allocation Fund should not
materially adversely affect this Fund because portfolio transactions ordinarily
will be made directly with principals on a net basis (although they may be
subject to markups) and, consequently, this Fund usually will not incur
brokerage expenses. Because the portfolio of the Money Market Fund consists of
securities with relatively short-term maturities, the Money Market Fund can
expect to experience a high portfolio turnover. A high portfolio turnover rate
should not adversely affect the Fund, however, because portfolio transactions
ordinarily will be made directly with principals on a net basis (although they
may be subject to markups) and, consequently, the Money Market Fund usually will
not incur brokerage expenses. The portfolio turnover rate will not be a limiting
factor when Wells Fargo Bank deems portfolio changes appropriate.
FUND EXPENSES
From time to time, Wells Fargo Bank and Stephens may waive fees from the
Funds in whole or in part. Any such waiver will reduce expenses of a Fund and,
accordingly, have a favorable impact on such Fund's performance. Except for the
expenses borne by Wells Fargo Bank and Stephens, the Funds bear all costs of
their respective operations, including the compensation of the Trust's directors
and the Trust's trustees who are not officers or employees of Wells Fargo Bank
or Stephens or any of their affiliates; advisory, shareholder servicing, and
administration fees; payments pursuant to any Plans; interest charges; taxes;
fees and expenses of independent auditors; legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming Fund shares; expenses of
preparing and printing prospectuses (except the expense of printing and mailing
prospectuses used for promotional purposes, unless otherwise payable pursuant to
a Plan), shareholders' or investors' reports, notices, proxy
16
<PAGE> 43
statements and reports to regulatory agencies; insurance premiums and certain
expenses relating to insurance coverage; trade association membership dues;
brokerage and other expenses connected with the execution of portfolio
transactions; fees and expenses of the custodian, including those of keeping
books and accounts and calculating the net asset value of each Fund; expenses of
shareholders' or investors' meetings; expenses relating to the issuance,
registration and qualification of shares of the Funds; pricing services;
organizational expenses; and any extraordinary expenses. Expenses attributable
to a Fund are charged against the respective assets of the Fund. A pro rata
portion of the expenses of the Trust are charged against the assets of a Fund.
FEDERAL INCOME TAXES
IN GENERAL. As stated in the Prospectus, each Fund intends to qualify each
year to be taxed as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended, (the "Code"). If so qualified, each Fund will not be
subject to federal income taxes on its investment company taxable income and net
capital gains to the extent such investment company taxable income and net
capital gains are distributed to the separate accounts of insurance companies
which hold its shares. Under current tax law, capital gains or dividends from
any Fund are not currently taxable when left to accumulate within a qualified
variable annuity or variable life insurance contract. In general, distributions
of net investment income and net short term capital gains will be treated as
ordinary income and distributions of net long-term capital gains will be treated
as long-term capital gain in the hands of the insurance companies.
Qualification as a regulated investment company also requires, among other
things, that (a) at least 90% of each Fund's annual gross income be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of securities or options thereon; (b) each Fund
derives less than 30% of its gross income from gains from the sale or other
disposition of securities or options thereon held for less than three months;
and (c) each Fund diversifies its holdings so that, at the end of each quarter
of the taxable year, (i) at least 50% of the market value of each Fund's assets
is represented by cash, government securities and other securities limited in
respect of any one issuer to an amount not greater than 5% of each Fund's assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities and the securities of other
regulated investment companies), or of two or more issuers which the Fund
controls and which are determined to be engaged in the same or similar trades or
businesses or related trades or businesses.
Section 817(h) of the Code requires that the investments of a segregated
asset account of an insurance company be "adequately diversified," in accordance
with Treasury Regulations promulgated thereunder, in order for the holders of
the variable annuity contracts or variable life insurance policies underlying
the account to receive the tax-deferred or taxfree treatment on such annuities
or policies generally afforded holders of annuities or life insurance policies
under the Code. The Department of the Treasury has issued Regulations under
Section 817(h) which, among other things, provide the manner in which an
investment by a segregated asset account in a regulated investment company will
be treated for purposes of the applicable diversification requirements. Under
the Regulations, if a regulated investment company satisfies certain conditions,
a segregated asset account owning shares of the regulated investment company
will not be treated as a single investment for these purposes, but rather the
account will be treated as owning its proportionate share of each of the assets
of the regulated investment company. Each Fund plans to satisfy these conditions
at all times so that the shares of such Fund owned by a segregated asset account
of a life insurance company will be subject to this treatment under the Code.
TAXATION OF FUND INVESTMENTS. Gains or losses on sales of portfolio
securities by a Fund will generally be long-term capital gains or losses if the
securities have been held by it for more than one year, except in certain cases
such as where the Fund acquires a put or writes a call thereon. Gains recognized
on the disposition of a debt obligation (including tax-exempt obligations
purchased after
17
<PAGE> 44
April 30, 1993) purchased by a Fund at a market discount (generally at a price
less than its principal amount) will be treated as ordinary income to the extent
of the portion of market discount which accrued during the period of time the
Fund held the debt obligation. Other gains or losses on the sale of portfolio
securities will be short-term capital gains or losses.
If an option written by a Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund will realize a short-term capital gain or loss, depending on whether the
premium income is greater or less than the amount paid by the Fund in the
closing transaction. Some realized capital losses may be deferred if they result
from a position which is part of a "straddle," discussed below. If securities
are sold by a Fund pursuant to the exercise of a call option written by it, the
Fund will add the premium received to the sale price of the securities delivered
in determining the amount of gain or loss on the sale. If securities are
purchased by a Fund pursuant to the exercise of a put option written by it, the
Fund will subtract the premium received from its cost basis in the securities
purchased. The requirement that a Fund derive less than 30% of its gross income
from gains from the sale of securities held for less than three months may limit
the Fund's ability to write options.
The amount of any gain or loss realized by a Fund on closing out a futures
contract will generally result in a realized capital gain or loss for tax
purposes. Futures contracts held at the end of each fiscal year will be required
to be "marked to market" for federal income tax purposes pursuant to Section
1256 of the Code. In this regard, they will be deemed to have been sold at
market value. Sixty percent (60%) of any net gain or loss recognized on these
deemed sales and sixty percent (60%) of any net realized gain or loss from any
actual sales, generally will be treated as long-term capital gain or loss, and
the remaining forty percent (40%) will be treated as short-term capital gain or
loss. Transactions that qualify as designated hedges are excepted from the
"marked to market" and "60%/40%" rules. Currency transactions may be subject to
Section 988 of the Code, under which foreign currency gains or losses would
generally be computed separately and treated as ordinary income or losses. The
Funds will attempt to monitor Section 988 transactions to avoid an adverse tax
impact.
Offsetting positions held by a regulated investment company involving
certain financial forward, futures or options contracts may be considered, for
tax purposes, to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of "straddles" is governed by Section 1092 of the Code which, in certain
circumstances, overrides or modifies the provisions of Section 1256.
If a regulated investment company were treated as entering into "straddles"
by reason of its engaging in certain financial forward, futures or option
contracts, such straddles could be characterized as "mixed straddles" if the
futures, forwards, or options comprising a part of such straddles were governed
by Section 1256 of the Code. The regulated investment company may make one or
more elections with respect to "mixed straddles." Depending upon which election
is made, if any, the results with respect to the regulated investment company
may differ. Generally, to the extent the straddle rules apply to positions
established by the regulated investment company, losses realized by the
regulated investment company may be deferred to the extent of unrealized gain in
any offsetting positions. Moreover, as a result of the straddle and the
conversion transaction rules, short-term capital loss on straddle positions may
be recharacterized as long-term capital loss, and long-term capital gain may be
characterized as short-term capital gain or ordinary income.
If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to federal income tax and an inters=est charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of its PFIC shares. If a Fund invests in a PFIC, the Fund intends to
make an available election to mark-to-market its interest in PFIC shares. Under
the election, a Fund will be treated as recognizing at the end of each taxable
year the excess, if any, of the fair market value of its interest in PFIC shares
over its basis in such shares. Although such excess will be taxable to a Fund as
ordinary income notwithstanding any distributions by the PFIC, the Fund will not
be subject to federal income tax or the interest charge with respect to its
interest in the PFIC.
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<PAGE> 45
For information concerning the federal income tax consequences for the
holders of variable annuity contracts and variable rate insurance policies, such
holders should consult the prospectus used in connection with the issuance of
their particular contracts or policies and should consult their tax advisors.
CAPITAL STOCK
Life & Annuity Trust, an open-end, management investment company, was
organized as a Delaware Business Trust on October 28, 1993. As of the date of
this SAI, Life & Annuity Trust's Board of Trustees has authorized the issuance
of four series of shares, each representing an unlimited number of beneficial
interests -- the U.S. Government Allocation Fund, the Growth and Income Fund,
the Asset Allocation Fund and the Money Market Fund -- and the Board of Trustees
may, in the future, authorize the creation of additional investment portfolios.
All shares of a Fund have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by a series is required by law
or where the matter involved only affects one series. For example, a change in a
Fund's fundamental investment policy would be voted upon only by shareholders of
the Fund involved. Additionally, approval of an advisory contract is a matter to
be determined separately by Fund. Approval by the shareholders of one Fund is
effective as to that Fund whether or not sufficient votes are received from the
Shareholders of the other investment portfolios to approve the proposal as to
those investment portfolios. As used in the Prospectus and in this SAI, the term
"majority," when referring to approvals to be obtained from shareholders of the
Fund, means the vote of the lesser of (i) 67% of the shares of the Fund
represented at a meeting if the shareholders of more than 50% of the outstanding
interests of the Fund are present in person or by proxy, or (ii) more than 50%
of the outstanding shares of the Fund. The term "majority," when referring to
the approvals to be obtained from shareholders of Life & Annuity Trust as a
whole, means the vote of the lesser of (i) 67% of Life & Annuity Trust's shares
represented at a meeting if the shareholders of more than 50% of Life & Annuity
Trust's outstanding shares are present in person or by proxy, or (ii) more than
50% of Life & Annuity Trust's outstanding shares. Shareholders are entitled to
one vote for each full share held and fractional votes for fractional shares
held.
Life & Annuity Trust may dispense with an annual meeting of shareholders in
any year in which it is not required to elect Trustees under the 1940 Act.
However, Life & Annuity Trust has undertaken to hold a special meeting of its
shareholders for the purpose of voting on the question of removal of a Trustee
or Trustees if requested in writing by the shareholders of at least 10% of Life
& Annuity Trust's outstanding voting shares, and to assist in communicating with
other shareholders as required by Section 16(c) of the 1940 Act.
Each share of a Fund represents an equal proportional interest in the Fund
with each other share and is entitled to such dividends and distributions out of
the income earned on the assets belonging to the Fund as are declared in the
discretion of the Trustees. In the event of the liquidation or dissolution of
Life & Annuity Trust, shareholders of a Fund are entitled to receive the assets
attributable to the Fund that are available for distribution, and a distribution
of any general assets not attributable to a particular investment portfolio that
are available for distribution in such manner and on such basis as the Trustees
in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares, when
issued as described in the Prospectus, will be fully paid and non-assessable by
Life & Annuity Trust.
Set forth below is the name, address and share ownership of each person
known by the Company to have beneficial or record ownership of 5% or more of a
class of the Fund or 5% or more of the voting securities of the Fund as a whole.
19
<PAGE> 46
5% OWNERSHIP AS OF APRIL 1, 1997
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE
NAME OF FUND OF SHAREHOLDER OF CLASS CAPACITY
------------ ---------------- ---------- --------
<S> <C> <C> <C>
Asset Allocation American Skandia Life 99.92% Record
P.O. Box 883
Shelton, CT 06484
Growth and Income American Skandia Life 99.90% Record
P.O. Box 883
Shelton, CT 06484
Money Market American Skandia Life 99.80% Record
P.O. Box 883
Shelton, CT 06484
U.S. Government Allocation American Skandia Life 98.27% Record
P.O. Box 883
Shelton, CT 06484
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class (or Fund), or is identified as the holder of
record of more than 25% of a class (or Fund) and has voting and/or investment
powers, it may be presumed to control such class (or Fund).
OTHER
The Registration Statement, including the Prospectus, the SAI and the
exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C. Statements contained in the Prospectus or the SAI as to the
contents of any contract or other document referred to herein or in the
Prospectus are not necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
The portfolio of investments, audited financial statements and independent
auditors' report for the Funds of Life & Annuity Trust for the year ended
December 31, 1996 are attached to this SAI.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected as the independent auditors for
Life & Annuity Trust. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of certain
SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero Center, San
Francisco, California 94111.
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<PAGE> 47
SAI APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate bonds and commercial paper.
CORPORATE BONDS
MOODY'S: The four highest ratings for corporate bonds are "Aaa,""Aa","A"
and "Baa." Bonds rated "Aaa" are judged to be of the "best quality" and carry
the smallest amount of investment risk. Bonds rated "Aa" are of "high quality by
all standards," but margins of protection or other elements make long-term risks
appear somewhat greater than "Aaa" rated bonds. Bonds rated "A" possess many
favorable investment attributes and are considered to be upper medium grade
obligations. Bonds rated "Baa" are considered to be medium grade obligations;
interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds have speculative
characteristics as well. Moody's applies numerical modifiers: 1, 2 and 3 in each
rating category from "Aa" through "Baa" in its rating system. The modifier 1
indicates that the security ranks in the higher end of its category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end.
S&P: The four highest ratings for corporate bonds are "AAA,""AA,""A" and
"BBB." Bonds rated "AAA" have the highest ratings assigned by S&P and have an
extremely strong capacity to pay interest and repay principal. Bonds rated "AA"
have a "very strong capacity to pay interest and repay principal" and differ
"from the highest rated issued only in small degree." Bonds rated "A" have a
"strong capacity" to pay interest and repay principal, but are "somewhat more
susceptible" to adverse effects of changes in economic conditions or other
circumstances than bonds in higher rated categories. Bonds rated "BBB" are
regarded as having an "adequate capacity" to pay interest and repay principal,
but changes in economic conditions or other circumstances are more likely to
lead to a "weakened capacity" to make such repayments. The ratings from "AA" to
"BBB" may be modified by the addition of a plus or minus sign to show relative
standing within the category.
CORPORATE COMMERCIAL PAPER
MOODY'S: The highest rating for corporate commercial paper is "P-1"
(Prime-1). Issuers rated "P-1" have a "superior capacity for repayment of
short-term promissory obligations." Issuers rated "P-2" (Prime-2) "have a strong
capacity for repayment of short-term promissory obligations," but earnings
trends, while sound, will be subject to more variation.
S&P: The "A-1" rating for corporate commercial paper indicates that the
"degree of safety regarding timely payment is either overwhelming or very
strong." Commercial paper with "overwhelming safety characteristics" will be
rated "A-1+." Commercial paper with a strong capacity for timely payments on
issues will be rated "A-2."
A-1
<PAGE> 48
To the Shareholders and Board of Trustees
Life & Annuity Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Asset Allocation Fund, Growth and Income
Fund, Money Market Fund and U.S. Government Allocation Fund (constituting Life &
Annuity Trust) as of December 31, 1996, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and financial highlights for the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
the aforementioned funds of Life & Annuity Trust as of December 31, 1996, the
results of their operations, the changes in their net assets and their financial
highlights for the periods indicated herein in conformity with generally
accepted accounting principles.
[Signature)
San Francisco, California
February 14, 1997
FS-1
<PAGE> 49
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (99.86%)
U.S. TREASURY BILLS (44.19%)
$ 326,000 U.S. Treasury Bills 4.98%S 01/02/97 $ 325,914
498,000 U.S. Treasury Bills 5.01S 01/09/97 497,412
70,000 U.S. Treasury Bills 5.12S 01/23/97 69,783
744,000 U.S. Treasury Bills 5.12S 01/30/97 740,996
2,955,000 U.S. Treasury Bills 5.17S 02/06/97 2,940,223
261,000 U.S. Treasury Bills 5.17S 02/13/97 259,534
3,801,000 U.S. Treasury Bills 5.18S 02/20/97 3,775,532
1,079,000 U.S. Treasury Bills+ 5.19S 03/13/97 1,068,530
13,328,000 U.S. Treasury Bills 5.20S 03/06/97 13,212,071
-----------
$22,889,995
U.S. TREASURY BONDS (55.67%)
$ 300,000 U.S. Treasury Bonds 6.25% 08/15/23 $ 281,156
500,000 U.S. Treasury Bonds 6.50 11/15/26 490,625
450,000 U.S. Treasury Bonds 6.75 08/15/26 453,094
2,050,000 U.S. Treasury Bonds 7.13 02/15/23 2,139,048
1,500,000 U.S. Treasury Bonds 7.25 08/15/22 1,586,719
450,000 U.S. Treasury Bonds 7.63 11/15/22 496,547
3,100,000 U.S. Treasury Bonds 7.63 02/15/25 3,441,970
3,600,000 U.S. Treasury Bonds 7.88 02/15/21 4,066,877
3,650,000 U.S. Treasury Bonds 8.00 11/15/21 4,183,813
250,000 U.S. Treasury Bonds 8.13 08/15/19 288,906
900,000 U.S. Treasury Bonds 8.13 05/15/21 1,044,000
850,000 U.S. Treasury Bonds 8.13 08/15/21 986,531
1,300,000 U.S. Treasury Bonds 8.75 05/15/17 1,585,188
3,000,000 U.S. Treasury Bonds 8.75 08/15/20 3,693,750
850,000 U.S. Treasury Bonds 8.88 08/15/17 1,049,219
1,850,000 U.S. Treasury Bonds 8.88 02/15/19 2,294,000
600,000 U.S. Treasury Bonds 9.00 11/15/18 752,063
-----------
$28,833,506
-----------
TOTAL U.S. TREASURY SECURITIES $51,723,501
(Cost $51,115,231)
</TABLE>
FS-2
<PAGE> 50
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
VALUE
<C> <S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $51,115,231)* (Notes 1 & 3) 99.86% $51,723,501
Other Assets and Liabilities, Net 0.14 73,440
------ -----------
TOTAL NET ASSETS 100.00% $51,796,941
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
S Yield to maturity.
+ These U.S. Treasury Bills are held in segregated accounts in connection with
the Fund's holdings of S&P 500 futures contracts.
* Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C> <C>
Gross Unrealized Appreciation $ 763,636
Gross Unrealized Depreciation (155,366)
---------
NET UNREALIZED APPRECIATION $ 608,270
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FS-3
<PAGE> 51
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS (89.82%)
ADVERTISING (0.92%)
6,700 Omnicom Group $ 219,243 $ 306,525
APPLIANCES AND FURNITURE (3.11%)
40,300 Sunbeam-Oster Co. Inc. $ 1,077,188 $ 1,037,725
AUTOMOBILE & RELATED (2.36%)
16,900 Danaher Corp $ 582,665 $ 787,963
BASIC INDUSTRIES (5.87%)
9,100 Aluminum Co of America $ 558,612 $ 580,125
10,300 Case Corp 526,274 561,350
21,000 Monsanto Co 602,411 816,375
----------- -----------
$ 1,687,297 $ 1,957,850
BEVERAGE (1.86%)
21,000 Pepsico Inc. $ 630,741 $ 614,250
CAPITAL GOODS (0.41%)
5,000 Lexmark International Group Inc Class A + $ 101,234 $ 138,125
COMMERCIAL SERVICES (2.54%)
3,500 AccuStaff Inc + $ 72,654 $ 73,938
18,000.... CUC International Inc + 402,624 427,500
12,400.... Service Corp International 270,098 347,200
----------- -----------
$ 745,376 $ 848,638
COMPUTER SOFTWARE (4.29%)
14,800 First Data Corp $ 529,600 $ 540,200
7,000 Oracle Systems Corp + 236,833 292,250
23,046 Reynolds & Reynolds Co Class A 523,255 599,196
----------- -----------
$ 1,289,688 $ 1,431,646
COMPUTER SYSTEMS (2.70%)
9,900 Cisco Systems Inc + $ 483,051 $ 629,888
10,000 Komag Inc + 251,217 271,250
----------- -----------
$ 734,268 $ 901,138
CONSUMER-BASIC (1.55%)
5,600 Colgate-Palmolive Co. $ 470,258 $ 516,600
DIVERSIFIED-OPERATIONS (2.37%)
9,000 General Electric $ 814,640 $ 791,000
ELECTRICAL EQUIPMENT (0.81%)
4,700 Nokia Corp ADR Class A $ 267,134 $ 270,250
</TABLE>
FS-4
<PAGE> 52
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
ENERGY & RELATED (10.33%)
8,000 Anadarko Petroleum Corp $ 443,692 $ 518,000
3,000 Cabot Corp 77,587 75,375
4,800 Mobil Corp 527,433 586,800
19,200 Reading & Bates Corp + 443,738 508,800
847 Smedvig ASA -- Sponsored ADR Class B + 17,999 17,046
11,780 Sonat Inc 457,831 606,670
6,000 Texaco Inc 588,672 588,750
5,000 Transocean Offshore Inc 316,061 313,125
7,400 U.S. Filter Corp 234,574 234,950
----------- -----------
$ 3,107,587 $ 3,449,516
FINANCE & RELATED (17.38%)
13,300 Aetna Inc $ 884,077 $ 1,064,000
2,500 American International Group Inc 237,179 270,625
9,900 Amli Residential Properties 215,325 231,413
8,700 Associates First Capital Corp 359,571 383,888
10,000 Brandywine Realty Trust 165,000 195,000
4,500 Cali Realty Corp 120,143 138,938
5,700 Citicorp 439,926 587,100
12,000 Excel Realty Trust 274,500 304,500
5,500 Federal Home Loan Mortgage Corp 473,339 605,688
2,500 Guidant Corp 121,198 142,500
10,000 Household International Inc 699,005 922,500
8,500 MBNA Corp 222,891 352,750
14,200 Schwab (Charles) Corp 349,410 454,400
7,000 Security Capital Industrial Trust 142,762 149,625
----------- -----------
$ 4,704,326 $ 5,802,927
FOOD & RELATED (1.74%)
5,150 Philip Morris Co Inc $ 474,296 $ 580,019
FOOTWEAR (0.93%)
5,200 Nike Inc Class B $ 291,157 $ 310,700
GENERAL BUSINESS & RELATED (1.53%)
2,400 Corrections Corp of America + $ 70,882 $ 73,500
9,500 Groupe AB SA-ADR + 199,500 136,563
7,000 Patriot American Hospitality Inc 299,354 301,875
----------- -----------
$ 569,736 $ 511,938
HEALTHCARE (0.97%)
14,800 Tenet Healthcare Corp + $ 317,768 $ 323,750
</TABLE>
FS-5
<PAGE> 53
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MANUFACTURING PROCESSING (5.01%)
6,600 Allied Signal Inc $ 336,740 $ 442,200
4,200 Harsco Corp 265,467 287,700
11,100 Potash Corp of Saskatchewan Inc 769,670 943,500
----------- -----------
$ 1,371,877 $ 1,673,400
MEDICAL EQUIPMENT & SUPPLIES (1.39%)
11,300 Baxter International Inc $ 458,133 $ 463,300
PHARMACEUTICALS (3.13%)
13,000 Astra AB ADR Class A $ 567,695 $ 637,000
6,000 Smithkline Beecham Plc 308,730 408,000
----------- -----------
$ 876,425 $ 1,045,000
REAL ESTATE INVESTMENT TRUSTS (2.39%)
5,400 Equity Residential Properties Trust $ 222,750 $ 222,750
16,000 Spieker Properties Inc 478,427 576,000
----------- -----------
$ 701,177 $ 798,750
RETAIL & RELATED (5.44%)
12,700 Gillette Co $ 727,819 $ 987,425
29,900 Mattel Inc 767,650 829,725
----------- -----------
$ 1,495,469 $ 1,817,150
SEMICONDUCTORS (4.92%)
7,300 Intel Corp $ 491,100 $ 955,844
11,200 Motorola Inc 513,101 687,400
----------- -----------
$ 1,004,201 $ 1,643,244
TELECOMMUNICATIONS (5.87%)
12,800 Alltel Corp $ 378,677 $ 401,600
38,300 Ericson Telefonaktiebolaget L M Class B 762,955 1,156,181
12,500 U.S. West Inc 375,802 403,125
----------- -----------
$ 1,517,434 $ 1,960,906
TOTAL COMMON STOCKS $25,509,318 $29,982,310
PREFERRED STOCKS (1.67%)
CONVERTIBLES (0.78%)
19,500 First Chicago NBD Corp expires 02/15/1997 $ 338,427 $ 258,375
TELECOMMUNICATIONS (0.89%)
10,900 Airtouch Communications Inc + $ 317,213 $ 297,025
TOTAL PREFERRED STOCKS $ 655,640 $ 555,400
</TABLE>
FS-6
<PAGE> 54
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
<C> <S> <C> <C> <C>
CORPORATE BONDS & NOTES (0.51%)
CONVERTIBLE CORPORATE BONDS (0.51%)
$ 170,000 U.S. Filter Corp
(Cost $170,000) 4.50% 12/15/01 $ 171,275
U.S. TREASURY SECURITIES (5.93%)
U.S. TREASURY BILLS (5.93%)
$2,000,000 U.S. Treasury Bills
(Cost $1,978,017) 5.00%S 03/20/97 $ 1,978,736
SHORT-TERM INSTRUMENTS (2.38%)
REPURCHASE AGREEMENTS (2.38%)
$ 795,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities (Cost
$795,000) 6.58% 01/02/97 $ 795,000
TOTAL INVESTMENTS IN SECURITIES
(Cost $29,107,975)* (Notes 1 and 3) 100.31% $33,482,721
Other Assets and Liabilities, Net (0.31) (102,083)
------ -----------
TOTAL NET ASSETS 100.00% $33,380,638
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
S Yield to maturity.
+ Non-income earning securities.
* Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C> <C>
Gross Unrealized Appreciation $4,713,110
Gross Unrealized Depreciation (338,364)
----------
NET UNREALIZED APPRECIATION $4,374,746
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FS-7
<PAGE> 55
LIFE & ANNUITY TRUST MONEY MARKET FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (58.40)%
U.S. TREASURY BILLS (52.86)%
$ 750,000 U.S. Treasury Bills 5.01%S 01/09/97 $ 749,171
2,750,000 U.S. Treasury Bills 5.12S 01/23/97 2,741,629
1,250,000 U.S. Treasury Bills 5.17S 02/06/97 1,243,706
100,000 U.S. Treasury Bills 5.24S 05/08/97 98,218
1,000,000 U.S. Treasury Bills 5.27S 05/15/97 981,463
900,000 U.S. Treasury Bills 5.28S 05/22/97 882,410
-----------
TOTAL U.S. TREASURY BILLS $ 6,696,597
U.S. TREASURY NOTES (5.54)%
$ 700,000 U.S. Treasury Notes 5.88% 07/31/97 $ 701,764
-----------
TOTAL U.S. TREASURY SECURITIES $ 7,398,361
SHORT TERM INSTRUMENTS (40.77)%
REPURCHASE AGREEMENTS (40.77)%
$ 815,000 Goldman Sachs Pooled Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.58% 01/02/97 $ 815,000
1,747,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.00 01/02/97 1,747,000
1,102,000 JP Morgan Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.37 01/02/97 1,102,000
1,500,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50 01/02/97 1,500,000
-----------
TOTAL REPURCHASE AGREEMENTS $ 5,164,000
TOTAL INVESTMENTS IN SECURITIES
(Cost $12,562,361)* (Note 1) 99.17% $12,562,361
Other Assets and Liabilities, Net 0.83 104,590
------ -----------
TOTAL NET ASSETS 100.00% $12,666,951
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
S 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.
FS-8
<PAGE> 56
LIFE & ANNUITY TRUST U.S. GOVERNMENT ALLOCATION FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (97.02%)
U.S. TREASURY BILLS (20.55%)
$ 23,000 U.S. Treasury Bills 4.98%S 01/02/97 $ 22,994
36,000 U.S. Treasury Bills 5.01S 01/09/97 35,957
25,000 U.S. Treasury Bills 5.11S 01/16/97 24,947
71,000 U.S. Treasury Bills 5.12S 01/23/97 70,780
883,000 U.S. Treasury Bills 5.17S 02/06/97 878,585
1,067,000 U.S. Treasury Bills 5.17S 02/13/97 1,061,008
277,000 U.S. Treasury Bills 5.18S 02/20/97 275,144
20,000 U.S. Treasury Bills 5.18S 02/27/97 19,844
147,000 U.S. Treasury Bills 5.19S 03/13/97 145,574
247,000 U.S. Treasury Bills 5.20S 03/06/97 244,852
-----------
$ 2,779,685
U.S. TREASURY BONDS (2.89%)
$ 300,000 U.S. Treasury Bonds 11.88% 11/15/03 $ 391,125
U.S. TREASURY NOTES (73.58%)
$3,000,000 U.S. Treasury Notes 5.75% 08/15/03 $ 2,910,000
1,850,000 U.S. Treasury Notes 6.25 02/15/03 1,848,266
2,850,000 U.S. Treasury Notes 6.38 08/15/02 2,868,704
2,200,000 U.S. Treasury Notes 7.50 05/15/02 2,326,500
-----------
$ 9,953,470
TOTAL U.S. TREASURY SECURITIES $13,124,280
(Cost $13,101,094)
TOTAL INVESTMENTS IN SECURITIES
(Cost $13,101,094)* (Notes 1 and 3) 97.02% $13,124,280
Other Assets and Liabilities, Net 2.98 403,054
------ -----------
TOTAL NET ASSETS 100.00% $13,527,334
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
S 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> <C>
Gross Unrealized Appreciation $ 56,504
Gross Unrealized Depreciation (33,318)
--------
NET UNREALIZED APPRECIATION $ 23,186
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FS-9
<PAGE> 57
LIFE & ANNUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<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 identified cost (Note 3) $51,115,231 $29,107,975 $12,562,361 $13,101,094
In securities, at market value $51,723,501 $33,482,721 $12,562,361 $13,124,280
Cash 614 1,445 1,820 0
Receivables:
Dividends and Interest 612,448 58,754 18,116 203,507
Investment securities sold 0 2,537 0 0
Fund shares sold 652,370 119,879 166,308 297,690
Prepaid expenses 15,893 6,722 0 1,139
TOTAL ASSETS 53,004,826 33,672,058 12,748,605 13,626,616
LIABILITIES
Variation margin on futures contracts 408,800 0 0 0
Payables:
Distribution to shareholders 652,371 119,880 49,873 58,582
Fund shares redeemed 65,327 130,184 0 0
Due to administrator (Note 2) 16,872 7,902 2,281 2,947
Due to advisor (Note 2) 28,088 13,702 1,634 3,496
Accrued expenses 36,427 19,752 27,866 34,257
TOTAL LIABILITIES 1,207,885 291,420 81,654 99,282
TOTAL NET ASSETS $51,796,941 $33,380,638 $12,666,951 $13,527,334
Net assets consist of:
Paid-in capital $50,471,742 $28,820,399 $12,666,951 $13,507,669
Undistributed net realized gain (loss) on investments 495,304 185,493 0 (3,521)
Net unrealized appreciation of futures 221,625 0 0 0
Net unrealized appreciation of investments 608,270 4,374,746 0 23,186
TOTAL NET ASSETS $51,796,941 $33,380,638 $12,666,951 $13,527,334
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
(NOTE 4)
Net assets $51,796,941 $33,380,638 $12,666,951 $13,527,334
Shares outstanding 4,537,205 2,176,280 12,666,954 1,334,979
Net asset value and offering price $11.42 $15.34 $1.00 $10.13
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FS-10
<PAGE> 58
LIFE & ANNUITY TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Asset Growth and Money U.S. Government
Allocation Income Market Allocation
Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 0 $290,801 $ 0 $ 0
Interest 2,396,945 157,749 492,085 520,326
TOTAL INCOME 2,396,945 448,550 492,085 520,326
EXPENSES (NOTE 2)
Advisory Fees 238,004 127,818 43,071 49,164
Custody fees 0 12,502 1,593 0
Portfolio accounting fees 0 40,435 30,711 0
Transfer agency fees 19,833 10,485 4,785 4,097
Administration fees 16,872 6,291 2,871 742
Legal and audit fees 29,055 23,586 18,732 24,998
Registration fees 3,800 999 0 999
Directors' fees 11,250 11,250 11,250 11,250
Other 166 3,039 3,561 5,478
TOTAL EXPENSES 318,980 236,405 116,574 96,728
Less: Waived Fees and Reimbursed Expenses (43,876) (109,481) (67,411) (47,252)
Net Expenses 275,104 126,924 49,163 49,476
NET INVESTMENT INCOME 2,121,841 321,626 442,922 470,850
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on sale of investments 2,464,924 670,537 225 (3,569)
Net unrealized appreciation of futures contracts 37,850 0 0 0
Net change in unrealized appreciation (depreciation)
of investments (24,131) 3,407,928 0 (32,071)
NET GAIN (LOSS) ON INVESTMENTS 2,478,643 4,078,465 225 (35,640)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,600,484 $4,400,091 $443,147 $435,210
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FS-11
<PAGE> 59
LIFE & ANNUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Asset Growth and
Allocation Income
Fund Fund
-------------------------------- --------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $2,121,841 $795,863 $321,626 $110,826
Net realized gain (loss) on sale of investments 2,464,924 1,687,439 670,537 158,953
Net unrealized appreciation of futures contracts 37,850 171,775 0 0
Net unrealized appreciation (depreciation) of
investments (24,131) 718,398 3,407,928 947,667
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 4,600,484 3,373,475 4,400,091 1,217,446
Distributions to shareholders:
From net investment income (2,121,841) (795,863) (321,626) (110,826)
From net realized gain on sales of investments (2,300,431) (1,266,518) (514,688) (122,419)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 25,372,586 15,133,424 19,876,206 7,617,936
Reinvestment of dividends 4,422,270 2,062,380 836,312 233,244
Cost of shares redeemed (3,642,899) (503,715) (1,815,249) (52,261)
Net increase in net assets resulting from capital share
transactions (Note 4) 26,151,957 16,692,089 18,897,269 7,798,919
INCREASE IN NET ASSETS 26,330,169 18,003,183 22,461,046 8,783,120
NET ASSETS
Beginning net assets 25,466,772 7,463,589 10,919,592 2,136,472
ENDING NET ASSETS $51,796,941 $25,466,772 $33,380,638 $10,919,592
SHARES ISSUED AND REDEEMED:
Shares sold 2,210,668 1,352,899 1,407,558 624,798
Shares issued in reinvestment of dividends 385,749 182,663 56,387 18,398
Shares redeemed (318,474) (45,222) (133,606) (4,706)
NET INCREASE IN SHARES OUTSTANDING 2,277,943 1,490,340 1,330,339 638,490
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FS-12
<PAGE> 60
LIFE & ANNUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money U.S. Government
Market Allocation
Fund Fund
-------------------------------- --------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $442,922 $113,358 $470,850 $126,604
Net realized gain (loss) on sale of investments 225 409 (3,569) 58,078
Net unrealized appreciation of futures contracts 0 0 0 0
Net unrealized appreciation (depreciation) of
investments 0 0 (32,071) 69,148
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 443,147 113,767 435,210 253,830
Distributions to shareholders:
From net investment income (442,922) (113,358) (470,850) (126,604)
From net realized gain on sales of investments (225) (409) 0 (40,804)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 15,213,897 6,635,924 8,754,298 3,905,350
Reinvestment of dividends 443,145 113,769 470,850 167,408
Cost of shares redeemed (8,813,439) (2,417,893) (517,327) (169,600)
Net increase in net assets resulting from capital share
transactions (Note 4) 6,843,603 4,331,800 8,707,821 3,903,158
INCREASE IN NET ASSETS 6,843,603 4,331,800 8,672,181 3,989,580
NET ASSETS
Beginning net assets 5,823,348 1,491,548 4,855,153 865,573
ENDING NET ASSETS $12,666,951 $5,823,348 $13,527,334 $4,855,153
SHARES ISSUED AND REDEEMED:
Shares sold 15,213,897 6,635,924 868,061 381,576
Shares issued in reinvestment of dividends 443,145 113,769 46,768 16,384
Shares redeemed (8,813,439) (2,417,893) (51,054) (16,619)
NET INCREASE IN SHARES OUTSTANDING 6,843,603 4,331,800 863,775 381,341
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FS-13
<PAGE> 61
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Asset Allocation Fund Growth and Income Fund
---------------------------------------------- ----------------------------------------------
From inception From inception
on April 15, April 12,
Year Ended Year Ended 1994 to Year Ended Year Ended 1994 to
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $ 11.27 $ 9.71 $10.00 $ 12.91 $ 10.30 $10.00
Income from investment
operations:
Net investment income 0.56 0.55 0.30 0.20 0.22 0.14
Net realized and unrealized
gain (loss) on investments 0.69 2.21 (0.19) 2.68 2.77 0.30
------- ------- ------ ------- ------- ------
Total from investment
operations 1.25 2.76 0.11 2.88 2.99 0.44
Less Distributions:
Dividends from net investment
income (0.56) (0.55) (0.30) (0.20) (0.22) (0.14)
Distributions from net
realized gain (0.54) (0.65) (0.10) (0.25) (0.16) 0.00
------- ------- ------ ------- ------- ------
Total from Distributions (1.10) (1.20) (0.40) (0.45) (0.38) (0.14)
------- ------- ------ ------- ------- ------
Net Asset Value, end of
period $ 11.42 $ 11.27 $ 9.71 $ 15.34 $ 12.91 $10.30
======= ======= ====== ======= ======= ======
Total Return (not
annualized)* 11.46% 28.95% 1.13% 22.44% 29.19% 4.47%
Ratios/supplemental data:
Net assets, end of period
(000) $51,797 $25,467 $7,464 $33,381 $10,920 $2,136
Number of shares outstanding,
end of period (000) 4,537 2,259 769 2,176 846 207
Ratios to average net assets
(annualized):
Ratio of expenses to average
net assets(1) 0.69% 0.41% 0.00% 0.60% 0.43% 0.00%
Ratio of net investment
income to average net
assets(2) 5.34% 5.58% 6.30% 1.53% 2.05% 3.00%
Portfolio turnover 4% 97% 0% 95% 84% 21%
Average commission rate
paid(3) N/A N/A N/A $0.0810 N/A N/A
- ---------------------------------------------------------------------------------------------
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 0.80% 1.22% 2.24% 1.12% 2.02% 10.18%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 5.23% 4.77% 4.06% 1.01% 0.46% -7.18%
- ---------------------------------------------------------------------------------------------
(3) For fiscal years beginning on or after September 15,
1995, a fund is required to disclose its average
commission rate per share for security trades on
which commissions are charged. This amount may vary
from period to period and fund to fund depending on
the mix of trades executed in various markets where
trading practices and commission rate structures may
differ.
</TABLE>
* Total returns do not include any sales charges.
FS-14
<PAGE> 62
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Money Market Fund U.S. Government Allocation Fund
-------------------------------------------- --------------------------------------------
From inception From inception
Year May 19, Year April 26,
Year Ended Ended 1994 to Year Ended Ended 1994 to
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 10.30 $ 9.63 $10.00
Income from investment
operations:
Net investment income 0.05 0.05 0.03 0.56 0.60 0.40
Net realized and unrealized gain
(loss) on investments 0.00 0.00 0.00 (0.17) 0.77 (0.37)
------- ------ ---------- ------- ------ ----------
Total from investment operations 0.05 0.05 0.03 0.39 1.37 0.03
Less Distributions:
Dividends from net investment
income (0.05) (0.05) (0.03) (0.56) (0.60) (0.40)
Distributions from net realized
gain 0.00 0.00 0.00 0.00 (0.10) 0.00
------- ------ ---------- ------- ------ ----------
Total from Distributions (0.05) (0.05) (0.03) (0.56) (0.70) (0.40)
------- ------ ---------- ------- ------ ----------
Net Asset Value, end of period $ 1.00 $ 1.00 $ 1.00 $ 10.13 $10.30 $ 9.63
======= ====== ========== ======= ====== ==========
Total Return (not annualized)* 4.72% 5.41% 2.71% 3.99% 14.40% 0.41%
Ratios/supplemental data:
Net assets, end of period (000) $12,667 $5,823 $1,492 $13,527 $4,855 $866
Number of shares outstanding, end
of period (000) 12,667 5,823 1,492 1,335 471 90
Ratios to average net assets
(annualized):
Ratio of expenses to average net
assets(1) 0.51% 0.42% 0.00% 0.60% 0.45% 0.00%
Ratio of net investment income to
average
net assets(2) 4.64% 5.15% 4.63% 5.75% 5.82% 7.35%
Portfolio turnover N/A N/A N/A 222% 405% 130%
Average commission rate paid(3) N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------
(1) Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses: 1.22% 3.83% 11.43% 1.18% 2.46% 12.73%
(2) Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses: 3.93% 1.74% -6.80% 5.17% 3.81% -5.38%
- -----------------------------------------------------------------------------------------------
(3) For fiscal years beginning on or after September 15,
1995, a fund is required to disclose its average
commission rate per share for security trades on which
commissions are charged. This amount may vary from
period to period and fund to fund depending on the mix
of trades executed in various markets where trading
practices and commission rate structures may differ.
</TABLE>
* Total returns do not include any sales charges.
FS-15
<PAGE> 63
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Life & 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, the
Growth and Income Fund, the Money Market Fund, and the U.S. Government
Allocation Fund. These Funds invest in a range of securities, generally
including money market instruments, equities, and U.S. Government securities.
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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 valued at the last reported sales price on the day of
valuation. U.S. Government obligations are valued at the 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 seeks to maintain a constant net asset value of $1.00 per share.
There is no assurance that the Fund will be able to do so. The amortized cost
method involves valuing a security at its cost, plus accretion of discount or
minus amortization of 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
Securities 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
are accreted and premiums are amortized as required by the Internal Revenue Code
(the "Code").
FS-16
<PAGE> 64
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
securities ("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 pools the Funds' cash and invests in repurchase
agreements entered into by the Funds. The repurchase agreements must be fully
collateralized based on values that are marked to market daily. The collateral
may be 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 December 31, 1996 are
collateralized by U.S. Treasury or Federal Agency obligations. The repurchase
agreements were entered into on December 31, 1996.
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. 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 with respect to each Fund is to comply with the requirements
of the Code that are applicable to regulated investment companies and to
distribute substantially all of the Fund's taxable income and any net realized
capital gains to its shareholders. Therefore, no provision for federal or state
income taxes is required.
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 or 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 obligations or other
high-quality debt securities equal to the minimum "initial margin" requirements
of the exchange on which the futures contract is traded. 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 difference 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
FS-17
<PAGE> 65
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996
may not correlate with changes in the value of the underlying securities. On
December 31, 1996 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>
56 S&P 500 Index March 1997 $20,846,000 $221,625
</TABLE>
The Life & Annuity Trust Asset Allocation Fund has pledged to brokers U.S.
Treasury bills for initial margin requirements with a par value of $820,000.
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 at an annual rate of 0.60% of each Fund's average
daily net assets. Under the contract with the Money Market Fund, WFB is entitled
to a monthly advisory fee at an annual rate of 0.45% of the Fund's 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 Barclays
Global Fund Advisors ("BGFA"). Subject to the overall supervision of Wells Fargo
Bank, BGFA is responsible for day-to-day portfolio management of such Funds.
BGFA is entitled to receive monthly fees at an annual rate of 0.20% and 0.15% of
the average daily net assets of the Asset Allocation Fund and the U.S.
Government Allocation Fund, respectively, as compensation for its sub-advisory
services. BGFA is an indirect subsidiary of Barclays Bank PLC. BGFA was formed
by the reorganization of Wells Fargo Nikko Investment Advisors ("WFNIA"), a
former affiliate of Wells Fargo & Company. Prior to January 1, 1996, WFNIA
served as sub-advisor to the Funds and was entitled to receive the same fees as
currently received by BGFA. Barclays Global Investors, N.A. ("BGI") acts as
custodian to the Asset Allocation Fund and the U.S. Government Allocation Fund.
BGI will not be entitled to receive compensation for its services to the Asset
Allocation Fund and the U.S. Government Allocation Fund so long as BGFA is
entitled to receive fees for providing investment sub-advisory services to such
Funds. Prior to January 1, 1996, BGI was known as Wells Fargo Institutional
Trust Company N.A. and was an affiliate of WFB.
The Trust has also entered into contracts on behalf of the Growth and Income
Fund and the Money Market Fund with WFB for custody and portfolio accounting
services. WFB is entitled to be compensated for custody services at 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% of the first $50 million of each Fund's average daily
net assets, 0.045% of the next $50 million and 0.02% of each Fund's average
daily net assets over $100 million.
The Trust has entered into a contract on behalf of each Fund with WFB whereby
WFB provides transfer agency services for each of the Funds. Under the contract,
WFB is entitled to receive fees at an annual rate of 0.05% of each Funds'
average daily net assets. Effective February 1, 1997, WFB will be entitled to
receive fees for transfer agency
FS-18
<PAGE> 66
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996
services at an annual rate of 0.14% of the average daily net assets of the Asset
Allocation, Growth and Income and U.S. Government Allocation Funds and 0.10% of
the average daily net assets of the Money Market Fund.
The Trust has entered into an administration agreement on behalf of the Funds
with Stephens. Under the agreement, Stephens provides supervisory and
administrative services to the Funds. For these services, Stephens is entitled
to receive a monthly fee at the annual rate of 0.03% of each of the Fund's
average daily net assets.
The Board of Trustees has approved a change in fund administrative duties.
Effective May 1, 1997, WFB will become Administrator to the Trust on behalf of
the Funds and Stephens will become Co-Administrator to the Trust on behalf of
the Funds. WFB and Stephens will be entitled to receive monthly fees at the
annual rates of 0.04% and 0.02%, respectively, of the average daily net assets
of each Fund.
WAIVED FEES AND REIMBURSED EXPENSES
The following amounts of fees and expenses have been waived and/or reimbursed
for the year ended December 31, 1996:
<TABLE>
<CAPTION>
Waived Fees and
Reimbursed
Waived Fees Expenses
FUND by WFB by Stephens Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Allocation............................................ $ 43,876 $ 0 $ 43,876
Growth and Income........................................... 109,481 0 109,481
Money Market................................................ 63,235 4,176 67,411
U. S. Government Allocation................................. 35,951 11,301 47,252
</TABLE>
- --------------------------------------------------------------------------------
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens.
All of the officers and one of the directors of the Trust are also officers of
Stephens. As of December 31, 1996, Stephens owned 3,182 shares of the Asset
Allocation Fund; 2,693 shares of the Growth and Income Fund; 28,367 shares of
the Money Market Fund and 2,948 shares of the U.S. Government Allocation Fund.
FS-19
<PAGE> 67
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for each
Fund for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Asset Growth and U.S. Government
Allocation Income Allocation
AGGREGATE PURCHASES AND SALES OF: Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $25,635,509 $ 0 $30,724,328
Sales proceeds 708,094 0 13,059,504
OTHER SECURITIES:
Purchases at cost 0 34,021,000 0
Sales proceeds 0 17,592,246 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 interests. Capital share transactions for each of the Funds for the
years ended December 31, 1996 and 1995 are disclosed in detail in the Statements
of Changes in Net Assets.
FS-20
<PAGE> 68
LIFE & ANNUITY TRUST
FILE NOS. 33-70988; 811-8118
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
The following audited financial statements for the Asset Allocation,
Growth and Income, Money Market and U.S. Government Allocation Funds
are included in Part B, Item 23:
Portfolio of Investments - December 31, 1996
Statement of Assets and Liabilities - December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statements of Changes in Net Assets for the year ended December 31,
1996
Financial Highlights for the year ended December 31, 1996
Notes to the Financial Statements - December 31, 1996
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
1(a) - Declaration of Trust, filed herewith.
1(b) - Amendment No. 1 to the Declaration of Trust, filed herewith.
2 - By-Laws, filed herewith.
3 - Not applicable
4 - Not applicable
5(a)(i) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the
Asset Allocation Fund and U.S. Government Allocation Fund,
filed herewith.
5(a)(ii) - Sub-Advisory Contract with BZW Barclays Global Fund Advisors
on behalf of the Asset Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 3 filed on April
26, 1996.
5(a)(iii) - Sub-Advisory Contract with BZW Global Fund Advisors on behalf
of the U.S. Government Allocation Fund, incorporated by
reference to Post-Effective Amendment No. 3 filed on April 26,
1996.
</TABLE>
C-1
<PAGE> 69
<TABLE>
<S> <C>
5(b) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the
Growth and Income Fund and the Money Market Fund, filed
herewith.
6(a) - Distribution Agreement with Stephens Inc. on behalf of each
Fund, incorporated by reference to Post-Effective Amendment
No. 2, filed herewith.
6(b) - Participation Agreement with American Skandia Life Assurance
Corporation, incorporated by reference to Post-Effective
Amendment No. 2, filed herewith.
7 - Not applicable
8(a) - Custody Agreement with Wells Fargo Institutional Trust
Company, N.A. on behalf of the Asset Allocation Fund and the
U.S. Government Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 2, filed on April 25, 1995.
8(b) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of the
Growth and Income Fund and the Money Market Fund, incorporated
by reference to Post-Effective Amendment No. 2, filed on April
25, 1995.
9(a) - Administration Agreement with Stephens Inc. on behalf of the
Funds, incorporated by reference to Post-Effective Amendment
No. 2, filed on April 25, 1995.
9(b) - Agency Agreement with Wells Fargo Bank, N.A. on behalf of the
Funds, incorporated by reference to Post-Effective Amendment
No. 2, filed on April 25, 1995.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Consent of Independent Auditors, filed herewith.
12 - Not applicable
13 - Investment Letter, incorporated by reference to the
Registration Statement on Form N-1A, filed on October 28,
1993.
14 - Not applicable
15 - Not applicable
16 - Schedule of Computation of Performance Data, incorporated by
reference to Post-Effective Amendment No. 2, filed on April
25, 1995.
17 - Powers of Attorney, incorporated by reference to the
Registration Statement on Form N-1A, filed on October 28,
1993.
27.1 - Financial Data Schedule for the Asset Allocation Fund, filed
herewith.
27.2 - Financial Data Schedule for the Growth and Income Fund, filed
herewith.
27.3 - Financial Data Schedule for the Money Market Fund, filed
herewith.
</TABLE>
C-2
<PAGE> 70
<TABLE>
<S> <C>
27.4 - Financial Data Schedule for the U.S. Government Allocation Fund,
filed herewith.
</TABLE>
Item 25. Persons Controlled by or Under
Common Control with Registrant.
No person is controlled by or under common control with Registrant.
Item 26. Number of Holders of Securities.
As of April 1, 1997 the number of record holders of each class of
securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
The Asset Allocation Fund 3
The Growth and Income Fund 2
The Money Market Fund 2
The U.S. Government Allocation Fund 2
</TABLE>
Item 27. Indemnification.
Article V of the Registrant's Declaration of Trust limits the
liability and, in certain instances, provides for mandatory indemnification of
the Registrant's trustees, officers, employees, agents and holders of
beneficial interests in the Trust and its four Funds. In addition, the
Trustees are empowered under Section 3.9 of the Registrant's Declaration of
Trust to obtain such insurance policies as they deem necessary.
Item 28. Business and Other Connections
of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, serves as investment adviser to all of the
Registrant's investment portfolios, and to certain other registered open-end
management investment companies. Wells Fargo Bank's business is that of a
national banking association with respect to which it conducts a variety of
commercial banking and trust activities.
To the knowledge of Registrant, none of the directors or executive
officers of Wells Fargo Bank, except those set forth below, is or has been at
any time during the past two fiscal
C-3
<PAGE> 71
years engaged in any other business, profession, vocation or employment of a
substantial nature, except that certain executive officers also hold various
positions with and engage in business for Wells Fargo & Company. Set forth
below are the names and principal businesses of the directors and executive
officers of Wells Fargo Bank who are or during the past two fiscal years have
been engaged in any other business, profession, vocation or employment of a
substantial nature for their own account or in the capacity of director,
officer, employee, partner or trustee. All the directors of Wells Fargo Bank
also serve as directors of Wells Fargo & Company.
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
- ------------------- -----------------------------------------
H. Jesse Arnelle Senior Partner of Arnelle, Hastie, McGee, Willis & Greene
Director 455 Market Street
San Francisco, CA 94105
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
Michael R. Bowlin Chairman of the Board, Chief Executive Officer, Chief
Operating Officer and President of Atlantic Richfield Co.
(ARCO)
Highway 150
Santa Paula, CA 93060
Edward Carson Chairman of the Board and Chief Executive Officer of
First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Director of Aztar Corporation
2390 East Camelback Road
Suite 400
Phoenix, AZ 85016
Director of Castle & Cook, Inc.
10900 Wilshire Blvd.
Los Angeles, CA 90024
Director of Terra Industries, Inc.
1321 Mount Pisgah Road
Walnut Creek, CA 94596
William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
C-4
<PAGE> 72
Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302
Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
Chairman of the Board of Trustees of Whittier College
13406 East Philadelphia Avenue
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors
Chairman of the and Chief Executive Officer of
Board of Directors Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean Emeritus of
Director Graduate School of Business, Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
C-5
<PAGE> 73
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Thomas L. Lee Chairman and Chief Executive Officer of
The Newhall Land and Farming Company
10302 Avenue 7 1-2
Firebaugh, CA 93622
Director of Calmat Co.
501 El Charro Road
Pleasanton, CA 94588
Director of the Los Angeles Area Chamber of Commerce
Trustee of the California Institute of the Arts
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San Francisco Foundation
250 Executive Park Blvd., Suite 2000
San Francisco, CA 94143
Director of American Conservatory Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
Philip J. Quigley Chairman, Chief Executive Officer and
Director Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
Carl E. Reichardt Director of Ford Motor Company
Director The American Road
Dearborn, MI 48121
C-6
<PAGE> 74
Director of Hospital Corporation of America,
HCA-Hospital Corp. of America
One Park Plaza
Nashville, TN 37203
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Donald B. Rice President, Chief Operating Officer and Director of
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Richard J. Stegemeier Chairman (Emeritus) of Unocal Corp
44141 Yucca Avenue
Lancaster, CA 93534
Director of Foundation Health Corporation
166 4th
Fort Irwin, CA 92310
Director of Halliburton Company
3600 Lincoln Plaza
500 North Alcard Street
Dallas, TX 75201
Director of Northrop Grumman Corp.
1840 Century Park East
Los Angeles, CA 90067
Director of Outboard Marine Corporation
100 SeaHorse Drive
Waukegan, IL 60085
Director of Pacific Enterprises
555 West Fifth Street
Suite 2900
Los Angeles, CA 90031
Director of First Interstate Bancorp
633 West Fifth Street
Los Angeles, CA 90071
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
David M. Tellep Chairman of the Board and Chief Executive Officer of
Martin Lockheed Martin Corp
6801 Rockledge Drive
Bethesda, MD 20817
Director of Edison International and Southern
California Edison Company
2244 Walnut Grove Ave.
Rosemead, CA 91770
Director of First Interstate
633 West Fifth Street
Los Angeles, CA 90071
Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720
John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
William F. Zuendt President and Chief Operating Officer of
President Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of 3Com Corp.
5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of MasterCard International
888 Seventh Avenue
New York, NY 10106
C-7
<PAGE> 75
Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of
Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo Institutional
Trust Company), serves as sub-adviser to the Asset Allocation and U.S.
Government Allocation Funds of the Trust and as adviser or sub-adviser to
certain other open-end management investment companies.
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management
business of the former sub-adviser to the Asset Allocation and U.S. Government
Allocation Funds, Wells Fargo Nikko Investment Advisors ("WFNIA") and, in some
cases, the service business of BGI. With the exception of Irving Cohen, each
of the directors and executive officers of BGFA will also have substantial
responsibilities as directors and/or officers of BGI. To the knowledge of the
Registrant, except as set forth below, none of the directors or executive
officers of BGFA is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ------------------------- -------------------------------
Frederick L.A. Grauer Co-Chairman and Director of BGFA and BGI
Co- Chairman and Director 45 Fremont Street, San Francisco, California 94105
Patricia Dunn Co-Chairman and Director of BGFA and BGI
Co-Chairman and Director 45 Fremont Street, San Francisco, California 94105
Irving Cohen Chief Financial Officer and Chief Operating Officer
Director of Barclays Bank PLC, New York Branch and Chief
Operating Officer of Barclays Group, Inc. (USA):
previously Chief Financial Officer of Barclays de
Zoete Wedd Securities Inc. (1994)
222 Broadway, New York, New York 10038
Andrea M. Zolberti Chief Financial Officer of BGFA and BGI
Chief Financial Officer
Prior to January 1, 1996, WFNIA served as sub-adviser to the Asset
Allocation and U.S. Government Allocation Funds of the Trust and as adviser or
sub-adviser to various other open-end management investment companies. For
additional information, see "Management of the Funds" in the Prospectus and
"Management" in the Statement of Additional Information for the Funds. For
information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and management committees of WFNIA,
reference is made to WFNIA's Form ADV and Schedules A and D filed under the
Investment Advisers Act of 1940, File No. 801-36479, incorporated herein by
reference.
C-8
<PAGE> 76
Item 29. Principal Underwriters.
(a) Stephens Inc. ("Stephens"), distributor for the Registrant, does
not presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Overland Express Funds,
Inc., MasterWorks Funds Inc. (formerly, "Stagecoach Inc."), Stagecoach Funds,
Inc. and Stagecoach Trust and is the exclusive placement agent for Master
Investment Trust, Managed Series Investment Trust and Master Investment
Portfolio, which are registered open-end management investment companies, and
has acted as principal underwriter for the Nations Government Income Term Trust
2003, Inc., Nations Government Income Term Trust 2004, Inc. and Nations Managed
Balanced Target Maturity Fund, Inc., which are closed-end management investment
companies, and Nations Fund Trust, Nations Fund Inc., Nations Fund Portfolios,
Inc., Nations LifeGoal Funds, Inc. and Nations Institutional Reserves
(formerly, "The Capital Mutual Funds"), which are open-end management investment
companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV and Schedules A
and D thereto, filed by Stephens with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940 (file #501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records.
(a) The Registrant maintains accounts, books and other documents
required by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder (collectively, "Records") at the offices of Stephens Inc., 111 Center
Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its services as
investment adviser, administrator and custodian and transfer and dividend
disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) BGFA and BGI maintain all Records relating to their services as
sub-adviser and custodian, respectively, to the Asset Allocation and U.S.
Government Allocation Funds at 45 Fremont Street, San Francisco, California
94105.
(d) Stephens maintains all Records relating to its services as
sponsor, co-administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
C-9
<PAGE> 77
Item 31. Management Services.
Other than as set forth under the captions "Management of the Funds"
in the Prospectus constituting Part A of this Registration Statement and
"Management" in the Statement of Additional Information constituting Part B of
this Registration Statement, the Registrant is not a party to any
management-related service contract.
Item 32. Undertakings.
(a) Not Applicable.
(b) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the
provisions set forth above in response to Item 27, or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a trustee,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(c) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of removal
of a trustee or trustees if requested in writing by the holders
of at least 10% of the Trust's outstanding voting securities, and
to assist in communicating with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940.
(d) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of its most current annual report to
shareholders, upon request and without charge.
C-10
<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to the Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Little Rock, State of Arkansas on the 29th day of April 1997.
LIFE & ANNUITY TRUST
By: /s/Richard H. Blank, Jr.
--------------------------------
(Richard H. Blank, Jr.
Secretary and Treasurer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated:
Signature Title
--------- -----
* Trustee, Chairman and President
------------------------------ (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr Secretary and Treasurer
-------------------------------
(Richard H. Blank, Jr.)
* Trustee
-------------------------------
(Jack S. Euphrat)
* Trustee
-------------------------------
(Thomas S. Goho)
* Trustee
-------------------------------
(W. Rodney Hughes)
* Trustee
-------------------------------
(Robert M. Joses)
* Trustee
-------------------------------
(J. Tucker Morse)
April 29, 1997
*By: /s/Richard H. Blank, Jr.
-------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
<PAGE> 79
LIFE & ANNUITY TRUST
FILE NOS. 33-70988; 811-8118
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
EX-27.1 Financial Data Schedule - Asset Allocation Fund
EX-27.2 Financial Data Schedule - Growth and Income Fund
EX-27.3 Financial Data Schedule - Money Market Fund
EX-27.4 Financial Data Schedule - U.S. Government Allocation Fund
EX-99.B1(a) Declaration of Trust
EX-99.B1(b) Amendment No. 1 to the Declaration of Trust
EX-99.B2 By-Laws
EX-99.B5(a)(i) Advisory Contract with Wells Fargo Bank, N.A. on behalf of the
Asset Allocation and U.S. Government Allocation Funds
EX-99.B5(b) Advisory Contract with Wells Fargo Bank, N.A. on behalf of the
Growth and Income and Money Market Funds
EX-99.B6(a) Distribution Agreement with Stephens Inc.
EX-99.B6(b) Participation Agreement with American Skandia Life Assurance
Corp.
EX-99.B9(b) Agency Agreement with Wells Fargo Bank, N.A.
EX-99.B10 Opinion of Counsel - Morrison & Foerster LLP
EX-99.B11 Consent of Independent Auditors - KPMG Peat Marwick LLP
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> ASSET ALLOCATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 51,115,231
<INVESTMENTS-AT-VALUE> 51,723,501
<RECEIVABLES> 1,264,818
<ASSETS-OTHER> 614
<OTHER-ITEMS-ASSETS> 15,893
<TOTAL-ASSETS> 53,004,826
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,207,885
<TOTAL-LIABILITIES> 1,207,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,471,742
<SHARES-COMMON-STOCK> 4,537,205
<SHARES-COMMON-PRIOR> 2,259,262
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 495,304
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 829,895
<NET-ASSETS> 51,796,941
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,396,945
<OTHER-INCOME> 0
<EXPENSES-NET> (275,104)
<NET-INVESTMENT-INCOME> 2,121,841
<REALIZED-GAINS-CURRENT> 2,464,924
<APPREC-INCREASE-CURRENT> 13,719
<NET-CHANGE-FROM-OPS> 4,600,484
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,121,841)
<DISTRIBUTIONS-OF-GAINS> (2,300,431)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,210,668
<NUMBER-OF-SHARES-REDEEMED> 318,474
<SHARES-REINVESTED> 385,749
<NET-CHANGE-IN-ASSETS> 26,330,169
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 330,811
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238,004
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 318,980
<AVERAGE-NET-ASSETS> 39,739,000
<PER-SHARE-NAV-BEGIN> 11.27
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.69
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> (0.54)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.42
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 29,107,975
<INVESTMENTS-AT-VALUE> 33,482,721
<RECEIVABLES> 181,170
<ASSETS-OTHER> 1,445
<OTHER-ITEMS-ASSETS> 6,722
<TOTAL-ASSETS> 33,672,058
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 291,420
<TOTAL-LIABILITIES> 291,420
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,820,399
<SHARES-COMMON-STOCK> 2,176,280
<SHARES-COMMON-PRIOR> 845,941
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 185,493
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,374,746
<NET-ASSETS> 33,380,638
<DIVIDEND-INCOME> 290,801
<INTEREST-INCOME> 157,749
<OTHER-INCOME> 0
<EXPENSES-NET> (126,924)
<NET-INVESTMENT-INCOME> 321,626
<REALIZED-GAINS-CURRENT> 670,537
<APPREC-INCREASE-CURRENT> 3,407,928
<NET-CHANGE-FROM-OPS> 4,400,091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (321,626)
<DISTRIBUTIONS-OF-GAINS> (514,688)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,407,558
<NUMBER-OF-SHARES-REDEEMED> 133,606
<SHARES-REINVESTED> 56,387
<NET-CHANGE-IN-ASSETS> 22,461,046
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 29,644
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 127,818
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 236,405
<AVERAGE-NET-ASSETS> 21,085,000
<PER-SHARE-NAV-BEGIN> 12.91
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 2.68
<PER-SHARE-DIVIDEND> (0.20)
<PER-SHARE-DISTRIBUTIONS> (0.25)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.34
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 12,562,361
<INVESTMENTS-AT-VALUE> 12,562,361
<RECEIVABLES> 184,424
<ASSETS-OTHER> 1,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,748,605
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81,654
<TOTAL-LIABILITIES> 81,654
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,666,951
<SHARES-COMMON-STOCK> 12,666,954
<SHARES-COMMON-PRIOR> 5,823,351
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,666,951
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 492,085
<OTHER-INCOME> 0
<EXPENSES-NET> (49,163)
<NET-INVESTMENT-INCOME> 442,922
<REALIZED-GAINS-CURRENT> 225
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 443,147
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (442,922)
<DISTRIBUTIONS-OF-GAINS> (225)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,213,897
<NUMBER-OF-SHARES-REDEEMED> 8,813,439
<SHARES-REINVESTED> 443,145
<NET-CHANGE-IN-ASSETS> 6,843,603
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 43,071
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 116,574
<AVERAGE-NET-ASSETS> 9,589,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 004
<NAME> U.S. GOVERNMENT ALLOCATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 13,101,094
<INVESTMENTS-AT-VALUE> 13,124,280
<RECEIVABLES> 501,197
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,139
<TOTAL-ASSETS> 13,626,616
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99,282
<TOTAL-LIABILITIES> 99,282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,507,669
<SHARES-COMMON-STOCK> 1,334,979
<SHARES-COMMON-PRIOR> 471,204
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,521)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,186
<NET-ASSETS> 13,527,334
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 520,326
<OTHER-INCOME> 0
<EXPENSES-NET> (49,478)
<NET-INVESTMENT-INCOME> 470,850
<REALIZED-GAINS-CURRENT> (3,569)
<APPREC-INCREASE-CURRENT> (32,071)
<NET-CHANGE-FROM-OPS> 435,210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (470,850)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 868,061
<NUMBER-OF-SHARES-REDEEMED> 51,054
<SHARES-REINVESTED> 46,768
<NET-CHANGE-IN-ASSETS> 8,672,181
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 48
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 49,164
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 96,728
<AVERAGE-NET-ASSETS> 8,193,000
<PER-SHARE-NAV-BEGIN> 10.30
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> (0.17)
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.13
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.B1(a)
DECLARATION OF TRUST
OF
VARIABLE INSURANCE PRODUCT TRUST
a Delaware Business Trust
October 26, 1993
Principal Place of Business:
111 Center Street
Little Rock, Arkansas 72201
<PAGE> 2
DECLARATION OF TRUST
OF
VARIABLE INSURANCE PRODUCT TRUST
This DECLARATION OF TRUST of the Variable Insurance Product Trust is made
on the 26th day of October, 1993 by the parties signatory hereto, as trustees
(such persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of Trust and are then in office, in their
capacity as trustees hereunder, are hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a business trust under the law of
Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the trust assets be composed of funds
contributed thereto by the holders of interests in the trust entitled to
ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all cash, securities and other assets which they may from time to time acquire
in any manner as Trustees hereunder, and manage and dispose of the same for the
benefit of the holders of interests in the trust and subject to the following
terms and conditions.
ARTICLE I
The Trust
1.1 Name. The name of the trust created hereby (the "Trust") shall be
"Variable Insurance Product Trust," and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue or
be sued under that name, which name (and the word "Trust" wherever hereinafter
used) shall not refer to the Trustees in their individual capacities or to the
officers, agents, employees or holders of interest in the Trust. However,
should the Trustees determine that the use of the name of the Trust is not
advisable, they may select such other name for the Trust as they deem proper
and the Trust may hold its property and conduct its activities under such other
name. Any name change shall become effective upon the execution by a majority
of the then Trustees of an instrument setting forth the new name. Any such
instrument shall not require the approval of the holders of interests in the
Trust, but shall have the status of an amendment to this Declaration.
1.2 Trust Purpose. The purpose of the Trust is to conduct, operate and
carry on the business of an open-end management investment company registered
under the 1940 Act.
1.3 Definitions. As used in this Declaration, the following terms shall
have the following meanings:
The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time, and the rules and regulations thereunder, as adopted or
amended from time to time.
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The terms "Affiliated Person", "Assignment" and "Interested Person" shall
have the meanings given them in the 1940 Act.
"Administrator" shall mean any party furnishing services to the Trust
pursuant to any administrative services contract described in Section 4.1
hereof.
"By-Laws" shall mean the By-Laws of the Trust as amended from time to
time.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations thereunder, as adopted or amended from
time to time.
"Commission" shall mean the Securities and Exchange Commission.
"Declaration" shall mean this Declaration of Trust as amended from time to
time. References in this Declaration to "Declaration", "hereof", "herein" and
"hereunder" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"DBTA" shall mean the Delaware Business Trust Act, Del. Code. Ann. tit.
12, Section Section 3801-3819, as amended from time to time.
"Fiscal Year" shall mean an annual period as determined by the Trustees
unless otherwise provided by the Code or applicable regulations.
"Holders" shall mean as of any particular time any or all holders of
record of Interest in the Trust or in Trust Property, as the case may be, at
such time.
"Institutional Investor(s)" shall mean any registered broker/dealer,
regulated investment company, segregated asset account, foreign investment
company, common or commingled trust fund, group trust or similar organization
or entity that is an "accredited investor" within the meaning of Regulation D
under the Securities Act of 1933.
"Interest(s)" shall mean the interest of a Holder in the Trust or Trust
Property, as the case may be, including all rights, powers and privileges
accorded to Holders in this Declaration.
"Investment Adviser" shall mean any party furnishing services to the Trust
pursuant to any investment advisory contract described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of the Holders
of Interests in the Trust, of the lesser of (A) 67% or more of the Interests
present or represented at such meeting, provided the Holders of more than 50%
of the Interests in the Trust are present or represented by proxy or (B) more
than 50% of the Interests in the Trust.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Registration Statement" shall mean the currently effective Registration
Statement of the Trust under the 1940 Act.
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"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees. The Trustees may
authorize the division of Trust Property into two or more series, in accordance
with the provisions of Section 9.8 hereof, in which case all references in this
Declaration to the Trust, Trust Property, Interests therein or Holders thereof
shall be deemed to refer to each such series, as the case may be, except as the
context otherwise requires. Any series of Trust Property shall be established
and designated, and the variations in the relative rights and preferences as
between the different series shall be fixed and determined, by the Trustees.
The voting rights of Interests in the Trust Property shall be governed by
Section 18(f)(2) of the 1940 Act and Rule 18f-2 thereunder, as amended from
time to time, or upon repeal thereof, in such other manner as the Trustees
shall establish in the Trust's By-Laws.
"Series" or "Series of Interest" refers to the one or more separate
investment portfolios of the Trust into which the assets and liabilities of the
Trust may be divided and the Interests of the Trust representing the beneficial
interest of Holders in such respective portfolios.
ARTICLE II
Trustees
2.1 Number and Qualification. The number of Trustees shall be fixed from
time to time by written instrument signed by a majority of the Trustees so
fixed then in office, provided, however, that the number of Trustees shall in
no event be less than three or more than fifteen. Any vacancy created by an
increase in Trustees may be filled by the appointment of an individual having
the qualifications described in this Article made by a written instrument
signed by a majority of the Trustees then in office. Any such appointment
shall not become effective, however, until the individual named in the written
instrument of appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of this Declaration. No reduction
in the number of Trustees shall have the effect of removing any Trustee from
office. Whenever a vacancy in the number of Trustees shall occur, until such
vacancy is filled as provided in Section 2.4 hereof, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this
Declaration. A Trustee shall be an individual at least 21 years of age who is
not under legal disability.
2.2 Term and Election. Each Trustee named herein, or elected or
appointed prior to the first meeting of the Holders, shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his or her successor has been elected at such meeting and has
qualified to serve as Trustee, as required under the 1940 Act. Beginning with
the Trustees elected at the first meeting of Holders, each Trustee shall hold
office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee resigns or is removed as provided in
Section 2.3 below.
2.3 Resignation and Removal. Any Trustee may resign (without need for
prior or subsequent accounting) by an instrument in writing signed by him or
her and delivered or mailed to the Chairman, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument. Any of the Trustees may
be removed by the affirmative vote of the Holders of two-thirds (2/3) of the
Interests or (provided the aggregate number of Trustees, after such removal and
after giving effect to any appointment made to fill the vacancy created by such
removal, shall not be less than the number required by Section 2.1 hereof) with
cause, by the action of two-thirds of the remaining Trustees. Removal with
cause includes, but is not limited to, the removal of a
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Trustee due to physical or mental incapacity. Upon the resignation or removal
of a Trustee, or his or her otherwise ceasing to be a Trustee, he or she shall
execute and deliver such documents as the remaining Trustees shall require for
the purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of the resigning or removed Trustee. Upon the death
of any Trustee or upon removal or resignation due to any Trustee's incapacity
to serve as trustee, his or her legal representative shall execute and deliver
on his or her behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
2.4 Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, adjudicated
incompetence or other incapacity to perform the duties of the office, or
removal, of a Trustee. No such vacancy shall operate to annul this Declaration
or to revoke any existing agency created pursuant to the terms of this
Declaration. In the case of a vacancy, the Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of the Holders held in
accordance with Section 9.1 hereof, or, to the extent permitted by the 1940
Act, a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
2.5 Meetings. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Chief Operating
Officer, if any, the Secretary, an Assistant Secretary or any two Trustees.
Regular meetings of the Trustees may be held without call or notice at a time
and place fixed by the By-Laws or by resolution of the Trustees. Notice of any
other meeting shall be mailed or otherwise given not less than 24 hours before
the meeting but may be waived in writing by any Trustee either before or after
such meeting. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Trustee attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened. The Trustees
may act with or without a meeting. A quorum for all meetings of the Trustees
shall be one-third of the total number of Trustees, but no less than two
Trustees. Unless provided otherwise in this Declaration, any action of the
Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consent of all
the Trustees. If there be less than a quorum present at any meeting of the
Trustees, a majority of those present may adjourn the meeting until a quorum
shall have been obtained.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be two or more of the members thereof, unless the Board shall
provide otherwise. Unless provided otherwise in this Declaration, any action
of any such committee may be taken at a meeting by vote of a majority of the
members present (a quorum being present) or without a meeting by written
consent of all of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust within the meaning of Section
1.3 hereof or otherwise interested in any action to be taken may be counted for
quorum purposes under this Section 2.5 and shall be entitled to vote to the
extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participating in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person," in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.
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2.6 Officers; Chairman of the Board. The Trustees shall, from time to
time, elect a President, a Secretary and a Treasurer. The Trustees shall elect
or appoint, from time to time, a Chairman of the Board who shall preside at all
meetings of the Trustees and carry out such other duties as the Trustees shall
designate. The Trustees may elect or appoint or authorize the President to
appoint such other officers or agents with such powers as the Trustees may deem
to be advisable. The Chairman of the Board shall be and the President,
Secretary and Treasurer may, but need not, be a Trustee.
2.7 By-Laws. The Trustees may adopt and, from time to time, amend or
repeal the By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1 General. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion
are proper for conducting the business of the Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid power.
Such powers of the Trustee may be exercised without order of or recourse to any
court.
3.2 Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of the United States and foreign currencies and
related instruments including forward contracts, and securities, including,
common and preferred stock, warrants, bonds, debentures, time notes and all
other evidences of indebtedness, negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, convertible securities,
forward contracts, options, futures contracts, and other securities, including,
without limitation, those issued, guaranteed or sponsored by any state,
territory or possession of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities, or by the United
States Government, any foreign government, or any agency, instrumentality or
political subdivision of the United States Government or any foreign
government, or international instrumentalities, or by any bank, savings
institution, corporation or other business entity organized under the laws of
the United States or under foreign laws; and to exercise any and all rights,
powers and privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations, or corporations to exercise
any of said rights, powers and privileges in respect of any of said
instruments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional securities in which the Trustees may determine to
invest.
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The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3 Legal Title. Legal title to all the Trust Property shall be vested
in the Trustees as joint tenants except that the Trustees shall have the power
to cause legal title to any Trust Property to be held by or in the name of one
or more of the Trustees, or in the name of the Trust, or in the name of any
other Person on behalf of the Trust on such terms as the Trustees may
determine.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each person who may hereafter become a Trustee upon his
or her due election and qualification. Upon the resignation, removal or death
of a Trustee he or she shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest of
such Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered.
3.4 Sale of Interests. Subject to the more detailed provisions set forth
in Articles VII and VIII, the Trustees shall have the power to issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in, Interests including Interests in fractional
denominations, and to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Interests any funds or other assets of the
appropriate series or class of Interests, whether capital or surplus or
otherwise.
3.5 Borrow Money. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other person,
firm, association or corporation.
3.6 Delegation; Committees. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient.
3.7 Collection and Payment. The Trustees shall have power to collect all
property due to the Trust; and to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims relating
to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owned to the Trust; and to
enter into releases, agreements and other instruments.
3.8 Expenses. The Trustees shall have the power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
The Trustees may pay themselves such compensation for special services,
including legal and brokerage services, as they in good faith may deem
reasonable (and subject to any limitations in the 1940 Act), and reimbursement
for expenses reasonably incurred by themselves on behalf of the Trust.
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3.9 Miscellaneous Powers. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c)
purchase, and pay for out of Trust Property, insurance policies (including, but
not limited to, fidelity bonding and errors and omission) insuring the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents, or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
any Trustees, officers, employees and agents of the Trust; (e) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Adviser, Administrator, distributor, Holders,
Trustees, officers, employees, agents or independent contractors of the Trust,
to such extent as the Trustees shall determine; (f) guarantee indebtedness or
contractual obligations of others; (g) determine and change the Fiscal Year of
the Trust and the method by which its accounts shall be kept; and (h) adopt a
seal for the Trust, but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust.
3.10 Further Powers. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices, whether within or without the State of Delaware,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the United States of
America and of foreign countries, and to do all such other things and execute
all such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of
the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in
favor of a grant of power to the Trustees. The Trustees will not be required
to obtain any court order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administrative Services
and Distribution Arrangements
4.1 Investment Advisory and Other Arrangements. The Trustees may in
their discretion, from time to time, enter into investment advisory,
administrative services (including transfer and dividend disbursing agency
services), distribution, fiduciary (including custodian), placement agent,
shareholder servicing and distribution or other service contracts or agreements
whereby the other party to such contract or agreement shall undertake to
furnish the Trustees such investment advisory, administrative, distribution,
fiduciary, placement agent, shareholder servicing and/or other services as the
Trustee shall, from time to time, consider desirable and all upon such terms
and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration, the Trustees may authorize
any Investment Adviser (subject to such general or specific instructions as the
Trustees may, from time to time, adopt) to effect purchases, sales, loans or
exchanges of Trust Property on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of any such Investment Adviser (and all
without further action by the Trustees). Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all of the Trustees.
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4.2 Parties to Contract. Any contract or agreement of the character
described in Section 4.1 of this Article IV or in the By-Laws of the Trust may
be entered into with any Person, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract or agreement, and no such contract
or agreement shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said contract or agreement or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract or agreement when entered into was reasonable and fair and
not inconsistent with the provisions of this Article IV or the By-Laws. The
same Person may be the other party to contracts or agreements entered into
pursuant to Section 4.1 above or the By-Laws of the Trust, and any individual
may be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts or agreements mentioned in this Section
4.2.
ARTICLE V
Limitations of Liability
5.1 No Personal Liability of Trustees, Officers, Employees, Agents;
Liability of Holders; Indemnification. No Trustee, officer, employee or agent
of the Trust shall be subject to any personal liability whatsoever, in his or
her official or individual capacity to any Person, other than the Trust or its
Holders, in connection with Trust Property or the affairs of the Trust, save
only that arising from his or her bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duty to such Person; and all
such Persons shall look solely to the Trust Property for satisfaction of claims
of any nature against a Trustee, officer, employee or agent of the Trust
arising in connection with the affairs of the Trust.
5.2 Non-liability of Trustees, etc. No Trustee, officer, employee or
agent of the Trust shall be liable to the Trust, Holders of Interests therein,
or to any Trustee, officer, employee, or agent thereof for any action or
failure to act (including, without limitation, the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his or
her own bad faith, willful misfeasance, gross negligence or reckless disregard
of his or her duties.
5.3 Mandatory Indemnification. The Trust shall indemnify each of its
Trustees, officers, employees, and agents (including Persons who serve at its
request as directors, officers or trustees of another organization in which it
has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him or her in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, in which he or she may be
involved or with which he or she may be threatened, while in office or
thereafter, by reason of his or her being or having been such a Trustee,
officer, employee or agent, except with respect to any matter as to which he or
she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless
there has been a determination that such Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office by the court or other body
approving the settlement or other disposition or by a reasonable determination,
based upon a review of readily available facts (as opposed to a full trial type
inquiry), that he or she did not engage in such conduct by written opinion from
independent legal counsel approved by the Trustees. The rights accruing to any
Person under these
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provisions shall not exclude any other right to which he or she may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he or she may be
otherwise entitled except out of the Trust Property. The Trustees may make
advance payments in connection with indemnification under this Section 5.3,
provided that the indemnified Person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that he or she
is not entitled to such indemnification.
5.4 No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his or her duties hereunder.
5.5 No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning
the validity of any transaction purporting to be made by the Trustees or by
said officer, employee or agent or be liable for the application of money or
property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate or other interest or undertaking of the Trust, and every other act
or thing whatsoever executed in connection with the Trust shall be conclusively
taken to have been executed or done by the executors thereof only in their
capacity as Trustees, officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate or other interest or
undertaking of the Trust made or sold by the Trustees or by any officer,
employee or agent of the Trust, in his or her capacity as such, shall contain
an appropriate recital to the effect that the Trustee, officer, employee and
agent of the Trust shall not personally be bound by or liable thereunder, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim thereunder, and appropriate references shall be made
therein to the Declaration, and may contain any further recital which they may
deem appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, officers, employees or agents of the
Trust. The Trustees may maintain insurance for the protection of the Trust
Property, Holders, Trustees, officers, employees and agents in such amount as
the Trustees shall deem adequate to cover possible tort liability, and such
other insurance as the Trustees in their sole judgment shall deem advisable.
5.6 Reliance on Experts, etc. Each Trustee and officer or employee of
the Trust shall, in the performance of his or her duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Administrator, accountant, appraiser or other experts or consultants selected
with reasonable care by the Trustees, officers or employees of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
ARTICLE VI
Interests in the Trust
6.1 Interests. The Interests of the Trust shall be issued in one or more
series as the Trustees may, without Holder approval, authorize. Each series
shall be preferred over all other series in respect of the assets allocated to
that series and shall represent a separate investment portfolio of the Trust.
The beneficial interest in each series at all times shall be divided into
Interests, with or without par value as the Trustees may from time to time
determine, each of which shall, except as provided in the following sentence,
represent an equal proportionate interest in the series with each other
Interest of the same series,
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none having priority or preference over another. The Trustees may, without
Holder Approval, divide Interests of any series into two or more classes,
Interests of each such class having such preferences and special or relative
rights and privileges (including conversion right, if any) as the Trustees may
determine. The number of Interests authorized shall be unlimited, and the
Interests so authorized may be represented in part by fractional Interests.
From time to time, the Trustees may divide or combine the Interests of any
series or class into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class.
6.2 Rights of Holders. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Holders shall have no right or
title therein other than the beneficial interest conferred by their Interests
and they shall have no right to call for any partition or division of any
property, profits or rights of the Trust. The Interests shall be personal
property giving only the rights in this Declaration specifically set forth.
6.3 Purchase of or Increase in Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit the
purchase of Interests by such party or parties (or increase in the Interest of
a Holder) and for such type of consideration, including cash or property, at
such time or times (including, without limitation, each business day), and on
such terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with
the assumption of, liabilities) and businesses.
6.4 Register of Interests. A register shall be kept at the Trust under
the direction of the Trustees which shall contain the names and addresses of
the Holders. Each such register shall be conclusive as to who are the Holders
of the Trust and who shall be entitled to payments of distributions or
otherwise to exercise or enjoy the rights of Holders. No Holder shall be
entitled to receive payment of any distribution, nor to have notice given to it
as herein provided, until it has given its address to such officer or agent of
the Trustees as shall keep the said register for entry thereon.
6.5 Notices. Any and all notices to which any Holder hereunder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Holder of record at its last known
address as recorded on the register of the Trust.
ARTICLE VII
Distributions
7.1 Distributions. The Trustees shall distribute periodically to the
Holders of each series of Interests an amount approximately equal to the net
income of that series, determined by the Trustees or as they may authorize and
as herein provided. Distributions of income may be made in one or more
payments, which shall be in Interests, cash or otherwise, and on a date or
dates and as of a record date or dates determined by the Trustees. At any time
and from time to time in their discretion, the Trustees also may cause to be
distributed to the Holders of any one or more series as of a record date or
dates determined by the Trustees, in Interests, cash or otherwise, all or party
of any gains realized on the sale or disposition of the assets of the series or
all or party of any other principal of the Trust attributable to the series.
Each distribution pursuant to this Section 1 shall be made ratably according to
the number of Interests of the series held by the several Holders on the record
date for such distribution, except to the extent otherwise required or
permitted by the preferences and special or relative rights and privileges of
any classes of Interests of that series, and any distribution to the Holders of
a particular class of Interests shall be made to
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such Holders pro rata in proportion to the number of Interests of such class
held by each of them. No distribution need be made on Interests purchased
pursuant to orders received, or for which payment is made, after such time or
times as the Trustees may determine.
7.2 Determination of Net Income. In determining the net income of each
series or class of Interests for any period, there shall be deducted from
income for that period (a) such portion of all charges, taxes, expenses and
liabilities due or accrued as the Trustees shall consider properly chargeable
and fairly applicable to income for that period or any earlier period and (b)
whatever reasonable reserves the Trustees shall consider advisable for possible
future charges, taxes, expenses and liabilities which the Trustees shall
consider properly chargeable and fairly applicable to income for that period or
any earlier period. The net income of each series or class for any period may
be adjusted for amounts included on account of net income in the net asset
value of Interests issued or redeemed or repurchased during that period. In
determining the net income of a series or class for a period ending on a date
other than the end of its fiscal year, income may be estimated as the trustees
shall deem fair. Gains on the sale or disposition of assets shall not be
treated as income, and losses shall not be charged against income unless
appropriate under applicable accounting principles, except in the exercise of
the discretionary powers of the Trustees. Any amount contributed to the Trust
which is received as income pursuant to a decree of any court of competent
jurisdiction shall be applied as required by the said decree.
ARTICLE VIII
Redemptions
8.1 Redemptions. Any Holder shall be entitled to require the Trust to
redeem and the Trust shall be obligated to redeem at the option of such Holder
all or any part of the Interests owned by said Holder, at the redemption price,
pursuant to the method, upon the terms and subject to the conditions
hereinafter set forth:
(a) Certificates for Interests, if issued, shall be presented for
redemption in proper form for transfer to the Trust or the agent of the Trust
appointed for such purpose, and these shall be presented with a written request
that the Trust redeem all or any part of the Interests represented thereby.
(b) The redemption price per Interest shall be the net asset value
per Interest when next determined by the Trust at such time or times as the
Trustees shall designate, following the time of presentation of certificates of
Interests, if issued, and an appropriate request for redemption, or such other
time as the Trustees may designate in accordance with any provision of the 1940
Act, or any rule or regulation made or adopted by any securities association
registered under the Securities Exchange Act of 1934, as determined by the
Trustees, less any applicable charge or fee imposed from time to time as
determined by the Trustees.
(c) Net asset value of each series or class of Interests (for the
purpose of issuance of Interests as well as redemptions thereof) shall be
determined by dividing:
(i) the total value of the assets of such series or class
determined as provided in paragraph (d) below less, to the extent
determined by or pursuant to the direction of the Trustees in accordance
with generally accepted accounting principles, all debts, obligations and
liabilities of such series or class (which debts, obligations and
liabilities shall include, without limitation of the generality of the
foregoing, any and all debts, obligations, liabilities, or claims, of any
and every
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kind and nature, fixed, accrued and otherwise, including the estimated
accrued expenses of management and supervision, administration and
distribution and any reserves or charges for any or all of the foregoing,
whether for taxes, expenses, or otherwise, and the price of Interests
redeemed but not paid for) but excluding the Trust's liability upon its
Interests and its surplus, by
(ii) the total number of Interests of such series or class
outstanding.
The Trustees are empowered, in their absolute discretion, to
establish other methods for determining such net asset value whenever such
other methods are deemed by them to be necessary to enable the Trust to comply
with applicable law, or are deemed by them to be desirable, provided they are
not inconsistent with any provision of the 1940 Act.
(d) In determining for the purposes of this Declaration of Trust the
total value of the assets of each series or class of Interests at any time,
investments and any other assets of such series or class shall be valued in
such manner as may be determined from time to time or pursuant to the order of
the Trustees.
(e) Payment of the redemption price by the Trust may be made either
in cash or in securities or other assets at the time owned by the Trust or
partly in cash and partly in securities or other assets at the time owned by
the Trust. The value of any part of such payment to be made in securities or
other assets of the Trust shall be the value employed in determining the
redemption price. Payment of the redemption price shall be made on or before
the seventh day following the day on which the Interests are properly presented
for redemption hereunder, except that delivery of any securities included in
any such payment shall be made as promptly as any necessary transfers on the
books of the issuers whose securities are to be delivered may be made and,
except as postponement of the date of payment may be permissible under the 1940
Act.
Pursuant to the resolution of the Trustees, the Trust may deduct
from the payment made for any Interests redeemed a liquidating charge not in
excess of an amount determined by the Trustees from time to time.
(f) The right of any Holder of Interests redeemed by the Trust as
provided in this Article VIII to receive dividends or distributions thereon and
all other rights of such Holder with respect to such Interests shall terminate
at the time as of which the redemption price of such Interests is determined,
except the right of such Holder to receive (i) the redemption price of such
Interests from the Trust in accordance with the provisions hereof, and (ii) any
dividend or distribution to which such Holder previously had become entitled as
the record holder of such Interests on the record date for such dividend or
distribution.
(g) Redemption of Interests by the Trust is conditional upon the
Trust having funds or other assets legally available therefor.
(h) The Trust, either directly or through an agent, may repurchase
its Interests, out of funds legally available therefor, upon such terms and
conditions and for such consideration as the Trustees shall deem advisable, by
agreement with the owner at a price not exceeding the net asset value per
Interest as determined by or pursuant to the order of the Trustees at such time
or times as the Trustees shall designate, less any applicable charge, if and as
fixed by the Trustees from time to time, and to take all other steps deemed
necessary or advisable in connection therewith.
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(i) Interests purchased or redeemed by the Trust shall be cancelled
or held by the Trust for reissue, as the Trustees from time to time may
determine.
(j) The obligations set forth in this Article VIII may be suspended
or postponed, (1) for any period (i) during which the New York Stock Exchange
is closed other than for customary weekend and holiday closing, or (ii) during
which trading on the New York Stock Exchange is restricted, (2) for any period
during which an emergency exists as a result of which (i) the disposal by the
Trust of investments owned by it is not reasonably practicable, or (ii) it is
not reasonably practicable for the Trust fairly to determine the value of its
net assets, or (3) for such other periods as the Commission or any successor
governmental authority by order may permit.
Notwithstanding any other provision of this Article VIII, if
certificates representing such Interests have been issued, the redemption or
repurchase price need not be paid by the Trust until such certificates are
presented in proper form for transfer to the Trust or the agent of the Trust
appointed for such purpose; however, the redemption or repurchase shall be
effective, in accordance with the resolution of the Trustees, regardless of
whether or not such presentation has been made.
8.2 Redemptions at the Option of the Trust. The Trust shall have the
right at its option and at any time to redeem Interests of any Holder at the
net asset value thereof: (i) if at such time such Holder owns fewer Interests
than, or Interests having an aggregate net asset value of less than, an amount
determined from time to time by the Trustees; or (ii) to the extent that such
Holder owns Interests of a particular series or class of Interests equal to or
in excess of a percentage of the outstanding Interests of that series or class
determined from time to time by the Trustees; or (iii) to the extent that such
Holder owns Interests of the Trust representing a percentage equal to or in
excess of such percentage of the aggregate number of outstanding Interests of
the Trust or the aggregate net asset value of the Trust determined from time to
time by the Trustees.
8.3 Dividends, Distributions, Redemptions and Repurchases. No dividend
or distribution (including, without limitation, any distribution paid upon
termination of the Trust or of any series) with respect to, nor any redemption
or repurchase of, the Interests of any series shall be effected by the Trust
other than from the assets of such series.
ARTICLE IX
Holders
9.1 Meetings of Holders. Meetings of the Holders may be called at any
time by a majority in the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests in the Trust, such request specifying the purpose or purposes for
which such meeting is to be called. Any such meeting shall be held within or
without the State of Delaware on such day and at such time as the Trustees
shall designate. Holders of one-third of the Interests in the Trust, present
in person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote by the Holders present, in person
or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action
of the Holders, unless the 1940 Act, other applicable law, this Declaration or
by the By-laws of the Trust requires a greater number of affirmative votes.
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9.2 Notice of Meetings. Written or printed notice of all meetings of the
Holders, stating the time, place and purposes of the meeting, shall be given by
the Trustees either by presenting it personally to a Holder, leaving it at his
or her residence or usual place of business, or by mailing it to a Holder, at
his or her registered address, at least 20 business days and not more than 90
business days before the meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail addressed to the Holder at his
or her address as it is registered with the Trust, with postage thereon
prepaid. At any such meeting, any business properly before the meeting may be
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
9.3 Record Date for Meetings For the purpose of determining the Holders
who are entitled to notice of any to vote at any meeting, or to participate in
any distribution, or for the purpose of any other action, the Trustees may from
time to time fix a date, not more than 90 calendar days prior to the date of
any meeting of the Holders or payment of distributions or other action, as the
case may be, as a record date for the determination of the persons to be
treated as Holders of record for such purposes.
9.4 Proxies, etc. At any meeting of Holders, any Holder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Secretary, or with such other
officer or agent of the Trust as the Secretary may direct, for verification
prior to the time at which such vote shall be taken. Pursuant to a resolution
of a majority of the Trustees, proxies may be solicited in the name of one or
more Trustees or one or more of the officers of the Trust. Only Holders of
record shall be entitled to vote. Each Holder shall be entitled to a vote
proportionate to its Interest in the Trust. When Interests are held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Interest, but if more than one of them shall be present at
such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such vote shall not be received in
respect of such Interest. A proxy purporting to be executed by or on behalf of
a Holder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the
Holder is a minor or a person of unsound mind, and subject to guardianship or
to the legal control of any other person regarding the charge or management of
its Interest, he or she may vote by his or her guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
9.5 Reports. The Trustees shall cause to be prepared, at least annually,
a report of operations containing a balance sheet and statement of income and
undistributed income of the Trust prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
furnish to the Holders at least semi-annually interim reports containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current Fiscal
Year to the end of such period.
9.6 Inspection of Records. The records of the Trust shall be open to
inspection by Holders during normal business hours and for any purpose not
harmful to the Trust.
9.7 Voting Powers. The Holders shall have power to vote only (i) for the
election of Trustees as contemplated by Section 2.2 hereof, (ii) with respect
to any investment advisory contract as contemplated by Section 4.1 hereof,
(iii) with respect to termination of the Trust as provided in Section 10.2
hereof, (iv) with respect to any amendment of the Declaration to the extent and
as provided in Section 10.3 hereof, (v) with respect to any merger,
consolidation or sale of assets as provided in Section 10.4 hereof, (vi) with
respect to incorporation of the Trust to the extent and as provided in
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Section 10.5 hereof, (vii) to the same extent as the stockholders of a Delaware
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Holders, and (viii) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
DBTA, or any other law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as and
when the Trustees may consider necessary or desirable. Each Holder shall be
entitled to vote based on the ratio its Interest bears to the Interests of all
Holders entitled to vote. Until Interests are issued, the Trustees may
exercise all rights of Holders and may take any action required by law, the
Declaration or the By-Laws to be taken by Holders. The By-Laws may include
further provisions for Holders' votes and meetings and related matters.
9.8 Series of Interests. If the Trustees shall divide the Trust Property
into two or more series the following provisions shall be applicable:
(a) All consideration received by the Trust for the issue or sale of
Interests of a particular series together with all Trust Property in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there is any Trust Property, or any income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series, the Trustees shall allocate
them among any one or more of the series established and designated from time
to time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Holders of all Interests for all purposes.
(b) The Trust Property belonging to each particular series shall be
charged with the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which
are not readily identifiable as belonging to any particular series shall be
allocated and charged by the Trustees to and among any one or more of the
series established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Holders of all Interests for
all purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Holders. The assets of a particular
series of the Trust shall, under no circumstances, be charged with liabilities
attributable to any other series of the Trust. All persons extending credit
to, or contracting with or having any claim against a particular series of the
Trust shall look only to the assets of that particular series for payment of
such credit, contract or claim.
(c) Notwithstanding any other provision hereof, if the Trust
Property has been divided into two or more series, then on any matter submitted
to a vote of Holders of Interests in the Trust, all Interests then entitled to
vote shall be voted by individual series, except that (1) when required by the
1940 Act, Interests shall be voted in the aggregate and not by individual
series, and (2) when the Trustees have determined that the matter affects only
the interests of Holders of Interests in a limited number of series, then only
the Holders of Interests in such series shall be entitled to vote thereon.
Except as otherwise provided in this Article IX, the Trustees shall have the
power to determine the designations,
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preferences, privileges, limitations and rights, including voting and dividend
rights, of each series of Interests.
(d) The establishment and designation of any series of Interests
shall be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such series, or as otherwise provided in such
instrument. At any time that there are no Interests outstanding of any
particular series previously established and designated, the Trustees may by an
instrument executed by a majority of their number abolish that series and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
(e) There shall initially be four series of Interest designated as
the "Asset Allocation Fund Series," the "Growth and Income Fund Series," the
"Money Market Fund Series," and the "U.S. Government Allocation Fund Series."
Each such series will consist of an unlimited number of Interests, and shall
have the rights and privileges as set forth herein.
9.9 Holder Action by Written Consent. Any action which may be taken by
Holders may be taken without a meeting if Holders holding more than 50% of the
total Interests entitled to vote (or such larger proportion thereof as shall be
required by any express provision of this Declaration) shall consent to the
action in writing and the written consents are filed with the records of the
meetings of Holders. Such consents shall be treated for all purposes as a vote
taken at a meeting of Holders.
ARTICLE X
Duration; Termination of Trust;
Amendment; Mergers; Etc.
10.1 Duration. Subject to possible termination or dissolution in
accordance with the provision of Section 10.2, the Trust created hereby shall
continue perpetually pursuant to Section 3808 of DBTA.
10.2 Termination of Trust.
(a) The Trust may be terminated (i) by the affirmative vote of the
Holders of not less than two-thirds of the Interests in the Trust at any
meeting of the Holders or by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the Holders of not
less than two-thirds of such Interests, or (ii) by the Trustees by written
notice to the Holders. Upon any such termination,
(i) The Trust shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, or otherwise dispose
of all or any part of the remaining Trust Property to one or more Persons
at public or private sale for consideration which may consist in whole or
in part of cash, securities or other property of any kind, discharge or
pay its liabilities, and
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do all other acts appropriate to liquidate its business; provided that any
sale, conveyance, assignment, exchange, or other disposition of all or
substantially all of the Trust Property shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration by the vote of Holders holding more than 50% of the total
Interests entitled to vote.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property, in cash or in kind
or partly each, among the Holders according to their respective rights.
(b) Upon termination of the Trust and distribution to the Holders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination. Upon termination of the Trust, the Trustees shall thereon be
discharged from all further liabilities and duties hereunder, and the rights
and interests of all Holders shall thereupon cease.
10.3 Amendment Procedure.
(a) This Declaration may be amended by the vote of Holders holding
more than 50% of the total Interests entitled to vote or by any instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the vote of Holders holding more than 50% of the total Interests entitled
to vote. The Trustees may also amend this Declaration without the vote or
consent of Holders to change the name of the Trust, to supply any omission, to
cure, correct or supplement any ambiguous, defective or inconsistent provision
hereof, or to conform this Declaration to the requirements of the 1940 Act, the
Code, DBTA, or any other applicable federal laws or regulations, but the
Trustees shall not be liable for failing so to do.
(b) No amendment may be made, under Section 10.3(a) above, which
would change any rights with respect to any Interest in the Trust by reducing
the amount payable thereon upon liquidation of the Trust or by diminishing or
eliminating any voting rights pertaining thereto, except with a Majority
Interests Vote.
(c) A certification in recordable form signed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by
the Holders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust.
Notwithstanding any other provision hereof, until such time as Interests
are first sold, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees or by an instrument signed
by a majority of the Trustees.
10.4 Merger, Consolidation and Sale of Assets. The Trust, or any series
thereof, may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of its property, including its good will, upon such terms and conditions
and for such consideration when and as authorized by no less than a majority of
the Trustees and, at any meeting of Holders called for the purpose, by the
affirmative vote of the Holders of not less than two-thirds of the Interests in
the Trust, or by an instrument or instruments in writing without a meeting,
consented to by the Holders of not less than two-thirds of such Interests, and
any such merger, consolidation, sale, lease
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or exchange shall be deemed for all purposes to have been accomplished under
and pursuant to the statutes of the State of Delaware. In accordance with
Section 3815(f) of DBTA, an agreement of merger or consolidation may effect any
amendment to the Declaration or By-Laws or effect the adoption of a new
declaration of trust or by-laws of the Trust if the Trust is the surviving or
resulting business trust.
10.5 Incorporation. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the equity interests thereof or
otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust,
association or organization in which the Trust holds or is about to acquire
equity interests. The Trustees may also cause a merger or consolidation
between the Trust or any successor thereto and any such corporation, trust,
partnership, association or other organization if and to the extent permitted
by law, as provided under the law then in effect. Nothing contained herein
shall be construed as requiring approval of the Holders for the Trustees to
organize or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.
ARTICLE XI
Miscellaneous
11.1 Certificate of Designation; Agent for Service of Process. The Trust
shall file, in accordance with Section 3812 of DBTA, in the office of the
Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 by DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at
least one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall
comply with Section 3807(b) of DBTA by having and maintaining a registered
office in Delaware and by designating a registered agent for service of process
on the Trust, which agent shall have the same business office as the Trust's
registered office. The failure to file any such certificate, to maintain a
registered office, to designate a registered agent for service of process, or
to include such other information shall not affect the validity of the
establishment of the Trust, the Declaration, the By-Laws or any action taken by
the Trustees, the Trust officers or any other Person with respect to the Trust
except insofar as a provision of the DBTA would have governed, in which case
the Delaware common law governs.
11.2 Governing Law. This Declaration is executed by all of the Trustees
and delivered with reference to DBTA and the laws of the State of Delaware, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed according to DBTA and the laws of the
State of Delaware (unless and to the extent otherwise provided for and/or
preempted by the 1940 Act or other applicable federal securities laws).
Reference shall be specifically made to DBTA as to the construction of matters
not specifically covered herein or as to which an ambiguity exists (unless and
to the extent otherwise provided for and/or preempted by the 1940 Act or other
applicable federal securities laws).
11.3 Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall
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constitute one and the same instrument, which shall be sufficiently evidenced
by any such original counterpart.
11.4 Reliance by Third Parties. Any certificate executed by an individual
who, according to the records of the Trust or of any recording office in which
this Declaration may be recorded, appears to be a Trustee hereunder, certifying
to: (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of
any vote passed at a meeting of Trustees or Holders, (d) the fact that the
number of Trustees or Holders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (e) the form of any
By-Laws adopted by or the identity of any officers elected by the Trustees, or
(f) the existence of any fact or facts which in any manner relate to the
affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees and their
successors.
11.5 Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the DBTA, or with other applicable
laws and regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
11.6 Trust Only. It is the intention of the Trustees to create only a
business trust under DBTA with the relationship of Trustee and beneficiary
between the Trustees and each Holder from time to time. It is not the
intention of the Trustees to create a general partnership, limited partnership,
joint stock association, corporation, bailment, or any form of legal
relationship other than a Delaware business trust. Nothing in this Declaration
of Trust shall be construed to make the Holders, either by themselves or with
the Trustees, partners or members of a joint stock association.
11.7 Withholding. Should any Holder be subject to withholding pursuant to
the Code, or any other provision of law, the Trust shall withhold all amounts
otherwise distributable to such Holder as shall be required by law and any
amounts so withheld shall be deemed to have been distributed to such Holder
under this Declaration of Trust. If any sums are withheld pursuant to this
provision, the Trust shall remit the sums so withheld to and file the required
forms with the Internal Revenue Service, or other applicable government
agency.
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11.8 Headings and Construction. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the 18th day of October, 1993.
/s/Jack S. Euphrat
----------------------------
Jack S. Euphrat, Trustee
/s/R. Greg Feltus
----------------------------
R. Greg Feltus, Trustee
/s/Thomas S. Goho
----------------------------
Thomas S. Goho, Trustee
/s/Zoe Ann Hines
----------------------------
Zoe Ann Hines, Trustee
/s/W. Rodney Hughes
----------------------------
W. Rodney Hughes, Trustee
/s/Robert M. Joses
----------------------------
Robert M. Joses, Trustee
/s/J. Tucker Morse
----------------------------
J. Tucker Morse, Trustee
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EXHIBIT 99.B1(b)
AMENDMENT NUMBER ONE TO THE
DECLARATION OF TRUST
OF
VARIABLE INSURANCE PRODUCT TRUST
This AMENDMENT NUMBER ONE to the DECLARATION OF TRUST of the Variable
Insurance Product Trust (the "Trust") is made on the 25th day of January, 1994
by the parties signatory hereto, as trustees (hereinafter called the
"Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to change the name of the Trust, pursuant to
a vote of the majority of the Trustees held at the January 25, 1994 meeting of
the Board;
NOW, THEREFORE, the Trustees hereby declare that Paragraph 1.1 of Article
I of the Trust's Declaration of Trust, dated October 26, 1993, is amended,
effective immediately, as follows:
ARTICLE I
The Trust
1.1 Name. The name of the trust created hereby (the "Trust") shall be
"Life & Annuity Trust," and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever hereinafter used) shall
not refer to the Trustees in their individual capacities or to the officers,
agents, employees or holders of interest in the Trust. However, should the
Trustees determine that the use of the name of the Trust is not advisable, they
may select such other name for the Trust as they deem proper and the Trust may
hold its property and conduct its activities under such other name. Any name
change shall become effective upon the execution by a majority of the then
Trustees of an instrument setting forth the new name. Any such instrument
shall not require the approval of the holders of interests in the Trust, but
shall have the status of an amendment to this Declaration.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this amendment to be
executed as of the 25th day of January, 1994.
/s/ Jack S. Euphrat, Trustee
- -------------------------------
Jack S. Euphrat, Trustee
/s/ R. Greg Feltus, Trustee
- -------------------------------
R. Greg Feltus, Trustee
/s/ Thomas S. Goho, Trustee
- -------------------------------
Thomas S. Goho, Trustee
/s/ Zoe Ann Hines, Trustee
- -------------------------------
Zoe Ann Hines, Trustee
/s/ W. Rodney Hughes, Trustee
- -------------------------------
W. Rodney Hughes, Trustee
/s/ Robert M. Joses, Trustee
- -------------------------------
Robert M. Joses, Trustee
/s/ J. Tucker Morse, Trustee
- -------------------------------
J. Tucker Morse, Trustee
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EXHIBIT 99.B2
BY-LAWS
OF
VARIABLE INSURANCE PRODUCT TRUST
a Delaware Business Trust
October 26, 1993
Principal Place of Business:
111 Center Street
Little Rock, Arkansas 72201
<PAGE> 2
VARIABLE INSURANCE PRODUCT TRUST
BY-LAWS
These By-Laws are made as of the 26th day of October, 1993 and adopted
pursuant to Section 2.7 of the Declaration of Trust establishing the VARIABLE
INSURANCE PRODUCT TRUST, dated October 26, 1993, as from time to time amended
(hereinafter called the "Declaration"). All words and terms capitalized in
these By-Laws shall have the meaning or meanings set forth for such words or
terms in the Declaration.
ARTICLE I
Meetings of Holders
Section 1.1 Annual Meeting. An annual meeting of the Holders of
Interests in the Trust, which may be held on such date and at such hour as may
from time to time be designated by the Board of Trustees and stated in the
notice of such meeting, is not required to be held unless certain actions must
be taken by the Holders as set forth in Section 9.7 of the Declaration, or
except when the Trustees consider it necessary or desirable.
Section 1.2 Chairman. The President or, in his absence, the Chief
Operating Officer shall act as chairman at all meetings of the Holders and, in
the absence of both of them, the Trustee or Trustees present at the meeting may
elect a temporary chairman for the meeting, who may be one of themselves or an
officer of the Trust.
Section 1.3 Proxies; Voting. Holders may vote either in person or by
duly executed proxy and each Holder shall be entitled to a vote proportionate
to his Interest in the Trust, all as provided in Article IX of the Declaration.
No proxy shall be valid after eleven (11) months from the date of its
execution, unless a longer period is expressly stated in such proxy.
Section 1.4 Fixing Record Dates. For the purpose of determining the
Holders who are entitled to notice of or to vote or act at a meeting, including
any adjournment thereof, or who are entitled to participate in any
distributions, or for any other proper purpose, the Trustees may from time to
time fix a record date in the manner provided in Section 9.3 of the
Declaration. If the Trustees do not, prior to any meeting of the Holders, so
fix a record date, then the date of mailing notice of the meeting shall be the
record date.
Section 1.5 Inspectors of Election. In advance of any meeting of the
Holders, the Trustees may appoint Inspectors of Election to act at the meeting
or any adjournment thereof. If Inspectors of Election are not so appointed,
the chairman, if any, of any meeting of the Holders may, and on the request of
any Holder or his proxy shall, appoint Inspectors of Election of the meeting.
The number of Inspectors shall be either one or three. If appointed at the
meeting on the request of one or more Holders or proxies, a Majority Interests
Vote shall determine whether one or three Inspectors are to be appointed, but
failure to allow such determination by the Holders shall not affect the
validity of the appointment of Inspectors of Election. In case any person
appointed as Inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment made by the Trustees in advance of the convening
of the meeting or at the meeting by the person acting as chairman. The
Inspectors of Election shall determine the Interests owned by Holders, the
Interests represented at the meeting, the existence of a quorum, the
authenticity, validity
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and effect of proxies, shall receive votes, ballots or consents, shall hear and
determine all challenges and questions in any way arising in connection with
the right to vote, shall count and tabulate all votes or consents, determine
the results, and do such other acts as may be proper to conduct the election or
vote with fairness to all Holders. If there are three Inspectors of Election,
the decision, act or certificate of a majority is effective in all respects as
the decision, act or certificate of all. On request of the chairman, if any,
of the meeting, or of any Holder or his proxy, the Inspectors of Election shall
make a report in writing of any challenge or question or matter determined by
them and shall execute a certificate of any facts found by them.
Section 1.6 Records at Meetings of Holders. At each meeting of the
Holders there shall be open for inspection the minutes of the last previous
meeting of Holders of the Trust and a list of the Holders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting. Such list of Holders shall
contain the name of each Holder in alphabetical order, the Holder's address and
Interests owned by such Holder. Holders shall have the right to inspect books
and records of the Trust during normal business hours and for any purpose not
harmful to the Trust.
ARTICLE II
Trustees
Section 2.1 Annual and Regular Meetings. The Trustees shall hold an
Annual Meeting of the Trustees for the election of officers and the transaction
of other business which
may come before such meeting. Regular meetings of the Trustees may be held
without call or notice at such place or places and times as the Trustees may by
resolution provide from time to time.
Section 2.2 Special Meetings. Special Meetings of the Trustees shall be
held upon the call of the chairman, if any, the President, the Chief Operating
Officer, the Secretary, an Assistant Secretary or any two Trustees, at such
time, on such day and at such place, as shall be designated in the notice of
the meeting.
Section 2.3 Notice. Notice of a meeting shall be given by mail (which
term shall include overnight mail) or by telegram (which term shall include a
cablegram or telefacsimile) or delivered personally (which term shall include
notice by telephone). If notice is given by mail, it shall be mailed not later
than 72 hours preceding the meeting and if given by telegram or personally,
such notice shall be delivered not later than 24 hours preceding the meeting.
Notice of a meeting of Trustees may be waived before or after any meeting by
signed written waiver. Neither the business to be transacted at, nor the
purpose of, any meeting of the Board of Trustees need be stated in the notice
or waiver of notice of such meeting, and no notice need be given of action
proposed to be taken by written consent. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except where a
Trustee attends a meeting for the express purpose of objecting, at the
commencement of such meeting, to the transaction of any business on the ground
that the meeting has not been lawfully called or convened.
Section 2.4 Chairman; Records. The Trustees shall appoint a Chairman of
the Board from among their number. Such Chairman of the Board shall act as
chairman at all meetings of the Trustees; in his absence the President shall
act as chairman; and, in the absence of the Chairman of the Board and the
President, the Chief Operating Officer shall act as Chairman. In the absence
of all of them, the Trustees present shall elect one of their number to act as
temporary chairman. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary.
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Section 2.5 Audit Committee. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, appoint from its members an
Audit Committee composed of two or more Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, as the Board may from time
to time determine. The Audit Committee shall (a) recommend independent public
accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
Trust's accounting staff with the independent public accountants and such other
persons as may be deemed appropriate, (c) review with the accounting staff and
the independent public accounts the compliance of transactions of the Trust
with its investment adviser, administrator or any other service provider with
the financial terms of applicable contracts or agreements, (d) review reports
of the independent public accountants and comment to the Board when warranted,
(e) report to the Board at least once each year and at such other times as the
committee deems desirable, and (f) be directly available at all times to
independent public accountants and responsible officers of the Trust for
consultation on audit, accounting and related financial matters.
Section 2.6 Nominating Committee of Trustees. The Board of Trustees may,
by the affirmative vote of a majority of the entire Board, appoint from its
members a Trustee Nominating Committee composed of two or more Trustees. The
Trustee Nominating Committee shall recommend to the Board a slate of persons to
be nominated for election as Trustees by the Holders at a meeting of the
Holders and a person to be elected to fill any vacancy occurring for any reason
in the Board. Notwithstanding anything in this Section to the contrary, if the
Trust has in effect a plan pursuant to Rule 12b-1 under the 1940 Act, the
selection and nomination of those Trustees who are not "interested persons" (as
defined in the Act) shall be committed to the discretion of such Disinterested
Trustees.
Section 2.7 Executive Committee. The Board of Trustees may appoint from
its members an Executive Committee composed of those Trustees as the Board may
from time to time determine, of which committee the Chairman of the Board shall
be a member. In the intervals between meetings of the Board, the Executive
Committee shall have the power of the Board to (a) determine the value of
securities and assets owned by the Trust, (b) elect or appoint officers of the
Trust to serve until the next meeting of the Board and (c) take such action as
may be necessary to manage the portfolio security loan business of the Trust.
All action by the Executive Committee shall be recorded and reported to the
Board at its meeting next succeeding such action.
Section 2.8 Other Committees. The Board of Trustees may appoint from
among its members other committees composed of two or more of its Trustees
which shall have such powers as may be delegated or authorized by the
resolution appointing them.
Section 2.9 Committee Procedures. The Board of Trustees may at any time
change the members of any committee, fill vacancies or discharge any committee.
In the absence of any member of any committee, the member or members thereof
present at any meeting, whether or not they constitute a quorum, may
unanimously appoint to act in the place of such absent member a member of the
Board who, except in the case of the Executive Committee, is not an "interested
person" of the Trust as the Board may from time to time determine. Each
committee may fix its own rules of procedure and may meet as and when provided
by those rules. Copies of the minutes of all meetings of committees other than
the Nominating Committee and the Executive Committee shall be distributed to
the Board unless the Board shall otherwise provide.
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<PAGE> 5
ARTICLE III
Officers
Section 3.1 Officers of the Trust; Compensation. The officers of the
Trust shall consist of the Chairman of the Board of Trustees, a President, a
Secretary, a Treasurer and such other officers or assistant officers, including
Chief Operating Officer, Vice Presidents and Assistant Secretaries, as may be
elected by the Trustees. Any two or more of the offices may be held by the
same person, except that the same person may not be both President and
Secretary. The Trustees may designate a Vice President as an Executive Vice
President and may designate the order in which the other Vice Presidents may
act. The Chairman shall be a Trustee, but no other officer of the Trust need
be a Trustee. The Board of Trustees may determine what, if any, compensation
shall be paid to officers of the Trust.
Section 3.2 Election and Tenure. At the initial organization meeting and
thereafter at each annual meeting of the Trustees, the Trustees shall elect the
Chairman, President, Chief Operating Officer, Secretary, Treasurer and such
other officers as the Trustees shall deem necessary or appropriate in order to
carry out the business of the Trust. Such officers shall hold office until the
next annual meeting of the Trustees and until their successors have been duly
elected and qualified. The Trustees may fill any vacancy in office or add any
additional officers at any time.
Section 3.3 Removal of Officers. Any officer may be removed at any time,
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the President, Chief Operating Officer or Secretary,
and such resignation shall take effect immediately, or at a later date
according to the terms of such notice in writing.
Section 3.4 Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
Section 3.5 President and Vice-Presidents. The President shall be the
chief executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the business
of the Trust and of its employees and shall exercise such general powers of
management as are usually vested in the office of president of a corporation.
The President shall preside at all meetings of the Holders and, in the absence
of the Chairman of the Board, the President shall preside at all meetings of
the Trustees. The President shall be, ex officio, a member of all standing
committees. Subject to direction of the Trustees, the President shall have the
power, in the name and on behalf of the Trust, to execute any and all loan
documents, contracts, agreements, deeds, mortgages, and other instruments in
writing, and to employ and discharge employees and agents of the Trust. Unless
otherwise directed by the Trustees, the President shall have full authority and
power, on behalf of all of the Trustees, to attend and to act and to vote, on
behalf of the Trust at any meetings of business organizations in which the
Trust holds an interest, or to confer such powers upon any other persons, by
executing any proxies duly authorizing such persons. The President shall have
such further authorities and duties as the Trustees shall from time to time
determine. In the absence or disability of the President, the Chief Operating
Officer, or, in the absence or disability of both of them, the Vice Presidents
in order of their rank or the Vice President designated by the Trustees, shall
perform all of the duties of President, and when so acting shall have all the
powers of and be subject to all of the restrictions upon the President.
Subject to the direction of the President, the Chief Operating Officer, the
Treasurer and each Vice President shall have the power in the name and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other
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instruments in writing, and, in addition, shall have such other duties
and powers as shall be designated from time to time by the Trustees, the
Chairman, or the President.
Section 3.6 Chief Operating Officer. The Chief Operating Officer shall
have the authority and duties that generally pertain to such office, including,
but not limited to, those delegated by the Chairman or the President.
Section 3.7 Secretary. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Holders, Trustees and any committees of
Trustees, provided that, in the absence or disability of the Secretary, the
Holders or Trustees or committee may appoint any other person to keep the
minutes of a meeting and record votes. The Secretary shall be custodian of the
seal of the Trust, if any, and he (and any other person so authorized by the
Trustees) shall affix the seal or, if permitted, a facsimile thereof, to any
instrument executed by the Trust which would be sealed by a Delaware
corporation executing the name or a similar instrument and shall attest the
seal and the signature or signatures of the officer or officers executing such
instrument on behalf of the Trust. The Secretary shall also perform any other
duties commonly incident to such office in a Delaware corporation, and shall
have such other authorities and duties as the Trustees shall from time to time
determine.
Section 3.8 Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and
shall have and exercise under the supervision of the Trustees and of the
Chairman, the President and the Chief Operating Officer all powers and duties
normally incident to his office. He may endorse for deposit or collection all
notes, checks and other instruments payable to the Trust or to its order. He
shall deposit all funds of the Trust as may be ordered by the Trustees, the
Chairman, the President or the Chief Operating Officer. He shall keep accurate
account of the books of the Trust's transactions which shall be the property of
the Trust and which, together with all other property of the Trust in his
possession, shall be subject at all times to the inspection and control of the
Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall
be the principal accounting officer of the Trust and shall also be the
principal financial officer of the Trust. He shall have such other duties and
authorities as the Trustees shall from time to time determine. Notwithstanding
anything to the contrary herein contained, the Trustees may authorize any
adviser or administrator to maintain bank accounts and deposit and disburse
funds on behalf of the Trust.
Section 3.9 Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his office. Each
officer, employee and agent of the Trust shall have such other duties and
authority as may be conferred upon him by the Trustees or delegated to him by
the President.
ARTICLE IV
Custodian
Section 4.1 Appointment and Duties. The Trustees shall at all times
employ a custodian or custodians with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the same upon
written order;
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(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of the
Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income and
net assets of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. The Trustees may also authorize the custodian to employ one
or more sub-custodians, from time to time, to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Trustee.
Section 4.2 Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, any such other person or
entity with which the Trustees may authorize deposit in accordance with the
1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery of
such securities. All such deposits shall be subject to withdrawal only upon
the order of the Trust.
ARTICLE V
Miscellaneous
Section 5.1 Depositories. In accordance with Article IV of these
By-Laws, the funds of the Trust shall be deposited in such depositories as the
Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any adviser
or administrator), as the Trustees may from time to time authorize.
Section 5.2 Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in these By-Laws or as the Trustees may from time to time by
resolution or authorization provide.
Section 5.3 Seal. The seal of the Trust, if any, may be affixed to any
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same
effect as if done by a Delaware corporation.
Section 5.4 Fiscal Year. The fiscal year of the Trust shall end on
December 31 of each year, subject, however, to change from time to time by the
Board of Trustees.
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ARTICLE VI
Interests
Section 6.1 Non-Transferability of Interests. Interests shall not be
transferable. Except as otherwise provided by law, the Trust shall be entitled
to recognize the exclusive right of a person in whose name Interests stand on
the record of Holders as the owners of such Interests for all purposes,
including, without limitation, the rights to receive distributions, and to vote
as such owner, and the Trust shall not be bound to recognize any equitable or
legal claim to or interest in any such Interests on the part of any other
person.
Section 6.2 Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the sale and purchase of Interests of the Trust.
Section 6.3 The Trustees shall have the power to employ and compensate
such distribution disbursing agents, warrant agents and agents for the
reinvestment of distributions as they shall deem necessary or desirable. Any
of such agents shall have such power and authority as is delegated to any of
them by the Trustees.
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EXHIBIT 99.B5(a)(i)
ADVISORY CONTRACT
VARIABLE INSURANCE PRODUCT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 31, 1994
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") on
behalf of the Funds listed in Appendix A (each a "Fund") and Wells Fargo Bank,
N.A. (the "Adviser") as follows:
1. The Trust is a registered open-end management investment company
currently consisting of four investment portfolios, but which may from time to
time consist of a greater or lesser number of investment portfolios (the
"Funds"). The Trust proposes to engage in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objective and restrictions specified in the Trust's currently
effective prospectus and the currently effective statement of additional
information incorporated by reference therein relating to the Fund and the
Trust (such prospectus and such statement of additional information being
collectively referred to as the "Prospectus") included in the Trust's
Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"Act") and the Securities Act of 1933. Copies of the documents referred to in
the preceding sentence have been furnished to the Adviser. Any amendments to
those documents shall be furnished to the Adviser promptly.
2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the assets of the Fund and to provide the advisory services
specified elsewhere in this contract, subject to the overall supervision of the
Board of Trustees of the Trust. Pursuant to an administration agreement
between the Trust and Stephens Inc. (the "Administrator") on behalf of the
Fund, the Trust has engaged the Administrator to provide the administrative
services specified therein.
3. (a) The Adviser shall make investments for the account of the Fund in
accordance with the Adviser's best judgment and consistent with the investment
objective and restrictions set forth in the Trust's Prospectus, the Act and the
provisions of the Internal Revenue Code relating to regulated investment
companies and variable annuity contracts, subject to policy decisions adopted
by the Trust's Board of Trustees. The Adviser shall advise the Trust's
officers and Board of Trustees, at such times as the Trust's Board of Trustees
may specify, of investments made for the Fund and shall, when requested by the
Trust's officers or Board of Trustees, supply the reasons for making particular
investments.
(b) The Adviser shall provide to the Trust investment guidance and policy
direction in connection with its daily management of the Fund's portfolio,
including oral and written research, analysis, advice, statistical and economic
data and information and judgments, and shall furnish to the Trust's Board
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of Trustees periodic reports on the investment strategy and performance of the
Fund and such additional reports and information as the Trust's Board of
Trustees and officers shall reasonably request.
(c) The Adviser shall pay the costs of printing and distributing all
materials relating to the Fund prepared by it, or prepared at its request,
other than such costs relating to proxy statements, prospectuses, reports for
holders of beneficial interests ("Interests") of the Fund ("Holders") and other
materials distributed to existing or prospective Holders on behalf of the Fund.
(d) The Adviser shall, at its expense, employ or associate with itself
such persons as the Adviser believes appropriate to assist it in performing its
obligations under this contract.
4. The Trust understands that the Adviser, in rendering its services to
the Fund hereunder, has engaged Wells Fargo Nikko Investment Advisors
("WFNIA"), to provide certain sub-advising services pursuant to a separate
Sub-Advisory Contract with WFNIA. The Adviser will not seek to amend the
Sub-Advisory Contract with WFNIA to materially alter the obligations of the
parties unless the Adviser gives the Trust at least 60 days' prior written
notice thereof.
5. Except as provided in each of the Trust's advisory contracts and
administration agreements, the Trust shall bear all costs of its operations,
including the compensation of its trustees who are not affiliated with the
Adviser, the Administrator or any of their affiliates; advisory and
administration fees; governmental fees; interest charges; taxes; fees and
expenses of its independent accountants, legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming Interests; expenses of
preparing and printing Interest certificates, prospectuses (except the expense
of printing and mailing prospectuses used for promotional purposes), Holders'
reports, notices, proxy statements and reports to regulatory agencies; travel
expenses of trustees, officers and employees; office supplies; insurance
premiums and certain expenses relating to insurance coverage; trade association
membership dues; brokerage and other expenses connected with the execution of
portfolio securities transactions; fees and expenses of any custodian,
including those for keeping books and accounts and calculating the net asset
value per Interest of the Fund; expenses of Holders' meetings; expenses
relating to the issuance, registration and qualification of Interests of the
Fund; pricing services, if any; organizational expenses; and any extraordinary
expenses. Expenses attributable to one or more, but not all, of the Funds are
charged against the assets of the relevant Funds. General expenses of the
Funds are allocated among the Funds in a manner proportionate to the net assets
of each Fund, on a transactional basis or on such other basis as the Board of
Trustees deems equitable.
6. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this contract. As an
inducement to the Adviser's undertaking to render these services, the Trust
agrees that the Adviser shall not be liable under this contract for any mistake
in judgment or in any other event whatsoever except for lack of good faith,
provided that nothing in this contract shall be deemed to protect or purport to
protect the Adviser against any liability to the Trust or its Holders to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Adviser's duties under this
contract or by reason of reckless disregard of its obligations and duties
hereunder.
7. In consideration of the services to be rendered by the Adviser under
this contract, the Trust shall pay the Adviser a monthly fee on the first
business day of each month, at an annual rate, listed in Appendix B, of the
average daily value (as determined on each day that such value is determined
for the Fund at the time set forth in the Prospectus for determining net asset
value per Interest) of the Fund's
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net assets during the preceding month. If the fee payable to the Adviser
pursuant to this paragraph 7 begins to accrue before the end of any month or if
this contract terminates before the end of any month, the fee for the period
from the effective date to the end of that month or from the beginning of that
month to the termination date, respectively, shall be prorated according to the
proportion that the period bears to the full month in which the effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Fund's net assets shall be computed in the manner specified in the
Prospectus and the Trust's Declaration of Trust for the computation of the
value of the Fund's net assets in connection with the determination of the net
asset value of Fund Interests.
8. If in any fiscal year the total expenses of the Fund incurred by, or
allocated to, the Fund excluding taxes, interest, brokerage commissions and
other portfolio transaction expenses, other expenditures that are capitalized
in accordance with generally accepted accounting principles and extraordinary
expenses of the Fund, but including the fees provided for in paragraph 7 and
those provided for pursuant to the Fund's Administration Agreement ("includible
expenses"), exceed the most restrictive expense limitation applicable to the
Fund imposed by state securities laws or regulations thereunder, as these
limitations may be raised or lowered from time to time, the Adviser shall waive
or reimburse that portion of the excess derived by multiplying the excess by a
fraction, the numerator of which shall be the percentage at which the excess
portion attributable to the fee payable pursuant to this agreement is
calculated under paragraph 7 hereof, and the denominator of which shall be the
sum of such percentage plus the percentage at which the excess portion
attributable to the fee payable pursuant to the Fund's Administration Agreement
is calculated (the "Applicable Ratio"), but only to the extent of the fee
hereunder for the fiscal year. If the fees payable under this agreement and/or
the Fund's Administration Agreement contributing to such excess portion are
calculated at more than one percentage rate, the Applicable Ratio shall be
calculated separately on the basis of, and applied separately to, the portions
of the fees calculated at the different rates. At the end of each month of the
Trust's fiscal year, the Trust shall review the includible expenses accrued
during that fiscal year to the end of the period and shall estimate the
contemplated includible expenses for the balance of that fiscal year. If as a
result of that review and estimation it appears likely that the includible
expenses will exceed the limitations referred to in this paragraph 8 for a
fiscal year with respect to the Fund, the monthly fee set forth in paragraph 7
payable to the Adviser for such month shall be reduced, subject to a later
adjustment, by an amount equal to the Applicable Ratio times the pro rata
portion (prorated on the basis of the remaining months of the fiscal year,
including the month just ended) of the amount by which the includible expenses
for the fiscal year are expected to exceed the limitations provided for in this
paragraph 8. For purposes of computing the excess, if any, over the most
restrictive applicable expense limitation, the value of the Fund's net assets
shall be computed in the manner specified in the last sentence of paragraph 7,
and any reimbursements required to be made by the Adviser shall be made once a
year promptly after the end of the Trust's fiscal year.
9. This contract shall become effective on its execution date and shall
thereafter continue in effect, provided that this contract shall continue in
effect for a period of more than two years from the date hereof only so long as
the continuance is specifically approved at least annually (a) by the vote of a
majority of the Fund's outstanding voting securities (as defined in the Act) or
by the Trust's Board of Trustees and (b) by the vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this contract or "interested persons" (as defined in the Act) of
any such party. This contract may be terminated at any time by the Trust,
without the payment of any penalty, by a vote of a majority of the Fund's
outstanding voting securities (as defined in the Act) or by a vote of a
majority of the Trust's entire Board of Trustees on 60 days' written notice to
the Adviser or by the Adviser, at any time after the second anniversary of the
effective date of this contract, on 60 days' written notice to the Trust. This
contract shall terminate automatically in the event of its assignment (as
defined in the Act).
3
<PAGE> 4
10. Except to the extent necessary to perform the Adviser's obligations
under this contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
11. This agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust.
The obligations of this agreement shall only be binding upon the assets and
property of the relevant Fund, as provided for in the Trust's Agreement and
Declaration of Trust, and shall not be binding upon any trustee, officer or
shareholder of the Trust or Fund individually.
12. The Trust shall own and control all records generated on behalf of the
Trust as a result of services provided under this contract. In addition, the
Trust shall have the right to inspect, audit, and/or copy all records
pertaining to the performance of services under this contract.
13. This contract shall be governed by and construed in accordance with
the laws of the State of California.
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
VARIABLE INSURANCE PRODUCT
TRUST
By: /s/Richard H. Blank, Jr.
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/Henry J. Cavigli
Name: Henry J. Cavigli
Title: Vice President
By: /s/Robert Chlebowski
Name: Robert Chlebowski
Title: Senior Vice President
4
<PAGE> 5
APPENDIX A
Asset Allocation Fund
U.S. Government Allocation Fund
A-1
<PAGE> 6
APPENDIX B
INVESTMENT ADVISORY FEE SCHEDULE
<TABLE>
<S> <C>
Fund Advisory Fee Rate
- ----
(as annualized %
of average net assets
---------------------
Asset Allocation Fund 0.60%
U.S. Government Allocation Fund 0.60%
</TABLE>
B-1
<PAGE> 1
EXHIBIT 99.B5(b)
ADVISORY CONTRACT
VARIABLE INSURANCE PRODUCT TRUST
111 Center Street
Little Rock, Arkansas 72201
March 31, 1994
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") on
behalf of the Funds listed in Appendix A (each, a "Fund") and Wells Fargo Bank,
N.A. (the "Adviser") as follows:
1. The Trust is a registered open-end management investment company
currently consisting of four investment portfolios, but which may from time to
time consist of a greater or lesser number of investment portfolios (the
"Funds"). The Trust proposes to engage in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objective and restrictions specified in the Trust's currently
effective prospectus and the currently effective statement of additional
information incorporated by reference therein relating to the Fund and the
Trust (such prospectus and such statement of additional information being
collectively referred to as the "Prospectus") included in the Trust's
Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"Act") and the Securities Act of 1933. Copies of the documents referred to in
the preceding sentence have been furnished to the Adviser. Any amendments to
those documents shall be furnished to the Adviser promptly.
2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the assets of the Fund and to provide the advisory services
specified elsewhere in this contract, subject to the overall supervision of the
Board of Trustees of the Trust. Pursuant to an administration agreement
between the Trust and Stephens Inc. (the "Administrator") on behalf of the
Fund, the Trust has engaged the Administrator to provide the administrative
services specified therein.
3. (a) The Adviser shall make investments for the account of the Fund in
accordance with the Adviser's best judgment and consistent with the investment
objective and restrictions set forth in the Trust's Prospectus, the Act and the
provisions of the Internal Revenue Code relating to regulated investment
companies and variable annuity contracts, subject to policy decisions adopted
by the Trust's Board of Trustees. The Adviser shall advise the Trust's
officers and Board of Trustees, at such times as the Trust's Board of Trustees
may specify, of investments made for the Fund and shall, when requested by the
Trust's officers or Board of Trustees, supply the reasons for making particular
investments.
(b) The Adviser shall provide to the Trust investment guidance and policy
direction in connection with its daily management of the Fund's portfolio,
including oral and written research, analysis, advice, statistical and economic
data and information and judgments, and shall furnish to the Trust's Board of
Trustees periodic reports on the investment strategy and performance of the
Fund and such additional reports and information as the Trust's Board of
Trustees and officers shall reasonably request.
<PAGE> 2
(c) The Adviser shall pay the costs of printing and distributing all
materials relating to the Fund prepared by it, or prepared at its request,
other than such costs relating to proxy statements, prospectuses, reports for
holders of beneficial interests ("Interests") of the Fund ("Holders") and other
materials distributed to existing or prospective Holders on behalf of the Fund.
(d) The Adviser shall, at its expense, employ or associate with itself
such persons as the Adviser believes appropriate to assist it in performing its
obligations under this contract.
4. Except as provided in each of the Trust's advisory contracts and
administration agreements, the Trust shall bear all costs of its operations,
including the compensation of its trustees who are not affiliated with the
Adviser, the Administrator or any of their affiliates; advisory and
administration fees; governmental fees; interest charges; taxes; fees and
expenses of its independent accountants, legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming Interests; expenses of
preparing and printing Interest certificates, prospectuses (except the expense
of printing and mailing prospectuses used for promotional purposes), Holders'
reports, notices, proxy statements and reports to regulatory agencies; travel
expenses of trustees, officers and employees; office supplies; insurance
premiums and certain expenses relating to insurance coverage; trade association
membership dues; brokerage and other expenses connected with the execution of
portfolio securities transactions; fees and expenses of any custodian,
including those for keeping books and accounts and calculating the net asset
value per Interest of the Fund; expenses of Holders' meetings; expenses
relating to the issuance, registration and qualification of Interests of the
Fund; pricing services, if any; organizational expenses; and any extraordinary
expenses. Expenses attributable to one or more, but not all, of the Funds are
charged against the assets of the relevant Funds. General expenses of the
Funds are allocated among the Funds in a manner proportionate to the net assets
of each Fund, on a transactional basis or on such other basis as the Board of
Trustees deems equitable.
5. The Adviser shall give the Trust the benefit of the Adviser's best
judgment and efforts in rendering services under this contract. As an
inducement to the Adviser's undertaking to render these services, the Trust
agrees that the Adviser shall not be liable under this contract for any mistake
in judgment or in any other event whatsoever except for lack of good faith,
provided that nothing in this contract shall be deemed to protect or purport to
protect the Adviser against any liability to the Trust or its Holders to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Adviser's duties under this
contract or by reason of reckless disregard of its obligations and duties
hereunder.
6. In consideration of the services to be rendered by the Adviser under
this contract, the Trust shall pay the Adviser a monthly fee on the first
business day of each month, at the annual rate, listed in Appendix B, of the
average daily value (as determined on each day that such value is determined
for the Fund at the time set forth in the Prospectus for determining net asset
value per Interest) of the Fund's net assets during the preceding month. If
the fee payable to the Adviser pursuant to this paragraph 6 begins to accrue
before the end of any month or if this contract terminates before the end of
any month, the fee for the period from the effective date to the end of that
month or from the beginning of that month to the termination date,
respectively, shall be prorated according to the proportion that the period
bears to the full month in which the effectiveness or termination occurs. For
purposes of calculating each such monthly fee, the value of the Fund's net
assets shall be computed in the manner specified in the Prospectus and the
Trust's Declaration of Trust for the computation of the value of the Fund's net
assets in connection with the determination of the net asset value of Fund
Interests.
2
<PAGE> 3
7. If in any fiscal year the total expenses of the Fund incurred by, or
allocated to, the Fund excluding taxes, interest, brokerage commissions and
other portfolio transaction expenses, other expenditures that are capitalized
in accordance with generally accepted accounting principles and extraordinary
expenses of the Fund, but including the fees provided for in paragraph 6 and
those provided for pursuant to the Fund's Administration Agreement ("includible
expenses"), exceed the most restrictive expense limitation applicable to the
Fund imposed by state securities laws or regulations thereunder, as these
limitations may be raised or lowered from time to time, the Adviser shall waive
or reimburse that portion of the excess derived by multiplying the excess by a
fraction, the numerator of which shall be the percentage at which the excess
portion attributable to the fee payable pursuant to this agreement is
calculated under paragraph 6 hereof, and the denominator of which shall be the
sum of such percentage plus the percentage at which the excess portion
attributable to the fee payable pursuant to the Fund's Administration Agreement
is calculated (the "Applicable Ratio"), but only to the extent of the fee
hereunder for the fiscal year. If the fees payable under this agreement and/or
the Fund's Administration Agreement contributing to such excess portion are
calculated at more than one percentage rate, the Applicable Ratio shall be
calculated separately on the basis of, and applied separately to, the portions
of the fees calculated at the different rates. At the end of each month of the
Trust's fiscal year, the Trust shall review the includible expenses accrued
during that fiscal year to the end of the period and shall estimate the
contemplated includible expenses for the balance of that fiscal year. If as a
result of that review and estimation it appears likely that the includible
expenses will exceed the limitations referred to in this paragraph 7 for a
fiscal year with respect to the Fund, the monthly fee set forth in paragraph 6
payable to the Adviser for such month shall be reduced, subject to a later
adjustment, by an amount equal to the Applicable Ratio times the pro rata
portion (prorated on the basis of the remaining months of the fiscal year,
including the month just ended) of the amount by which the includible expenses
for the fiscal year are expected to exceed the limitations provided for in this
paragraph 7. For purposes of computing the excess, if any, over the most
restrictive applicable expense limitation, the value of the Fund's net assets
shall be computed in the manner specified in the last sentence of paragraph 6,
and any reimbursements required to be made by the Adviser shall be made once a
year promptly after the end of the Trust's fiscal year.
8. This contract shall become effective on its execution date and shall
thereafter continue in effect, provided that this contract shall continue in
effect for a period of more than two years from the date hereof only so long as
the continuance is specifically approved at least annually (a) by the vote of a
majority of the Fund's outstanding voting securities (as defined in the Act) or
by the Trust's Board of Trustees and (b) by the vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this contract or "interested persons" (as defined in the Act) of
any such party. This contract may be terminated at any time by the Trust,
without the payment of any penalty, by a vote of a majority of the Fund's
outstanding voting securities (as defined in the Act) or by a vote of a
majority of the Trust's entire Board of Trustees on 60 days' written notice to
the Adviser or by the Adviser, at any time after the second anniversary of the
effective date of this contract, on 60 days' written notice to the Trust. This
contract shall terminate automatically in the event of its assignment (as
defined in the Act).
9. Except to the extent necessary to perform the Adviser's obligations
under this contract, nothing herein shall be deemed to limit or restrict the
right of the Adviser, or any affiliate of the Adviser, or any employee of the
Adviser, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
3
<PAGE> 4
10. This agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust.
The obligations of this agreement shall only be binding upon the assets and
property of the relevant Fund, as provided for in the Trust's Agreement and
Declaration of Trust, and shall not be binding upon any trustee, officer or
shareholder of the Trust or Fund individually.
11. The Trust shall own and control all records generated on behalf of the
Trust as a result of services provided under this contract. In addition, the
Trust shall have the right to inspect, audit, and/or copy all records
pertaining to the performance of services under this contract.
12. This contract shall be governed by and construed in accordance with
the laws of the State of California.
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
VARIABLE INSURANCE PRODUCT TRUST
By: /s/Richard H. Blank, Jr.
------------------------
Name: Richard H. Blank, Jr.
---------------------
Title: Chief Operating Officer
-----------------------
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By: /s/Henry J. Cavigli, Jr.
------------------------
Name: Henry J. Cavigli
----------------
Title: Vice President
--------------
By: /s/M.J. Niedermeyer
-------------------
Name: Michael J. Niedermeyer
----------------------
Title: Senior Vice President
---------------------
4
<PAGE> 5
APPENDIX A
VARIABLE INSURANCE PRODUCT TRUST FUNDS
Growth and Income Fund
Money Market Fund
<PAGE> 6
APPENDIX B
INVESTMENT ADVISORY FEE SCHEDULE
<TABLE>
<CAPTION>
Fund Advisory Fee Rate
- ---- (as annualized %
of average net assets
---------------------
<S> <C>
Growth and Income Fund 0.60%
Money Market Fund 0.45%
</TABLE>
<PAGE> 1
EXHIBIT 99.B6(a)
DISTRIBUTION AGREEMENT
VARIABLE INSURANCE PRODUCT TRUST
111 Center Street
Little Rock, Arkansas 72201
November 15, 1993
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Dear Sirs:
This will confirm the agreement between the undersigned (the
"Trust"), on behalf of each of its series now or hereafter in effect (each, a
"Fund"), and you ("Distributor") as follows:
1. As the Trust's agent, Distributor shall be the exclusive
distributor for the unsold portion of beneficial interests of the Trust's Funds
("Interests") that are registered under the Securities Act of 1933 ("1933
Act").
2. The Trust shall sell through Distributor, as the Trust's
agent, and deliver, upon the terms set forth herein, Fund Interests that
Distributor orders from the Trust and for which Distributor has received and
confirmed unconditional purchase orders. All orders from Distributor shall be
subject to acceptance and confirmation by the Trust. The Trust shall have the
right, at its election, to deliver either Interests issued upon original issue
or treasury Interests.
3. As the Trust's agent, Distributor may sell and distribute
Fund Interests in such manner not inconsistent with the provisions hereof as
Distributor may determine from time to time. In that connection Distributor
shall comply with all laws, rules and regulations applicable to it, including,
without limiting the generality of the foregoing, all applicable rules or
regulations under the Investment Company Act of 1940 ("1940 Act") and of any
securities association registered under the Securities Exchange Act of 1934
("1934 Act").
4. The Trust reserves the right to sell Fund Interests to
purchasers to the extent that it or the transfer agent for Fund Interests
receives purchase applications therefor. Distributor's right to accept
purchase orders for Fund Interests or to make sales thereof shall not apply to
Fund Interests that may be offered by the Trust to holders for the reinvestment
of cash distributed to holders of the Trust or Fund Interests that may
otherwise be offered by the Trust to holders, unless Distributor is otherwise
notified by the Trust.
5. All Interests offered for sale and sold by Distributor
shall be offered for sale and sold by Distributor to or through insurance
companies offering the Funds as funding vehicles for their annuity and variable
life insurance products ("Participating Insurance Companies") upon the terms
and conditions set forth in paragraph 7(b) hereof. Purchases of Interests
shall be made for full and fractional Interests, carried to the third decimal
place.
1
<PAGE> 2
6. Ownership of Fund Interests sold hereunder shall be
registered in such names and denominations as are specified in writing to the
Trust or to its agent designated for the purpose. No certificates for
Interests of the Fund will be issued.
7. (a) Distributor shall from time to time employ or
associate with it such persons as it believes necessary to assist it in
carrying out its obligations under this agreement. The compensation of such
persons shall be paid by Distributor.
(b) Distributor shall enter into participation
agreements with Participating Insurance Companies of its choice for the sale of
Fund Interests at the offering price and upon the terms and conditions set
forth in the Prospectus. The initial form of participation agreement is
attached hereto as an Exhibit. Distributor may amend those agreements, or
modify the form of agreement, only upon approval of the Trust.
(c) Distributor shall pay all expenses incurred in
connection with its qualification as a dealer or broker under Federal or state
laws.
(d) Distributor shall pay all expenses incurred in
connection with: (i) printing and distributing such number of copies of the
Prospectus, statements of additional information and financial reports as the
Distributor deems necessary for use in connection with offering Fund Interests
to prospective investors, (ii) preparing, printing and distributing any other
literature and advertising deemed appropriate by Distributor for use in
connection with offering Fund Interests for sale and (iii) all other expenses
incurred in connection with the sale of Fund Interests as contemplated by this
agreement. The Treasurer of the Trust shall provide to the Board of Trustees
of the Trust and the Board of Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(e) The Trust shall execute all documents and furnish
any information which may be reasonably necessary in connection with the
qualification of Fund Interests of the Trust for sale in jurisdictions
designated by Distributor.
8. The Trust shall furnish Distributor from time to time, for
use in connection with the sale of Fund Interests, such written information
with respect to the Trust as Distributor may reasonably request. In each case
such written information shall be signed by an authorized officer of the Trust.
The Trust represents and warrants that such information, when signed by one of
its officers, shall be true and correct. The Trust shall also furnish to
Distributor copies of its reports to its holders and such additional
information regarding the Trust's financial condition as Distributor may
reasonably request from time to time.
9. The Registration Statement when it becomes effective will
conform in all material respects with the 1933 Act and the rules and
regulations thereunder. The Trust represents and warrants to Distributor that
the Registration Statement will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Trust shall from
time to time file such amendment or amendments to the Registration Statement
as, in the light of future developments, shall, in the opinion of the Trust's
counsel, be necessary in order to have the Registration Statement contain all
material facts required to be stated therein or necessary to make the
statements therein not misleading. If the Trust shall not file such amendment
or amendments within 15 days after receipt by the Trust of a written request
from Distributor to do so, Distributor may, at its option, terminate this
agreement immediately. The Trust shall not file any
2
<PAGE> 3
amendment to the Registration Statement without giving Distributor reasonable
notice thereof in advance, provided that nothing in this agreement shall in any
way limit the Trust's right to file at any time such amendments as the Trust
may deem advisable. The Trust represents and warrants to Distributor that any
amendment to the Registration Statement will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
10. Subject to the provisions of paragraph 7, the Trust shall
prepare and furnish to Distributor from time to time such number of copies of
the most recent form of the Prospectus filed with the SEC as Distributor may
reasonably request. The Trust authorizes Distributor and Participating
Insurance Companies to use the Prospectus, in the form furnished to Distributor
from time to time, in connection with the sale of Fund Interests. The Trust
shall indemnify, defend and hold harmless Distributor, its officers and
partners and any person who controls Distributor within the meaning of the 1933
Act, from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
Distributor, its officers or partners or any such controlling person, may incur
under the 1933 Act, the 1940 Act, the common law or otherwise, arising out of
or based upon any alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated in such Registration Statement or
necessary to make the statements in either thereof not misleading.
Notwithstanding the foregoing, this indemnity agreement, to the extent that it
might require indemnity of any person who is an officer or partner of
Distributor and who is also a trustee of the Trust, shall not inure to the
benefit of such officer or partner unless a court of competent jurisdiction
shall determine, or it shall have been determined by controlling precedent,
that such result would not be against public policy as expressed in the 1933
Act or the 1940 Act, and in no event shall anything contained herein be so
construed as to protect Distributor against any liability to the Trust or its
Holders to which Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
agreement. This indemnity agreement is expressly conditioned upon the Trust's
being notified of any action brought against Distributor, its officers or
partners or any such controlling person, which notification shall be given by
letter or by telegram addressed to the Trust at its principal office in Little
Rock, Arkansas, and sent to the Trust by the person against whom such action is
brought within 10 days after the summons or other first legal process shall
have been served. The failure to notify the Trust of any such action shall not
relieve the Trust from any liability which it may have to the person against
whom such action is brought by reason of any such alleged untrue statement or
omission otherwise than on account of the indemnity agreement contained in this
paragraph. The Trust shall be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, the
defense shall be conducted by counsel chosen by the Trust and approved by
Distributor. If the Trust elects to assume the defense of any such suit and
retain counsel approved by Distributor, the defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel retained by any
of them, but in case the Trust does not elect to assume the defense of any such
suit, or in case Distributor does not approve of counsel chosen by the Trust,
the Trust will reimburse Distributor, its officers and partners or the
controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Distributor or them. In
addition, Distributor shall have the right to employ one separate counsel to
represent it, its officers and partners and any such controlling person who may
be subject to liability arising out of any claim in respect of which indemnity
may be sought by Distributor against the Trust hereunder if in the reasonable
judgment of Distributor it is advisable because of actual or potential
differing interests between the Distributor, its officers and partners or such
controlling person and the Trust in the conduct of the defense of such action,
for Distributor, its officers and partners or such controlling person to be
represented by separate counsel, in
3
<PAGE> 4
which event the fees and expenses of such separate counsel shall be borne by
the Trust. This indemnity agreement and the Trust's representations and
warranties in this agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of Distributor, its
officers and partners or any such controlling person and shall survive the
delivery of any Interests as provided in this agreement. This indemnity
agreement shall inure exclusively to the benefit of Distributor and its
successors, Distributor's officers and partners and their respective estates
and any such controlling persons and their successors and estates. The Trust
shall promptly notify Distributor of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any Fund
Interests.
11. Distributor agrees to indemnify, defend and hold harmless
the Trust, its officers and trustees and any person who controls the Trust
within the meaning of the 1933 Act, from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which the Trust, its officers or trustees or any such
controlling person, may incur under the 1933 Act, the 1940 Act, the common law
or otherwise, but only to the extent that such liability or expense incurred by
the Trust, its officers or trustees or such controlling person resulting from
such claims or demands shall arise out of or be based upon (a) any alleged
untrue statement of a material fact contained in information furnished in
writing by Distributor to the Trust specifically for use in the Registration
Statement or shall arise out of or be based upon any alleged omission to state
a material fact in connection with such information required to be stated in
the Registration Statement or necessary to make such information not misleading
and (b) any alleged act or omission on Distributor's part as the Trust's agent
that has not been expressly authorized by the Trust in writing. This indemnity
agreement is expressly conditioned upon Distributor's being notified of any
action brought against the Trust, its officers and trustees or any such
controlling person, which notification shall be given by letter or telegram,
addressed to Distributor at its principal office in Little Rock, Arkansas, and
sent to Distributor by the person against whom such action is brought, within
10 days after the summons or other first legal process shall have been served.
The failure to notify Distributor of any such action shall not relieve
Distributor from any liability which it may have to the Trust, its officers or
trustees or such controlling person by reason of any such alleged misstatement
or omission on Distributor's part otherwise than on account of the indemnity
agreement contained in this paragraph. Distributor shall have a right to
control the defense of such action with counsel of its own choosing and
approved by the Trust if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the
Trust, its officers and trustees or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action at their own expense.
12. No Fund Interests shall be sold through Distributor or by
the Trust under this agreement and no orders for the purchase of Fund Interests
shall be confirmed or accepted by the Trust if and so long as the effectiveness
of the Registration Statement shall be suspended under any of the provisions of
the 1933 Act. Nothing contained in this paragraph 12 shall in any way
restrict, limit or have any application to or bearing upon the Trust's
obligation to redeem Fund Interests from any Holder in accordance with the
provisions of its Declaration of Trust. The Trust will use its best efforts at
all times to have Fund Interests effectively registered under the 1933 Act.
13. The Trust agrees to advise Distributor immediately:
(a) of any request by the SEC for amendments to the
Registration Statement or for additional information;
4
<PAGE> 5
(b) in the event of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement under the 1933
Act or the initiation of any proceedings for that purpose;
(c) of the happening of any material event that makes
untrue any statement made in the Registration Statement or that requires the
making of a change in such Registration Statement in order to make the
statements therein not misleading; and
(d) of any action of the SEC with respect to any
amendments to the Registration Statement that may from time to time be filed
with the SEC under the 1933 Act or the 1940 Act.
14. The Distributor warrants that:
(a) it has taken all actions necessary under its
Articles of Incorporation, By-laws and state corporate law to authorize the
execution and performance of this Agreement; and
(b) it is and shall remain duly registered as a
broker-dealer under the 1934 Act, is a member in good standing of NASD and is
duly registered under applicable state securities laws.
15. Insofar as they concern the Trust, the Trust shall comply
with all applicable laws, rules and regulations, including, without limiting
the generality of the foregoing, all rules or regulations made or adopted
pursuant to the 1933 Act, the 1940 Act or by any securities association
registered under the 1934 Act.
16. Distributor may, if it desires and at its own cost and
expense, appoint or employ agents to assist it in carrying out its obligations
under this agreement, but no such appointment or employment shall relieve
Distributor of any of its responsibilities or obligations to the Trust under
this agreement.
17. Subject to the provisions of paragraph 9, this agreement
shall continue in effect until such time as there shall remain no unsold
balance of Fund Interests registered under the 1933 Act, provided that this
agreement shall continue in effect for a period of more than one year from the
date hereof only so long as such continuance is specifically approved at least
annually in accordance with the 1940 Act and the rules thereunder. This
agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). This agreement may, in any event, be terminated at
any time, without the payment of any penalty, by the Trust upon 60 days'
written notice to Distributor or by Distributor at any time after the second
anniversary of the effective date of this agreement on 60 days' written notice
to the Trust.
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18. This agreement shall be governed by and construed in
accordance with the laws of the State of Arkansas.
If the foregoing correctly sets forth the agreement between the
Trust and Distributor, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
VARIABLE INSURANCE PRODUCT
TRUST
By: /s/Richard H. Blank, Jr.
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
ACCEPTED as of the date set forth above:
STEPHENS INC.
By: /s/R. Greg Feltus
Name: R. Greg Feltus
Title: Senior Vice President
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EXHIBIT 99.B6(b)
PARTICIPATION AGREEMENT
Between
LIFE & ANNUITY TRUST
And
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
THIS AGREEMENT, made and entered into this 6th day of April, 1994 by and
between American Skandia Life Assurance Corporation (hereinafter the "Company")
on its own behalf and on behalf of Separate Account B (hereinafter the
"Account"), a segregated asset account of the Company, and the Life & Annuity
Trust, an unincorporated business trust organized under the laws of Delaware
(hereinafter the "Trust") and Stephens Inc. (hereinafter the "Underwriter").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively referred to herein as "Variable Insurance
Products") to be offered by insurance companies which have entered into
participation agreements substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (hereinafter the
"1940 Act") and its shares of beneficial interest ("shares") will be registered
under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Account has registered or will register certain variable
annuity contracts under the 1933 Act; and
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WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company to set aside and invest assets attributable to the aforesaid variable
annuity contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker/dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended (hereinafter the "1934 Act"), and is a member in good standing of
the National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account intends to purchase shares in the Funds to fund
certain of the aforesaid variable annuity contracts and the Underwriter is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust and the Underwriter agree as follows:
ARTICLE I
Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Trust which the Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Trust or its designee of the
order for the shares of the Trust. For purposes of this Section 1.1, the
Company shall be the designee of the Trust for receipt of such orders from the
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such order on the next following
Business Day. "Business Day" shall mean any day on which a Fund calculates its
net asset value pursuant to the rules of the Securities and Exchange
Commission.
1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Account on those days on which the Trust calculates its
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net asset value pursuant to rules of the Securities and Exchange Commission.
Notwithstanding the foregoing, the Board of Trustees of the Trust (hereinafter
the "Trustees") may refuse to sell shares of any Fund to any person, or suspend
or terminate the offering of shares of any Fund if such action is required by
law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Trustees acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, necessary in the best
interests of the shareholders of such Fund.
1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.
1.4 The Trust and the Underwriter will not sell Trust shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Trust agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Trust for receipt of
requests for redemption from the Account and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of
such request for redemption on the next following Business Day.
1.6 The Company agrees to purchase and redeem the shares of each Fund
offered by the then current prospectus of the Trust and in accordance with the
provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts (the "Contracts") with the form
number(s) which are listed on Schedule A attached hereto and incorporated
herein by reference, as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto, shall be
invested in the Trust, in such other investment companies, or series thereof,
advised by Wells Fargo Bank ("the Adviser") as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Trust if (a) such other investment company, or series thereof, has investment
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objectives or policies that are substantially different from the investment
objectives and policies of all the Funds of the Trust; or (b) the Company gives
the Trust and the Underwriter forty-five (45) days' written notice of its
intention to make such other investment company available as a funding vehicle
for the contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Trust and the Underwriter prior to their signing this
Agreement; or (d) the Trust or Underwriter consents to the use of such other
investment company.
1.7 The Account shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.8 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in an appropriate title for the
Account or the appropriate subaccount of the Account.
1.9 The Trust shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Trust's shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Fund shares in additional shares of that Fund. The Company reserves the right
to revoke this election and to receive all such dividends and distributions in
cash. The Trust shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.10 The Trust shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 5:30 p.m. Pacific time.
1.11 The Trust may apply for an order exempting it from certain provisions
of the 1940 Act and rules thereunder so that the Trust may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable life insurance policies, separate
accounts of insurance companies unaffiliated with the Company and trustees of
qualified pension and retirement plans ("mixed and shared funding").
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ARTICLE II
Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state
insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the
Account prior to any issuance or sale thereof as a segregated asset account
under Section 38a-433(a) of the General Statutes of Connecticut, Revision of
1958, as amended, and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts, and will amend the Separate Account's registration
statements under the 1933 Act and the 1940 Act to add the Trust as a funding
vehicle for the Contracts.
2.2 The Trust represents and warrants that Trust shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Trust is and shall
remain registered under the 1940 Act. The Trust shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The
Trust shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Trust or the Underwriter.
2.3 The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
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2.4 The Company represents that the Contracts are currently treated as
annuity contracts, under applicable provisions of the Code, as amended, and
that it will make every effort to maintain such treatment and that it will
notify the Trust and the Underwriter immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Trust represents that the Trust's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker/dealer with the Securities
and Exchange Commission. The Underwriter further represents that it will sell
and distribute the Trust shares in accordance with the laws of the State of
Delaware and all applicable state and federal securities laws, including
without limitation, the 1933 Act, the 1934 Act, and the 1940 Act.
2.7 The Trust represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.8 The Trust and Underwriter represent and warrant that all of their
trustees, directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Trust are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than
$500,000. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Trust are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust, in an amount not less than $500,000. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
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2.10 The Trust represents that it will provide the Company notice of 90
days prior to the effective date of any plan under Rule 12b-1 pursuant to the
1940 Act if, at the time such plan is adopted, the majority of the Trust's
Board does not consist of disinterested Trustees. The Trust also represents
that it understands that the Company may need to take whatever steps are
necessary to cease investing in the Trust as a result of the adoption of such a
plan in order to comply with the terms of certain orders for exemptive relief
from provisions of the 1940 Act given to the Company and certain of its
separate accounts by the Securities and Exchange Commission.
ARTICLE III
Prospectuses and Proxy Statement; Voting
3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of its current prospectus as the Company may reasonably
request. If requested by the Company in lieu thereof, the Trust shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Trust's expense) and other assistance as is reasonably necessary in
order for the Company once each year (or more frequently if the prospectus for
the Trust is amended) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2 The Trust's prospectus shall state that the statement of additional
information for the Trust is available from the Underwriter (or in the Trust's
discretion, the prospectus shall state that such statement is available from
the Trust).
3.3 The Trust, at its expense, shall provide the Company with copies of
its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners and participants.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners or
participants;
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(ii) vote the Trust shares in accordance with instructions
received from Contract owners or participants; and
(iii) vote Trust shares for which no instructions have been
received in the same proportion as Trust shares of such
portfolio for which instructions have been received:
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Trust
shares held in any segregated asset account or in its general account in its
own right, to the extent permitted by law.
3.5 The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Trust will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the
Trust is not one of the trusts described in Section 16(c) of that Act) as well
as with Sections 16(a) and, if and when applicable, 16(b). Further, the Trust
will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate
with respect thereto.
ARTICLE IV
Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or its investment adviser or the Underwriter is
named, at least five Business Days prior to its use unless such material is
substantially similar to material previously approved by the Trust or its
designee. No such material shall be used if the Trust or its designee object
to such use within five business days after receipt of such material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Trust shares, as
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such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the fund, or in sales
literature or other promotional material approved by the Trust or its designee
or by the Underwriter, except with the permission of the Trust or the
Underwriter or the designee of either.
4.3 The Trust, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company or its separate account(s)
is named at least five Business Days prior to its use unless such material is
substantially similar to material previously approved by the Company or its
designee. No such material shall be used if the Company or its designee object
to such use within five business days after receipt of such material.
4.4 The Trust and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public domain
or approved by the Company for distribution to Contract owners or participants,
or in sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company.
4.5 The Trust will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Trust or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6 The Company will provide to the Trust at least one complete copy of
all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Contracts or the Account, contemporaneously with the filing of such document
with the Securities and Exchange Commission.
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4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials.
ARTICLE V
Fees and Expenses
5.1 The Trust and Underwriter shall pay no fee or other compensation to
the Company under this agreement.
5.2 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Trust, in accordance with
applicable state laws prior to their sale. The Trust shall bear the expenses
for the cost of registration and qualification of the Trust's shares,
preparation and filing of the Trust's prospectus and registration statement,
proxy materials and reports, printing the prospectus and proxy materials and
reports to shareholders (including the annual report), the preparation of
statements and notices required by any federal or state law, all taxes on the
issuance or transfer of the Trust's shares, and any expenses permitted to be
paid or assumed by the Trust pursuant to a plan, if any, under Rule 12b-1.
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5.3 The Company shall bear the expenses of printing and distributing the
Trust's prospectus to owners and participants of Contracts issued by the
Company and of distributing the Trust's proxy materials and reports to such
Contract owners or participants.
ARTICLE VI
Diversification
6.1 The Trust will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code, and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Trust will at all times comply with Section 817(h)
of the Code and the rules and regulations thereunder.
ARTICLE VII
Potential Conflicts
7.1 The Board of Trustees of the Trust (the "Board") will monitor the
Trust for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the
Trust. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Fund are
being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out
its responsibilities under any mixed and/or
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shared funding exemptive order, by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Trust or any Fund and reinvesting such assets in a different investment
medium, including (but not limited ) another Fund of the Trust, or submitting
the question whether such segregation should be implemented to a vote of all
affected contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) the vote in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the Account's investment
in the Trust and terminate this Agreement; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six months after the Trust gives written notice that this
provision is being implemented, and until the end of that six month period the
Underwriter and Trust shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Trust.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement with six
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months after the board informs the Company in writing that it has determined
that such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Underwriter and Trust shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Trust.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Trust
and terminate this Agreement within six months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding,
then (a) the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rule 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules
are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this
Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
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ARTICLE VIII
Indemnification
8.1 Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Trust and
each of its Trustees and officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Contracts shares and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by
or on behalf of the Trust for use in the Registration Statement
or prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales
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literature of the Trust not supplied by the Company, or persons
under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of
the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, or sales literature of the Trust or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Trust by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material
breach of any representation and/or warranty made by the Company
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Trust, whichever is applicable.
(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the
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Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Company to such party
of the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d) The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust Shares or the Contracts or the operation
of the Trust.
8.2 Indemnification By the Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
control the Company within the meaning of Section 1 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Trust's
shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Trust (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such
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alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Trust by or on behalf of the Company for use in the
Registration Statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Trust
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Trust, Underwriter or
persons under their control, with respect to the sale or
distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the
Company by or on behalf of the Trust; or
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Trust and/or
Underwriter in this Agreement or arise out of or result from
any other material breach of this Agreement by the Trust and/or
Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would
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otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to the Company or the Account,
whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the indemnified Party against whom such action is brought otherwise
then on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Trust
(a) The Trust agrees to indemnify and hold harmless the Company, the
Underwriter and each of their respective directors and officers and each
person, if any, who controls the Company or the Underwriter within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts
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paid in settlement with the written consent of the Trust) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements which:
(i) are related to the sale or acquisition of the Trust's shares
and:
A. arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus or sales literature
for the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or
Trust by or on behalf of the Company for use in the
Registration Statement or prospectus for the Trust
or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Trust shares; or
B. arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature for the Contracts not supplied by the Underwriter
or persons under its control) or wrongful conduct of the
Trust, or persons under its control, with respect to the
sale or distribution of the Contracts or Trust shares; or
C. arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be
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stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Trust; or
(ii) are related to the operations of the Trust, results from the
gross negligence, bad faith or willful misconduct of the Board
or any member thereof and:
A. arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement; or
B. arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust;
as limited by and in accordance with the provisions of Section 8.3(b) and
8.3(c) hereof.
(b) The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Trust, the Underwriter or the
Account, whichever is applicable.
(c) The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Trust of
any such claim shall not relieve the Trust from any liability which it may have
to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel
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satisfactory to the party named in the action. After notice from the Trust to
such party of the Trust's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Trust will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the
Trust of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Trust.
ARTICLE IX
Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Connecticut.
9.2 This Agreement shall be subject to the Provisions of the 1933, 1934
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities
and Exchange Commission may grant and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X
Termination
10.1 This Agreement shall terminate:
(a) at the option of any party upon one year's advance written
notice to the other parties without the payment of any penalty; provided,
however, such notice may not be given earlier than one year following the date
of this Agreement; or
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(b) at the option of the Company to the extent that shares of Funds
are not reasonably available to meet the requirements of the Contracts as
determined by the Company, provided however, that such termination shall apply
only to the Fund(s) not reasonably available; or
(c) at the option of the Trust in the event that formal
administrative proceedings are instituted against the Company by the National
Association of Securities Dealers, Inc. ("NASD"), the Securities and Exchange
Commission, the Insurance Commissioner or any other regulatory body regarding
the Company's duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, or the purchase of the Trust shares,
provided, however, that the Trust determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Company to perform its obligations under
this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Trust or Underwriter by
the NASD, the Securities and Exchange Commission, or any state securities or
insurance department or any other regulatory body, provided, however, that the
Company determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Trust or Underwriter to perform its obligations under this Agreement; or
(e) upon requisite vote of the Contract owners having an interest
in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Fund shares of the Trust in accordance
with the terms of the Contracts for which those Fund shares had been selected
to serve as the underlying investment media. The Company will give 30 days'
prior written notice to the Trust of the date of any proposed vote to replace
the Trust's shares; or
(f) at the option of the Company, in the event any of the Trust's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(g) at the option of the Trust, in the event the Contracts are not
registered, issued or sold in accordance with applicable state and/or federal
law; or
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(h) at the option of the Company, if the Trust ceases to qualify as
a Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(i) at the option of the Company, if the Trust fails to meet the
diversification requirements specified in Article VI hereof; or
(j) at the option of either the Trust or the Underwriter, if (1)
the Trust or the Underwriter, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Company has suffered a
material adverse change in the business or financial condition or is the
subject of material adverse publicity and such material adverse change or
material adverse publicity will have a material adverse impact upon the
business and operations of either the Trust or the Underwriter, (2) the Trust
or the Underwriter shall notify the Company in writing of such determination
and its intent to terminate this Agreement, and (3) after considering the
actions taken by the Company and any other changes in circumstances since the
giving of such notice, such determination of the Trust or the
Underwriter shall continue to apply on the sixtieth day following the giving of
such notice, which sixtieth day shall be the effective date of termination; or
(k) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good faith, that either
the Trust or the Underwriter has suffered a material adverse change in its
business or financial condition or is the subject of material adverse publicity
and such material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of the Company, (2)
the Company shall notify the Trust and the Underwriter in writing of such
determination and its intent to terminate the Agreement, and (3) after
considering the actions taken by the Trust and/or the Underwriter and any other
changes in circumstances since the giving of such notice, such determination
continue to apply on the sixtieth day following the giving of such notice,
which sixtieth day shall be the effective date of termination; or
(l) at the option of either the Trust or the Underwriter, if the
Company gives the Trust and the Underwriter the written notice specified in
Section 1.6(b) hereof and at the time such notice was given there was no notice
of termination outstanding under any other provision of this Agreement;
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provided, however any termination under this Section 10.1(l) shall be effective
forty-five days after the notice specified in Section 1.6(b) was given; or
(m) automatically in the event of its assignment, unless made with
the written consent of each party.
10.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) In the event that any termination is based upon the provisions
of Article VII, or the provision of Section 10.1(a), 10.1(j), 10.1(k) or
10.1(l) of this Agreement, such prior written notice shall be given in advance
of the effective date of termination as required by such provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice
shall be given at least 90 days before the effective date of termination.
10.4 Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Trust pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Trust, redeem
investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII
and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.5 Except as necessary to implement Contract Owner initiated
transactions, or as required by state and/or federal laws or regulations, the
Company shall not redeem Trust shares attributable to the Contracts (as opposed
to Trust shares attributable to the Company's assets held in the Accounts).
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Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Fund that was otherwise available under the Contracts without first giving the
Trust or the Underwriter ninety (90) days notice of its intention to do so.
ARTICLE XI
Notices
11.1 Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
111 Center Street
Little Rock, Arkansas 72201
Attention: Treasurer
If to the Company:
American Skandia Life Assurance Corporation
Attention: President
If to the Underwriter:
111 Center Street
Little Rock, Arkansas 72201
Attention: Treasurer
ARTICLE XII
Miscellaneous
12.1 All persons dealing with the Trust must look solely to the property
of the Trust for the enforcement of any claims against the Trust as neither the
Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Trust.
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12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators)
and shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.7 The Trust shall own and control all records generated on behalf of
the Trust as a result of services provided under this Agreement. In addition,
the Trust shall have the right to inspect, audit, and/or copy all records
pertaining to the performance of services under this Agreement.
12.8 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative as of the date specified below.
Company:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: /s/Bayard F. Tracy
Date: 4/6/94
Trust:
LIFE & ANNUITY TRUST
By: /s/Richard H. Blank, Jr.
Date: 4/5/94
Underwriter:
STEPHENS INC.
By: /s/Richard H. Blank, Jr.
Date: 4/5/94
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Schedule A
Contracts
A-1
<PAGE> 1
EXHIBIT 99.B9(b)
AGENCY AGREEMENT
This agreement is made and entered into as of this 15th day of
November, 1993 (the "Agreement"), by and between VARIABLE INSURANCE PRODUCT
TRUST, a registered diversified management investment company established in
the State of Delaware (the "Fund"), and Wells Fargo Bank, N.A., national
association ("Agent"), for transfer agency and dividend disbursing services as
follows:
I. SERVICES.
A. Appointment of Agent. The Fund hereby appoints Agent as its
transfer and dividend disbursing agent for each of its investment portfolios
and Agent accepts such appointment.
B. Description of Services. As consideration for the
compensation hereinafter described in Section I(C), Agent agrees to provide the
Fund with the facilities and services described and set forth on Schedule A
attached hereto and incorporated herein by reference.
C. Compensation. As consideration for the services described in
Section I(B), above, the Fund shall pay to Agent an annual fee of 0.05% of the
Fund's average net assets.
II. EXPENSES. The Fund shall promptly reimburse Agent for all
reasonable out-of-pocket expenses incurred by Agent in connection with the
performance of services under this Agreement, including, without limitation,
the following:
A. Postage, including first class mail insurance in connection
with mailing share certificates, express delivery, etc.;
B. Envelopes, check forms, continuous forms, forms for reports
and statements, stationery and other similar supplies;
C. Fees and costs of outside legal counsel employed by Agent;
D. Banking services, fees, and costs for wire transfers, deposit
accounts, etc.;
E. Expenses of fidelity and liability insurance and bonding;
F. Fees and costs relating to the use, licensing, development or
implementation of data processing software used by or for the Fund;
G. Data transmission expenses;
H. Costs and microfilm/microfiche; and
I. Costs for telephone lines and equipment.
III. TERM. This Agreement shall become effective as of the date first
above written and shall continue until terminated pursuant to its provisions.
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IV. INSURANCE. Agent agrees to procure and maintain such fidelity
bond coverage as may be required by the Investment Company Act of 1940 (the
"1940 Act"), in the amounts and with such deductibles as are required by or
permitted under the 1940 Act, as it may be amended from time to time.
V. REGISTRATION AND COMPLIANCE.
A. Agent represents that it is registered as a transfer agent
with the Securities and Exchange Commission ("SEC") pursuant to Section 17A of
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations promulgated thereunder, and Agent agrees to maintain said
registration current and comply with all of the requirements of the Exchange
Act, rules and regulations during the term of this Agreement.
B. The Fund represents that it is a diversified management
investment company registered with the SEC in accordance with the 1940 Act and
the rules and regulations promulgated thereunder. The Fund is authorized to
offer and sell its shares pursuant to the 1940 Act, the Securities Act of 1933
("1933 Act") and the rules and regulations promulgated thereunder. The Fund
will furnish Agent with a list of those jurisdictions in the United States and
elsewhere in which it is authorized to offer and sell its shares to the general
public and will maintain the currency of such list by amendment. The Fund
agrees promptly to advise Agent of any change in or limitation upon its
authority to carry on business as an investment company pursuant to the 1940
Act, the Exchange Act and the 1933 Act and the statutes, rules and regulations
of each and every jurisdiction to which it is subject.
VI. DOCUMENTATION. The Fund and Agent shall each supply to the other
upon request such documentation as is required by them to carry out their
respective obligations under this Agreement including, but not limited to,
articles or incorporation, bylaws, codes of ethics, registration statements,
permits, financial reports, third party audits, certificates of authority,
computer tapes and related items.
VII. PROPRIETARY INFORMATION. It is agreed that all records and
documents, excepting computer data processing programs and any related
documentation used or prepared by, or on behalf of Agent for the performance of
its services hereunder, are the property of the Fund and shall be open to audit
or inspection by the Fund or its agents during the normal business hours of
Agent, shall be maintained in a manner designed to preserve the confidentiality
thereof and to comply with applicable federal and state laws and regulations,
and shall, in whole or any specified part, be surrendered to the Fund or its
duly authorized agents upon receipt by Agent of reasonable notice of and
request therefor.
VIII. INDEMNITY. The Fund shall indemnify and hold Agent harmless
against any losses, claims, damages, liabilities or expenses (including
reasonable attorney's fees and expenses) resulting from any claim, demand,
action or suit brought by any person other than the Fund (including a
shareholder naming the Fund as a party) and not resulting from Agent's bad
faith, willful misfeasance, reckless disregard of its obligations and duties,
gross negligence or breach of this Agreement, and arising out of, or in
connection with:
A. Agent's performance hereunder;
B. Any error or omission in any record (including but not
limited to magnetic tapes, computer printouts, hard copies and microfilm or
microfiche copies) delivered, or caused to be delivered, by the Fund to Agent
in connection with this Agreement;
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C. Bad faith, willful misfeasance, reckless disregard of its
obligations and duties or negligence of the Fund, or Agent's acting upon any
instructions reasonably believed by it to have been properly executed or
communicated by any person duly authorized by the Fund;
D. Agent's acting in reliance upon advice given by counsel for
Agent or upon advice reasonably believed by it to have been given by counsel
for the Fund; or
E. Agent's acting in reliance upon any instrument reasonably
believed by it to have been genuine and signed, countersigned or executed by
the proper person(s) in accordance with the currently effective certificate(s)
of authority delivered to Agent by the Fund.
In the event that Agent requests the Fund to indemnify or
hold it harmless hereunder, agent shall use its best efforts to inform the Fund
of the relevant facts concerning the matter in question. Agent shall use
reasonable care to identify and promptly notify the Fund concerning any matter
which presents, or appears likely to present, a claim for indemnification
against the Fund.
The Fund shall have the election of defending Agent against
any claim which may be the subject of indemnification hereunder. In the event
the Fund so elects, it will so notify Agent and thereupon the Fund shall take
over defense of the claim, and (if so requested by the Fund) Agent shall incur
no further legal limit or other expenses related thereto for which it would be
entitled to indemnify hereunder; provided, however, that nothing herein
contained shall prevent Agent from retaining, at its own expense, counsel to
defend any claim. Except with the Fund's prior consent, Agent shall in no
event confess any claim or make any compromise in any matter in which the Fund
will be asked to indemnify or hold harmless hereunder.
IX. LIABILITY
A. Damages. Agent shall not be liable to the Fund, or any third
party, for punitive, exemplary, indirect, special or consequential damages
(even if Agent has been advised of the possibility of such damages) arising
from its obligations and the services provided under this Agreement, including
but not limited to loss of profits, loss of use of the shareholder accounting
system, cost of capital and expenses of substitute facilities, programs or
services.
B. Force Majeure. Anything in this Agreement to the contrary
notwithstanding, Agent shall not be liable for delays or errors occurring by
reason of circumstances beyond its control, including but not limited to acts
or civil or military authority, national emergencies, work stoppage, fire,
flood, catastrophe, earthquake, acts of God, insurrection, war, riot, data
processing and communications downtime (where such downtime occurs for reasons
other than Agent's gross negligence or willful misconduct) or interruption of
power supply.
X. AMENDMENT. This Agreement and the Schedules attached hereto and
made a part hereof may be amended at any time, with or without shareholder
approval (except as otherwise required by law), in writing signed by each of
the parties hereto. Any change in the Fund's registration statements or other
documents of compliance or in the forms relating to any plan, program or
service offered by its current prospectuses which would require a change in
Agent's obligations hereunder shall be subject to Agent's approval, which
approval shall not be unreasonably withheld.
XI. TERMINATION. This Agreement may be terminated by either party
without cause upon one hundred twenty (120) days prior written notice to the
other, and at any time for cause in the event that such
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cause remains unremedied for more than thirty (30) days after receipt by the
other party of written specification of such cause.
In the event the Fund designates a successor to any of Agent's
obligations hereunder, Agent shall, at the expense and pursuant to the
direction of the Fund, transfer promptly to such successor all relevant books,
records and other data of the Fund in the possession or under the control of
Agent.
XII. SEVERABILITY. If any clause or provision of this Agreement is
determined to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, then such clause or provision shall be
considered severed herefrom and the remainder of this Agreement shall continue
in full force and effect.
XIII. RECORDS. The Trust shall own and control all records generated on
behalf of the Trust as a result of services provided under this Agreement. In
addition, the Trust shall have the right to inspect, audit, and/or copy all
records pertaining to the performance of services under this Agreement.
XIV. APPLICABLE LAW. This Agreement shall be subject to and construed
in accordance with the laws of the State of California.
XV. ENTIRE AGREEMENT. Except as otherwise provided herein, this
Agreement constitutes the entire and complete agreement of the parties hereto
relating to the subject matter hereof and supersedes and merges all prior
contracts and discussions between the parties.
XVI. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same Agreement and
each of which shall be deemed an original.
<TABLE>
<S> <C>
VARIABLE INSURANCE WELLS FARGO BANK, N.A.
PRODUCT TRUST
By: /s/Richard H. Blank, Jr. By: /s/Robert Chlebowski
----------------------- --------------------
Name: Richard H. Blank, Jr. Name: Robert Chlebowski
--------------------- -----------------
Title: Chief Operating Officer Title: Senior Vice President
----------------------- ----------------------
By: /s/Henry J. Cavigli
-------------------
Name: Henry J. Cavigli
----------------
Title: Vice President
--------------
</TABLE>
4
<PAGE> 5
SCHEDULE A
SCHEDULE OF SERVICES
1 . Share Transfer and Dividend Disbursing Services
A. Maintenance of shareholder accounts, including processing
of new accounts.
B. Posting address changes and other file maintenance for
shareholder accounts.
C. Posting all transactions to the shareholder file,
including:
- Direct purchase
- Wire order purchases
- Direct redemptions
- Telephone redemption
- Wire order redemption
- Direct exchanges
- Dividend payments
- Dividend reinvestments
- Transfers
D. Prepare daily reconciliations of shareholder processing to
money movement instructions.
E. Issuing all checks and stopping and replacing checks.
F. Performing certain of the Fund's other mailings, including:
- Dividend and capital gain distributions
- 1099/year-end shareholder reporting
- Daily confirmations
- Furnish certified list of shareholders (hard copy of
microfilm)
G. Maintaining and retrieving all required past history for
shareholders and provide research capabilities as follows:
- Daily monitoring of all processing activity to
verify back-up documentation
- Provide exception reports
- Microfilming
- Storage, retrieval and archive of records in
accordance with Rules 31a-1, 31a-2, and 31a-3 under
the 1940 Act.
H. Reporting and remitting as necessary for state escheat
requirements.
A-1
<PAGE> 6
SCHEDULE B
SHAREHOLDER SERVICES FEE SCHEDULE
A. Account Maintenance Fees:
Open accounts daily dividend fixed NAV - $16.75 per account per year.
Open accounts monthly dividend variable NAV - $14.25 per account per year
for the first 10,000 accounts per fund. $13.25 per account for each
account over $10,000.
Open accounts monthly dividend - $13.00 per account per year for the
first 10,000 accounts per fund. $12.00 per account for each account over
$10,000.
Open accounts quarterly or semi-annual dividend - $12.00 per account per
year for the first 10,000 accounts per fund. $11.00 per account for each
account over $10,000.
Closed account all funds - $2.25 per account per year.
B. Processing Fees:
12(b)1 processing $.25 per account per payment cycle.
Set up new accounts - $2.50 per new account established.
Sales reporting - $250.00 per month per fund utilizing sales reporting.
Transaction processing fee per transaction - $.50 per subsequent account
purchase, redemption or exchange excluding those transactions made via
fund drafts, audio response, systematic withdrawal plans or
pre-authorized check plans.
C. Base Fee:
There is a monthly base fee of $500.00 per fund per month.
D. Minimum Fee:
There is a monthly minimum fee of $3,000 per fund/portfolio.
E. Miscellaneous:
Fiduciary trustee fees - $10.00 per account per year.
Audio response fee - If audio response is utilized by a fund, the annual
open account maintenance fee increases by $.10 per year, the minimum
monthly fee increases by $250.00 and there is a charge of $.12 per call
utilizing the system.
F. Notes to Fee Schedule:
B-1
<PAGE> 7
a. For fee calculation purposes, a series fund is treated as multiple
funds. For example, a three portfolio series fund would be treated
as three separate funds when calculating set-up for minimum base
fees.
b. Annual maintenance fees are payable monthly at 1/12th of the annual
stated rate.
c. The above schedules do not include out-of-pocket expenses that would
be incurred by Wells Fargo Bank on the Fund's behalf. Examples of
out-of-pocket expenses include pricing services, forms, postage,
outside mailing services, magnetic tapes, bank wire charges,
microfilm/microfiche, etc.
d. The fees stated above are exclusive of terminal equipment required in
the Client's location(s) and communication line costs.
e. Each month Wells Fargo Bank bills service fees and out-of-pocket
expenses separately. The bills are mailed on approximately the 10th
and 20th, respectively, of each month. Ten days after the mailing
date of the invoice, Wells Fargo Bank will automatically debit the
Fund's custody account for the amount of the fees or expenses due.
f. Any fees not paid within 45 days of the date of the original invoices
will be charged a late payment fee of 1% per month until payment of
the fees are received by Wells Fargo Bank.
g. Wells Fargo Bank will provide a credit against service fees based
upon 85% of the average 91 day Treasury Bill Index applied to the
average cash balances in the Fund's Custodial Account. The balance
credit will be calculated monthly and carried forward from month to
month. Any excess credit remaining at year-end (December 31) will
not be carried forward.
G. Fee Waivers:
Wells Fargo Bank agrees to waive all shareholder servicing fees,
including out-of-pocket expenses, for any fund with less than $20,000,000
in net assets.
B-2
<PAGE> 1
EXHIBIT 99.B10
[Morrison & Foerster LLP Letterhead]
April 30, 1997
Life & Annuity Trust
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of
Life & Annuity Trust
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 4 and Amendment No. 6 to
the Registration Statement on Form N-1A (SEC File Nos. 33-70988 and 811-8118)
(the "Registration Statement") of Life & Annuity Trust (the "Trust") relating
to the registration of an indefinite number of shares of common stock of the
Trust (collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the
Trust and its series and the authorization and issuance of shares of its
series.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance of the Shares by the Company has been duly and
validly authorized by all appropriate corporate action, and assuming delivery
by sale or in accord with the Funds' dividend reinvestment plan in accordance
with the description set forth in the Funds' current prospectus the Shares will
be legally issued, fully paid and nonassessable by the Trust.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement. In addition, we hereby consent to the use of our name
and the description of advice rendered by our firm under the heading
"Management of the Funds" in the Prospectus, which is included as part of
the Registration Statement.
Very truly yours,
/s/ Morrison & Foerster LLP
MORRISON & FOERSTER LLP
<PAGE> 1
EXHIBIT 99.B11
Independent Auditors' Consent
The Board of Trustees and Shareholders
Life & Annuity Trust:
We consent to the inclusion in the Life & Annuity Trust Post-Effective
Amendment No. 4 to the Registration Statement No. 33-70988 on Form N-1A under
the Securities Act of 1933 and Amendment No. 6 to the Registration Statement
Number 811-8118 on Form N-1A under the Investment Company Act of 1940 of our
report dated February 14, 1997, on the statement of assets and liabilities,
including the portfolios of investments, of the Asset Allocation Fund, Growth
and Income Fund, Money Market Fund and U.S. Government Allocation Fund
(constituting Life & Annuity Trust) as of December 31, 1996, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two year period then ended, and the
financial highlights for the periods indicated therein, which report has been
included in the statement of additional information.
We also consent to the references to our firm under the heading
"Financial Highlights" in the prospectus and "Independent Auditors" in the
statement of additional information.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
San Francisco, California
April 30, 1997
