<PAGE> 1
STAGECOACH VARIABLE ANNUITY(TM)
STAGECOACH VARIABLE ANNUITY PLUS(TM)
STAGECOACH EXTRA CREDIT VARIABLE ANNUITY(TM)
-------------------------------
SEMI-ANNUAL REPORT
-------------------------------
JUNE 30, 1997
-------------------------------
NOT FDIC INSURED
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Contract Holders................................................................... 2
Life & Annuity Trust Financial Statements.................................................... 3
American Skandia Trust Financial Statements.................................................. 27
Alger American Fund Financial Statements..................................................... 61
</TABLE>
This report has been prepared to provide information to owners of American
Skandia Life Assurance Corporation's Stagecoach Variable Annuity, Stagecoach
Variable Annuity Plus, and Stagecoach Extra Credit Variable Annuity. If it is
used for any other purpose, it must be accompanied or preceded by a current
prospectus, as applicable, which discloses any charges and other important
information about the Account, together with the current applicable prospectus
for the Life & Annuity Trust, the American Skandia Trust, and the Alger American
Growth Fund.
The financial statements for the sub-accounts that invest in Portfolios of
American Skandia Trust reflect financial activity for the Stagecoach Variable
Annuities and other products that use the same sub-accounts.
VARIABLE ANNUITIES:
- ---------------------------------------------------------------------
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor guaranteed by the
Bank
- involve investment risk, including possible loss of principal
[NOT FDIC INSURED LOGO]
1
<PAGE> 3
STAGECOACH VARIABLE ANNUITY
STAGECOACH VARIABLE ANNUITY PLUS
STAGECOACH EXTRA CREDIT VARIABLE ANNUITY
SEMI-ANNUAL REPORT
TO OUR CONTRACT HOLDERS:
This summer we witnessed the Dow Jones Industrial Average ascend to new
highs. The DJIA passed 8000 on July 16th. Despite the short-term volatility that
we have seen throughout the spring and summer, recent corporate earnings reports
support the idea that the economy is healthy. GM and Ford, for example, just
reported quarterly earnings substantially above expectations. With low
unemployment and low inflation, the prospects for growth are encouraging.
With regard to tax reform, we look to this fall's Congressional session for
more definition. Currently there are several proposals in circulation and
rewrite stages. We believe the outlook for the individual investor may be
positive, particularly in the event that capital gains taxes are lowered from
28%. That said, taxation is but one of many variables that will ultimately drive
investors' investment and tax strategies.
At American Skandia, we continue to dedicate our efforts to providing you
with quality investment selections and choice. In addition, we provide a broad
array of money management expertise. The INVESCO EQUITY INCOME PORTFOLIO
investing for high current income represents a top-down/bottom-up approach to
income and growth. The JANCAP GROWTH PORTFOLIO offers a bottom-up,
stock-by-stock selection process. Three portfolios offer long-term growth
strategies, all representing well-defined, disciplined, proven asset management
strategies: ALGER AMERICAN GROWTH PORTFOLIO, BERGER CAPITAL GROWTH PORTFOLIO AND
FOUNDERS CAPITAL APPRECIATION. THE T. ROWE PRICE INTERNATIONAL EQUITY PORTFOLIO
seeks total return of growth and income investments in non-U.S. companies.
As always, we are pleased to offer an outstanding selection of WELLS FARGO
BANK advised portfolios: the GROWTH AND INCOME, ASSET ALLOCATION, U.S.
GOVERNMENT ALLOCATION and MONEY MARKET FUNDS.
We appreciate your participation in the Stagecoach Variable Annuities and
we will continue to work diligently to help you realize your financial goals.
Sincerely,
[GORDON C. BORONOW SIGNATURE]
Gordon C. Boronow
President & Chief Operating Officer
American Skandia Life Assurance Corporation
2
<PAGE> 4
LIFE & ANNUITY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1997
ASSET ALLOCATION FUND
GROWTH AND INCOME FUND
MONEY MARKET FUND
U.S. GOVERNMENT ALLOCATION FUND
3
<PAGE> 5
ASSET ALLOCATION FUND
The Asset Allocation Fund is a professionally managed portfolio, advised by
Wells Fargo Bank, N.A. ("Wells Fargo Bank"). Barclays Global Fund Advisors
("BGFA") serves as sub-investment adviser. BGFA uses an investment model
developed over the past 20 years that analyzes extensive financial data from
numerous sources and recommends a portfolio allocation. Looking at the asset
classes through the framework of a model gives the advantage of assessing the
relative attractiveness of stocks, bonds, and cash consistently through time.
Q. How did the Asset Allocation Fund perform for the six-month period ending
June 30, 1997?
A. The Asset Allocation Fund posted a total return of 8.84% for the six month
period ending June 30, 1997.*
Q. During the first six months of 1997, what factors influenced the returns for
the stock, bond and cash allocations of the Fund?
A. Although the stock market has continued to post strong gains in 1997, there
were several factors that affected the allocation shifts between asset classes.
In January, the Commerce Department reported moderate monthly GDP growth with
the lowest inflation rate since 1967. This positive news contributed to an S&P
500 Index return of 6.24% for the month.
Concerns over higher interest rates in March brought a significant sell off to
both the stock and bond markets. During March, the S&P 500 Index fell 4.11% and
the bond market fell 2.75%. Cash securities returned 0.48%, making cash the best
performing asset class for the month. By the time the Federal Reserve announced
that interest rates would be raised by 25 basis points (0.25%), the market had
already anticipated the rise, so reaction was minimal.
The S&P 500 Index has continued to break new ground, closing over 800 for the
first time in February, and returning 20.61% for the six month period ended
6/30/97. The bond markets have reacted strongly to economic news. Bond Market
Performance has been volatile, but has overcome the negative return of the first
quarter (-3.60%), returning 2.09% in the six-month period ended June 30, 1997,
as measured by the Lehman Bros. Long-Government Bond Index.
Q. How has the allocation changed during the year and what is the current asset
mix of the Fund?
A. Although both the stock and bond markets have experienced volatility in the
last six months, the Model has behaved defensively as stocks continue to be
analyzed as overvalued. Throughout the first six months of 1997, the asset mix
of the Fund remained very close to its current allocation of 40% stocks, 60%
bonds. Due to the small size of the Fund, its exposure to equities was realized
through the use of S&P 500 futures contracts instead of investing directly in
all of the common stocks which comprise the S&P 500 Index. The advisor adopted
this strategy to maximize the Fund's ability to meet its investment objectives.
For more details on how the Futures Contracts are used within the Fund's
portfolio, please read the notes to the financial statements.
- ---------------
* Past performance is not predictive of future results. The investment
return and net asset value of shares of the Fund will fluctuate with
market conditions so that shares of the Fund, when redeemed, may have a
greater or lesser net asset value than when originally purchased.
Average annual total returns for the indicated periods represent the
average annual increase in the value of an investment over the periods
assuming reinvestment of dividends and capital gains distributions at net
asset value. Return figures reflect waived expenses.
4
<PAGE> 6
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (99.15%)
U.S. TREASURY BILLS (42.30%)
$ 808,000 U.S. Treasury Bills 4.62%* 07/03/97 $ 807,680
647,000 U.S. Treasury Bills 4.97* 07/10/97 646,145
2,411,000 U.S. Treasury Bills 4.98* 07/31/97 2,401,782
196,000 U.S. Treasury Bills 5.00* 07/17/97 195,566
4,471,000 U.S. Treasury Bills 5.01* 07/24/97 4,457,509
513,000 U.S. Treasury Bills 5.05* 08/07/97 510,455
1,425,000 U.S. Treasury Bills 5.10* 09/04/97 1,411,904
6,434,000 U.S. Treasury Bills+ 5.11* 08/21/97 6,389,591
3,340,000 U.S. Treasury Bills 5.12* 08/14/97 3,320,414
7,481,000 U.S. Treasury Bills 5.13* 08/28/97 7,421,117
2,742,000 U.S. Treasury Bills 5.13* 09/18/97 2,711,372
-----------
$30,273,535
U.S. TREASURY BONDS (56.85%)
$ 600,000 U.S. Treasury Bonds 6.00% 02/15/26 $ 536,813
2,500,000 U.S. Treasury Bonds 6.25 08/15/23 2,313,282
1,050,000 U.S. Treasury Bonds 6.50 11/15/26 1,006,360
1,115,000 U.S. Treasury Bonds 6.63 02/15/27 1,124,844
1,050,000 U.S. Treasury Bonds 6.75 08/15/26 1,038,844
1,000,000 U.S. Treasury Bonds 6.88 08/15/25 1,003,125
2,050,000 U.S. Treasury Bonds 7.13 02/15/23 2,110,219
1,500,000 U.S. Treasury Bonds 7.25 08/15/22 1,565,157
900,000 U.S. Treasury Bonds 7.50 11/15/24 970,594
1,250,000 U.S. Treasury Bonds 7.63 11/15/22 1,360,938
3,100,000 U.S. Treasury Bonds 7.63 02/15/25 3,392,563
1,700,000 U.S. Treasury Bonds 7.88 02/15/21 1,894,438
4,000,000 U.S. Treasury Bonds 8.00 11/15/21 4,523,752
2,150,000 U.S. Treasury Bonds 8.13 08/15/19 2,451,673
1,200,000 U.S. Treasury Bonds 8.13 05/15/21 1,372,876
1,200,000 U.S. Treasury Bonds 8.13 08/15/21 1,373,626
1,300,000 U.S. Treasury Bonds 8.50 02/15/20 1,539,282
1,000,000 U.S. Treasury Bonds 8.75 05/15/20 1,213,438
3,000,000 U.S. Treasury Bonds 8.75 08/15/20 3,643,125
1,550,000 U.S. Treasury Bonds 8.88 08/15/17 1,887,125
1,850,000 U.S. Treasury Bonds 8.88 02/15/19 2,263,360
1,000,000 U.S. Treasury Bonds 9.00 11/15/18 1,236,250
700,000 U.S. Treasury Bonds 9.13 05/15/18 873,907
-----------
$40,695,591
TOTAL U.S. TREASURY SECURITIES $70,969,126
(Cost $70,526,532)
</TABLE>
5
<PAGE> 7
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30,1997
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
<C> <S> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $70,526,532)** (Notes 1 and 3) 99.15% $70,969,126
Other Assets and Liabilities, Net 0.85 606,526
------ -----------
TOTAL NET ASSETS 100.00% $71,575,652
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
* Yield to maturity.
+ These U.S. Treasury Bills are held in a segregated account for margin
requirements on future contracts. See note 1.
** 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 $ 637,889
Gross Unrealized Depreciation (195,295)
---------
NET UNREALIZED APPRECIATION $ 442,594
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
GROWTH AND INCOME FUND
Brian K. Mulligan manages the Growth and Income Fund. Mr. Mulligan joined Wells
Fargo Bank through its acquisition of Crocker National Bank in 1986, and became
manager of the San Francisco investment office in 1994. Mr. Mulligan graduated
from Skidmore College in Saratoga Springs, New York with a B.A. in Business
Management. He is a Chartered Financial Analyst and currently serves as a member
of the staff of graders for the Association for Investment Management Research.
In 1991, he joined the Council of Examiners for the Institute of Chartered
Financial Analysts in writing the CFA exam. Mr. Mulligan is currently a member
of the San Francisco Security Analysts Society.
Q. How did the Growth and Income Fund perform for the six-month period ending
June 30, 1997?
A. The Growth and Income Fund posted a total return of 11.99%, excluding sales
charge, for the six-month period ended June 30, 1997.*
Q. On what sectors of the stock market did the Fund focus in the first half of
1997?
A. Our focus has been on companies which we believe have strong earnings
potential, including companies in the technology, financial services and
telecommunications equipment sectors. Our focus on strong earnings growth
dampened the Fund's results modestly. During the last six months the market
focused its attention on large companies with modest growth because such
companies are generally perceived to have less down-side price volatility. This
lessened demand for high growth stocks somewhat and caused some stock prices to
drop, reducing the Fund's total return.
Q. What is the current allocation of investments in the Fund's portfolio?
A. The Fund is invested over 95% in stocks and does not hold any convertible
securities. The Fund's dividend yield is modestly below that of the market but
we believe the Fund has potential for appreciation. The portfolio is broadly
diversified across various industry sectors with emphasis on technology,
intermediate goods, financial services, telecommunication equipment and income
producing real estate investment trusts (REITs). The Fund is underweighted in
capital goods, electric utilities, healthcare and consumer cyclicals.
Q. Can you discuss the investment strategy with which you manage the Fund?
A. We look for companies whose potential future growth exceeds that of the
market. Companies must have proven records of earnings and, when possible,
dividend growth. We attempt to reduce risk in the portfolio by diversifying
across industry sectors, and generally sell holdings when their relative
attractiveness is below that of others in their industry or others in the
portfolio. Lastly, we value company's management and generally choose to invest
in companies whose interest is aligned with its shareholders. Companies that tie
a meaningful portion of compensation to stock prices or reasonable return
hurdles dominate our portfolio.
Q. What was the Fund's exposure to foreign stocks as of the end of June 1997?
A. On June 30, 1997, 9.3% of the portfolio was invested in foreign stocks. The
bulk of that was invested in Ericsson Telefonaktiebolaget LM (ADR) and Nokia
Corp. (ADR), two companies involved in wireless telecommunications.
- ---------------
* Past performance is not predictive of future results. The investment
return and net asset value of shares of the Fund will fluctuate with
market conditions so that shares of the Fund, when redeemed, may have a
greater or lesser net asset value than when originally purchased.
Average annual total returns for the indicated periods represent the
average annual increase in the value of an investment over the periods
assuming reinvestment of dividends and capital gains distributions at net
asset value. Return figures reflect waived expenses.
7
<PAGE> 9
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS (88.40%)
ADVERTISING (1.41%)
12,400 Omnicom Group $ 534,766 $ 764,150
APPLIANCES AND FURNITURE (3.02%)
43,500 Sunbeam-Oster Co. Inc. $ 1,209,892 $ 1,642,122
AUTOMOBILE & RELATED (2.58%)
27,600 Danaher Corp $ 1,084,966 $ 1,402,425
BASIC INDUSTRIES (5.56%)
9,100 Aluminum Co of America $ 558,612 $ 685,913
11,200 Colgate-Palmolive Co. 470,258 730,800
37,200 Monsanto Co 1,234,194 1,601,925
----------- -----------
$ 2,263,064 $ 3,018,638
BEVERAGE BREWING AND DISTRIBUTION (0.97%)
14,000 Pepsico Inc. $ 538,719 $ 525,875
CAPITAL GOODS (0.90%)
14,000 Loewen Group Inc $ 462,400 $ 486,500
COMMERCIAL SERVICES (2.40%)
39,700 Service Corp International $ 1,154,797 $ 1,305,138
COMPUTER SOFTWARE (4.30%)
27,000 First Data Corp $ 980,751 $ 1,186,313
9,600 Oracle Systems Corp + 336,283 483,600
42,446 Reynolds & Reynolds Co Class A 1,070,344 668,525
----------- -----------
$ 2,387,378 $ 2,338,438
COMPUTER SYSTEMS (1.22%)
9,900 Cisco Systems Inc + $ 483,051 $ 664,538
ELECTRICAL EQUIPMENT (1.72%)
12,700 Nokia Corp ADR Class A $ 797,904 $ 936,625
ENERGY & RELATED (9.19%)
14,000 Anadarko Petroleum Corp $ 808,542 $ 840,000
9,600 Mobil Corp 527,433 670,800
15,200 Reading & Bates Corp + 363,418 406,600
1,500 Santa Fe International + 44,915 51,000
13,493 Sonat Inc 743,722 691,516
9,000 Texaco Inc 916,311 978,750
16,000 Tosco Corp 505,089 479,000
6,000 Transocean Offshore Inc 387,286 435,750
10,000 Williams Co Inc 420,600 437,500
----------- -----------
$ 4,717,316 $ 4,990,916
ENTERTAINMENT & LEISURE (0.85%)
31,000 Tele-Communication Inc Class A + $ 525,177 $ 461,125
</TABLE>
8
<PAGE> 10
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
FINANCE & RELATED (18.42%)
15,600 Aetna Inc $ 1,090,686 $ 1,597,050
9,000 American International Group Inc 1,001,195 1,344,375
11,000 Chase Manhattan Bank 1,087,409 1,067,688
7,700 Citicorp 672,126 928,331
18,600 Conseco Inc 735,658 688,200
28,000 Federal Home Loan Mortgage Corp 662,819 962,500
12,500 Hartford Life Class A + 407,890 468,750
12,700 Household International Inc 1,091,878 1,491,456
20,000 MBNA Corp 571,659 732,500
14,200 Schwab (Charles) Corp 349,410 577,763
7,000 Security Capital Industrial Trust 142,762 150,500
----------- -----------
$ 7,813,492 $10,009,113
FOOD & RELATED (2.61%)
16,750 American Stores Co $ 802,683 $ 827,031
13,350 Philip Morris Co Inc 452,957 592,406
----------- -----------
$ 1,255,640 $ 1,419,437
GENERAL BUSINESS & RELATED (6.74%)
26,600 Corning Inc $ 999,075 $ 1,479,625
16,000 General Electric Co 814,640 1,046,000
4,500 Georgia-Pacific Corp 349,038 384,188
15,000 Kimberly-Clark Corp 750,179 746,250
----------- -----------
$ 2,912,932 $ 3,656,063
MANUFACTURING PROCESSING (3.96%)
13,000 Allied Signal Inc. $ 817,252 $ 1,092,000
14,100 Potash Corp of Saskatchewan Inc 993,430 1,058,381
----------- -----------
$ 1,810,682 $ 2,150,381
MEDICAL EQUIPMENT & SUPPLIES (2.18%)
22,700 Baxter International Inc $ 979,333 $ 1,186,075
PHARMACEUTICALS (2.02%)
12,000 Smithkline Beecham Plc $ 734,010 $ 1,099,500
REAL ESTATE INVESTMENT TRUSTS (2.70%)
15,000 Boston Properties Inc + $ 375,000 $ 412,500
7,600 Equity Residential Properties Trust 316,701 361,000
12,000 Patriot American Hospitality Inc 270,314 306,000
11,000 Spieker Properties Inc 334,005 387,063
----------- -----------
$ 1,296,020 $ 1,466,563
RETAIL & RELATED (4.05%)
32,300 Corporate Express Inc + $ 357,567 $ 466,331
10,000 Dayton-Hudson Corp 529,309 531,875
12,700 Gillette Co 727,819 1,203,325
----------- -----------
$ 1,614,695 $ 2,201,531
</TABLE>
9
<PAGE> 11
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
SEMICONDUCTORS (3.61%)
7,300 Intel Corp $ 663,425 $ 1,035,231
12,200 Motorola Inc 573,951 927,000
----------- -----------
$ 1,237,376 $ 1,962,431
----------- -----------
TELECOMMUNICATIONS (7.99%)
17,800 Alltel Corp $ 550,952 $ 595,188
54,000 Ericsson Telefonaktiebolaget L M Class B (ADR) 1,526,395 2,126,250
10,000 GTE Corp 446,516 438,750
1,000 Qwest Communications International + 22,000 27,250
8,000 SBC Communication Inc 440,154 495,000
17,500 U.S. West Inc 549,327 659,531
----------- -----------
$ 3,535,344 $ 4,341,969
TOTAL COMMON STOCKS $39,348,954 $48,029,553
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
<C> <S> <C> <C> <C>
SHORT-TERM INSTRUMENTS (12.03%)
REPURCHASE AGREEMENTS (12.03%)
$1,901,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.85% 07/01/97 $ 1,901,000
1,800,000 HSBC Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.80 07/01/97 1,800,000
1,537,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.95 07/01/97 1,537,000
1,295,000 JP Morgan Stanley & Co Repurchase Agreement -
102% Collateralized by U.S. Government Securities 6.00 07/01/97 1,295,000
-----------
$ 6,533,000
TOTAL SHORT-TERM INSTRUMENTS
(Cost $6,533,000)
TOTAL INVESTMENTS IN SECURITIES
(Cost $45,881,954)* (Notes 1 and 3) 100.43% $54,562,553
Other Assets and Liabilities, Net (0.43) (231,907)
------- -----------
TOTAL NET ASSETS 100.00% $54,330,646
======= ===========
</TABLE>
- --------------------------------------------------------------------------------
+ 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 $9,396,761
Gross Unrealized Depreciation (716,162)
----------
NET UNREALIZED APPRECIATION $8,680,599
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 12
MONEY MARKET FUND
MICHAEL J. NEITZKE, MONEY MARKET SPECIALIST/PORTFOLIO MANAGER
Mr. Neitzke joined Wells Fargo in 1996 from First Interstate Capital Management.
He has over a decade of experience in managing taxable money market mutual funds
at First Interstate Bank and Union Capital Advisors. He holds a B.A. in Finance
from California State University and is a Chartered Financial Analyst candidate.
Q. How did the Money Market Fund perform?
A. For the seven-day period ending June 30, 1997, the Money Market Fund had a
yield of 4.98%.*
Q. What factors contributed to the Fund's yields for the first half of 1997?
A. During the first quarter the market anticipated higher interest rates, which
proved correct as the Federal Reserve Bank raised interest rates in late March.
The yield curve steepened thereafter to the point where value existed in the one
year range. The Fund invested a significant portion of its assets in one year
securities in April and May to take advantage of the relatively steep curve.
Q. What do you expect to happen to rates for the rest of 1997?
A. With inflation remaining relatively low and the economy showing modest
growth, there is little pressure on the Federal Reserve Banks to raise rates
again any time soon. However, if the economy shows unexpected strength, our
outlook for interest rates may change.
Q. How have you prepared for another interest rate hike?
A. With current one-year treasury yields at or below the federal funds rate, the
Fund is maintaining around 55%-65% of its portfolio in repurchase agreements.
This enables the Fund to provide liquidity and seek to maintain competitive
yields, while positioning itself to adjust to potential rate increases.
- ---------------
* Although the Fund seeks to maintain a $1.00 per share net asset value,
there is no assurance that it will meet this objective.
Yield reflects fluctuations in interest rates on portfolio investments and
reflects fund expenses. Past performance is not predictive of future
results.
11
<PAGE> 13
LIFE & ANNUITY TRUST MONEY MARKET FUND--JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (37.64)%
U.S. TREASURY BILLS (6.23)%
$1,000,000 U.S. Treasury Bills 5.10%* 09/04/97 $ 990,647
U.S. TREASURY NOTES (31.41)%
$ 380,000 U.S. Treasury Notes 5.13% 04/30/98 $ 376,840
400,000 U.S. Treasury Notes 5.50 09/30/97 400,000
1,600,000 U.S. Treasury Notes 5.88 07/31/97 1,600,622
800,000 U.S. Treasury Notes 6.13 05/15/98 801,813
150,000 U.S. Treasury Notes 7.88 01/15/98 151,750
250,000 U.S. Treasury Notes 7.88 04/15/98 253,413
600,000 U.S. Treasury Notes 8.50 07/15/97 600,692
800,000 U.S. Treasury Notes 8.75 10/15/97 807,239
-----------
TOTAL U.S. TREASURY NOTES $ 4992,423
TOTAL U.S. TREASURY SECURITIES $ 5,983,070
REPURCHASE AGREEMENTS (62.88)%
$2,314,000 Goldman Sachs Pooled Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.85% 07/01/97 $ 2,314,000
2,623,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.80 07/01/97 2,623,000
2,952,000 JP Morgan Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.95 07/01/97 2,952,000
2,107,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.00 07/01/97 2,107,000
-----------
TOTAL REPURCHASE AGREEMENTS $ 9,996,000
TOTAL INVESTMENTS IN SECURITIES
(Cost $15,979,070)** (Note 1) 100.52% $15,979,070
Other Assets and Liabilities, Net (0.52) (83,126)
------ -----------
TOTAL NET ASSETS 100.00% $15,895,944
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
* Yield to maturity.
** Cost for federal income tax purposes is the same as for financial statement
purposes.
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 14
U.S. GOVERNMENT ALLOCATION FUND
The U.S. Government Allocation Portfolio is a professionally managed portfolio,
advised by Wells Fargo Bank, N.A. ("Wells Fargo Bank"). Barclays Fund Advisors
("BGFA") serves as sub-investment adviser. The Fund utilizes a proprietary
investment model to assess the relative attractiveness of U.S. Treasury bonds,
U.S. Treasury notes, and money market instruments over time.
Q. How did the U.S. Government Allocation Fund perform for the six-month period
ending June 30, 1997?*
A. The Fund posted a 2.57% total return. The Fund's long-term bond benchmark,
the Lehman Brothers 20+ Treasury Index returned 2.51%, while the Fund's
short-term benchmark, U.S. Treasury Bills, returned 2.68% during the same
period.
Q. How has the Fund's allocation changed during the year and what was the
maturity mix of the Fund throughout the period?
A. Although bond markets have experienced volatility in the last six months, the
allocation has been relatively stable. Short and intermediate-term sides of the
yield curve have been more attractive than the longer-term during the year. The
allocation of the Fund has remained mostly in intermediate-term
maturities -- between 80% and 100% for the first half of the year.
- ---------------
* Past performance is not predictive of future results. The investment
return and net asset value of shares of the Fund will fluctuate with
market conditions so that shares of the Fund, when redeemed, may have a
greater or lesser net asset value than when originally purchased.
Average annual total returns for the indicated periods represent the
average annual increase in the value of an investment over the periods
assuming reinvestment of dividends and capital gains distributions at net
asset value. Return figures reflect waived expenses.
13
<PAGE> 15
LIFE & ANNUITY TRUST U.S. GOVERNMENT ALLOCATION FUND--JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (95.41%)
U.S. TREASURY BILLS (22.17%)
$ 16,000 U.S. Treasury Bills 4.98%* 07/31/97 $ 15,939
52,000 U.S. Treasury Bills 5.00* 07/17/97 51,885
65,000 U.S. Treasury Bills 5.01* 07/24/97 64,804
23,000 U.S. Treasury Bills 5.05* 08/07/97 22,886
85,000 U.S. Treasury Bills 5.10* 09/04/97 84,219
102,000 U.S. Treasury Bills 5.11* 08/21/97 101,296
179,000 U.S. Treasury Bills 5.11* 09/11/97 177,178
51,000 U.S. Treasury Bills 5.13* 08/28/97 50,592
3,558,000 U.S. Treasury Bills 5.13* 09/18/97 3,518,256
-----------
$ 4,087,055
U.S. TREASURY BONDS (12.76%)
$ 300,000 U.S. Treasury Bonds 10.75% 02/15/03 $ 360,375
400,000 U.S. Treasury Bonds 10.75 05/15/03 483,250
300,000 U.S. Treasury Bonds 11.13 08/15/03 370,031
300,000 U.S. Treasury Bonds 11.63 11/15/02 370,500
600,000 U.S. Treasury Bonds 11.88 11/15/03 767,063
-----------
$ 2,351,219
U.S. TREASURY NOTES (60.48%)
$3,450,000 U.S. Treasury Notes 5.75% 08/15/03 $ 3,331,406
2,000,000 U.S. Treasury Notes 5.88 02/15/04 1,937,500
1,750,000 U.S. Treasury Notes 6.25 02/15/03 1,736,329
2,850,000 U.S. Treasury Notes 6.38 08/15/02 2,848,219
800,000 U.S. Treasury Notes 7.25 05/15/04 833,750
350,000 U.S. Treasury Notes 12.38 05/15/04 462,547
-----------
$11,149,751
TOTAL U.S. TREASURY SECURITIES $17,588,025
(Cost $17,578,816)
TOTAL INVESTMENTS IN SECURITIES
(Cost $17,578,816)** (Notes 1 and 3) 95.41% $17,588,025
Other Assets and Liabilities, Net 4.59 845,247
------ -----------
TOTAL NET ASSETS 100.00% $18,433,272
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
* Yield to maturity.
** Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C> <C>
Gross Unrealized Appreciation $ 60,060
Gross Unrealized Depreciation (50,851)
--------
NET UNREALIZED APPRECIATION $ 9,209
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 16
LIFE & ANNUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1997
<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) $70,526,532 $45,881,954 $15,979,070 $17,578,816
In securities, at market value $70,969,126 $54,562,553 $15,979,070 $17,588,025
Cash 397 1,098 1,979 351
Receivables:
Dividends and interest 857,551 56,700 103,763 284,661
Investment securities sold 0 434,494 0 0
Fund shares sold 916,669 160,689 65,889 689,546
Prepaid expenses 16,492 12,787 2,868 3,455
TOTAL ASSETS 72,760,235 55,228,321 16,153,569 18,566,038
LIABILITIES
Variation margin on futures contracts 209,475 N/A N/A N/A
Payables:
Investment securities purchased 0 420,600 0 0
Distribution to shareholders 878,468 160,689 65,889 89,814
Fund shares redeemed 0 259,846 158,189 0
Due to co-administrator (Note 2) 7,620 5,620 1,850 1,946
Due to advisor (Note 2) 40,979 24,401 4,004 6,070
Accrued expenses 48,041 26,519 27,693 34,936
TOTAL LIABILITIES 1,184,583 897,675 257,625 132,766
TOTAL NET ASSETS $71,575,652 $54,330,646 $15,895,944 $18,433,272
Net assets consist of:
Paid-in Capital $66,505,726 $45,055,875 $15,895,944 $18,456,640
Undistributed net realized gain(loss) on
investments 5,132,007 594,172 0 (32,577)
Net unrealized appreciation (depreciation) of
futures (504,675) N/A N/A N/A
Net unrealized appreciation of investments 442,594 8,680,599 0 9,209
TOTAL NET ASSETS $71,575,652 $54,330,646 $15,895,944 $18,433,272
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
(NOTE 4)
Net assets $71,575,652 $54,330,646 $15,895,944 $18,433,272
Shares outstanding 5,906,534 3,183,297 15,895,947 1,827,309
Net asset value and offering price $12.12 $17.07 $1.00 $10.09
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 17
LIFE & ANNUITY TRUST
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<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 $ 306,326 $ 0 $ 0
Interest 1,853,813 134,260 388,977 509,527
TOTAL INCOME 1,853,813 440,586 388,977 509,527
EXPENSES (NOTE 2)
Advisory fees 178,929 127,723 32,513 45,408
Custody fees 0 8,018 2,520 0
Portfolio accounting fees 0 26,743 16,935 0
Transfer agency fees 38,006 27,201 6,687 9,621
Administration fees 12,004 8,973 2,890 3,049
Legal and audit fees 14,183 12,453 10,246 11,852
Registration fees 2,076 496 0 496
Directors' fees 5,578 5,578 5,578 5,578
Other 1,571 880 1,546 311
TOTAL EXPENSES 252,347 218,065 78,915 76,315
Less: Waived Fees and Reimbursed Expenses (14,567) (79,815) (40,644) (27,889)
Net Expenses 237,780 138,250 38,271 48,426
NET INVESTMENT INCOME 1,616,033 302,336 350,706 461,101
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain(loss) on sale of investments 4,636,703 408,679 0 (29,056)
Net unrealized appreciation of futures contracts (726,300) N/A N/A N/A
Net change in unrealized appreciation (depreciation)
of investments (165,676) 4,305,853 0 (13,977)
NET GAIN (LOSS) ON INVESTMENTS 3,744,727 4,714,532 0 (43,033)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,360,760 $5,016,868 $350,706 $418,068
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 18
LIFE & ANNUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Asset Growth and
Allocation Income
Fund Fund
-------------------------- --------------------------
(Unaudited) (Unaudited)
For the Six For the Six
Months For the Months For the
Ended Year Ended Ended Year Ended
June 30, Dec. 31, June 30, Dec. 31,
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $1,616,033 $2,121,841 $302,336 $321,626
Net realized gain (loss) on sale of investments 4,636,703 2,464,924 408,679 670,537
Net unrealized appreciation of futures contracts (726,300) 37,850 N/A 0
Net unrealized appreciation (depreciation) of
investments (165,676) (24,131) 4,305,853 3,407,928
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 5,360,760 4,600,484 5,016,868 4,400,091
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,616,033) (2,121,841) (302,336) (321,626)
From net realized gain on sales of investments 0 (2,300,431) 0 (514,688)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 15,016,055 25,372,586 17,318,648 19,876,206
Reinvestment of dividends 1,616,030 4,422,270 302,337 836,312
Cost of shares redeemed (598,101) (3,642,899) (1,385,509) (1,815,249)
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL SHARE
TRANSACTIONS (NOTE 4) 16,033,984 26,151,957 16,235,476 18,897,269
INCREASE IN NET ASSETS 19,778,711 26,330,169 20,950,008 22,461,046
NET ASSETS
Beginning net assets 51,796,941 25,466,772 33,380,638 10,919,592
ENDING NET ASSETS $71,575,652 $51,796,941 $54,330,646 $33,380,638
SHARES ISSUED AND REDEEMED:
Shares sold 1,282,399 2,210,668 1,077,711 1,407,558
Shares issued in reinvestment of dividends 138,869 385,749 18,763 56,387
Shares redeemed (51,939) (318,474) (89,457) (133,606)
NET INCREASE IN SHARES OUTSTANDING 1,369,329 2,277,943 1,007,017 1,330,339
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 19
LIFE & ANNUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money U.S. Government
Market Allocation
Fund Fund
-------------------------- --------------------------
(Unaudited) (Unaudited)
For the Six For the Six
Months For the Months For the
Ended Year Ended Ended Year Ended
June 30, Dec. 31, June 30, Dec. 31,
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $350,706 $442,922 $461,101 $470,850
Net realized gain (loss) on sale of investments 0 225 (29,056) (3,569)
Net unrealized appreciation of futures contracts N/A 0 N/A 0
Net unrealized appreciation (depreciation) of
investments 0 0 (13,977) (32,071)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 350,706 443,147 418,068 435,210
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (350,706) (442,922) (461,101) (470,850)
From net realized gain on sales of investments 0 (225) 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 10,799,194 15,213,897 4,957,398 8,754,298
Reinvestment of dividends 350,673 443,145 461,100 470,850
Cost of shares redeemed (7,920,874) (8,813,439) (469,527) (517,327)
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL SHARE
TRANSACTIONS (NOTE 4) 3,228,993 6,843,603 4,948,971 8,707,821
INCREASE IN NET ASSETS 3,228,993 6,843,603 4,905,938 8,672,181
NET ASSETS:
Beginning net assets 12,666,951 5,823,348 13,527,334 4,855,153
ENDING NET ASSETS $15,895,944 $12,666,951 $18,433,272 $13,527,334
SHARES ISSUED AND REDEEMED:
Shares sold 10,799,194 15,213,897 493,006 868,061
Shares issued in reinvestment of dividends 350,673 443,145 45,974 46,768
Shares redeemed (7,920,874) (8,813,439) (46,650) (51,054)
NET INCREASE IN SHARES OUTSTANDING 3,228,993 6,843,603 492,330 863,775
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 20
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Asset Allocation Fund
-----------------------------------------------------
(Unaudited)
Six
Months Year Year From inception
Ended Ended Ended on April 15,
June Dec. Dec. 1994 to
30, 31, 31, Dec. 31,
1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.42 $ 11.27 $ 9.71 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.29 0.56 0.55 0.30
Net realized and unrealized gain (loss) on investments 0.70 0.69 2.21 (0.19)
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.99 1.25 2.76 0.11
LESS DISTRIBUTIONS:
Dividends from net investment income (0.29) (0.56) (0.55) (0.30)
Distributions from net realized gain 0.00 (0.54) (0.65) (0.10)
------- ------- ------- -------
TOTAL FROM DISTRIBUTIONS (0.29) (1.10) (1.20) (0.40)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.12 $ 11.42 $ 11.27 $ 9.71
======= ======= ======= =======
Total Return (not annualized)* 8.84% 11.46% 28.95% 1.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $71,576 $51,797 $25,467 $7,464
Number of shares outstanding, end of period (000) 5,907 4,537 2,259 769
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.80% 0.69% 0.41% 0.00%
Ratio of net investment income to average net assets 5.42% 5.34% 5.58% 6.30%
Portfolio turnover 11% 4% 97% 0%
Average commission rate paid(1) N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees
and reimbursed expenses: 0.85% 0.80% 1.22% 2.24%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses: 5.37% 5.23% 4.77% 4.06%
- ----------------------------------------------------------------------------------------------------------------------
(1) 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
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 21
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Growth and Income Fund
-----------------------------------------------------
(Unaudited)
Six
Months Year Year From inception
Ended Ended Ended April 12,
June Dec. Dec. 1994 to
30, 31, 31, Dec. 31,
1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.34 $ 12.91 $ 10.30 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.10 0.20 0.22 0.14
Net realized and unrealized gain (loss) on investments 1.73 2.68 2.77 0.30
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.83 2.88 2.99 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income (0.10) (0.20) (0.22) (0.14)
Distributions from net realized gain 0.00 (0.25) (0.16) 0.00
------- ------- ------- -------
TOTAL FROM DISTRIBUTIONS (0.10) (0.45) (0.38) (0.14)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.07 $ 15.34 $ 12.91 $10.30
======= ======= ======= =======
Total Return (not annualized)* 11.99% 22.44% 29.19% 4.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $54,331 $33,381 $10,920 $2,136
Number of shares outstanding, end of period (000) 3,183 2,176 846 207
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.65% 0.60% 0.43% 0.00%
Ratio of net investment income to average net assets 1.42% 1.53% 2.05% 3.00%
Portfolio turnover 40% 95% 84% 21%
Average commission rate paid(1) $0.0815 $0.0810 N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees
and reimbursed expenses: 1.02% 1.12% 2.02% 10.18%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses: 1.05% 1.01% 0.46% (7.18%)
- ----------------------------------------------------------------------------------------------------------------------
(1) 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
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 22
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Money Market Fund
--------------------------------------------------------
(Unaudited)
Six
Months Year From inception
Ended Ended May 19,
June Dec. Year Ended 1994 to
30, 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.05 0.03
Net realized and unrealized gain (loss) on investments 0.00 0.00 0.00 0.00
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.02 0.05 0.05 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.05) (0.05) (0.03)
Distributions from net realized gain 0.00 0.00 0.00 0.00
------- ------- ------ ------
TOTAL FROM DISTRIBUTIONS (0.02) (0.05) (0.05) (0.03)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ====== ======
Total Return (not annualized)* 2.43% 4.72% 5.41% 2.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $15,896 $12,667 $5,823 $1,492
Number of shares outstanding, end of period (000) 15,896 12,667 5,823 1,492
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.53% 0.51% 0.42% 0.00%
Ratio of net investment income to average net assets 4.86% 4.64% 5.15% 4.63%
Portfolio turnover N/A N/A N/A N/A
Average commission rate paid(1) N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees
and reimbursed expenses 1.09% 1.22% 3.83% 11.43%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 4.30% 3.93% 1.74% (6.80%)
- --------------------------------------------------------------------------------------------------------------------------
(1) 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
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 23
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. Government Allocation Fund
--------------------------------------------------------
(Unaudited)
Six
Months Year From inception
Ended Ended April 26,
June Dec. Year Ended 1994 to
30, 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.13 $ 10.30 $ 9.63 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.30 0.56 0.60 0.40
Net realized and unrealized gain (loss) on investments (0.04) (0.17) 0.77 (0.37)
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.26 0.39 1.37 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income (0.30) (0.56) (0.60) (0.40)
Distributions from net realized gain 0.00 0.00 (0.10) 0.00
------- ------- ------ ------
TOTAL FROM DISTRIBUTIONS (0.30) (0.56) (0.70) (0.40)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 10.13 $10.30 $ 9.63
======= ======= ====== ======
Total Return (not annualized)* 2.57% 3.99% 14.40% 0.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $18,433 $13,527 $4,855 $ 866
Number of shares outstanding, end of period (000) 1,827 1,335 471 90
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.64% 0.60% 0.45% 0.00%
Ratio of net investment income to average net assets 6.09% 5.75% 5.82% 7.35%
Portfolio turnover 43% 222% 405% 130%
Average commission rate paid(1) N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived fees
and reimbursed expenses 1.01% 1.18% 2.46% 12.73%
Ratio of net investment income to average net assets prior to
waived fees and reimbursed expenses 5.72% 5.17% 3.81% (5.38%)
- --------------------------------------------------------------------------------------------------------------------------
(1) 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
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 24
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
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 management 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, Growth and Income, Money Market, and U.S. Government Allocation
Funds.
The Funds are available exclusively as pooled funding vehicles for certain
participating life insurance companies offering variable annuity contracts and
variable life insurance policies.
The following significant accounting policies are consistently followed by the
Trust in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles ("GAAP") for investment
companies. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, 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. These estimates should not be
considered an indication of actual or expected figures; actual results may
differ.
INVESTMENT POLICY AND SECURITY VALUATION
The portfolio of investments of the Asset Allocation, Growth and Income and U.S.
Government Allocation Funds are valued as follows. Equity securities, for which
the primary market is a national securities exchange or the National Association
of Securities Dealers Automated Quotation ("NASDAQ") system, are valued at the
last reported sales price on the day of valuation. U.S. Government obligations
are valued at the reported bid price. 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. 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. Securities for which
quotations are not readily available are valued at fair value as determined by
policies approved by the Board of Trustees.
The Money Market Fund's portfolio investments are valued on the basis of
amortized cost. By using amortized cost valuation, the Money Market Fund seeks
to maintain a constant net asset value of $1.00 per share, although there is no
assurance that it will be able to do so.
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 recorded no later than one business day after 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 of 1986, as
amended (the "Code").
23
<PAGE> 25
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
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 Funds may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank, N.A. ("WFB"). 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 custodian's responsibility to value collateral
daily and to take action to obtain additional collateral as necessary to
maintain market value equal to or greater than the resale price. Repurchase
agreements held by the Funds are collateralized by instruments such as U.S.
Treasury or federal agency obligations.
FUTURES CONTRACTS
The Asset Allocation and U.S. Government Allocation Funds may purchase futures
contracts to gain exposure to market changes. 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, but are not limited to, the possibility that there may be an illiquid
market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities. On June 30,
1997 the Asset Allocation Fund held the following futures contracts:
<TABLE>
<CAPTION>
Notional
Contract Net Unrealized
Contracts Type Expiration Date Value Depreciation
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
63 S&P 500 Index August 1997 $ 28,042,875 $(504,675)
</TABLE>
The Asset Allocation Fund has pledged to brokers U.S. Treasury bills for initial
margin requirements with a par value of $1,095,000.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of the Asset Allocation and Growth and
Income Funds, if any, are declared and distributed quarterly. Dividends from net
investment income of the U.S. Government Allocation Fund, if any, are declared
and distributed monthly. Dividends from net investment income of the Money
Market Fund, if any, are declared daily and distributed monthly. Distributions
to shareholders from net realized capital gains are declared and distributed
annually.
24
<PAGE> 26
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
FEDERAL INCOME TAXES
Each Fund of the Trust is treated as a separate entity for federal income tax
purposes. It is the policy of each Fund to continue to qualify as a regulated
investment company by complying with the provisions applicable to regulated
investment companies, as defined in the Code, and to make distributions of
substantially all of its investment company taxable income and any net realized
capital gains (after reduction for capital loss carryforwards) sufficient to
relieve it from all, or substantially all, federal income taxes. Accordingly, no
provision for federal income taxes was required at December 31, 1996. The Funds
had no net capital loss carryforwards at December 31, 1996.
2. AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
The Trust has entered into advisory contracts on behalf of the Funds with WFB.
Pursuant to the contracts, WFB has agreed to provide the Funds with daily
portfolio management. Under the contracts with the Asset Allocation, Growth and
Income, and U.S. Government Allocation Funds, WFB is entitled to a monthly
advisory fee at an annual rate of 0.60% of such Funds' 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 and U.S. Government Allocation Funds,
the Trust and WFB have entered into sub-advisory contracts with Barclays Global
Fund Advisors ("BGFA"). Subject to the overall supervision of WFB, BGFA is
responsible for the day-to-day portfolio management of such Funds. BGFA is
entitled to receive from WFB, as compensation for its sub-advisory services,
monthly fees at the annual rates of 0.20% and 0.15% of the average daily net
assets of the Asset Allocation and U.S. Government Allocation Funds,
respectively. BGFA is an indirect subsidiary of Barclays Bank PLC. Barclays
Global Investors, N.A. ("BGI") currently acts as custodian to the Asset
Allocation and U.S. Government Allocation Funds. BGI is an affiliate of BGFA and
will not be entitled to receive compensation for its custodial services to the
Asset Allocation and U.S. Government Allocation Funds so long as BGFA is
entitled to receive fees for providing investment sub-advisory services to such
Funds.
The Trust has also entered into contracts on behalf of the Growth and Income and
Money Market Funds with WFB, whereby WFB is responsible for providing custody
and portfolio accounting services for such Funds. Pursuant to these contracts,
WFB is entitled to receive certain transaction charges plus a fee for custody
services at an annual rate of 0.0167% of the average daily net assets of each
Fund. For portfolio accounting services, WFB is entitled to receive a monthly
base fee from each such Fund of $2,000 plus an annual fee of 0.07% of the first
$50 million of each such Fund's average daily net assets, 0.045% of the next $50
million and 0.02% of each such Fund's average daily net assets in excess of $100
million.
The Trust has entered into a contract on behalf of the Funds with WFB, whereby
WFB provides transfer agency services for the Funds. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees 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. Prior to February 1, 1997, WFB was entitled to receive
transfer agency fees at an annual rate of 0.05% of the Funds' average daily net
assets.
WFB as administrator and Stephens Inc. ("Stephens") as co-administrator provide
the Funds with administration services. For these services, WFB 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 nets assets. Prior to May 1, 1997,
Stephens provided substantially
25
<PAGE> 27
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
the same services as sole administrator to the Funds. Under the previous
agreement, Stephens was entitled to receive a monthly fee at the annual rate of
0.03% of each Fund's average daily net assets.
WAIVED FEES AND REIMBURSED EXPENSES
All amounts shown as waived fees and reimbursed expenses on the Statement of
Operations for the six months ended June 30, 1997 were waived by WFB. Waived
fees and reimbursed expenses continue at the discretion of WFB and Stephens.
Certain officers and one director of the Trust are also officers of Stephens. As
of June 30, 1997, Stephens owned 3,263 shares of the Asset Allocation Fund,
2,710 shares of the Growth and Income Fund, 29,055 shares of the Money Market
Fund and 3,036 shares of the U.S. Government Allocation Fund.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for the Funds
for the six months ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
Asset Growth and U.S. Government
Allocation Income Allocation
AGGREGATE PURCHASES AND SALES: Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases at cost $15,721,142 $28,316,015 $8,790,141
Sales proceeds 3,671,790 15,710,698 5,603,109
- ----------------------------------------------------------------------------------------------------------------------
</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
six months ended June 30, 1997 and the year ended December 31, 1996 are
disclosed in detail in the Statements of Changes in Net Assets.
26
<PAGE> 28
American Skandia Life
Assurance Corporation
Tower One Corporate Drive
Shelton, CT 06484
--------------------------
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 237
SECAUCUS, N.J.
---------------------------
This report and the financial statements contained herein are
submitted for the general information of the contract holders of
the Stagecoach Variable Annuity, the Stagecoach Variable Annuity
Plus, and the Stagecoach Extra Credit Variable Annuity. If this
report is used for promotional purposes, distribution of the
report must be accompanied or preceded by a current prospectus.
For a prospectus containing more complete information, including
charges and expenses, call 1-800-680-8920. Read the prospectus
carefully before you invest.
(LOGO)PRINTED ON RECYCLED PAPER (C)1997 AMERICAN SKANDIA VA0506 (8/97)
