<PAGE> 1
STAGECOACH VARIABLE ANNUITY(TM)
STAGECOACH VARIABLE ANNUITY PLUS(TM)
STAGECOACH EXTRA CREDIT VARIABLE ANNUITY(TM)
STAGECOACH VARIABLE ANNUITY FLEX(TM)
-------------------------------
SEMI-ANNUAL REPORT
-------------------------------
JUNE 30, 1998
-------------------------------
NOT FDIC INSURED
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Contract Holders.................................. 2
Life & Annuity Trust Financial Statements................... 5
American Skandia Trust Financial Statements................. 63
Alger American Fund Financial Statements.................... 113
Montgomery Emerging Markets Fund Financial Statements....... 125
</TABLE>
Stagecoach Variable Annuities:
Issued by American Skandia Life Assurance Corporation, One Corporate Drive, P.O.
Box 883, Shelton, CT 06484-0883.
Distributed by American Skandia Marketing Incorporated, One Corporate Drive,
P.O. Box 883, Shelton, CT 06484-0883.
Offered through Wells Fargo Securities Inc., a licensed insurance agency (CA
insurance license #0791624), or WFS Insurance Agency Inc. or WFS Insurance
Agency of Texas Inc. WFS Insurance Agency of Texas is not affiliated with Wells
Fargo Securities Inc. or WFS Insurance Agency Inc. Wells Fargo is not affiliated
with American Skandia.
This report has been prepared to provide information to owners of American
Skandia Life Assurance Corporation's Stagecoach Variable Annuity, Stagecoach
Variable Annuity Plus, Stagecoach Extra Credit Variable Annuity, and Stagecoach
Variable Annuity Flex. 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 product, together with the
current applicable prospectus for the Life & Annuity Trust, the American Skandia
Trust, the Alger American Growth Fund, and the Montgomery Emerging Markets 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.
NOT FDIC INSURED -- NO BANK GUARANTEE -- MAY LOSE VALUE
1
<PAGE> 3
STAGECOACH VARIABLE ANNUITY
STAGECOACH VARIABLE ANNUITY PLUS
STAGECOACH EXTRA CREDIT VARIABLE ANNUITY
STAGECOACH VARIABLE ANNUITY FLEX
SEMI-ANNUAL REPORT
TO OUR CONTRACT HOLDERS:
Thank you for investing in the Stagecoach Variable Annuities. We genuinely
appreciate the confidence you place in us, in our investment selection process,
and in the long-term investment perspective we bring to all of our programs.
This has been a good period for your investments in the Stagecoach Variable
Annuities. Why? Because we have hired the best possible investment specialists
we can find to manage money in each of your sub-accounts. What this means for
you is the relative comfort of knowing that your hard-earned dollars are managed
by professionals who are recognized for their experience, expertise and
consistency in evaluating, selecting and monitoring portfolios.
Let's look at the Stagecoach Variable Annuities. Today, we offer eighteen
sub-accounts and six fixed account options. The sub-accounts represent the best
managers available. From large cap growth managers to small cap value managers,
we offer a broad universe of possibilities. Our goal is to find investments that
can meet your needs, which have consistently strong performance and demonstrate
stable corporate management.
We seek investments that complement each other when held over the longer
term. We want you to be able to take advantage of asset allocation across
investment styles and capitalization ranges. Odds are against being in the right
place at the right time while holding the right investment! That is why we
encourage our customers to diversify their investments across various
sub-account offerings.
Our tax-deferred variable annuity products continue to set the pace for the
industry. In the last year we introduced Stagecoach Variable Annuity Flex, a
tax-deferred growth product that offers an industry-leading degree of
flexibility and access to your money not usually found in an annuity. At the
same time, we increased your investment options in all Stagecoach Variable
Annuities by adding the following portfolios offering long-term, disciplined,
proven asset management and growth strategies: LIFE & ANNUITY TRUST STRATEGIC
GROWTH FUND, LIFE & ANNUITY TRUST EQUITY VALUE FUND, T.ROWE PRICE SMALL COMPANY
VALUE FUND, STEIN ROE VENTURE FUND, MONTGOMERY EMERGING MARKETS FUND, NEUBERGER
& BERMAN MIDCAP VALUE.
American Skandia's financial strength and claims-paying ability are
increasingly respected and understood in the market. We follow what we believe
are the safest possible business practices. All assets backing deferred
annuities are held in segregated separate accounts, "insulated" from our
company's general liabilities. We purchase only 100% investment-grade
instruments for our fixed annuity portfolios and use no junk bonds, real estate
or commercial mortgages to support fixed-rate annuities.
As always, the future remains uncertain. There will be corrections and
turmoil around the world that may impact the financial markets. Our focus,
however, will remain on the longer-term picture. We believe in the prosperity
that is evident in the blossoming of innovative technologies, health care
services, inventions in engineering and agri-science.
2
<PAGE> 4
Our goal is the long-term success for your investment dollars. We take the
responsibility of serving your investment needs seriously and will continue to
work diligently to help you realize your financial goals.
Sincerely,
/s/ GORDON C. BORONOW
Gordon C. Boronow
President & Chief Operating Officer
American Skandia Life Assurance Corporation
3
<PAGE> 5
[This page intentionally left blank.]
4
<PAGE> 6
LIFE & ANNUITY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1998
ASSET ALLOCATION FUND
EQUITY VALUE FUND
GROWTH FUND
MONEY MARKET FUND
STRATEGIC GROWTH FUND
U.S. GOVERNMENT ALLOCATION FUND
5
<PAGE> 7
ASSET ALLOCATION FUND
The LAT Asset Allocation Fund (the "Fund") seeks to earn 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
invests in common stocks, U.S. Treasury bonds and money market instruments.
The Asset Allocation Fund is a professionally managed portfolio, advised by
Wells Fargo Bank, N.A. Barclay's Global Fund Advisors ("BGFA") serves as
sub-investment advisor. BGFA uses an investment model developed and refined over
the past twenty years that analyzes extensive financial data from numerous
sources and recommends a portfolio allocation.
PERFORMANCE SUMMARY
During the six-month reporting period, the Asset Allocation Fund's price
increased from $11.99 on December 31, 1997 to $13.45 on June 30, 1998. The Fund
distributed $0.244 per share in dividend income, and no capital gains were
distributed from the Fund. Keep in mind that past distributions are not
predictive of future trends as distributions will vary based on Fund portfolio
earnings.
For the six months ended June 30, 1998, the Fund posted a cumulative total
return of 14.26%. The Fund has three benchmarks representing each of the major
asset classes in which the Fund can invest. The S&P 500 Index returned 17.72%,
the Lehman Brothers U.S. Treasury Bond Index returned 4.20%, and the
IBC/Donoghue Money Market Index posted a 2.52% return over the six-month period.
The Fund's performance can be partially attributed to the strong performance of
the stock market as well as to the low interest rate environment. The Fund's
investment model recommends the optimal mix of assets designed for a long-term
investment strategy and under normal market conditions, the Fund's allocation
mix is 60% stocks, 40% bonds and 0% cash.
PORTFOLIO REVIEW
Every day the Fund's proprietary investment model determines an appropriate
asset allocation and recommends shifts in the Fund based on changing economic
conditions. As opportunities arise among the three asset classes, the investment
model will shift Fund assets accordingly in 5% increments.
The Fund began the year with an asset allocation mix of 70% stocks and 30%
bonds and experienced two reallocations in the first half of the year. In April,
the Fund reallocated assets to 65% stocks and 35% bonds when the model sought to
take advantage of opportunities on the shorter-end of the yield curve, and
lessen exposure to a slumping U.S. equity market.
The Fund rebalanced in June, selling bonds and buying stocks on June 15,
1998. On the same day, the equity market reached its low for the month and bond
prices reached their peak. There was a rebound in the U.S. equity markets in
June that prompted the increased allocation in stocks to 70% and bonds to 30%.
STRATEGIC OUTLOOK
The Asian market crisis may cause further effects such as a growing
strength of the U.S. dollar and a slowing of inflation. As a result, we believe
that while the nation's economy continues to be healthy, it may eventually
weaken over time. We also feel that interest rates may drift lower and
short-term rates will remain stable.
With the backdrop of this outlook, the Fund will continue to apply it's
strategy which employs an objective, quantitative model to allocate among
stocks, bonds, and cash. The model determines the optimal, or recommended, mix
of these three asset classes. Events in Asia will continue to be watched closely
because the model determines the optimal asset mixes on a daily basis. Overall,
we feel that the Fund is well positioned for the upcoming months and we expect
it to produce solid performance.
6
<PAGE> 8
The Fund is sub-advised by BGFA, one of the largest providers of
index-driven financial products in the world. The firm specializes in creating
solid investment strategies through quantitative models. Their objective is to
implement the recommended allocations from the asset allocation process in the
most efficient and least costly manner.
ASSET ALLOCATION FUND
DATA AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR TO DATE 1-YEAR 3-YEAR SINCE INCEPTION
------------ ------ ------ ---------------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS 14.26% 26.90% 19.14% 18.01%
</TABLE>
PORTFOLIO ALLOCATION
<TABLE>
<S> <C>
Stocks 70%
Bonds 30%
Cash 0%
</TABLE>
Average annual returns represent the average annual change in value of an
investment over the indicated periods assuming reinvestment of dividends and
capital gains distributions. These figures assume the contract owner is still
invested at the end of the reporting period. Investment return and principal
value of an investment will fluctuate so that an investor's units, when
redeemed, may be worth more or less than their original cost. Figures quoted
represent past performance, which is no guarantee of future results. Portfolio
performance numbers are net of all portfolio expenses, but do not reflect
deduction of insurance account charges. The value of an investment in the Asset
Allocation Fund will fluctuate with the market conditions so that redemption
proceeds may be worth more or less than their original cost.
During the six-month reporting period, ended June 30, 1998 the Fund's
advisor and administrator have voluntarily waived portions of their fees or
assumed responsibility for other expenses, which has reduced operating expenses
for shareholders. Without these reductions, the Fund's returns would have been
lower.
There is no guarantee that the Fund will continue to hold any one
particular security or stay invested in any one sector. The composition of the
Fund's portfolio is subject to change.
7
<PAGE> 9
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS (69.55%)
AEROSPACE (0.23%)
1,772 Lockheed Martin Corporation $ 198,660 $ 187,610
1,828 Rockwell International Corporation 105,198 87,858
----------- -----------
$ 303,858 $ 275,468
AUTOMOBILE & RELATED (0.88%)
5,879 Chrysler Corporation $ 315,718 $ 331,429
1,003 Dana Corporation 53,475 53,660
11,046 Ford Motor Company 516,672 651,714
----------- -----------
$ 885,865 $ 1,036,803
BASIC INDUSTRIES (0.33%)
2,697 Colgate-Palmolive Company $ 237,185 $ 237,336
1,764 Freeport McMoRan Copper & Gold Inc Class B 28,915 26,791
2,601 Nike Inc Class B 119,274 126,636
----------- -----------
$ 385,374 $ 390,763
BEVERAGE BREWING AND DISTRIBUTION (2.12%)
22,486 Coca-Cola Company $ 1,729,080 $ 1,922,553
13,578 Pepsico Incorporated 530,121 559,244
----------- -----------
$ 2,259,201 $ 2,481,797
CAPITAL GOODS (1.21%)
1,220 Advanced Micro Devices Incorporated+ $ 30,698 $ 20,816
1,993 AMP Incorporated 78,756 68,509
762 ANDREW Corporation+ 16,669 13,764
1,142 Apple Computer Incorporated+ 34,492 32,761
3,335 Applied Materials Incorporated+ 119,208 98,382
1,718 Ascend Communications Incorporated+ 83,529 85,148
402 Autodesk Incorporated 19,398 15,527
865 Black & Decker Corporation 46,468 52,765
9,201 Boeing Company 456,689 410,020
1,763 Browning-Ferris Industries Incorporated 58,335 61,264
646 Case Corporation 38,286 31,170
1,432 Gateway 2000 Incorporated 77,485 72,495
687 Harris Corporation 35,316 30,700
818 Maytag Corporation 40,334 40,389
3,115 Raytheon Company Class B 174,497 184,174
525 Tupperware Corporation 14,090 14,766
4,331 Waste Management Incorporated 148,534 151,585
957 Willamette Industries Incorporated 36,099 30,624
----------- -----------
$ 1,508,883 $ 1,414,859
</TABLE>
8
<PAGE> 10
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMPUTER SOFTWARE (2.86%)
4,066 First Data Corporation $ 139,530 $ 135,449
9,450 Hewlett Packard Company 709,060 565,819
22,438 Microsoft Corporation+ 1,931,543 2,431,718
8,867 Oracle Systems Corporation+ 236,357 217,796
----------- -----------
$ 3,016,490 $ 3,350,782
COMPUTER SYSTEMS (2.14%)
3,239 3Com Corporation+ $ 100,587 $ 99,397
15,050 Compaq Computer Corporation 473,941 427,044
8,586 International Business Machines Corporation 1,023,718 985,780
11,947 Lucent Technologies Incorporated 878,264 993,841
----------- -----------
$ 2,476,510 $ 2,506,062
CONGLOMERATES (0.12%)
1,119 ITT Industries Incorporated $ 40,857 $ 41,823
1,090 Loews Corporation 107,132 94,966
----------- -----------
$ 147,989 $ 136,789
CONSUMER--BASIC (1.95%)
14,056 Abbott Laboratories $ 514,536 $ 574,539
2,214 Albertson's Incorporated 103,024 114,713
562 Allergan Incorporated 23,679 26,063
787 Alza Corporation+ 36,344 34,038
11,953 American Home Products Corporation 550,735 618,568
2,452 American Stores Corporation 59,423 59,308
2,365 Amgen Incorporated+ 140,664 154,612
5,117 Archer Daniels Midland Company 106,499 99,142
475 Bausch & Lomb Incorporated 23,955 23,809
2,559 Baxter International Incorporated 140,421 137,706
1,151 Becton, Dickinson & Company 79,531 89,346
2,630 Bestfoods 141,415 152,704
961 Biomet Incorporated 28,381 31,773
489 C R Bard Incorporated 16,788 18,613
3,488 CVS Corporation 120,745 135,814
629 Mallinckrodt Incorporated 20,249 18,673
----------- -----------
$ 2,106,389 $ 2,289,421
</TABLE>
9
<PAGE> 11
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
CONSUMER--DISCRETIONARY (0.81%)
26 Abercrombie & Fitch Company Class A+ $ 695 $ 1,144
489 Alberto Culver Company Class B 14,470 14,181
1,669 AMR Corporation+ 124,703 138,944
4,416 Anheuser-Busch Companies Incorporated 204,783 208,380
1,409 Autozone Incorporated+ 42,307 45,000
1,236 Avon Products Incorporated 102,735 95,790
1,991 Bay Networks Incorporated+ 50,877 64,210
7,752 Cendant Corporation+ 180,519 161,823
1,056 Dillards Incorporated Class A 40,010 43,758
869 Harrah's Entertainment Incorporated+ 21,467 20,204
2,297 Marriott International 74,404 74,365
484 Reebok International Limited 14,474 13,401
1,406 Tricon Global Restaurants Incorporated+ 42,600 44,553
1,161 Venator Group Incorporated+ 24,394 22,204
----------- -----------
$ 938,438 $ 947,957
ELECTRICAL EQUIPMENT (0.04%)
2,185 Seagate Technology Incorporated+ $ 60,339 $ 52,030
ENERGY & RELATED (4.14%)
832 Amerada Hess Corporation $ 46,728 $ 45,188
8,780 Amoco Corporation 383,323 365,467
515 Anadarko Petroleum Corporation 36,586 34,602
647 Ashland Incorporated 34,798 33,401
2,922 Atlantic Richfield Company 232,584 228,281
1,558 Baker Hughes Incorporated 62,842 53,848
22,281 Exxon Corporation 1,620,875 1,588,914
1,665 FPL Group Incorporated 101,349 104,895
7,115 Mobil Corporation 556,226 545,187
0 Octel Corporation+ 6 5
19,526 Royal Dutch Petroleum Company 1,112,595 1,070,255
4,542 Schlumberger Limited 368,182 310,275
4,916 Texaco Incorporated 298,079 293,424
2,284 Union Pacific Resources Group Incorporated 50,681 40,113
639 W.R. Grace & Company 12,558 10,903
3,861 Williams Company Incorporated 120,705 130,309
----------- -----------
$ 5,038,117 $ 4,855,067
ENTERTAINMENT & LEISURE (0.74%)
1,644 Mirage Resorts Incorporated+ $ 37,598 $ 35,038
4,564 Tele-Communication Incorporated Class A+ 154,332 175,429
6,208 Walt Disney Company 733,819 652,228
----------- -----------
$ 925,749 $ 862,695
</TABLE>
10
<PAGE> 12
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
FINANCE & RELATED (7.64%)
1,378 Aetna Incorporated $ 110,215 $ 104,900
3,890 Allstate Corporation 362,733 356,178
4,199 American Express 427,853 478,686
2,284 American General Corporation 151,876 162,592
6,371 American International Group Incorporated 822,548 930,166
3,181 Associates First Capital Corporation 237,255 244,539
6,366 Banc One Corporation 356,415 355,302
3,441 Bank of New York Company Incorporated 198,717 208,826
6,268 BankAmerica Corporation 515,970 541,790
2,700 BankBoston Corporation 141,419 150,188
892 Bankers Trust Corporation 114,150 103,528
1,327 BB&T Corporation 89,429 89,738
498 Beneficial Corporation+ 65,287 76,287
7,772 Chase Manhattan Bank 532,587 586,786
2,013 CIGNA Corporation 141,620 138,897
1,721 Conseco Incorporated 84,924 80,457
1,034 Countrywide Credit Industries Incorporated 48,924 52,476
9,442 Federal National Mortgage Association 559,194 573,602
2,603 First Chicago NBD Corporation 228,574 230,691
8,824 First Union Corporation 519,587 513,998
1,398 Guidant Corporation 90,100 99,695
1,003 H&R Block Incorporated 44,197 42,251
1,042 H F Ahmanson & Company 77,818 73,982
1,116 Hartford Financial Services Group 124,491 127,643
2,370 Mellon Bank Corporation 170,346 165,011
5,464 Morgan St Dean Witter Discover 413,880 499,273
8,723 NationsBank Corporation 650,414 667,309
866 Providian Financial Corporation 52,853 68,035
1,039 Republic New York Corporation 67,993 65,392
1,315 SAFECO Corporation 63,369 59,750
1,484 State Street Corporation 100,993 103,138
1,614 Summit Bancorp 80,954 76,665
10,473 Travelers Group Incorporated 625,418 634,926
6,765 U.S. Bancorp 273,538 290,895
----------- -----------
$ 8,545,641 $ 8,953,592
FOOD & RELATED (1.27%)
3,345 Heinz (H J) Company $ 181,087 $ 187,738
6,260 McDonald's Corporation 391,416 431,940
22,122 Philip Morris Company Incorporated 850,165 871,054
----------- -----------
$ 1,422,668 $ 1,490,732
FOOD SERVICES (0.02%)
1,278 Darden Restaurants Incorporated $ 20,083 $ 20,288
</TABLE>
11
<PAGE> 13
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
GENERAL BUSINESS & RELATED (4.54%)
1,786 Allegheny Teledyne Incorporated $ 44,406 $ 40,855
627 American Greetings Corporation 29,097 31,938
1,543 AON Corporation 98,546 108,396
2,741 Automatic Data Processing Incorporated 178,154 199,750
6,539 CBS Corporation 218,884 207,613
1,496 Cognizant Corporation 78,001 94,248
2,090 Corning Incorporated 84,827 72,627
10,276 DuPont E I de Nemours and Company 762,003 766,846
1,363 FDX Corporation+ 89,325 85,528
29,668 General Electric Company 2,474,520 2,699,788
1,373 General Instrument Corporation+ 32,962 37,328
797 Georgia-Pacific Corporation 61,295 46,973
3,913 HBO & Company 115,141 137,933
5,074 Kimberly-Clark Corporation 251,542 232,770
5,524 Media One Group Incorporated+ 204,959 242,711
1,122 Mortan International Incorporated 36,231 28,050
1,158 Tribune Company 78,345 79,685
4,568 US WEST Incorporated 232,914 214,696
----------- -----------
$ 5,071,152 $ 5,327,735
HEALTHCARE (1.90%)
5,873 Columbia HCA Healthcare Corporation $ 187,854 $ 171,051
3,588 Healthsouth Corporation+ 106,199 95,755
10,084 Lilly Eli & Company 673,283 666,174
11,889 Pfizer Incorporated 1,318,481 1,292,186
----------- -----------
$ 2,285,817 $ 2,225,166
</TABLE>
12
<PAGE> 14
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
INTERNATIONAL STOCKS (0.39%)
5,809 Unilever NV (Netherlands) $ 448,006 $ 458,548
LARGE CAPITALIZATION STOCKS (18.80%)
5,213 Airtouch Communications Incorporated+ $ 263,989 $ 304,635
1,775 Boston Scientific Corporation+ 125,624 127,134
213 Briggs & Stratton Corporation 9,394 7,974
594 Brown-Forman Corporation Class B 34,196 38,164
858 Brunswick Corporation 26,969 21,235
1,619 Burlington Resources Incorporated 71,262 69,718
4,128 Campbell Soup Company 225,432 219,300
1,394 Carolina Power & Light Company 59,142 60,465
3,403 Caterpillar Incorporated 189,009 179,934
510 Centex Corporation 17,454 19,253
1,926 Central & South West Corporation 52,213 51,761
661 Ceridian Corporation+ 37,742 38,834
876 Champion International Corporation 45,814 43,088
5,952 Chevron Corporation 501,978 494,388
1,564 Chubb Corporation 120,180 125,707
343 Cincinnati Milacron Incorporated 10,092 8,339
899 Circuit City Stores Incorporated 37,078 42,141
9,316 Cisco Systems Incorporated+ 710,266 857,654
4,131 Citicorp 605,166 616,552
946 Clorox Company 78,999 90,225
967 Coastal Corporation 70,826 67,509
758 Columbia Gas System Incorporated 41,268 42,164
3,358 Comcast Corporation Class A 121,327 136,314
4,973 Computer Associates International Incorporated 299,405 276,312
1,441 Computer Sciences Corporation+ 75,652 92,224
4,375 ConAgra Incorporated 129,380 138,633
872 Consolidated Natural Gas Company 48,898 51,339
1,141 Cooper Industries Incorporated 77,034 62,684
678 Cooper Tire & Rubber Company 16,443 13,984
319 Adolph Coors Company Class B 11,795 10,846
395 Crane Company 20,841 19,182
1,204 Crown Cork & Seal Company 62,495 57,190
329 Cummins Engine Company Incorporated 18,437 16,861
804 Cyprus Amax Minerals 13,343 10,653
419 Data General Corporation+ 6,494 6,259
2,249 Deere & Company 126,748 118,916
700 Deluxe Corporation 24,186 25,069
1,765 Dominion Resources Incorporated 69,663 71,924
1,355 RR Donnelley & Sons Company 60,490 61,991
2,014 Dover Corporation 78,223 68,979
2,051 Dow Chemical Company 200,570 198,306
829 Dow Jones & Company Incorporated 40,414 46,217
1,611 Dresser Industries Incorporated 81,861 70,985
1,565 Dun & Bradstreet Corporation 53,303 56,536
176 Eastern Enterprises 7,158 7,546
721 Eastman Chemical Company 49,093 44,882
</TABLE>
13
<PAGE> 15
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
LARGE CAPITALIZATION STOCKS (CONTINUED)
543 Echlin Incorporated $ 26,312 $ 26,641
1,211 Ecolab Incorporated 38,971 37,541
390 EG & G Incorporated 11,625 11,700
4,016 Emerson Electric Company 254,710 242,215
1,343 Engelhard Corporation 29,319 27,196
2,991 Enron Corporation 157,202 161,701
2,199 Entergy Corporation 56,823 63,221
6,281 Federal Home Loan Mortgage Corporation 282,414 295,600
2,588 Fleet Financial Group Incorporated 210,972 216,098
314 Fleetwood Enterprises Incorporated 13,509 12,560
721 Fluor Corporation 33,893 36,771
316 FMC Corporation+ 24,172 21,547
350 Foster Wheeler Corporation 9,387 7,503
2,590 Gannett Company Incorporated 171,094 184,052
1,182 General Dynamics Corporation 50,226 54,963
1,462 General Mills Incorporated 100,558 99,964
6,086 General Motors Corporation 419,282 406,621
697 General Re Corporation 153,438 176,690
423 General Signal Corporation 17,918 15,228
1,637 Genuine Parts Company 57,130 56,579
517 Giant Food Incorporated Class A 19,870 22,263
10,230 Gillette Company 583,499 579,913
522 Golden West Financial 54,288 55,495
1,445 Goodyear Tire & Rubber Company 101,413 93,112
854 Grainger (W W) Incorporated 45,739 42,540
329 Great Atlantic & Pacific Tea Company 10,286 10,878
515 Great Lakes Chemical Corporation 21,792 20,310
2,354 Halliburton Company 124,265 104,900
609 Harcourt General Incorporated 31,917 36,235
412 Harnischfeger Industries Incorporated 11,763 11,665
1,246 Hasbro Incorporated 47,129 48,983
432 Helmerich & Payne Incorporated 12,525 9,612
1,329 Hershey Foods Corporation 94,583 91,701
2,254 Hilton Hotels Corporation 72,295 64,239
1,817 Homestake Mining Company 20,557 18,851
2,932 Household International Incorporated 128,595 145,867
2,693 Houston Industries Incorporated 79,256 83,146
2,247 Illinois Tool Works Incorporated 150,534 149,847
1,438 Inco Limited 23,583 19,593
1,524 Ingersoll-Rand Company 69,983 67,151
421 Inland Steel Industries Incorporated 12,133 11,867
1,039 International Flavors & Fragrances 50,333 45,132
2,800 International Paper Company 144,102 120,400
1,242 Interpublic Group Companys Incorporated 74,897 75,374
1,014 Jefferson-Pilot Corporation 57,872 58,749
335 Jostens Incorporated 7,996 8,082
4,399 K Mart Corporation 80,102 84,681
336 Kaufman & Broad Home Corporation 9,104 10,668
3,736 Kellogg Company 153,324 140,333
</TABLE>
14
<PAGE> 16
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
LARGE CAPITALIZATION STOCKS (CONTINUED)
410 Kerr-McGee Corporation $ 26,800 $ 23,729
3,981 KeyCorp 154,365 141,823
633 King World Productions+ 16,379 16,141
683 Knight-Ridder Incorporated 40,100 37,608
2,294 Kroger Company+ 95,263 98,355
2,125 Limited Incorporated 72,442 70,391
915 Lincoln National Corporation 81,151 83,608
575 Liz Claiborne Incorporated 27,966 30,044
333 Longs Drug Stores Corporation 9,674 9,615
943 Louisiana-Pacific Corporation 19,980 17,210
3,210 Lowe's Company Incorporated 111,782 130,206
548 Manor Care Incorporated 18,572 21,064
2,343 Marsh & McLennan Companies Incorporated 136,393 141,605
1,521 Masco Corporation 88,839 92,021
2,673 Mattel Incorporated 109,188 113,101
4,513 MBNA Corporation 148,247 148,929
519 McDermott International Incorporated 21,668 17,873
906 McGraw-Hill Incorporated 67,776 73,896
6,596 MCI Communications 333,224 383,392
902 Mead Corporation 31,259 28,638
316 Mercantile Stores Company Incorporated 23,596 24,944
454 Meredith Corporation 19,045 21,310
3,151 Merrill Lynch & Company Incorporated 277,748 290,680
375 Millipore Corporation 12,829 10,219
3,716 Minnesota Mining & Manufacturing Company 344,268 305,409
5,454 Monsanto Company 294,055 304,742
764 Moore Corporation Limited 12,173 10,123
1,629 JP Morgan & Company Incorporated 214,420 190,797
70 NACCO Industries Incorporated Class A 11,271 9,047
573 Nalco Chemical Company 21,770 20,127
2,989 National City Corporation 201,055 212,219
1,513 National Semiconductor+ 31,264 19,953
370 National Service Industries Incorporated 19,459 18,824
622 Navistar International Corporation+ 17,710 17,960
873 New York Times Company Class A 63,296 69,185
1,470 Newell Company 69,451 73,224
1,347 Newmont Mining Corporation 39,831 31,823
1,242 Niagara Mohawk Power Corporation+ 15,762 18,552
416 NICOR Incorporated 16,313 16,692
665 Nordstrom Incorporated 44,194 51,371
3,445 Norfolk Southern Corporation 113,948 102,704
1,382 Northern States Power Company 39,284 39,560
4,740 Northern Telecom Limited 289,447 268,995
616 Northrop Grumman Corporation 65,780 63,525
6,891 Norwest Corporation 262,058 257,551
3,220 Novell Incorporated+ 32,904 41,055
756 Nucor Corporation 43,244 34,776
3,345 Occidental Petroleum Corporation 96,148 90,315
910 Oryx Energy Company+ 23,112 20,134
</TABLE>
15
<PAGE> 17
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
LARGE CAPITALIZATION STOCKS (CONTINUED)
711 PACCAR Incorporated $ 40,676 $ 37,150
2,651 PacifiCorp 60,708 59,979
1,054 Parker Hannifin Corporation 45,115 40,184
2,015 PECO Energy Company 49,266 58,813
2,286 JC Penney Company Incorporated 163,487 165,306
408 Pennzoil Company 25,472 20,655
303 Peoples Energy Corporation 11,039 11,703
546 Pep Boys-Manny Moe & Jack 12,480 10,340
418 Perkin-Elmer Corporation 28,368 25,994
506 Phelps Dodge Corporation 32,897 28,937
2,364 Phillips Petroleum Company 113,887 113,915
2,202 Pioneer Hi Bred International Inc 85,376 91,108
2,580 Pitney Bowes Incorporated 124,898 124,162
2,227 Placer Dome Incorporated 30,914 26,167
2,725 PNC Bank Corporation 161,132 146,639
386 Polaroid Corporation 16,394 13,727
249 Potlatch Corporation 11,370 10,458
1,633 PPG Industries Incorporated 116,755 113,596
2,096 Public Services Enterprise Group 70,519 72,181
364 Pulte Corporation 9,741 10,875
1,292 Quaker Oats Company 71,265 70,979
962 Ralston-Purina Group 103,586 112,374
730 Raychem Corporation 28,841 21,581
636 Reynolds Metals Company 41,070 35,576
552 Rohm & Haas Company 60,531 57,373
745 Rowan Company Incorporated+ 22,421 14,481
1,389 Rubbermaid Incorporated 42,498 46,097
314 Russell Corporation 8,282 9,479
658 Ryder System Incorporated 22,382 20,768
4,271 Sara Lee Corporation 257,936 238,909
6,681 Schering-Plough Corporation 567,705 612,147
680 Scientific-Atlanta Incorporated 15,638 17,255
3,267 Seagram Company Limited 136,544 133,743
2,331 Service Corporation International 94,926 99,942
216 Shared Medical System Corporation 15,589 15,862
1,587 Sherwin Williams Company 54,143 52,569
864 Sigma-Aldrich Corporation 33,180 30,348
1,615 Silicon Graphics Incorporated+ 20,771 19,582
524 Snap-On Incorporated 22,882 18,995
1,046 Sonat Incorporated 44,271 40,402
2,000 Southwest Airlines Company 53,748 59,250
173 Springs Industries Incorporated Class A 9,681 7,980
3,898 Sprint Corporation 268,761 274,809
722 St Jude Medical Incorporated+ 27,782 26,579
2,136 St Paul Company Incorporated 92,896 89,846
768 Stanley Works 38,066 31,920
855 Stone Container Corporation 15,289 13,359
824 Sun Company Incorporated 34,508 31,981
3,448 Sun Microsystems Incorporated+ 144,544 149,772
</TABLE>
16
<PAGE> 18
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
LARGE CAPITALIZATION STOCKS (CONTINUED)
1,914 SunTrust Banks Incorporated $ 150,667 $ 155,632
517 Supervalu Incorporated 22,313 22,942
3,027 Sysco Corporation 74,694 77,567
990 Tandy Corporation 45,518 52,532
435 Tektronix Incorporated 17,841 15,388
486 Temple-Inland Incorporated 30,744 26,183
3,558 Texas Instruments Incorporated 225,584 207,476
2,381 Texas Utilities Company 93,135 99,109
1,514 Textron Incorporated 117,989 108,535
473 Thomas & Betts Corporation 27,882 23,295
5,380 Time Warner Incorporated 416,182 459,654
808 Times Mirror Company Class A 50,755 50,803
542 Timken Company 21,501 16,700
2,976 TJX Companies Incorporated 70,805 71,796
1,305 Torchmark Corporation 56,766 59,704
2,544 Toys R Us Incorporated+ 71,772 59,943
573 Transamerica Corporation 65,827 65,967
1,160 TRW Incorporated 63,084 63,365
1,963 Unicom Corporation 66,121 68,828
600 Union Camp Corporation 36,560 29,775
1,240 Union Carbide Corporation 63,637 66,185
2,227 Union Pacific Corporation 122,728 98,266
2,247 Unisys Corporation+ 55,299 63,478
1,721 United Healthcare Corporation 122,651 109,283
652 United States Surgical 20,916 29,747
2,105 United Technologies Corporation 200,561 194,712
2,221 Unocal Corporation 87,841 79,401
1,294 UNUM Corporation 75,627 71,817
919 USAir Group Incorporated+ 63,454 72,831
1,686 UST Incorporated 45,912 45,522
2,581 USX -- Marathon Group 92,067 88,561
742 USX -- US Steel Group 27,396 24,486
1,151 VF Corporation 59,241 59,205
3,239 Viacom Incorporated Class B+ 184,609 188,672
1,872 Wachovia Corporation 152,756 158,184
7,429 Warner Lambert Company 460,691 515,387
777 Wells Fargo & Company 285,061 286,713
1,137 Wendy's International Incorporated 26,892 26,720
499 Western Atlas Incorporated+ 40,685 42,353
877 Westvaco Corporation 26,427 24,775
1,817 Weyerhaeuser Company 100,757 83,923
688 Whirlpool Corporation 46,589 47,300
1,380 Winn-Dixie Stores Incorporated 53,624 70,639
833 Worthington Industries Incorporated+ 14,356 12,547
1,098 Wm. Wrigley Jr. Company 102,444 107,604
2,989 Xerox Corporation 330,741 303,757
----------- -----------
$21,915,471 $22,034,158
</TABLE>
17
<PAGE> 19
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MANUFACTURING PROCESSING (4.14%)
243 Aeroquip Vickers Incorporated $ 16,185 $ 14,185
2,226 Air Products & Chemicals Incorporated 97,220 89,040
2,055 Alcan Aluminum Limited 65,633 56,769
5,154 Allied Signal Incorporated 224,714 228,709
1,584 Aluminum Company of America 117,463 104,445
14,790 American Telephone & Telegraph Corporation 858,952 844,879
898 Apache Corporation 31,431 28,287
929 Armco Incorporated+ 6,136 5,922
347 Asarco Incorporated 8,271 7,721
1,068 Avery Dennison Corporation 54,662 57,405
260 Ball Corporation 9,865 10,449
3,308 Barrick Gold Corporation 70,776 63,472
1,976 Battle Mountain Gold Company 12,670 11,732
456 Bemis Company Incorporated 19,691 18,639
1,183 Bethlehem Steel Corporation+ 16,703 14,714
2,938 Eastman Kodak Company 209,178 214,658
660 Eaton Corporation 59,891 51,315
2,007 Fort James Corporation 98,066 89,311
1,577 Fortune Brands Incorporated 58,293 60,616
664 Goodrich Company 34,165 32,951
831 Hercules Incorporated 38,554 34,175
1,195 Honeywell Incorporated 106,170 99,857
1,159 IKON Office Solutions 27,627 16,878
12,245 Johnson & Johnson 871,435 903,069
770 Johnson Controls Incorporated 45,672 43,938
1,419 Owens-Illinois Incorporated+ 58,934 63,500
1,073 Pall Corporation 21,557 21,996
1,456 Praxair Incorporated 71,103 68,159
12,211 Procter & Gamble Company 997,225 1,111,964
709 Sealed Air Corporation 36,798 26,056
2,180 Sempra Energy 59,188 60,487
1,565 Tenneco Incorporated 66,554 59,568
5,310 Tyco International Limited+ 278,087 334,530
----------- -----------
$ 4,748,869 $ 4,849,396
MEDIUM CAPITALIZATION STOCKS (2.36%)
590 Adobe Systems Incorporated $ 29,319 $ 25,038
1,362 Cabletron Systems Incorporated+ 19,128 18,302
1,044 Cardinal Health Incorporated 96,705 97,875
1,516 Cincinnati Financial Corporation 64,597 58,176
1,456 Comerica Incorporated 95,831 96,460
927 Consolidated Stores Corporation+ 36,774 33,604
5,918 Dell Computer Corporation+ 536,133 549,264
4,532 EMC Corporation+ 203,197 203,090
1,393 Equifax Incorporated 52,034 50,583
1,905 Federated Department Stores Incorporated+ 97,189 102,513
2,104 Fifth Third Bancorp 107,230 132,552
2,275 Franklin Resources Incorporated 123,387 122,850
1,512 Frontier Corporation 45,168 47,628
630 Fruit of the Loom Incorporated Class A+ 22,414 20,908
</TABLE>
18
<PAGE> 20
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MEDIUM CAPITALIZATION STOCKS (CONTINUED)
1,272 Green Tree Financial Corporation $ 53,845 $ 54,458
1,510 Humana Incorporated+ 40,874 47,093
1,746 Huntington Bancshares Incorporated 59,535 58,491
723 KLA Instruments Corporation+ 29,084 20,018
1,080 Lehman Brothers Holdings 79,507 83,768
889 MBIA Incorporated 66,038 66,564
1,228 Mercantile Bancorporation 64,838 61,861
1,082 MGIC Investment Corporation 67,346 61,742
1,060 Northern Trust Corporation 74,768 80,825
1,550 Omnicom Group 74,481 77,306
2,464 Parametric Technology Corporation+ 80,335 66,836
660 Progressive Corporation Ohio 92,763 93,060
2,385 Charles Schwab Corporation 83,222 77,513
1,779 Sunamerica Incorporated 87,761 102,181
2,359 Synovus Financial Corporation 53,473 56,026
1,409 Thermo Electron Corporation+ 53,921 48,170
3,525 Washington Mutual Incorporated 163,400 153,117
----------- -----------
$ 2,754,297 $ 2,767,872
PHARMACEUTICALS (2.31%)
9,063 Bristol-Myers Squibb Company $ 992,397 $ 1,041,679
10,884 Merck & Company Incorporated 1,292,272 1,455,735
4,626 Pharmacia and Upjohn Incorporated 196,141 213,374
----------- -----------
$ 2,480,810 $ 2,710,788
RETAIL & RELATED (2.76%)
1,944 Costco Companies Incorporated+ $ 110,816 $ 122,593
3,961 Dayton-Hudson Corporation 171,671 192,108
3,605 Gap Incorporated 191,068 222,158
6,691 Home Depot Incorporated 470,343 555,771
2,090 May Department Stores Company 132,665 136,895
4,276 Medtronic Incorporated 213,539 272,595
2,319 Rite Aid Corporation 72,428 87,107
3,573 Sears Roebuck & Company 211,285 218,176
20,452 Wal Mart Stores Incorporated 1,053,729 1,242,459
4,523 Walgreen Company 160,757 186,856
----------- -----------
$ 2,788,301 $ 3,236,718
SEMICONDUCTORS (1.28%)
15,444 Intel Corporation $ 1,261,053 $ 1,144,786
1,218 LSI Logic Corporation+ 30,419 28,090
1,921 Micron Technology Incorporated+ 58,874 47,665
5,437 Motorola Incorporated 304,281 285,782
----------- -----------
$ 1,654,627 $ 1,506,323
</TABLE>
19
<PAGE> 21
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
SHELTER & RELATED (0.05%)
349 Armstrong World Incorporated $ 28,726 $ 23,514
484 Boise Cascade Corporation 17,779 15,851
460 Owens Corning Fiberglass Corporation 18,685 18,774
----------- -----------
$ 65,190 $ 58,139
TELECOMMUNICATIONS (1.66%)
1,161 Clear Channel Communications Incorporated+ $ 107,148 $ 126,694
1,015 DSC Communications Corporation+ 19,113 30,450
8,766 GTE Corporation 512,302 487,609
2,489 NEXTEL Communications Class A+ 65,791 61,914
16,745 SBC Communication Incorporated 702,374 669,800
1,662 Tellabs Incorporated+ 116,302 119,041
9,399 WorldCom Incorporated+ 406,919 455,264
----------- -----------
$ 1,929,949 $ 1,950,772
TRANSPORTATION (0.30%)
1,444 Burlington Northern Santa Fe $ 145,482 $ 141,783
1,978 CSX Corporation 106,276 89,999
690 Delta Air Lines Incorporated 81,358 89,182
2,928 Laidlaw Incorporated 38,882 35,685
----------- -----------
$ 371,998 $ 356,649
UTILITIES (2.54%)
1,682 Alltel Corporation $ 68,741 $ 78,213
1,281 Ameren Corporation 50,076 50,920
1,732 American Electric Power Incorporated 81,710 78,589
10,021 Ameritech Corporation 440,118 449,692
1,371 Baltimore Gas & Electric Company 43,338 42,587
14,136 Bell Atlantic Corporation 668,633 644,955
9,016 Bellsouth Corporation 588,744 605,199
1,456 Cinergy Corporation 48,840 50,960
2,122 Consolidated Edison Incorporated 95,438 97,745
1,349 DTE Energy Company 54,026 54,466
3,297 Duke Power Company 190,350 195,347
3,482 Edison International 102,126 102,937
2,082 First Energy Corporation 62,494 64,022
1,192 GPU Incorporated 46,037 45,073
267 Oneok Incorporated 10,737 10,647
3,619 PG&E Corporation 111,080 114,225
1,528 PP & L Resources Incorporated 34,571 34,667
6,351 Southern Company 167,480 175,843
2,735 Tenet Healthcare Corporation+ 97,648 85,469
----------- -----------
$ 2,962,187 $ 2,981,556
TOTAL COMMON STOCKS $79,518,268 $81,528,925
</TABLE>
20
<PAGE> 22
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES--28.56%
U.S. TREASURY BONDS--28.56%
$3,800,000 U.S. Treasury Bonds 6.00% 02/15/26 $ 3,953,178
4,050,000 U.S. Treasury Bonds 6.13 11/15/27 4,339,818
2,900,000 U.S. Treasury Bonds 6.38 08/15/27 3,184,548
300,000 U.S. Treasury Bonds 6.50 11/15/26 333,141
1,050,000 U.S. Treasury Bonds 6.63 02/15/27 1,185,681
550,000 U.S. Treasury Bonds 6.75 08/15/26 629,662
700,000 U.S. Treasury Bonds 7.25 08/15/22 837,592
3,500,000 U.S. Treasury Bonds 8.50 02/15/20 4,691,085
3,700,000 U.S. Treasury Bonds 8.75 05/15/20 5,080,544
2,350,000 U.S. Treasury Bonds 8.75 08/15/20 3,231,979
2,200,000 U.S. Treasury Bonds 8.88 02/15/19 3,030,148
2,150,000 U.S. Treasury Bonds 9.00 11/15/18 2,988,156
------------
TOTAL U.S. TREASURY SECURITIES $ 33,485,532
(Cost $31,318,581)
SHORT-TERM INSTRUMENTS--1.42%
U.S. TREASURY BILLS--1.42%
$ 73,000 U.S. Treasury Bills 4.94%++ 07/30/98 $ 72,720
430,000 U.S. Treasury Bills 4.95++ 09/03/98 426,268
141,000 U.S. Treasury Bills 4.96++ 07/09/98 140,836
871,000 U.S. Treasury Bills 5.00++ 09/10/98 862,621
94,000 U.S. Treasury Bills 5.01++ 09/17/98 93,006
75,000 U.S. Treasury Bills 5.02++ 08/27/98 74,435
------------
TOTAL SHORT-TERM INSTRUMENTS $ 1,669,886
(Cost $1,669,730)
TOTAL INVESTMENTS IN SECURITIES
(Cost $112,506,579)* (Notes 1 and 3) 99.54% $116,684,343
Other Assets and Liabilities, Net 0.46 544,832
----- ------------
TOTAL NET ASSETS 100.00% $117,229,175
----- ============
-----
</TABLE>
- --------------------------------------------------------------------------------
+ Non-income earning securities.
++ Yield to maturity.
* Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C> <C>
Gross Unrealized Appreciation $6,450,601
Gross Unrealized Depreciation (2,272,837)
----------
NET UNREALIZED APPRECIATION $4,177,764
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 23
EQUITY VALUE FUND
The LAT Equity Value Fund (the "Fund") seeks to provide investors with
long-term capital appreciation. The Fund invests in common stocks and may invest
in foreign and domestic convertible debt securities. The Fund follows a value
strategy that targets underpriced stocks, with the flexibility to invest in a
wide range of companies, regardless of company size. The portfolio managers
believe that buying securities with low valuations potentially reduces overall
volatility while maintaining long-term performance potential.
Rex Wardlaw manages the Equity Value Fund. Mr. Wardlaw joined Wells Fargo
Bank in 1993, and in addition to managing this Fund, also manages the Stagecoach
Equity Value Fund, the equity portion of the Stagecoach Balanced Fund, the
Employee Benefit Equity Value Fund, three Diversified Investment Funds and
several individual institutional accounts. He earned an MBA with honors in
Finance from the University of Oregon and is a Chartered Financial Analyst. Mr.
Wardlaw is also an active member of the Portland Society of Financial Analysts.
PERFORMANCE SUMMARY
The Equity Value Fund commenced operations on May 1, 1998. During the
two-month reporting period ended June 30, 1998, the Fund reported a cumulative
total return of -2.61%. The Fund underperformed its benchmark, the S&P 500
Index, which returned 2.27% over the same period. The Fund's performance was
impacted by the underweighting in drug companies compared to our benchmark. We
chose not to invest in these sometimes volatile companies, thus foregoing the
recent price appreciation, but remaining true to our value discipline. Despite
the fact that this sector performed well, we do not believe that it offers value
in the current market or at the current price levels.
Value stocks in general lagged the market during the first two months of
the Fund's operation. During May and early June, the U.S. markets witnessed a
corrective cycle, which had a negative short-term impact on the performance of
the newly launched Fund. As a result of this cycle, the market focused on the
safety and liquidity of the top fifty U.S. stocks. These top-tiered stocks had a
stellar performance of 22.4% year-to-date, compared with the bottom 450 stocks
returning less than 12%. The Fund did not capture this performance, as it did
not invest in these large, popular companies.
During the two-month reporting period, the Equity Value Fund's share price
decreased from $10.00 on May 1, 1998, to $9.72 on June 30, 1998. The Fund
distributed $0.0193 per share in dividend income and did not distribute capital
gains.
PORTFOLIO REVIEW
We pursue a bottom-up investment approach for the Fund by focusing on key
characteristics of individual companies. First, we screen stocks for low
valuations or expectations. Then we look for stocks with a catalyst that may
reverse the conditions that caused the low expectations. This process helps us
identify true value stocks with a potential for long-term capital appreciation.
We allocated the Fund's assets 82% into stocks and 18% in cash and cash
equivalents. Because the Fund commenced operations on May 1, 1998, it had a
higher cash allocation as we received large amounts of new money. Moving
forward, we will reduce our cash position as the Fund further diversifies its
assets.
The finance sector was the largest industry group held by the Fund. We felt
that this industry was a good place to find value stocks. This industry has been
a strong performer, helping to boost earnings for the Fund. In addition, we
increased investment in the utility sector to take advantage of deregulation
effects and we believe there are excellent continued opportunities for these and
other value stocks to perform positively.
We selected stocks for the portfolio that we found to be inexpensive based
on low price-to-earnings ratios or low price-to-book values. More importantly,
each selected company had a catalyst working for it, providing large upside
potential. Waste Management, for example, was a strong holding as the company is
going through a merger, and we believe there will
22
<PAGE> 24
be an upward turn in stock price. Showing similar potential, Hartford Financial,
a spin off from ITT, was in the process of becoming one of the top three
insurance companies in the world. Overall, the Fund holds a wide range of stocks
and is now diversified in a number of industry sectors.
The Fund's turnover ratio of 50% was higher than normal, which can be
attributed to our decision to sell securities where large capital gains
occurred. In addition, the decision to sell securities in the basic materials
and basic industry sectors was made because these stocks did not perform as
originally anticipated. Typically, we attempt to maintain the portfolio turnover
ratio between 35% and 40%.
STRATEGIC OUTLOOK
We believe that the nation's economy may weaken over time due to the events
in Asia, and that this impact may continue for up to five years. We believe that
the U.S. dollar will continue to show strength and inflation will remain at
stable to low levels. Given this, we feel that interest rates may drift lower
and short-term rates will remain stable.
Based on this outlook, we continue to see many good opportunities in the
large-cap value universe. Our management strategy targets stocks that are "out
of favor." We believe these companies are underpriced relative to their book
value, current earnings, or projected earnings, making them hidden opportunities
for capital appreciation. We intend to continue purchasing stocks within these
parameters as they show the most potential for achieving long-term capital
appreciation. Going forward, we will continue to monitor events in Asia and to
avoid investment in particular industries that might be impacted by the crisis.
We will continue to maintain our current management style with an emphasis on
value. We feel the Fund is positioned very well for the upcoming months and we
hope to produce solid performance.
EQUITY VALUE FUND
DATA AS OF JUNE 30, 1998
AVERAGE ANNUAL TOTAL RETURN
YEAR TO DATE
-2.61%
<TABLE>
<CAPTION>
TOP 10 HOLDINGS % OF PORTFOLIO
--------------- --------------
<S> <C>
Cabot Corp. 2.9%
Hartford Financial Services 2.5%
Chase Manhattan Corp. 2.5%
Waste Management Inc. 2.2%
Washington Mutual Inc. 2.1%
Lockheed Martin Corp. 2.1%
Royal Bank of Canada 2.1%
Cigna Corp 2.0%
Raytheon Company 2.0%
Fremont General Corp. 1.9%
</TABLE>
<TABLE>
<CAPTION>
INDUSTRY BREAKDOWN % OF PORTFOLIO
------------------ --------------
<S> <C>
Finance 22%
Manufacturing -- Process 12%
Capital Goods 12%
Utilities 9%
Petroleum 8%
Consumer -- Discretionary 8%
Consumer -- Basic 5%
General Business 4%
Transportation 1%
Shelter 1%
- ------------------------------------------------
TOTAL COMMON STOCK: 82%
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
PORTFOLIO ALLOCATION % OF PORTFOLIO
-------------------- --------------
<S> <C>
Stocks 82%
Cash 18%
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO DATA % OF PORTFOLIO
-------------- --------------
<S> <C>
Number of Issues 60
Beta 0.89
Median Market Capitalization $10.0
($B)
Weighted Average P/E 18.6
Weighted Average Price to Book 3.5
</TABLE>
Past performance is historical, assumes reinvestment of all dividends and
capital gains at net asset value, and is not indicative of future results.
Portfolio performance numbers are net of all portfolio expenses, but do not
reflect deduction of insurance account charges. The value of an investment in
the Equity Value Fund will fluctuate with the market conditions so that
redemption proceeds may be worth more or less than their original cost.
During the six-month reporting period ended June 30, 1998, the Fund's
advisor and administrator have voluntarily waived portions of their fees or
assumed responsibility for other expenses, which has reduced operating expenses
for shareholders. Without these reductions, the Fund's returns would have been
lower.
There is no guarantee that the Fund will continue to hold any one
particular security or stay invested in any one sector. The composition of the
Fund's portfolio is subject to change.
24
<PAGE> 26
LIFE & ANNUITY TRUST EQUITY VALUE FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS (80.75%)
AEROSPACE (2.03%)
400 Lockheed Martin Corporation $ 40,857 $ 42,350
AUTOMOBILE & RELATED (1.38%)
250 Chrysler Corporation $ 13,411 $ 14,094
250 Ford Motor Company 14,004 14,750
---------- ----------
$ 27,415 $ 28,844
CAPITAL GOODS (6.88%)
300 Harris Corporation $ 12,680 $ 13,406
250 Maytag Corporation 12,614 12,344
675 New Century Energies Incorporated 31,074 30,670
700 Raytheon Company Class B 39,837 41,387
1,300 Waste Management Incorporated 43,648 45,500
---------- ----------
$ 139,853 $ 143,307
COMPUTER SYSTEMS (1.10%)
200 International Business Machines Corporation $ 21,891 $ 22,962
CONGLOMERATES (1.05%)
250 Loews Corporation $ 22,067 $ 21,781
CONSUMER--BASIC (1.45%)
1,250 American Stores Corporation $ 31,959 $ 30,234
CONSUMER--DISCRETIONARY (1.15%)
1,250 Venator Group Incorporated+ $ 23,928 $ 23,906
ENERGY & RELATED (7.89%)
400 Atlantic Richfield Company $ 31,757 $ 31,250
1,850 Cabot Corporation 60,648 59,778
300 Mobil Corporation 23,446 22,988
300 Texaco Incorporated 18,812 17,906
975 Valero Energy Corporation 32,281 32,419
---------- ----------
$ 166,944 $ 164,341
</TABLE>
25
<PAGE> 27
LIFE & ANNUITY TRUST EQUITY VALUE FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
FINANCE & RELATED (20.21%)
500 American Bankers Insurance Group Incorporated $ 29,853 $ 30,063
175 BankAmerica Corporation 14,747 15,127
675 Chase Manhattan Bank 47,906 50,963
600 CIGNA Corporation 42,332 41,400
350 First Chicago NBD Corporation 31,244 31,019
500 First Union Corporation 29,938 29,125
700 Fremont General Corporation 38,272 37,931
450 Hartford Financial Services Group 48,305 51,469
700 Royal Bank of Canada 41,050 42,219
100 SAFECO Corporation 4,688 4,544
850 Simon Debartolo Group Incorporated 26,577 27,625
750 SLM Holding Corporation 31,165 36,750
375 Travelers Group Incorporated 22,882 22,734
---------- ----------
$ 408,959 $ 420,969
FOOD & RELATED (1.61%)
850 Philip Morris Co Incorporated $ 32,543 $ 33,469
GENERAL BUSINESS & RELATED (2.42%)
750 Allegheny Teledyne Incorporated $ 19,654 $ 17,156
700 Corrections Corporation of America+ 16,579 16,450
225 DuPont E I de Nemours and Company 16,654 16,791
---------- ----------
$ 52,887 $ 50,397
HEALTHCARE (1.58%)
1,250 Foundation Health Systems Incorporated $ 34,944 $ 32,969
LARGE CAPITALIZATION STOCKS (8.03%)
650 Columbia Gas System Incorporated $ 36,208 $ 36,156
500 Deere & Company 25,009 26,437
600 Phillips Petroleum Company 30,048 28,913
800 St Paul Company Incorporated 34,414 33,650
550 Toys R Us Incorporated+ 13,141 12,959
850 USX -- Marathon Group 30,459 29,166
---------- ----------
$ 169,279 $ 167,281
MANUFACTURING PROCESSING (7.25%)
250 Aluminum Company of America $ 18,770 $ 16,484
375 Eaton Corporation 32,180 29,156
500 Goodrich (B F) Company 22,696 24,812
500 Hercules Incorporated 20,571 20,562
450 Magna International Incorporated Class A 32,658 30,881
650 Owens-Illinois Incorporated+ 28,696 29,087
---------- ----------
$ 155,571 $ 150,982
</TABLE>
26
<PAGE> 28
LIFE & ANNUITY TRUST EQUITY VALUE FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MEDIUM CAPITALIZATION STOCKS (7.24%)
3,200 Food Lion Incorporated Class B $ 30,701 $ 32,200
1,075 Montana Power Company 39,099 37,356
550 TECO Energy Incorporated 14,894 14,747
700 Tidewater Incorporated 23,550 23,100
1,000 Washington Mutual Incorporated 44,912 43,438
---------- ----------
$ 153,156 $ 150,841
TELECOMMUNICATIONS (1.34%)
500 GTE Corporation $ 28,500 $ 27,813
TRANSPORTATION (1.31%)
600 CSX Corporation $ 27,136 $ 27,300
UTILITIES (6.82%)
850 American Water Works Incorporated $ 25,887 $ 26,350
400 Ameritech Corporation 17,582 17,950
700 Bell Atlantic Corporation 33,230 31,938
550 Cinergy Corporation 19,363 19,250
250 Duke Power Company 14,942 14,813
1,150 Southern Company 32,148 31,841
---------- ----------
$ 143,152 $ 142,142
TOTAL COMMON STOCKS $1,681,041 $1,681,888
</TABLE>
27
<PAGE> 29
LIFE & ANNUITY TRUST EQUITY VALUE FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
SHORT-TERM INSTRUMENTS--17.48%
REPURCHASE AGREEMENTS--17.48%
$94,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75% 7/1/98 $ 94,000
90,000 HSBC Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75 7/1/98 90,000
90,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.65 7/1/98 90,000
90,000 Morgan Stanley & Co Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.70 7/1/98 90,000
TOTAL SHORT-TERM INSTRUMENTS
(Cost $364,000) $ 364,000
TOTAL INVESTMENTS IN SECURITIES
(Cost $2,045,036)* (Notes 1 and 3) 98.23% $2,045,887
Other Assets and Liabilities, Net 1.77 36,903
------ ----------
TOTAL NET ASSETS 100.00% $2,082,790
====== ==========
</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 $ 35,206
Gross Unrealized Depreciation (34,355)
--------
NET UNREALIZED APPRECIATION $ 851
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 30
GROWTH FUND
The LAT Growth Fund (the "Fund") seeks to earn current income and achieve
long-term capital appreciation by investing primarily in common stocks and
preferred stocks and debt securities that are convertible into common stocks.
The majority of the Fund's holdings consist of larger, established companies
with market capitalizations which fall within the range of the Russell 1000
Index. The management style is based on fundamentals, meaning stocks must
exhibit solid fundamentals, such as a strong management team, industry dominance
and low production costs.
Kelli Hill manages the Growth Fund. Ms. Hill joined Wells Fargo Bank in
1987 and in addition to managing the Life & Annuity Trust Growth Fund, also
manages the Stagecoach Growth Fund, two Diversified Investment Funds, and an
Employee Benefit Trust Fund, all of which are managed in the large cap growth
style. She holds a B.A. in International Relations and Economics from the
University of Southern California and is a Chartered Financial Analyst, Level II
candidate.
PERFORMANCE SUMMARY
For the six months ending June 30, 1998 the Fund reported a cumulative
total return of 16.94%, slightly underperforming the Fund's benchmark, the S&P
500 Index, which returned 17.72% over the same period.
The Fund lagged the benchmark primarily because it was underweighted in the
consumer-cyclical industry as compared to its benchmark. This sector provided
strong returns during the first half of the year. As we recognized significant
opportunities in retail stocks, we increased our weighting in
consumer-cyclicals. In addition, the Fund held an unusually high level of cash
in January as we received sizable cash positions.
During the six-month reporting period, the Growth Fund's share price
increased from $16.79 on December 31, 1997 to $19.57 on June 30, 1998. The Fund
distributed $0.0633 per share in dividend income, and no capital gains were
distributed from the Fund. Keep in mind that past distributions are not
predictive of future trends as distributions will vary based on fund portfolio
earnings.
PORTFOLIO REVIEW
The Fund pursues a large cap growth strategy as we search for companies
with rapidly expanding revenues and profits, and a demonstrated ability to
develop new products, services and markets. Historically, these large cap stocks
have long records of increasing earnings and steady dividend payments. We look
for these stocks to contribute to our growth objective.
As of June 30, 1998, the Fund was invested 95% in stocks and 5% in cash and
cash equivalents. Due to uncertain market conditions, we held a higher
allocation of cash than normal. In the future, we expect to keep that level
below 5%.
We decreased the amount of technology stocks held in the Fund, and enlisted
companies that produced computer hardware. Our analysis showed that these stocks
could be volatile due to decreased demand from Asian countries, as well as from
overseas manufacturing concerns. Although these stocks contributed to the
performance of the Fund's benchmark, we chose not to assume the risk.
The finance sector represented 15% of the portfolio. This sector has been a
strong performer due to the low interest rate environment. Specifically,
holdings such as AIG and Chase Manhattan Bank did very well. Consolidations and
mergers contributed to the performance of this industry. In addition, securities
in consumer goods, entertainment and broadcasting also brought positive
performance to the Fund.
The telecommunication equipment industry played a significant role in the
Fund's performance with investments in companies such as Lucent, Northern
Telecom and Cisco Systems. As networks and systems are continually being built
from mergers such as AT&T with TCI and WorldComm with MCI, companies will need
to build their telecommunications infrastructure. As a result, we believe this
industry will continue to show increased demand.
29
<PAGE> 31
Overall, the stocks in the portfolio exemplify a level of accelerated
earnings growth. For example, the heavy equipment industry began to illustrate
the kind of growth that we look for. Accordingly, we will continue to watch this
industry and may increase the Fund's exposure to equipment stocks as
opportunities warrant further consideration.
Each of the stocks in the Fund's portfolio is selected with a focus on
company fundamentals. We look for expanding revenues and profits, and the
ability to develop new products, services and markets. For example, we believe
General Electric is a well-run company that meets many of these criteria. It is
one of the largest companies in the world and has implemented a manufacturing
strategy that should increase its growth rate from 11% to 15%. In addition to
being a company with consistent earnings, it has also improved operating margins
and return on equity.
Overall, the top ten holdings represent approximately 30-40% of the Fund's
total return. And the top five holdings were the biggest contributors to total
return, not only to the Fund, but also to the overall stock market.
STRATEGIC OUTLOOK
While the nation's economy continues to be healthy, we believe that it may
weaken over time. The Asian market crisis may cause further effects such as
strengthening the U.S. dollar and slowing inflation. Given this, we feel that
interest rates may drift lower and short-term rates will remain stable.
Based on this outlook, we continue to see many good opportunities in the
large-cap growth universe. These companies represent some of America's
best-known firms with long histories of increasing earnings and steady dividend
payments. Our management strategy examines these stocks for signs of expanding
revenues and profits, and a demonstrated ability to develop new products,
services and markets. We will continue to watch the events in Asia closely and
take any appropriate actions to buffer the portfolio. Moving forward, we feel
the Fund is well positioned and we will continue to search for domestically
oriented large cap stocks with strong future growth projections.
GROWTH FUND
DATA AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR TO DATE 1-YEAR 3-YEAR SINCE INCEPTION
------------ ------ ------ ---------------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS 16.94% 22.52% 22.92% 21.43%
</TABLE>
TOP 10 HOLDINGS
<TABLE>
<CAPTION>
% OF PORTFOLIO
--------------
<S> <C>
General Electric Co. 4.5%
American Int'l Group Inc. 3.2%
Microsoft Corporation 3.0%
Chase Manhattan Corp. 2.9%
Coca Cola Co. 2.6%
Household Int'l Inc. 2.6%
Cisco Systems Inc. 2.2%
Ericsson Lm. Tel. Adr. 2.1%
Merck & Co. Inc. 2.0%
Wal Mart Stores, Inc. 1.8%
</TABLE>
INDUSTRY BREAKDOWN
<TABLE>
<CAPTION>
% OF PORTFOLIO
--------------
<S> <C>
Capital Goods 18%
Consumer -- Basic 15%
Finance 15%
Consumer -- Discretionary 13%
Manufacturing -- Process 11%
Utilities 8%
Petroleum 7%
General Business 7%
Shelter 1%
- ---------------------------------------------------
TOTAL COMMON STOCK: 95%
</TABLE>
30
<PAGE> 32
PORTFOLIO ALLOCATION
<TABLE>
<CAPTION>
% OF PORTFOLIO
--------------
<S> <C>
Stocks 95%
Cash 5%
</TABLE>
PORTFOLIO DATA
<TABLE>
<CAPTION>
% OF PORTFOLIO
--------------
<S> <C>
Number of Issues 84
Beta 1.02
Median Market Capitalization ($B) $63.3
Weighted Average P/E 27.1
Weighted Average Price to Book 6.6
</TABLE>
Past performance assumes reinvestment of all dividends and capital gains at
net asset value, and is not indicative of future results. Portfolio performance
numbers are net of all portfolio expenses, but do not reflect deduction of
insurance account charges. The value of an investment in the Growth Fund will
fluctuate with the market conditions so that redemption proceeds may be worth
more or less than their original cost.
During the six-month reporting period ended June 30, 1998, the Fund's
advisor and administrator have voluntarily waived portions of their fees or
assumed responsibility for other expenses, which has reduced operating expenses
for shareholders. Without these reductions, the Fund's returns would have been
lower.
There is no guarantee that the Fund will continue to hold any one
particular security or stay invested in any one sector. The composition of the
Fund's portfolio is subject to change.
31
<PAGE> 33
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS (94.60%)
AUTOMOBILE & RELATED (1.99%)
34,544 Danaher Corporation $ 887,619 $ 1,267,333
9,000 Ford Motor Company 458,477 531,000
----------- -----------
$ 1,346,096 $ 1,798,333
BASIC INDUSTRIES (2.67%)
17,082 Colgate-Palmolive Company $ 1,026,966 $ 1,503,216
16,354 Monsanto Company 650,162 913,780
----------- -----------
$ 1,677,128 $ 2,416,996
BEVERAGE BREWING AND DISTRIBUTION (2.64%)
27,960 Coca-Cola Company $ 1,866,077 $ 2,390,580
CAPITAL GOODS (0.19%)
3,900 Boeing Company $ 231,750 $ 173,794
COMMERCIAL SERVICES (1.59%)
33,450 Service Corporation International $ 1,147,545 $ 1,434,169
COMPUTER SOFTWARE (3.50%)
7,918 Hewlett Packard Company $ 537,430 $ 474,090
24,804 Microsoft Corporation+ 1,810,950 2,688,133
----------- -----------
$ 2,348,380 $ 3,162,223
COMPUTER SYSTEMS (5.13%)
21,417 Cisco Systems Incorporated+ $ 1,104,772 $ 1,971,703
11,806 International Business Machines Corporation 1,304,133 1,355,476
15,796 Lucent Technologies Incorporated 697,287 1,314,030
----------- -----------
$ 3,106,192 $ 4,641,209
CONSUMER--BASIC (3.65%)
17,036 Abbott Laboratories $ 605,005 $ 696,347
26,000 American Home Products Corporation 985,723 1,345,500
14,386 Baxter International Incorporated 734,958 774,147
8,400 Bestfoods 459,893 487,725
----------- -----------
$ 2,785,579 $ 3,303,719
ENERGY & RELATED (7.09%)
7,900 Anadarko Petroleum Corporation $ 524,747 $ 530,781
22,114 Exxon Corporation 1,418,847 1,577,005
9,624 FPL Group Incorporated 521,412 606,312
9,662 Mobil Corporation 683,372 740,351
21,808 Royal Dutch Petroleum Company 1,178,882 1,195,351
9,171 Schlumberger Limited 716,095 626,494
10,702 Texaco Incorporated 593,250 638,776
14,790 Williams Company Incorporated 380,723 499,163
----------- -----------
$ 6,017,328 $ 6,414,233
</TABLE>
32
<PAGE> 34
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
ENTERTAINMENT & LEISURE (0.78%)
6,700 Walt Disney Company $ 651,806 $ 703,919
FINANCE & RELATED (15.94%)
10,624 Allstate Corporation $ 943,909 $ 972,760
19,584 American International Group Incorporated 1,793,497 2,859,264
20,401 Banc One Corporation 1,020,257 1,138,631
35,180 Chase Manhattan Bank 1,913,554 2,656,090
25,600 Conseco Incorporated 1,061,734 1,196,800
30,080 Federal Home Loan Mortgage Corporation 1,261,754 1,415,640
17,088 Federal National Mortgage Association 1,034,742 1,038,096
46,338 Household International Incorporated 1,666,484 2,305,316
12,510 MBNA Corporation 353,672 412,830
12,932 Charles Schwab Corporation 388,363 420,290
----------- -----------
$11,437,966 $14,415,717
FOOD & RELATED (1.45%)
6,300 McDonald's Corporation $ 385,669 $ 434,700
22,300 Philip Morris Company Incorporated 956,616 878,062
----------- -----------
$ 1,342,285 $ 1,312,762
GENERAL BUSINESS & RELATED (7.10%)
13,488 DuPont E I de Nemours and Company $ 863,085 $ 1,006,542
44,614 General Electric Company 2,941,846 4,059,874
22,200 HBO & Company 654,393 782,550
8,614 Kimberly-Clark Corporation 434,056 395,167
2,624 Tribune Company 157,864 180,564
----------- -----------
$ 5,051,244 $ 6,424,697
HEALTHCARE (2.14%)
7,802 Lilly Eli & Company $ 538,552 $ 515,420
13,070 Pfizer Incorporated 1,035,685 1,420,546
----------- -----------
$ 1,574,237 $ 1,935,966
INTERNATIONAL STOCKS (0.36%)
10,000 News Corporation Limited ADR (Australia) $ 277,240 $ 321,250
LARGE CAPITALIZATION STOCKS (6.76%)
12,145 Chevron Corporation $ 1,015,294 $ 1,008,794
14,440 Gannett Company Incorporated 891,470 1,026,142
9,400 MCI Communications 450,567 546,375
16,000 Northern Telecom Limited 884,313 908,000
15,700 Sara Lee Corporation 923,989 878,219
9,400 Schering-Plough Corporation 705,756 861,275
5,200 United Technologies Corporation 478,514 481,000
4,000 Xerox Corporation 392,460 406,500
----------- -----------
$ 5,742,363 $ 6,116,305
</TABLE>
33
<PAGE> 35
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MANUFACTURING PROCESSING (9.93%)
30,678 Allied Signal Incorporated $ 1,162,301 $ 1,361,336
15,900 Aluminum Company of America 1,084,332 1,048,406
11,882 American Telephone & Telegraph Corporation 663,971 678,759
21,400 Fort James Corporation 936,751 952,300
15,600 Honeywell Incorporated 1,207,060 1,303,575
16,026 Johnson & Johnson 1,070,814 1,181,917
15,372 Procter & Gamble Company 1,255,228 1,399,813
16,800 Tyco International Limited+ 873,712 1,058,400
----------- -----------
$ 8,254,169 $ 8,984,506
MEDIUM CAPITALIZATION STOCKS (2.14%)
9,400 Consolidated Stores Corporation+ $ 426,097 $ 340,750
23,500 EMC Corporation+ 864,799 1,053,094
9,400 Sunamerica Incorporated 468,642 539,912
----------- -----------
$ 1,759,538 $ 1,933,756
PHARMACEUTICALS (3.99%)
11,896 Bristol-Myers Squibb Company $ 1,158,876 $ 1,367,296
13,500 Merck & Company Incorporated 1,381,668 1,805,625
7,200 Smithkline Beecham Plc 360,551 435,600
----------- -----------
$ 2,901,095 $ 3,608,521
RETAIL & RELATED (5.14%)
21,360 Dayton-Hudson Corporation $ 657,481 $ 1,035,960
4,854 Gap Incorporated 182,036 299,128
20,188 Gillette Company 723,855 1,144,407
6,300 Home Depot Incorporated 438,332 523,294
27,176 Wal Mart Stores Incorporated 1,142,251 1,650,942
----------- -----------
$ 3,143,955 $ 4,653,731
SEMICONDUCTORS (1.05%)
12,804 Intel Corporation $ 1,079,774 $ 949,096
TELECOMMUNICATIONS (6.81%)
2,100 Clear Channel Communications Incorporated+ $ 199,368 $ 229,162
64,830 Ericsson Telefonaktiebolaget L M Class B--Sponsored ADR 1,266,514 1,855,759
17,198 GTE Corporation 810,252 956,639
8,604 Portugal Telecom SA--Sponsored ADR 383,714 455,474
31,952 SBC Communication Incorporated 1,040,152 1,278,080
6,244 Telecom Italia SPA--Sponsored ADR 411,054 458,934
6,855 Tellabs Incorporated+ 420,405 490,989
9,000 WorldCom Incorporated+ 427,982 435,937
----------- -----------
$ 4,959,441 $ 6,160,974
</TABLE>
34
<PAGE> 36
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
UTILITIES (2.57%)
19,776 Bell Atlantic Corporation $ 904,866 $ 902,280
19,918 Edison International 523,501 588,826
26,368 PG&E Corporation 804,109 832,240
----------- -----------
$ 2,232,476 $ 2,323,346
TOTAL COMMON STOCKS $70,933,664 $85,579,802
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
<C> <S> <C> <C> <C>
SHORT-TERM INSTRUMENTS--5.39%
REPURCHASE AGREEMENTS--5.39%
$3,549,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75% 7/1/98 $ 3,549,000
166,000 HSBC Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75 7/1/98 166,000
707,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.65 7/1/98 707,000
457,000 Morgan Stanley & Co Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.70 7/1/98 457,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL SHORT-TERM INSTRUMENTS
(Cost $4,879,000) $ 4,879,000
TOTAL INVESTMENTS IN SECURITIES
(Cost $75,812,663)* (Notes 1 and 3) 100.00% $90,458,802
Other Assets and Liabilities, Net 0.00 2,034
------ -----------
TOTAL NET ASSETS 100.00% $90,460,836
====== ===========
</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 $15,545,325
Gross Unrealized Depreciation (899,186)
-----------
NET UNREALIZED APPRECIATION $14,646,139
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE> 37
MONEY MARKET FUND
The LAT Money Market Fund (the "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 Fund may invest in repurchase
agreements, commercial paper, corporate bonds, floating rate bonds and
certificates of deposit. The Fund is managed with the goal of maintaining a
stable share price of $1.00, however, there can be no assurance that the Fund
will meet this objective.
Mike Neitzke manages the Fund. Mr. Neitzke joined Wells Fargo Bank 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.
YIELD SUMMARY
The Money Market Fund's seven-day annualized yield on June 30, 1998 was
4.57% and its 30-day current yield was 4.66%. The Fund distributed $0.0239 in
dividend income for the 6-month reporting period, and no capital gains were
distributed from the Fund. Keep in mind that past distributions are not
predictive of future trends as distributions will vary based on Fund portfolio
earnings.
During the reporting period ended June 30, 1998, the Fund posted a return
of 2.41% compared with its benchmark, the IBC/Donoghue Money Market Average
Index, which returned 2.52% for the same period.
The Fund slightly underperformed the benchmark primarily because it
maintained a heavier weighting in repurchase agreements to provide a high level
of liquidity. Overall, we followed a high quality and conservative strategy,
which allowed us to maintain a competitive yield.
PORTFOLIO REVIEW
Due to the low interest rate environment, we invested in repurchase
agreements which are higher yielding than comparable maturity U.S. Treasury
bills. As a result, we maintained a portfolio weighting of approximately 43% in
repurchase agreements. In addition to repurchase agreements, we purchased
longer-term U.S. Treasury notes with maturities of thirteen months or less,
because they offered competitive yields over Treasury bills. This strategy
provided a higher yield without sacrificing liquidity.
STRATEGIC OUTLOOK
We anticipate the U.S. economy to continue to be healthy. Over time, we
believe that the economy may slow because of the impact from the Asian market
crisis. As a result, interest rates are expected to remain low and we expect the
Federal Reserve Board to leave rates unchanged for the balance of the year.
The money market yield curve continues to be flat, with 6 month - 1 year
rates expected to trade in a narrow range. The Fund will continue to maintain
40-50% of its investments in maturities of one month or less, providing a high
level of liquidity with little or no sacrifice in yield. We will also
selectively invest in longer term securities when yields are at the upper end of
their expected range. The average maturity of the Fund will be maintained at
55-70 days, with an emphasis on high credit quality of securities. Maintaining a
portion of the Fund in repurchase agreements ensures we can quickly move the
Fund's assets to the appropriate, liquid securities. As we keep a close watch on
the events in Asia, we will continue to monitor the Fund's holdings with
heightened sensitivity.
36
<PAGE> 38
MONEY MARKET FUND
DATA AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
1-YEAR 3-YEAR SINCE INCEPTION
------ ------ ---------------
<S> <C> <C> <C>
AVERAGE ANNUAL RETURNS 5.02% 4.94% 4.94%
</TABLE>
<TABLE>
<S> <C> <C> <C>
PORTFOLIO ALLOCATION MONTH-END YIELDS
Commercial Paper 10% 7-Day Current Yield 4.57%
Treasury Notes 22% 30-Day Effective Yield 4.66%
Treasury Bills 25%
Repurchase Agreements 43%
</TABLE>
Average annual total returns represent the average annual change in value
of an investment over the indicated periods assuming reinvestment of dividend
and capital gains distributions. The Fund is neither insured nor guaranteed by
the U.S. Government. Figures quoted represent past performance, which is no
guarantee of future results. These figures assume the contract owner is still
invested at the end of the reporting period. Investment return and principal
value of an investment will fluctuate so that an investor's units, when
redeemed, may be worth more or less than their original cost. Portfolio
performance numbers are net of all portfolio expenses, but do not reflect
deduction of insurance account charges. The value of an investment in the Money
Market Fund will fluctuate with the market conditions so that redemption
proceeds may be worth more or less than their original cost.
Yield reflects fluctuations in interest rates on portfolio investments and
reflects Fund expenses.
During the six-month reporting period ended June 30, 1998 the Fund's
advisor and administrator have voluntarily waived portions of their fees or
assumed responsibility for other expenses, which has reduced operating expenses
for shareholders. Without these reductions, the Fund's returns would have been
lower.
Investors should note that the Fund is a professionally managed portfolio,
while the index is unmanaged, does not incur expenses and is not available
directly for investment. If Fund operating expenses had been applied to the
index, its performance would have been lower.
There is no guarantee that the Fund will continue to hold any one
particular security or stay invested in any one sector. The composition of the
Fund's portfolio is subject to change.
37
<PAGE> 39
LIFE & ANNUITY TRUST MONEY MARKET FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY NOTES--21.95 %
$ 480,000 U.S. Treasury Notes 6.13% 08/31/98 $ 480,271
225,000 U.S. Treasury Notes 6.25 03/31/99 226,246
360,000 U.S. Treasury Notes 6.38 01/15/99 361,919
700,000 U.S. Treasury Notes 6.38 04/30/99 704,493
365,000 U.S. Treasury Notes 6.50 04/30/99 367,827
660,000 U.S. Treasury Notes 7.13 10/15/98 662,695
375,000 U.S. Treasury Notes 8.25 07/15/98 375,370
-----------
TOTAL U.S. TREASURY SECURITIES $ 3,178,821
(Cost $3,178,821)
SHORT-TERM INSTRUMENTS--78.12%
COMMERCIAL PAPER--10.34%
$ 500,000 Associates Corporation CPDN 5.67%+ 07/10/98 $ 499,303
500,000 Ford Motor Credit Company CPDN 5.66+ 07/08/98 499,458
500,000 General Electric CPDN # 5.67+ 07/15/09 498,917
-----------
$ 1,497,678
U.S. TREASURY BILLS--24.82%
$ 600,000 U.S. Treasury Bills 4.95%+ 09/03/98 $ 594,603
3,000,000 U.S. Treasury Bills 5.05+ 07/02/98 2,999,613
-----------
$ 3,594,216
REPURCHASE AGREEMENTS--42.96%
$2,121,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75% 07/01/98 $ 2,121,000
867,000 HSBC Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75 07/01/98 867,000
1,818,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.65 07/01/98 1,818,000
1,414,000 Morgan Stanley & Co Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.70 07/01/98 1,414,000
-----------
$ 6,220,000
</TABLE>
38
<PAGE> 40
LIFE & ANNUITY TRUST MONEY MARKET FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
<C> <S> <C> <C> <C>
TOTAL SHORT-TERM INSTRUMENTS $11,311,894
(Cost $11,311,894)
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $14,490,715)* (Notes 1 and 3) 100.07% $14,490,715
Other Assets and Liabilities, Net (0.07) (9,517)
------- -----------
TOTAL NET ASSETS 100.00 % $14,481,198
======= ===========
</TABLE>
- --------------------------------------------------------------------------------
+ Yield to maturity.
# This security is subject to a demand feature which reduces the remaining
maturity.
* Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
The accompanying notes are an integral part of these financial statements.
39
<PAGE> 41
STRATEGIC GROWTH FUND
The LAT Strategic Growth Fund (the "Fund") seeks to provide investors with
an above-average level of capital appreciation. The Fund primarily invests in
equity securities of companies expected to experience strong growth in revenues
and earnings. In addition, the Fund may invest up to 40% of its assets in
securities acquired in the Initial Public Offering ("IPO") market. While
generally more volatile, these new issues can potentially offer greater growth
opportunities.
Jon Hickman manages the Strategic Growth Fund. Mr. Hickman joined Wells
Fargo Bank in 1986 when the bank merged with Crocker National Bank. In addition
to managing the Life & Annuity Trust Fund, he also manages several large
individual equity and balanced portfolios. Mr. Hickman has an MBA in Finance
from Brigham Young University.
PERFORMANCE SUMMARY
The Strategic Growth Fund commenced operations on May 1, 1998. During the
two-month reporting period ended June 30, 1998, the Fund reported a cumulative
total return of 28.30%, strongly outperforming it's benchmark, the S&P 500
Index. This index returned 2.27% over the same period.
The Fund benefited from the sharp correction in small and mid-cap issues
during May, which allowed the Fund to purchase quality issues at very attractive
prices. In addition, the Fund's performance was positively impacted because we
stayed away from poor performing sectors. We limited the Fund's holdings with
respect to semiconductors and PC-related issues, due to the Asian market crisis.
PC stocks, for example, were negatively impacted as those companies began to see
a decrease in Asian country orders. IPOs brought into the portfolio, such as
Restoration Hardware, also contributed to the Fund's performance in May and
June. We liked this company because it had strong future growth projections as
well as a strong management team. As you may know, while generally more
volatile, new issues can potentially offer greater growth opportunities.
During the two-month reporting period, the Strategic Growth Fund's share
price increased from $10.00 on May 1, 1998, to $12.83 on June 30, 1998. The Fund
did not distribute dividend income or capital gains.
PORTFOLIO REVIEW
The Fund is managed with a mid-cap growth emphasis, and potential holdings
are primarily companies with attractive long-term earnings growth prospects. The
Fund may also invest in IPOs, turn around or acquisition candidates, or
attractive smaller-sized companies. These companies often see accelerated growth
rates and can help contribute to the Fund's growth objective. We focus on new
technology and companies that benefit from changing industries with new
technologies. Opportunities are continually researched in high growth sectors
including technology, biotechnology and consumer growth companies.
The Fund's assets were invested 86% in stocks and 14% in cash and cash
equivalents at the end of the reporting period. Because the Fund commenced
operations on May 1, 1998, it had a slightly higher allocation of cash than
normal as we received sizable amounts of new money. Our goal is to be fully
invested and to have less than 5% in cash and cash equivalents. Going forward,
our cash position will be reduced as the Fund diversifies its assets.
The assisted living sector was a major contributor to the Fund's
performance, and we expect the growth of this industry to continue. We bought
stocks in the assisted living sector as we anticipate a need for people to be
properly cared for as the U.S. population continues to age.
Hollywood Entertainment is an example of a video chain on a renewed growth
track. We are impressed by the company's management and believe they have a
solid vision for achieving long-term success. Specifically, they are making
revolutionary efforts to help meet the needs of their customers. They have
approached the Hollywood studios and have entered into a new marketing
arrangement to get more videos at lower costs up front, with profit sharing
taking place after the videos are rented. This new business model is increasing
the company's same-store sales growth.
40
<PAGE> 42
As of June 30, 1998, there were 28 stocks in the portfolio. Because the
Fund is new, many of the portfolio attributes are not typical. For example, the
number of issues held by the Fund was relatively small. We expect this figure to
increase as the Fund increases in size.
STRATEGIC OUTLOOK
We feel that the nation's economy, while currently healthy, may weaken in
the next few months due to events in Asia. Although the problems in Asia could
last several years, we believe that the economy will continue to remain strong.
Key indicators of this strength will be a strong U.S. dollar and stable to low
inflation levels. We feel that the Federal Reserve Board will not drastically
modify interest rates in the near future.
Based on this economic outlook, we will focus on mid-cap stocks that are
domestically oriented with high future growth projections. Our management team
will continue to search for companies that are characterized by dominant market
share, technological leadership and a strong management team. We will continue
to watch the events in Asia closely and monitor the region's impact on U.S.
corporate profitability. This will help us remain sensitive to the performance
of the Fund's holdings. As a result, we feel the Fund is positioned very well
for the upcoming months and we expect it to produce solid performance. Overall,
we will continue to maintain our current management style with an emphasis on
growth.
STRATEGIC GROWTH FUND
DATA AS OF JUNE 30, 1998
AVERAGE ANNUAL TOTAL RETURN
YEAR TO DATE
28.30%
<TABLE>
<CAPTION>
TOP 10 HOLDINGS % OF PORTFOLIO
--------------- --------------
<S> <C>
Primus Telecommunications 4.5%
Coinstar Inc. 4.4%
Parexel International 4.3%
Compuware Corporation 4.2%
Saville Systems PLC 4.1%
Administaff Inc. 3.8%
Applied Graphics Technology 3.8%
Concentric Network Corp. 3.6%
Atlantic Coast Airlines 3.5%
Cellnet Data Systems Inc. 3.4%
</TABLE>
<TABLE>
<CAPTION>
INDUSTRY BREAKDOWN % OF PORTFOLIO
------------------ --------------
<S> <C>
Capital Goods 21%
General Business 18%
Consumer -- Discretionary 13%
Finance 11%
Manufacturing -- Process 9%
Consumer -- Basic 5%
Transportation 4%
Shelter 3%
Petroleum 2%
- ---------------------------------------------------
TOTAL COMMON STOCK: 86%
</TABLE>
PORTFOLIO ALLOCATION
<TABLE>
<S> <C>
Stocks 86%
Cash 14%
</TABLE>
PORTFOLIO DATA
<TABLE>
<S> <C>
Number of Issues 29
Beta 1.27
Median Market Capitalization ($B) $ 0.5
Weighted Average P/E 50.7
Weighted Average Price to Book 7.7
</TABLE>
Past performance is historical, assumes reinvestment of all dividends and
capital gains at net asset value, and is not indicative of future results.
Portfolio performance numbers are net of all portfolio expenses, but do not
reflect deduction of insurance account charges. The value of an investment in
the Strategic Growth Fund will fluctuate with the market conditions so that
redemption proceeds may be worth more or less than their original cost.
41
<PAGE> 43
During the six-month reporting period, ended June 30, 1998, the Fund's
advisor and administrator have voluntarily waived portions of their fees or
assumed responsibility for other expenses, which has reduced operating expenses
for shareholders. Without these reductions, the Fund's returns would have been
lower.
There is no guarantee that the Fund will continue to hold any one
particular security or stay invested in any one sector. The composition of the
Fund's portfolio is subject to change.
42
<PAGE> 44
LIFE & ANNUITY TRUST STRATEGIC GROWTH FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS--108.67%
ADVERTISING--2.78%
300 HA-LO Industries Incorporated+ $ 9,980 $ 9,338
CAPITAL GOODS--12.79%
1,500 Cellnet Data Systems Incorporated+ $ 15,750 $ 14,531
500 Concentric Network Corporation+ 11,250 15,156
306 Smed International Incorporated+ 6,406 5,508
500 Tristar Aerospace Incorporated+ 8,500 7,750
-------- --------
$ 41,906 $ 42,945
COMMERCIAL SERVICES--3.40%
300 Boron Lepore & Associates Incorporated+ $ 8,850 $ 11,400
COMPUTER SOFTWARE--10.27%
300 Aris Corporation+ $ 9,562 $ 8,400
500 Quadramed Corporation+ 12,000 13,656
300 Veritas Software Corporation+ 10,875 12,412
-------- --------
$ 32,437 $ 34,468
CONSUMER--BASIC--3.61%
1,000 Laser Vision Centers Incorporated+ $ 15,313 $ 12,125
CONSUMER--DISCRETIONARY--14.52%
1,000 Headway Corporate Resources Incorporated $ 12,375 $ 11,875
500 Hollywood Entertainment Corporation+ 5,875 6,781
500 Restoration Hardware Incorporated+ 9,500 12,563
350 Saville Systems PLC Sponsored ADR+ 15,662 17,544
-------- --------
$ 43,412 $ 48,763
ENERGY & RELATED--2.02%
300 R & B Falcon Corporation+ $ 10,112 $ 6,787
FINANCE & RELATED--13.81%
350 Applied Graphics Technology Incorporated+ $ 16,493 $ 16,013
2,000 Coinstar Incorporated+ 19,075 18,500
250 Envoy Corporation+ 10,406 11,844
-------- --------
$ 45,974 $ 46,357
GENERAL BUSINESS & RELATED--15.87%
350 Administaff Incorporated+ $ 13,503 $ 16,144
500 Parexel International Corporation+ 15,688 18,187
1,000 Primus Telecommunications Group Incorporated+ 16,625 18,937
-------- --------
$ 45,816 $ 53,268
HEALTHCARE--2.44%
1,000 Somnus Medical Technologies+ $ 10,250 $ 8,188
LARGE CAPITALIZATION STOCKS--3.80%
1,000 Novell Incorporated+ $ 13,328 $ 12,750
</TABLE>
43
<PAGE> 45
LIFE & ANNUITY TRUST STRATEGIC GROWTH FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MEDIUM CAPITALIZATION STOCKS--7.49%
200 Centocor Incorporated+ $ 7,963 $ 7,250
350 Compuware Corporation+ 17,281 17,894
-------- --------
$ 25,244 $ 25,144
PHARMACEUTICALS--3.72%
200 MedImmune Incorporated+ $ 10,775 $ 12,475
RETAIL & RELATED--3.87%
1,000 Oakley Incorporated+ $ 13,080 $ 13,000
SHELTER & RELATED--3.82%
500 Brookdale Living Communities Incorporated+ $ 11,813 $ 12,813
TRANSPORTATION--4.47%
500 Atlantic Coast Airlines Incorporated+ $ 15,063 $ 15,000
TOTAL COMMON STOCKS $353,353 $364,821
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS--17.87%
$ 6,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75% 7/1/98 $ 6,000
18,000 HSBC Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.75 7/1/98 18,000
18,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.65 7/1/98 18,000
18,000 Morgan Stanley & Co Repurchase Agreement -
102% Collateralized by U.S. Government Securities 5.70 7/1/98 18,000
---------
TOTAL SHORT-TERM INSTRUMENTS $ 60,000
(Cost $60,000)
TOTAL INVESTMENTS IN SECURITIES
(Cost $413,353)* (Notes 1 and 3) 126.54% $424,821
Other Assets and Liabilities, Net (26.54) (89,103)
------ --------
TOTAL NET ASSETS 100.00% $335,718
====== ========
</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 $ 27,703
Gross Unrealized Depreciation (16,235)
--------
NET UNREALIZED APPRECIATION $ 11,468
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE> 46
U.S. GOVERNMENT ALLOCATION FUND
The LAT U.S. Government Allocation Fund (the "Fund") seeks to earn 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 invests in long-term U.S. Treasury bonds, intermediate-term U.S. Treasury
notes, and short-term money market instruments.
The U.S. Government Allocation Fund is a professionally managed portfolio,
advised by Wells Fargo Bank, N.A. Barclay's Global Fund Advisors ("BGFA") serves
as sub-investment advisor. BGFA uses a proprietary model developed and refined
over the past twenty years that analyzes extensive financial data from numerous
sources and recommends a portfolio allocation.
PERFORMANCE SUMMARY
During the six-month reporting period, the U.S. Government Allocation
Fund's price increased from $10.27 on December 31, 1997 to $10.29 on June 30,
1998. The Fund distributed $0.2508 per share in dividend income, and no capital
gains were distributed from the Fund. Keep in mind that past distributions are
not predictive of future trends as distributions will vary based on Fund
portfolio earnings.
For the six months ended June 30, 1998, the Fund posted a cumulative total
return of 2.66%. The Fund has three benchmarks representing each of the major
asset classes in which the Fund can invest. The Lehman Brothers U.S. Treasury
Bond Index returned 4.20%, the Lehman Brothers U.S. Treasury Note Index returned
3.00%, and the IBC/Donoghue Money Market Average Index posted 2.52% over the
six-month period. The performance of the Fund is not surprising considering that
the allocation within the portfolio was weighted in favor of notes and cash for
the six-month period.
Because the U.S. Government Allocation Fund focuses on long-term total
return consistent with reasonable risk, it's important to place emphasis on risk
in addition to total return performance. The Fund is designed for conservative
investors, and typically will have a lower beta than it's benchmark. The result
of this lowered risk benefits investors in the form of reduced price
fluctuations, or stated differently, a more stable share price. The Fund
determines the optimal mix of assets designed for a long-term investment
strategy and under normal conditions, the Fund's allocation mix is 40% in U.S.
Government obligations and 60% cash.
PORTFOLIO REVIEW
Every day, the Fund's proprietary investment model analyzes extensive
financial data and market conditions to determine the optimal combination of
bonds, notes and money market instruments. As opportunities arise among the
three types of securities, the investment model will recommend shifts in Fund
assets accordingly.
The portfolio experienced two reallocations since the beginning of the
year. The Fund began and ended the period with a recommended allocation of 40%
notes and 60% cash. In January, the Fund reallocated assets in response to
continued flattening of the yield curve between shorter-term securities like
bills and notes. The decision to increase exposure in bonds and cash led to a
model allocation of 10% bonds, 20% notes, and 70% cash.
The portfolio remained in this configuration until late April, when the
portfolio was reallocated to take advantage of opportunities on the shorter-end
of the yield curve. At that time, the weighting in bonds and cash was decreased
and exposure to notes was increased. The Fund's model allocation was 39% notes
and 61% cash as of June 30, 1998.
STRATEGIC OUTLOOK
We believe the nation's economy, while currently healthy, may weaken in the
next five years, due to Asian influences. The U.S. dollar, we believe, will
continue to show strength and inflation will remain at stable to low levels. As
a result, we feel that interest rates may drift lower and short-term rates will
remain stable.
45
<PAGE> 47
Based on this outlook, the Fund will continue to apply its process-driven
strategy that applies asset allocation technology to managing fixed income
securities. The Fund will exploit yield spread opportunities between long-term
U.S. government bonds, intermediate-term government notes and money market
instruments to benefit from a stable interest rate environment. The model will
continue to monitor events in Asia closely, as it determines the optimal asset
mixes on a daily basis. Overall, we feel that the Fund is well positioned for
the upcoming months and we believe it will produce solid performance.
The Fund is sub-advised by BGFA, one of the largest providers of
index-driven financial products in the world. The firm specializes in creating
solid investment strategies through quantitative models. Their objective is to
implement the recommended allocations from the asset allocation process in the
most efficient and least costly manner.
Investors should note that this is a professionally managed portfolio,
while the indices are unmanaged, do not incur expenses and are not available
directly for investment. If Fund operating expenses had been applied to the
indices, their performance would have been lower.
The Lehman Brothers U.S. Treasury Bond Index is an unmanaged index
comprised of Treasury bonds with maturities averaging between 10 and 30 years.
The IBC/Donoghue Money Fund Average Index is comprised of the average
yields of over 600 taxable money market funds.
The Lehman Brothers U.S. Treasury Note Index is an unmanaged index
comprised of U.S. Treasury 2-10 year notes.
U.S. GOVERNMENT ALLOCATION FUND
DATA AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
YEAR TO DATE 1-YEAR 3-YEAR SINCE INCEPTION
AVERAGE ANNUAL RETURNS ------------ ------ ------ ---------------
<S> <C> <C> <C> <C>
2.66% 7.57% 6.12% 6.83%
</TABLE>
PORTFOLIO ALLOCATION
<TABLE>
<S> <C>
Treasury Bonds/Notes 39%
Cash 61%
</TABLE>
Performance is historical, assumes reinvestment of all dividends and
capital gains at net asset value, and is not indicative of future results.
Portfolio performance numbers are net of all portfolio expenses, but do not
reflect deduction of insurance account charges. The value of an investment in
the U.S. Government Allocation Fund will fluctuate with market conditions so
that redemption proceeds may be worth more or less than their original cost.
During the six month reporting period, ended June 30, 1998 the Fund's
advisor and administrator have voluntarily waived portions of their fees or
assumed responsibility for other expenses, which has reduced operating expenses
for shareholders. Without these reductions, the Fund's returns would have been
lower.
Yield, calculated as required by the SEC, is based on earnings of the
Fund's portfolio during the 30 days ended June 30, 1998.
46
<PAGE> 48
LIFE & ANNUITY TRUST U.S. GOVERNMENT ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES--38.40 %
U.S. TREASURY BONDS--6.89%
$ 300,000 U.S. Treasury Bonds 11.13% 08/15/03 $ 373,548
400,000 U.S. Treasury Bonds 11.63 11/15/04 528,936
600,000 U.S. Treasury Bonds 11.88 11/15/03 773,250
300,000 U.S. Treasury Bonds 13.75 08/15/98 396,819
-----------
$ 2,072,553
U.S. TREASURY NOTES--31.51%
$1,700,000 U.S. Treasury Notes 5.75% 08/15/03 $ 1,718,054
1,400,000 U.S. Treasury Notes 5.88 02/15/04 1,425,816
600,000 U.S. Treasury Notes 6.50 05/15/05 633,282
1,100,000 U.S. Treasury Notes 7.25 05/15/04 1,193,500
1,000,000 U.S. Treasury Notes 7.25 08/15/04 1,087,970
1,200,000 U.S. Treasury Notes 7.50 02/15/05 1,328,244
1,200,000 U.S. Treasury Notes 7.88 11/15/04 1,347,744
550,000 U.S. Treasury Notes 12.38 05/15/04 735,713
-----------
$ 9,470,323
TOTAL U.S. TREASURY SECURITIES $11,542,876
(Cost $11,455,490)
SHORT-TERM INSTRUMENTS--60.99%
CERTIFICATES OF DEPOSITS--3.32%
$1,000,000 Nationsbank N.A 5.50% 08/06/98 $ 999,630
COMMERCIAL PAPER--10.06%
$1,013,000 Associates Corporation of North America 5.47%+ 08/06/98 $ 1,007,501
1,021,000 Coca-Cola Commercial Paper 5.55+ 09/24/98 1,007,788
1,009,000 Motorola Incorporated Commercial Paper 5.52+ 07/07/98 1,007,927
-----------
$ 3,023,216
SHORT-TERM FEDERAL AGENCIES--33.53%
$3,024,000 Federal Farm Credit Bank Discount Note 5.75%+ 07/02/98 $ 3,023,098
3,041,000 FHLMC Discount Note 5.40+ 08/07/98 3,023,799
4,055,000 FNMA Discount Note 5.40+ 08/07/98 4,032,088
-----------
$10,078,985
</TABLE>
47
<PAGE> 49
LIFE & ANNUITY TRUST U.S. GOVERNMENT ALLOCATION FUND--JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY BILLS--14.08%
$ 396,000 U.S. Treasury Bills 4.94%+ 07/30/98 $ 394,481
114,000 U.S. Treasury Bills 4.95+ 09/03/98 113,011
153,000 U.S. Treasury Bills 4.96+ 07/09/98 152,822
23,000 U.S. Treasury Bills 4.99+ 09/24/98 22,737
100,000 U.S. Treasury Bills 5.00+ 09/10/98 99,038
647,000 U.S. Treasury Bills 5.01+ 09/17/98 640,161
2,732,000 U.S. Treasury Bills 5.02+ 08/27/98 2,711,401
99,000 U.S. Treasury Bills 5.08+ 08/20/98 98,325
-----------
$ 4,231,976
TOTAL SHORT-TERM INSTRUMENTS $18,333,807
(Cost $18,334,833)
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
(Cost $29,790,323)* (Notes 1 and 3) 99.39% $29,876,683
Other Assets and Liabilities, Net 0.61 183,465
------ -----------
TOTAL NET ASSETS 100.00% $30,060,148
====== ===========
</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 $128,957
Gross Unrealized Depreciation (42,597)
--------
NET UNREALIZED APPRECIATION $ 86,360
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE> 50
LIFE & ANNUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
U.S.
Asset Equity Money Strategic Government
Allocation Value Growth Market Growth Allocation
Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
In securities, at identified cost (Note
3)
(Includes repurchase agreements of
$6,220,000 for the Money Market Fund) $112,506,579 $2,045,036 $75,812,663 $14,490,715 $413,353 $29,790,323
In securities, at market value $116,684,343 $2,045,887 $90,458,802 $14,490,715 $424,821 $29,876,683
Cash 612 1,115 1,955 1,332 2,368 706
Receivables:
Dividends and interest 653,799 1,300 90,747 60,618 10 215,928
Fund shares sold 942,972 96,752 109,641 12,308 0 132,809
Due from co-administrator (Note 2) 0 0 0 0 0 1,008
Due from advisor (Note 2) 0 2,124 0 0 2,975 0
Prepaid expenses 876 4,744 3,330 0 4,744 932
TOTAL ASSETS 118,282,602 2,151,922 90,664,475 14,564,973 434,918 30,228,066
LIABILITIES
Payables:
Investment securities purchased 38,121 61,078 0 0 36,356 0
Distribution to shareholders 920,656 3,949 129,271 56,193 0 121,765
Fund shares redeemed 0 0 0 0 58,767 0
Due to co-administrator (Note 2) 3,696 40 4,407 482 8 0
Due to adviser (Note 2) 76,524 0 65,394 5,975 0 19,114
Accrued expenses 14,430 4,065 4,567 21,125 4,069 27,039
TOTAL LIABILITIES 1,053,427 69,132 203,639 83,775 99,200 167,918
TOTAL NET ASSETS $117,229,175 $2,082,790 $90,460,836 $14,481,198 $335,718 $30,060,148
Net assets consist of:
Paid-in Capital $102,095,553 $2,082,442 $70,397,273 $14,480,727 $281,548 $29,694,312
Undistributed net investment income (loss) 0 0 0 0 39 0
Undistributed net realized gain (loss) on
investments 10,955,858 (503) 5,417,424 471 42,663 279,476
Net unrealized appreciation (depreciation)
of investments 4,177,764 851 14,646,139 0 11,468 86,360
TOTAL NET ASSETS $117,229,175 $2,082,790 $90,460,836 $14,481,198 $335,718 $30,060,148
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets $117,229,175 $2,082,790 $90,460,836 $14,481,198 $335,718 $30,060,148
Shares outstanding 8,717,396 214,263 4,623,335 14,480,730 26,166 2,922,160
Net asset value and offering price $13.45 $9.72 $19.57 $1.00 $12.83 $10.29
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE> 51
LIFE & ANNUITY TRUST
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
U.S.
Asset Equity Money Strategic Government
Allocation Value Growth Market Growth Allocation
Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------------------------
From May 1, 1998 From May 1, 1998
For the Six (commencement For the Six For the Six (commencement For the Six
Months Ended of operations) to Months Ended Months Ended of operations) to Months Ended
June 30, 1998 June 30, 1998 June 30, 1998 June 30, 1998 June 30, 1998 June 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 178,341 $ 1,605 $ 545,840 $ 0 $ 0 $ 0
Interest 2,245,299 3,729 140,909 404,129 351 775,578
TOTAL INCOME 2,423,640 5,334 686,749 404,129 351 775,578
EXPENSES (NOTE 2)
Advisory fees 298,674 755 242,622 32,762 170 79,204
Administration fees 31,703 88 25,711 4,623 20 8,399
Custody fees 0 21 11,216 2,952 5 0
Shareholder Servicing 46,035 331 36,303 6,364 74 11,996
Portfolio accounting
fees 13,961 4,099 36,296 16,997 4,030 7,370
Transfer agency fees 69,690 176 56,612 7,280 40 18,481
Legal and audit fees 15,038 3,644 14,368 9,404 3,643 10,396
Registration fees 1,884 501 496 2 501 496
Directors' fees 6,322 2,131 10,120 7,374 2,131 6,820
Other 6,863 184 4,598 712 184 396
TOTAL EXPENSES 490,170 11,930 438,342 88,470 10,798 143,558
Less: Waived Fees and
Reimbursed Expenses (58,075) (10,545) (39,678) (32,783) (10,486) (25,458)
Net Expenses 432,095 1,385 398,664 55,687 312 118,100
NET INVESTMENT INCOME
(LOSS) 1,991,545 3,949 288,085 348,442 39 657,478
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss)
on sale of investments 9,092,368 (503) 2,212,744 471 42,663 173,627
Net change in unrealized
appreciation
(depreciation) of
investments 2,144,819 851 10,128,340 0 11,468 (141,787)
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS 11,237,187 348 12,341,084 471 54,131 31,840
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $13,228,732 $ 4,297 $12,629,169 $348,913 $ 54,170 $ 689,318
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE> 52
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Equity
Asset Value
Allocation Fund
Fund -----------------
--------------------------------------------- (Unaudited)
(Unaudited) From May 1, 1998
For the Six For the For the (commencement
Months Ended Year Ended Year Ended of operations) to
June 30, 1998 Dec. 31, 1997 Dec. 31, 1996 June 30, 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 1,991,545 $ 3,654,066 $ 2,121,841 $ 3,949
Net realized gain (loss) on sale of investments 9,092,368 8,763,882 2,464,924 (503)
Net unrealized appreciation (depreciation) of futures
contracts 0 496,725 37,850 0
Net unrealized appreciation (depreciation) of investments 2,144,819 706,325 (24,131) 851
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 13,228,732 13,620,998 4,600,484 4,297
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,991,545) (3,654,066) (2,121,841) (3,949)
From net realized gain on sales of investments 0 (7,395,696) (2,300,431) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 18,063,373 28,067,836 25,372,586 2,078,493
Reinvestment of dividends 1,991,545 11,049,762 4,422,270 3,949
Cost of shares redeemed (568,786) (6,979,919) (3,642,899) 0
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 4) 19,486,132 32,137,679 26,151,957 2,082,442
INCREASE (DECREASE) IN NET ASSETS 30,723,319 34,708,915 26,330,169 2,082,790
NET ASSETS:
Beginning net assets 86,505,856 51,796,941 25,466,772 0
ENDING NET ASSETS $117,229,175 $86,505,856 $51,796,941 $2,082,790
SHARES ISSUED AND REDEEMED:
Shares sold 1,395,791 2,314,085 2,210,668 213,857
Shares issued in reinvestment of dividends 150,636 914,141 385,749 406
Shares redeemed (46,135) (548,327) (318,474) 0
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,500,292 2,679,899 2,277,943 214,263
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE> 53
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Growth Fund Money Market Fund
--------------------------------------------- ---------------------------------------------
(Unaudited) (Unaudited)
For the Six For the For the For the Six For the For the
Months Ended Year Ended Year Ended Months Ended Year Ended Year Ended
June 30, 1998 Dec. 31, 1997 Dec. 31, 1996 June 30, 1998 Dec. 31, 1997 Dec. 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 288,085 $ 632,754 $ 321,626 $ 348,442 $ 788,439 $ 442,922
Net realized gain (loss) on sale
of investments 2,212,744 6,848,993 670,537 471 0 225
Net unrealized appreciation
(depreciation) of futures
contracts 0 0 0 0 0 0
Net unrealized appreciation
(depreciation) of investments 10,128,340 143,053 3,407,928 0 0 0
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 12,629,169 7,624,800 4,400,091 348,913 788,439 443,147
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (288,085) (632,754) (321,626) (348,442) (788,439) (442,922)
From net realized gain on sales
of investments 0 (3,829,806) (514,688) 0 0 (225)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 7,460,229 33,001,835 19,876,206 9,871,891 20,957,328 15,213,897
Reinvestment of dividends 288,090 4,462,560 836,312 348,442 788,439 443,145
Cost of shares redeemed (1,572,435) (2,063,405) (1,815,249) (10,527,234) (19,625,090) (8,813,439)
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 4) 6,175,884 35,400,990 18,897,269 (306,901) 2,120,677 6,843,603
INCREASE (DECREASE) IN NET ASSETS 18,516,968 38,563,230 22,461,046 (306,430) 2,120,677 6,843,603
NET ASSETS:
Beginning net assets 71,943,868 33,380,638 10,919,592 14,787,628 12,666,951 5,823,348
ENDING NET ASSETS $90,460,836 $71,943,868 $ 33,380,638 $ 14,481,198 $14,787,628 $12,666,951
SHARES ISSUED AND REDEEMED:
Shares sold 407,534 1,974,920 1,407,558 9,871,891 20,957,328 15,213,897
Shares issued in reinvestment of
dividends 15,031 261,363 56,387 348,441 788,439 443,145
Shares redeemed (84,630) (127,163) (133,606) (10,527,234) (19,625,090) (8,813,439)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING 337,935 2,109,120 1,330,339 (306,902) 2,120,677 6,843,603
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE> 54
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Strategic U.S. Government
Growth Allocation
Fund Fund
----------------- ---------------------------------------------
(Unaudited)
From May 1, 1998 (Unaudited)
(commencement For the Six For the For the
of operations) to Months Ended Year Ended Year Ended
June 30, 1998 June 30, 1998 Dec. 31, 1997 Dec. 31, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 39 $ 657,478 $ 1,105,416 $ 470,850
Net realized gain (loss) on sale of investments 42,663 173,627 149,427 (3,569)
Net unrealized appreciation (depreciation) of futures
contracts 0 0 0 0
Net unrealized appreciation (depreciation) of investments 11,468 (141,787) 204,961 (32,071)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 54,170 689,318 1,459,804 435,210
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income 0 (657,478) (1,105,416) (470,850)
From net realized gain on sales of investments 0 0 (40,057) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 345,932 6,314,447 12,942,563 8,754,298
Reinvestment of dividends 0 657,474 1,145,473 470,850
Cost of shares redeemed (64,384) (837,392) (4,035,922) (517,327)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 4) 281,548 6,134,529 10,052,114 8,707,821
INCREASE (DECREASE) IN NET ASSETS 335,718 6,166,369 10,366,445 8,672,181
NET ASSETS:
Beginning net assets 0 23,893,779 13,527,334 4,855,153
ENDING NET ASSETS $335,718 $30,060,148 $23,893,779 $13,527,334
SHARES ISSUED AND REDEEMED:
Shares sold 31,296 612,456 1,273,335 868,061
Shares issued in reinvestment of dividends 0 63,907 112,789 46,768
Shares redeemed (5,130) (81,206) (394,100) (51,054)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 26,166 595,157 992,024 863,775
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE> 55
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Asset Allocation Fund
-------------------------------------------------------------------
(Unaudited) From inception
Six Months on April 15,
Ended Year Ended Year Ended Year Ended 1994 to
June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.99 $ 11.42 $ 11.27 $ 9.71 $10.00
Net investment income (loss) 0.24 0.60 0.56 0.55 0.30
Net realized and unrealized gain (loss) on investments 1.46 1.73 0.69 2.21 (0.19)
-------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 1.70 2.33 1.25 2.76 0.11
LESS DISTRIBUTIONS:
Dividends from net investment income (0.24) (0.60) (0.56) (0.55) (0.30)
Distributions from net realized gain 0.00 (1.16) (0.54) (0.65) (0.10)
-------- ------- ------- ------- ------
TOTAL FROM DISTRIBUTIONS (0.24) (1.76) (1.10) (1.20) (0.40)
-------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 13.45 $ 11.99 $ 11.42 $ 11.27 $ 9.71
======== ======= ======= ======= ======
Total Return* 14.26% 20.88% 11.46% 28.95% 1.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $117,229 $86,506 $51,797 $25,467 $7,464
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.87% 0.80% 0.69% 0.41% 0.00%
Ratio of net investment income to average net assets 3.99% 5.20% 5.34% 5.58% 6.30%
Portfolio turnover 17% 156% 4% 97% 0%
Average commission rate paid (1) $ 0.1919 N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 0.98% 0.85% 0.80% 1.22% 2.24%
Ratio of net investment income(loss) to average net assets
prior to waived fees and reimbursed expenses 3.88% 5.15% 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.
54
<PAGE> 56
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Equity
Value Fund Growth Fund
-------------- -------------------------------------------------------------------
(Unaudited)
From inception (Unaudited) From inception
on May 1, Six Months on April 12,
1998 to Ended Year Ended Year Ended Year Ended 1994 to
June 30, June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 16.79 $ 15.34 $ 12.91 $ 10.30 $ 10.00
Net investment income (loss) 0.02 0.06 0.19 0.20 0.22 0.14
Net realized and unrealized gain (loss)
on investments (0.28) 2.78 2.48 2.68 2.77 0.30
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS (0.26) 2.84 2.67 2.88 2.99 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.06) (0.19) (0.20) (0.22) (0.14)
Distributions from net realized gain 0.00 0.00 (1.03) (0.25) (0.16) 0.00
------- ------- ------- ------- ------- -------
TOTAL FROM DISTRIBUTIONS (0.02) (0.06) (1.22) (0.45) (0.38) (0.14)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 19.57 $ 16.79 $ 15.34 $ 12.91 $ 10.30
======= ======= ======= ======= ======= =======
Total Return* (2.61%) 16.94% 17.33% 22.44% 29.19% 4.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 2,083 $90,461 $71,944 $33,381 $10,920 $ 2,136
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.05% 0.98% 0.65% 0.60% 0.43% 0.00%
Ratio of net investment income to average
net assets 2.98% 0.71% 1.19% 1.53% 2.05% 3.00%
Portfolio turnover 1% 44% 124% 95% 84% 21%
Average commission rate paid (1) $0.0758 $0.0543 $0.0725 $0.0810 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses 9.00% 1.08% 1.01% 1.12% 2.02% 10.18%
Ratio of net investment income(loss) to
average net assets prior to waived fees
and reimbursed expenses (4.97%) 0.61% 0.83% 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.
55
<PAGE> 57
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Money Market Fund
-------------------------------------------------------------------
(Unaudited) From inception
Six Months on May 19,
Ended Year Ended Year Ended Year Ended 1994 to
June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.02 0.05 0.05 0.05 0.03
Net realized and unrealized gain (loss) on investments 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ---------- ------
TOTAL FROM INVESTMENT OPERATIONS 0.02 0.05 0.05 0.05 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.03)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ---------- ------
TOTAL FROM DISTRIBUTIONS (0.02) (0.05) (0.05) (0.05) (0.03)
------- ------- ------- ---------- ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ========== ======
Total Return* 2.41% 5.04% 4.72% 5.41% 2.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $14,481 $14,788 $12,667 $ 5,823 $1,492
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.77% 0.53% 0.51% 0.42% 0.00%
Ratio of net investment income to average net assets 4.81% 4.95% 4.64% 5.15% 4.63%
Portfolio turnover N/A 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 1.22% 1.07% 1.22% 3.83% 11.43%
Ratio of net investment income(loss) to average net assets
prior to waived fees and reimbursed expenses 4.36% 4.41% 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.
56
<PAGE> 58
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Strategic
Growth Fund U.S. Government Allocation Fund
-------------- -------------------------------------------------------------------
(Unaudited)
From inception (Unaudited) From inception
on May 1, Six Months on April 26,
1998 to Ended Year Ended Year Ended Year Ended 1994 to
June 30, June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.27 $ 10.13 $ 10.30 $ 9.63 $10.00
Net investment income (loss) 0.00 0.25 0.58 0.56 0.60 0.40
Net realized and unrealized gain (loss)
on investments 2.83 0.02 0.15 (0.17) 0.77 (0.37)
------- ------- ------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.83 0.27 0.73 0.39 1.37 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income 0.00 (0.25) (0.58) (0.56) (0.60) (0.40)
Distributions from net realized gain 0.00 0.00 (0.01) 0.00 (0.10) 0.00
------- ------- ------- ------- ------ ------
TOTAL FROM DISTRIBUTIONS 0.00 (0.25) (0.59) (0.56) (0.70) (0.40)
------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 12.83 $ 10.29 $ 10.27 $ 10.13 $10.30 $ 9.63
======= ======= ======= ======= ====== ======
Total Return* 28.30% 2.66% 7.47% 3.99% 14.40% 0.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 336 $30,060 $23,894 $13,527 $4,855 $ 866
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 1.06% 0.90% 0.64% 0.60% 0.45% 0.00%
Ratio of net investment income to average
net assets 0.13% 4.98% 5.75% 5.75% 5.82% 7.35%
Portfolio turnover 102% 98% 135% 222% 405% 130%
Average commission rate paid(1) $0.0508 N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses 36.72% 1.09% 0.97% 1.18% 2.46% 12.73%
Ratio of net investment income(loss) to
average net assets prior to waived fees
and reimbursed expenses (35.53%) 4.79% 5.42% 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.
57
<PAGE> 59
NOTES TO THE FINANCIAL STATEMENTS (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 six separate diversified funds (the "Funds"): the Asset
Allocation, Equity Value, Growth, Money Market, Strategic Growth 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 and
assumptions should not be considered an indication of actual or expected
figures; actual results may differ.
INVESTMENT POLICY AND SECURITY VALUATION
NON-MONEY MARKET FUNDS -- All securities are valued at the close of each
business day on the New York Stock Exchange. Securities, for which the primary
market is a national or foreign recognized securities or commodities exchange or
the National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market, are valued at the last reported sales price on the day of
valuation. Debt securities are generally traded in the over-the-counter market
and are valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in those securities or by an independent pricing source. U.S.
Government obligations are valued at the last reported bid price. In the absence
of any sale of such securities on the valuation date and in the case of other
securities, 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. 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.
Futures contracts are marked to market daily at their respective settlement
prices determined by the relevant exchange. Securities for which quotations are
not readily available are valued at fair value as determined by policies
approved by the Trust's Board of Trustees (the "Board").
MONEY MARKET FUND -- The Money Market Fund invests only in securities with
remaining maturities not exceeding 397 days (thirteen months) and uses the
amortized cost method to value these securities. 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.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Securities transactions are recorded on a trade date basis. 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").
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
58
<PAGE> 60
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
collateral as necessary to maintain market value equal to or greater than the
resale price. Any repurchase agreements held in the Funds are collateralized by
instruments such as U.S. Treasury or federal agency obligations.
FUTURES CONTRACTS
The Asset Allocation, Equity Value 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, these Funds 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 may not correlate
with changes in the value of the underlying securities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of the Asset Allocation, Equity Value, and
Growth Funds, if any, are declared and distributed quarterly. Dividends from net
investment income of the Money Market Fund, if any, are declared daily and
distributed monthly. Dividends from net investment income of the Strategic
Growth Fund, if any, are declared and distributed annually. Dividends from net
investment income of the U.S. Government Allocation Fund, if any, are declared
and distributed monthly. Distributions to shareholders from net realized capital
gains are declared and distributed annually.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by
the Fund. The differences between the income or gains distributed on a book
versus tax basis are shown as excess distributions of net investment income and
net realized gain on sales of investments in the accompanying Statements of
Changes in Net Assets. The amount of distributions from net investment income
and net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from GAAP. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent that these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
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 June 30, 1998. The Funds had
no net capital loss carryforwards at June 30, 1998.
59
<PAGE> 61
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
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, Equity
Value, Growth, Strategic Growth, 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 such Fund's
average daily net assets.
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of Barclays
Global Investors, N.A. ("BGI") and indirect subsidiary of Barclays Bank PLC,
currently acts as sub-adviser to the Asset Allocation and U.S. Government
Allocation Funds. BGFA is entitled to receive from WFB, as compensation for its
sub-advisory services to the Asset Allocation Fund, a monthly fee at the annual
rate of 0.15% the Fund's average daily net assets up to $900 million and 0.10%
of the average daily net assets in excess of $900 million. For its sub-advisory
services to the U.S. Government Allocation Fund, BGFA is entitled to receive a
monthly fee at the annual rate of 0.05% of the Fund's average daily net assets
up to $75 million, 0.04% for the next $75 million and 0.03% of the Fund's
average daily net assets in excess of $150 million.
BGI, a wholly-owned subsidiary of Barclays Global Investors Holdings Inc.,
currently acts as custodian to the Asset Allocation and U.S. Government
Allocation Funds. BGI will not be entitled to receive compensation for its
custodial services so long as BGFA is entitled to receive compensation for
providing investment sub-advisory services to such Funds.
The Trust has entered into contracts on behalf of the Equity Value, Growth,
Money Market and Strategic Growth Funds with WFB, whereby WFB is responsible for
providing custody services for such Funds. Pursuant to the contracts, WFB is
entitled to certain transaction charges plus an annual fee for custody services
at an annual rate of 0.0167% of the average daily net assets of each Fund.
The Company entered into contracts on behalf of the Funds with WFB, whereby WFB
is responsible for providing portfolio accounting services for the Funds.
Pursuant to the contracts, 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.
Prior to May 1, 1998, the Asset Allocation and U.S. Government Allocation Funds
were not being charged for portfolio accounting services.
The Trust has entered into contracts 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, Equity Value,
Growth, Strategic Growth 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 contracts on behalf of the Funds with WFB, whereby
WFB provides shareholder services to the Funds. Pursuant to the contracts, WFB
is entitled to receive shareholder servicing fees at an annual rate of 0.25% of
the average daily net assets of each Fund. Prior to May 1, 1998, the Funds were
not being charged for shareholder services.
The Trust has entered into administration agreements on behalf of the Funds
whereby WFB as administrator and Stephens Inc. ("Stephens") as co-administrator
provide the Funds with administrative services. For these services, WFB and
Stephens are entitled to receive monthly fees at the annual rates of 0.03% and
0.04%, respectively, of each Fund's average daily net assets. Prior to May 1,
1998, WFB and Stephens were entitled to receive monthly fees at the annual rates
of 0.04% and 0.02%, respectively, of each Fund's average daily net assets.
60
<PAGE> 62
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
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, 1998 were waived by WFB. Waived
fees and reimbursed expenses continue at the discretion of WFB and Stephens.
Certain officers and one trustee of the Trust are also officers of Stephens. As
of June 30, 1998, Stephens owned 3,731 shares of the Asset Allocation Fund,
10,020 shares of the Equity Value Fund, 2,897 shares of the Growth Fund, 235
shares of the Money Market Fund, 10,000 shares of the Strategic Growth Fund and
3,202 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, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
AGGREGATE PURCHASES AND SALES: at Cost Proceeds
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Fund $93,799,780 $ 8,874,380
Equity Value Fund 1,690,436 8,896
Growth Fund 42,714,536 33,607,467
Strategic Growth Fund 546,154 235,464
U.S. Government Allocation Fund 9,825,684 8,938,059
</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 capital
stock. Capital share transactions for each of the Funds are disclosed in detail
in the Statements of Changes in Net Assets.
5. SUBSEQUENT EVENTS
On August 1, 1998, Wells Capital Management Incorporated ("WCM"), a wholly-owned
subsidiary of WFB, began acting as investment sub-advisor to the Equity Value,
Growth, Money Market and Strategic Growth Funds. WCM is entitled to receive from
WFB, as compensation for its sub-advisory services to the Equity Value, Growth
and Strategic Growth Funds, a monthly fee at the annual rate of 0.25% of the
Funds' average daily net assets up to $200 million, 0.20% for the next $200
million and 0.15% of the Fund's average daily net assets in excess of $400
million. WCM is entitled to receive from WFB, as compensation for its
sub-advisory services to the Money Market Fund, a monthly fee at the annual rate
of 0.05% of the Funds' average daily net assets up to $960 million and 0.04% of
the Funds' average daily net assets in excess of $960 million. WCM's minimum
annual fee is $120,000 for each Fund. This minimum annual fee does not increase
the advisory fees paid by the Funds to WFB.
61
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62
<PAGE> 64
American Skandia Life
Assurance Corporation
Tower One Corporate Drive
Shelton, CT 06484
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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, the Stagecoach Extra Credit Variable Annuity and the
Stagecoach Variable Annuity Flex. 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)1998 AMERICAN SKANDIA VA05001 (8/98)
