<PAGE> 1
STAGECOACH VARIABLE ANNUITY(TM)
STAGECOACH VARIABLE ANNUITY PLUS(TM)
STAGECOACH EXTRA CREDIT VARIABLE ANNUITY(TM)
------------------
ANNUAL REPORT
------------------
DECEMBER 31, 1997
------------------
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................. 35
Alger American Fund Financial Statements.................... 81
</TABLE>
This report has been prepared to provide information to owners of American
Skandia Life Assurance Corporation's Stagecoach Variable Annuity, Stagecoach
Variable Annuity Plus, and Stagecoach Extra Credit Variable Annuity. If it is
used for any other purpose, it must be accompanied or preceded by a current
prospectus, as applicable, which discloses any charges and other important
information about the Account, together with the current applicable prospectus
for the Life & Annuity Trust, the American Skandia Trust, and the Alger American
Growth Fund.
The financial statements for the sub-accounts that invest in Portfolios of
American Skandia Trust reflect financial activity for the Stagecoach Variable
Annuities and other products that use the same sub-accounts.
VARIABLE ANNUITIES:
- ---------------------------------------------------------------------
- are NOT insured by the FDIC or U.S. Government
- are NOT obligations or deposits of Wells Fargo Bank nor guaranteed by the
Bank
- involve investment risk, including possible loss of principal [NO FDIC LOGO]
1
<PAGE> 3
STAGECOACH VARIABLE ANNUITY
STAGECOACH VARIABLE ANNUITY PLUS
STAGECOACH EXTRA CREDIT VARIABLE ANNUITY
ANNUAL REPORT
TO OUR CONTRACT HOLDERS:
Powerful performances in the domestic equity markets brought investors yet
another outstanding record for 1997. With the Dow Jones Industrial Average
pacing through the 8000 point mark several times in the recent months and with
an S&P 500 Index just shy of 30% at 12/31/97, individual and corporate investors
celebrated the seventh anniversary of the bull market run.
We witnessed varying degrees of volatility during this period. In
mid-October, a market correction seized the markets for one or two days before
prices found their floors and proceeded to climb again. Similarly, as this
letter is written, the Asian Tiger economies and their currencies have lost
value. We are actively watching their day-to-day status to better evaluate a
recovery and monitor the impact of this fall-off on our own and the world's
economy.
Offering you a selection of top-flight portfolios that can help your
long-term savings and investment programs succeed -- despite such
volatility -- is a cornerstone of the American Skandia investment philosophy.
This past winter, we introduced five new portfolios into the American Skandia
Trust engaging in four new partnerships with proven, well-regarded asset
management organizations.
With approval from Board of Trustees, on 12/2/97, we brought into the
Trust, the following portfolios:
1. BT (Bankers Trust) Enhanced 500 Portfolio
2. Cohen and Steers Real Estate Trust Portfolio
3. Lord Abbett Small Capitalization Value Portfolio
4. Marsico Capital Growth Portfolio
5. Stein Roe Venture Portfolio
The new portfolios expand our capability by broadening our coverage of the
equity style universe as defined by the style and capitalization guidelines from
Morningstar. As an example, the five new portfolios offer investors selection in
Large Cap Growth -- Marsico Capital Growth; Large Cap Blend -- BT Enhanced 500;
Mid-Cap Value -- Cohen & Steers Real Estate; Small Cap Blend -- Stein Roe
Venture; and Small Cap Value -- Lord, Abbett Small Cap Value.
What this means for you, our investors, is a greater range of managers and
portfolios from which to choose. We believe that our mission is to provide
selection for the investing public through financial intermediaries who can
provide professional advice and insight. By enabling the selection to broaden
and cover the principal asset classes and capitalization strata, we hope to
fulfill this objective.
AST BANKERS TRUST ENHANCED 500
The first index fund in our offering, Bankers Trust is recognized as a
premier index manager with a broad range of institutional clients. Bankers
Trust, headquartered in New York City, manages over 317.8 billion including 3
Billion in index funds.
2
<PAGE> 4
AST COHEN & STEERS REAL ESTATE PORTFOLIO
The addition of Cohen & Steers, the first name in real estate investment
trust management, is an exciting inflection point for American Skandia. At
present, the portfolio in which AST is investing, is the largest public REIT
fund representing the broadest possible research and investment selection
capability in the industry. Located in New York City with over 5.83 billion
under management, the AST Cohen & Steers Real Estate Portfolio is personally
managed by partner Robert Steers.
AST LORD ABBETT SMALL CAPITALIZATION VALUE PORTFOLIO
A familiar manager and partner to American Skandia, Lord Abbett's value
discipline attracts assets and delivers consistently strong value-oriented
results for investors. The small cap value portfolio, managed by Robert Fetch, a
veteran investor with more than 20 years experience in this style, enlarges the
capacity of AST to accept assets in this important asset class.
AST MARSICO CAPITAL GROWTH PORTFOLIO
We are delighted to welcome Tom Marsico and his superb management team to
American Skandia. Marsico, familiar to most of us as the former manager of the
Janus Capital Growth portfolio, established his own equity management firm in
Denver this autumn following his departure from Janus. Focusing on selecting
high quality, large capitalization growth companies with multi-national
presence, Marsico Capital Growth is an exciting addition to the American Skandia
Trust.
AST STEIN ROE VENTURE PORTFOLIO
Stein Roe is a well respected manager of personal and institutional assets,
located in Chicago with a tradition of superior stock picking expertise dating
back to the 1930s. Stein Roe is offering investors its proven small
capitalization security selection process which seeks quality fundamentals and
improving market prospects. The portfolio rounds out our small cap offerings.
Our goal is to provide you and your financial advisors with choice and
selection. I think that you will agree with us that the new portfolios enhance
your ability to choose from among the best. Your overwhelming response in 1997,
with more than $3.7 billion in sales, is a positive signal that we are
delivering the products and portfolio opportunities that you seek.
Best regards,
/s/ GORDON C. BORONOW
Gordon C. Boronow
3
<PAGE> 5
[This page intentionally left blank.]
4
<PAGE> 6
LIFE & ANNUITY TRUST
ANNUAL REPORT
DECEMBER 31, 1997
ASSET ALLOCATION FUND
GROWTH AND INCOME FUND
MONEY MARKET FUND
U.S. GOVERNMENT ALLOCATION FUND
5
<PAGE> 7
ASSET ALLOCATION FUND
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 over the past 20
years that analyzes extensive financial data from numerous sources and
recommends a portfolio allocation.
Q. What was the total return for the Fund for the year ended December 31, 1997?
A. The Fund recorded a 20.88% total return for the year.
Q. Increased corporate earnings and low inflation have fueled S&P 500 stocks
over the recent years. Was this the case during the year?
A. Yes, a strong economy with above-expected earnings and a low inflation rate
were once again the primary drivers of the S&P 500's rise of over 33% for the
year. Corporate earnings have continued to meet or exceed analysts'
expectations, with positive earnings surprises having surpassed negative
surprises. Inflation has been kept at bay. The annual inflation rate was below
2.0% for the year.
Q. What is the current analysis: can the equities market support these
valuations?
A. Investor concerns that the stock market may be overvalued may have
contributed to the slackening pace of the market over the last quarter. The
market's susceptibility to bad news was demonstrated in the reaction to the
crisis in the Asian markets. The S&P 500 forward price-to-earning ratio, which
measure stock prices against expected earnings over the next year, reached a
post-World War II high of 19.2 in July. The general decline in the last quarter
helped nudge the P/E ratio down. If earnings continue at the current pace and
inflation remains low, we believe the current market valuations may be
justified. An increase in the inflation rate (most likely causing the Fed to
hike interest rates) and/or any downturn in corporate earnings could cause a
further correction in the equities market, forcing the valuation down to
something closer to historical averages.
Q. Have the swings in the market been reflected in swings in the Fund's
investment allocation?
A. Throughout the first six or seven months of the year, the allocation was
relatively stable, remaining at about 60% bonds and 40% stocks. This was due to
the model's analysis, discussed above, that the stock market was overvalued. The
allocation began to shift as the Asian financial crisis, among other causes,
began to take the steam out of the stock market -- including the Dow's largest
ever one-day point decline on October 27. This helped bring stock valuations
closer in line with historical averages. The fourth quarter's equity decline,
coupled with the inflows into the US bond market as foreign dollars tried to
find a safe haven, caused the value-adjusted outlook to favor stocks again. The
year ended with an allocation of 65% stocks, 35% bonds. Due to the small size of
the Fund, its exposure to equities was realized through the use of S&P 500
futures contracts instead of investing directly in common stocks which comprise
the S&P 500 Index. The Advisor adopted this strategy to maximize the Fund's
ability to meet its investment objectives.
Q. What was the year end relative yield difference between cash and bonds?
A. The yield curve, which measures the differences in yields for bonds of
different maturity lengths, "flattened" throughout the year, meaning that the
long-term yields and short-term (cash) drew closer together. Thirty-year
Treasury yields were down to 5.92% by the end of 1997, while the three month
yield (cash) ended at 5.34%.
6
<PAGE> 8
LAT ASSET ALLOCATION FUND
[GRAPH]
<TABLE>
<CAPTION>
LAT Asset Lehman Brothers U.S. IBC/Donoghue
Allocation Fund Treasury Bond Index Money Fund Average S&P 5000
<S> <C> <C> <C> <C>
10000 10000 10000 10000
9940 9934 10028 10164
6/94 9796 9840 10058 9915
10107 10173 10090 10241
10248 10098 10123 10660
9/94 9964 9780 10158 10400
10055 9746 10195 10633
9954 9803 10234 10246
12/94 10113 9954 10277 10398
10384 10209 10322 10668
10707 10499 10369 11083
3/95 10894 10590 10416 11409
11137 10778 10464 11745
11686 11605 10512 12214
6/95 11870 11740 10560 12497
12031 11553 10608 12911
12127 11809 10654 12944
9/95 12438 12026 10701 13490
12514 12363 10747 13442
12860 12672 10794 14031
12/95 13041 13009 10841 14301
13284 13009 10886 14788
13180 12381 10931 14925
3/96 13256 12134 10975 15068
13233 11932 11019 15290
13350 11870 11063 15683
6/96 13531 12122 11107 15742
13223 12127 11151 15047
13199 11976 11196 15364
9/96 13705 12306 11241 16227
14185 12790 11286 16675
14917 13217 11331 17934
12/96 14535 12893 11376 17579
14815 12800 11422 18678
14853 12808 11467 18824
3/97 14323 12481 11513 18050
14904 12786 11561 19128
15406 12929 11608 20292
6/97 15820 13180 11657 21204
16903 13958 11706 22889
16211 13572 11755 21607
9/97 16822 13940 11804 22792
16849 14409 11854 22030
17232 14602 11904 23050
12/97 17569 14845 11954 23447
</TABLE>
Total Return for the year ended December 31, 1997: 20.88%
Three-year Average Annual Total Return: 20.21%
Average Annual Return Since Inception: 16.22%
- --------------------------------------------------------------------------------
1. Investors should note that the Fund 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.
2. The Lehman Brothers U.S. Treasury Bond Index is an unmanaged index
comprised of Treasury bonds with maturities averaging between 10 and 30
years.
3. The IBC/Donoghue Money Fund Average is comprised of the average yields
of over 600 taxable money funds.
4. The S&P 500 Index is an unmanaged index of 500 widely held common
stocks, representing industrial, financial, utility and transportation
companies, listed or traded on national exchanges and the over-the-counter
market.
5. 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 Asset Allocation Fund will fluctuate with market
conditions so that redemption proceeds may be worth more or less than
their original cost.
6. During 1997, the Fund's adviser 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.
7
<PAGE> 9
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--DECEMBER 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (99.48%)
U.S. TREASURY BILLS (68.70%)
$ 8,310,000 U.S. Treasury Bills 4.71%+ 01/15/98 $ 8,292,853
8,932,000 U.S. Treasury Bills 5.00+ 02/05/98 8,884,674
3,814,000 U.S. Treasury Bills* 5.00+ 02/26/98 3,783,162
31,387,000 U.S. Treasury Bills 5.01+ 01/22/98 31,291,531
297,000 U.S. Treasury Bills 5.02+ 02/19/98 294,777
4,664,000 U.S. Treasury Bills 5.10+ 03/05/98 4,622,635
2,281,000 U.S. Treasury Bills 5.13+ 03/26/98 2,253,968
-----------
$59,423,600
U.S. TREASURY BONDS (30.78%)
$ 900,000 U.S. Treasury Bonds 6.00% 02/15/26 $ 898,874
4,800,000 U.S. Treasury Bonds 8.50 02/15/20 6,238,502
5,000,000 U.S. Treasury Bonds 8.75 05/15/20 6,657,815
2,350,000 U.S. Treasury Bonds 8.75 08/15/20 3,133,579
2,200,000 U.S. Treasury Bonds 8.88 02/15/19 2,943,875
5,000,000 U.S. Treasury Bonds 9.00 11/15/18 6,757,815
-----------
$26,630,460
TOTAL U.S. TREASURY SECURITIES $86,054,060
(Cost $84,739,465)
TOTAL INVESTMENTS IN SECURITIES
(Cost $84,739,465)** (Notes 1 and 3) 99.48% $86,054,060
Other Assets and Liabilities, Net 0.52 451,796
------- -----------
TOTAL NET ASSETS 100.00% $86,505,856
======= ===========
</TABLE>
- --------------------------------------------------------------------------------
+ Yield to maturity.
* These U.S. Treasury Bills are held in a segregated account for margin
requirements on future contracts. As of 12/31/97 the notional contractual
value of the futures contracts was $50,893,650. See note 1.
** Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
<TABLE>
<S> <C> <C>
Gross Unrealized Appreciation $1,317,010
Gross Unrealized Depreciation (2,415)
----------
NET UNREALIZED APPRECIATION $1,314,595
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 10
GROWTH AND INCOME FUND
The Growth and Income Fund seeks to earn current income and achieve long-term
capital appreciation. It seeks to achieve this objective by investing in common
stocks and preferred stocks and debt securities that are convertible into common
stocks. Under normal market conditions, the Fund invests at least 65% of its
total assets in common stocks and securities that are convertible into common
stocks and at least 65% of its total assets in income-producing securities.
Q. What was the total return for the Fund for the year ended December 31, 1997?
A. The Fund recorded an 17.33% total return for the year.
Q. What characterized the equity market this year?
A. Despite volatility towards the end of the year in particular, the stock
market had another very strong year. As measured by the S&P 500 Index, the
equity market had a total return of 33.17%. Much of the growth was found in the
large cap stocks as investors tended to look for stable, high quality companies
that they thought provided a degree of safety amid the general uncertainty
surrounding the direction of interest rates, inflation and the continuation of
the bull markets. This large cap orientation was seen again in the S&P 500's
quick recovery following the October setback sparked by the Asian financial
crisis. Small cap indexes, such as the Russell 2000, which returned 22.36% for
1997, did less well by comparison to large-cap indexes such as the S&P 500
Index.
Q. What sectors did well during the year? Which did poorly?
A. For the full year, financial stocks posted the best sector return as lower
interest rates and industry consolidation buoyed prices for bank, insurance and
credit card companies. Healthcare stocks rose as investors sought their
consistent dividends. Basic materials and energy stocks underperformed
expectations due to weak commodities prices and deflation fears spawned by the
Asian crisis.
Q. What's the outlook for the growth sector?
A. We feel that the current high equity prices makes the equity market
vulnerable as investors continue to assess the potential impact of
Asian -- especially Japanese -- markets on U.S. corporate earnings growth. In
the end we expect only a moderate impact, but combined with the natural slowing
of the nearly seven year long economic expansion, we expect that overall growth
will be less than in recent years. We believe that earnings reports in 1998 will
demonstrate that the Asian markets have not overly affected US corporate growth,
and that the growth sector will rebound.
9
<PAGE> 11
LAT GROWTH AND INCOME
[Graph]
<TABLE>
<CAPTION>
LAT Growth and Income S&P 500
--------------------- -------
<S> <C> <C>
10000 10000
10110 10164
6/94 9888 9915
10189 10241
10511 10660
9/94 10422 10400
10502 10633
10260 10246
12/94 10447 10398
10508 10668
10994 11083
3/95 11237 11409
11390 11745
11930 12214
6/95 12209 12497
12589 12911
12794 12944
9/95 13223 13490
12801 13442
13325 14031
12/95 13497 14301
13748 14788
14260 14925
3/96 14297 15068
14769 15290
15136 15683
6/96 14676 15742
14108 15047
14518 15364
9/96 15247 16227
15659 16675
16662 17934
12/96 16525 17579
17473 18678
16966 18624
3/97 16376 18050
17036 19128
18117 20292
6/97 18506 21204
20013 22889
18853 21607
9/97 19906 22792
18986 22030
19280 23050
12/97 19389 23447
</TABLE>
Total Return for the Year Ended December 31, 1997: 17.33%
Three-year Average Annual Total Return: 22.89%
Average Annual Total Return Since Inception: 19.31%
- --------------------------------------------------------------------------------
1. 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.
2. The S&P 500 Index is an unmanaged index of 500 widely held common
stocks, representing industrial, financial, utility and transportation
companies, listed or traded on national exchanges and the over-the-counter
market.
3. 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 Growth and Income Fund will fluctuate with the market
conditions so that redemption proceeds may be worth more or less than
their original cost.
4. During 1997, the Fund's adviser 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.
10
<PAGE> 12
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS (89.14%)
AEROSPACE (1.70%)
15,000 Boeing Co $ 857,615 $ 734,063
5,000 Lockheed Martin Corp 527,804 492,500
----------- -----------
$ 1,385,419 $ 1,226,563
APPLIANCES AND FURNITURE (1.20%)
20,500 Sunbeam-Oster Co Inc $ 619,068 $ 863,563
AUTOMOBILE & RELATED (1.84%
21,000 Danaher Corp $ 874,115 $ 1,325,625
BASIC INDUSTRIES (3.34%)
13,400 Aluminum Co of America $ 899,658 $ 943,025
12,800 Colgate-Palmolive Co 685,664 940,800
12,300 Monsanto Co 443,860 516,600
----------- -----------
$ 2,029,182 $ 2,400,425
BEVERAGE BREWING AND DISTRIBUTION (3.01%)
20,900 Coca-Cola Co $ 1,383,789 $ 1,392,463
21,300 Pepsico Inc 780,853 776,119
----------- -----------
$ 2,164,642 $ 2,168,582
COMMERCIAL SERVICES (2.11%)
41,000 Service Corp International $ 1,291,254 $ 1,514,438
COMPUTER SOFTWARE (2.46%)
14,600 First Data Corp $ 563,633 $ 427,050
10,400 Microsoft Corp! 1,454,653 1,344,200
----------- -----------
$ 2,018,286 $ 1,771,250
COMPUTER SYSTEMS (4.75%)
21,000 Cisco Systems Inc! $ 833,105 $ 1,170,750
9,400 Hewlett Packard Co 636,474 587,500
8,900 International Business Machines Corp 1,001,450 930,606
9,100 Lucent Technologies Inc 737,874 726,863
----------- -----------
$ 3,208,903 $ 3,415,719
</TABLE>
11
<PAGE> 13
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
ENERGY & RELATED (11.25%)
10,200 Amoco Corp $ 916,955 $ 868,275
14,400 Anadarko Petroleum Corp 890,170 873,900
15,000 Baker Hughes Inc 666,671 654,375
22,000 Exxon Corp 1,409,870 1,346,125
7,200 FPL Group Inc 379,759 426,150
8,800 Mobil Corp 599,139 635,250
19,200 Royal Dutch Petroleum Co 1,037,232 1,040,400
7,243 Santa Fe International Corp 339,288 294,700
8,149 Schlumberger Ltd 629,551 655,995
10,200 Texaco Inc 551,597 554,625
9,100 Tosco Corp 296,333 344,094
14,200 Williams Co Inc 332,795 402,917
----------- -----------
$ 8,049,360 $ 8,096,806
ENTERTAINMENT & LEISURE (1.20%)
8,700 Disney (Walt) Co $ 818,540 $ 861,844
FINANCE & RELATED (13.20%)
16,100 American International Group Inc $ 1,274,351 $ 1,750,875
6,000 Banc One Corp 324,934 325,875
14,700 Chase Manhattan Bank 1,521,317 1,609,650
29,600 Conseco Inc 1,181,818 1,344,950
13,100 Federal Home Loan Mortgage Corp 457,998 549,381
11,800 Household International Inc 1,197,031 1,505,238
15,264 MBNA Corp 389,659 416,898
28,900 SAFECO Corp 1,400,866 1,408,875
9,700 Schwab (Charles) Corp 268,180 406,794
7,000 Security Capital Industrial Trust 142,134 174,125
----------- -----------
$ 8,158,288 $ 9,492,661
FOOD & RELATED (1.74%)
27,700 Philip Morris Co Inc $ 1,158,656 $ 1,255,156
GENERAL BUSINESS & RELATED (4.71%)
10,100 DuPont (E I) de Nemours $ 651,677 $ 606,631
28,500 General Electric Co 1,698,681 2,091,188
11,500 Kimberly-Clark Corp 550,885 567,094
2,000 Tribune Co 117,920 124,500
----------- -----------
$ 3,019,163 $ 3,389,413
HEALTHCARE (4.00%)
17,000 American Home Products Corp $ 1,243,765 $ 1,300,500
10,200 Lilly (Eli) & Co 688,191 710,175
11,600 Pfizer Inc 876,786 864,925
----------- -----------
$ 2,808,742 $ 2,875,600
</TABLE>
12
<PAGE> 14
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MANUFACTURING PROCESSING (5.55%)
30,000 Allied Signal Inc $ 963,992 $ 1,168,125
5,500 Honeywell Inc 428,145 376,750
12,000 Johnson & Johnson 783,270 790,500
8,100 Praxair Inc 456,908 364,500
16,200 Procter & Gamble Co 1,317,727 1,292,963
----------- -----------
$ 3,950,042 $ 3,992,838
MEDICAL EQUIPMENT & SUPPLIES (1.89%)
27,000 Baxter International Inc $ 1,202,653 $ 1,361,813
PHARMACEUTICALS (3.69%)
12,500 Bristol-Myers Squibb Co $ 1,201,063 $ 1,182,813
10,900 Merck & Co Inc 1,039,892 1,158,125
6,100 Smithkline Beecham Plc 293,730 313,769
----------- -----------
$ 2,534,685 $ 2,654,707
REAL ESTATE INVESTMENT TRUSTS (0.88%)
6,200 Equity Residential Properties Trust $ 258,951 $ 313,488
7,500 Spieker Properties Inc 227,475 321,563
----------- -----------
$ 486,426 $ 635,051
RETAIL & RELATED (3.10%)
8,000 Dayton-Hudson Corp $ 448,899 $ 540,000
3,650 Gap Inc 129,121 129,347
7,500 Gillette Co 447,088 753,281
20,400 Wal Mart Stores Inc 836,859 804,525
----------- -----------
$ 1,861,967 $ 2,227,153
SEMICONDUCTORS (1.74%)
9,600 Intel Corp $ 782,551 $ 674,400
10,100 Motorola Inc 692,099 576,331
----------- -----------
$ 1,474,650 $ 1,250,731
TELECOMMUNICATIONS (11.06%)
25,800 AT & T Corp $ 1,277,388 $ 1,580,250
21,100 Bell Atlantic Corp 1,790,316 1,920,100
45,000 Ericsson Telefonaktiebolaget L M Class B 1,475,953 1,679,063
8,700 France Telecom SA -- Sponsored ADR+ (France) 319,703 313,200
13,000 GTE Corp 576,046 679,250
4,000 Nokia Corp ADR Class A 353,231 280,000
6,750 Portugal Telecom SA -- Sponsored ADR (Portugal) 286,385 317,250
11,900 SBC Communication Inc 719,029 871,675
4,900 Telecom Italia SPA -- Sponsored ADR (Italy) 316,932 313,600
----------- -----------
$ 7,114,983 $ 7,954,388
</TABLE>
13
<PAGE> 15
LIFE & ANNUITY TRUST GROWTH AND INCOME FUND--DECEMBER 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
UNIT INVESTMENT TRUSTS (4.16%)
30,850 Standard & Poor's Depositary Receipt $ 2,998,157 $ 2,990,522
UTILITIES (0.56%)
14,900 Edison International $ 384,109 $ 405,094
TOTAL COMMON STOCKS $59,611,290 $64,129,942
WARRANTS (0.002%)
325 Security Capital Group expires 9/18/98+ $ 2,559 $ 1,706
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
<C> <S> <C> <C> <C>
SHORT-TERM INSTRUMENTS (6.56%)
REPURCHASE AGREEMENTS (6.56%)
$2,793,000 Goldman Sachs Pooled Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50% 01/02/98 $ 2,793,000
1,923,000 JP Morgan Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities (Cost
$4,716,000) 6.30 01/02/98 1,923,000
-----------
$ 4,716,000
TOTAL INVESTMENTS IN SECURITIES
(Cost $64,329,849)* (Notes 1 and 3) 95.70% $68,847,648
Other Assets and Liabilities, Net 4.30 3,096,220
----- ------ -----------
TOTAL NET ASSETS 100.00% $71,943,868
----- ====== ===========
-----
</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 $6,030,574
Gross Unrealized Depreciation (1,512,775)
----------
NET UNREALIZED APPRECIATION $4,517,799
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 16
MONEY MARKET
Q. What was the seven-day yield as of December 31, 1997?
A. The seven-day yield for the Fund as of December 31, 1997 was 5.17%.
Q. What happened to interest rates during the year?
A. There was considerable uncertainty regarding interest rates early in the
year. The bond market slumped in the first quarter in response to inflation
fears. This prompted the Federal Reserve to tighten money policy with a 0.25%
increase in the federal funds target rate. The markets absorbed this news and
gradually yields began to fall for the bench mark 30-year Treasury bond. The
yield curve, which measures the spread in yields between short-term to long-term
instruments, began to flatten. Short-term rates are vulnerable to swings in
market expectations of Federal Reserve policy, but recent comments by Federal
Reserve Chairman Alan Greenspan suggest that no further rate hike is likely in
the immediate future. We expect rates to move lower as inflation fears recede,
and believe that the Federal Reserve may ease monetary policy later in the year
if inflation fears continue to recede.
Q. What are some of the market pressures that affect yields?
A. There are a number of influences. If the economy is expected to grow rapidly,
interest rates usually move higher in anticipation of a Federal Reserve rate
hike. Cash flows into money market mutual funds are another important factor.
The dynamics of supply and demand as managers invest shareholders' cash can
drive yields higher or drag them lower, particularly for variable rate
securities.
Q. What does "weighted average maturity" tell us about the Fund? How has it
changed during the period?
A. Weighted average maturity is a measure of the average length of time before
securities in a portfolio mature on a dollar for dollar basis. It is one of the
measures of a fund's sensitivity to interest rate changes. Funds with longer
maturities generally are more sensitive to interest rate fluctuations.
Typically, for a money market mutual fund, managers will increase maturity to
lock in higher rates or shorten maturity if they anticipate higher rates being
available soon. Market forces may also make one maturity range relatively more
attractive than another. For the most part, the weighted average maturity for
the Fund has been fairly steady and in the short-to-intermediate range of 45 to
55 days.
Q. What are repurchase agreements and why are they attractive?
A. A repurchase agreement is as an agreement between the buyer and seller of a
security to repurchase the security at an agreed upon time and price. In effect,
it's like a loan with the security acting as collateral. Repurchase Agreements
are attractive to both parties because they offer a short-term return that
usually is greater than market yields, yet they often are less expensive than
some traditional loans.
15
<PAGE> 17
LIFE & ANNUITY TRUST MONEY MARKET FUND--DECEMBER 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES 69.21%
U.S. TREASURY BILLS 39.39%
$1,500,000 U.S. Treasury Bills 4.09%+ 01/08/98 $ 1,498,513
4,340,000 U.S. Treasury Bills 5.01+ 01/22/98 4,326,374
-----------
$ 5,824,887
U.S. TREASURY NOTES 29.82%
$ 530,000 U.S. Treasury Notes 5.13% 04/30/98 $ 528,480
250,000 U.S. Treasury Notes 5.13 06/30/98 249,361
500,000 U.S. Treasury Notes 5.88 04/30/98 500,581
1,200,000 U.S. Treasury Notes 6.13 05/15/98 1,201,528
480,000 U.S. Treasury Notes 6.13 08/31/98 481,076
660,000 U.S. Treasury Notes 7.13 10/15/98 667,296
150,000 U.S. Treasury Notes 7.88 01/15/98 150,124
250,000 U.S. Treasury Notes 7.88 04/15/98 251,232
375,000 U.S. Treasury Notes 8.25 07/15/98 380,147
-----------
$ 4,409,825
TOTAL U.S. TREASURY SECURITIES $10,234,712
(Cost $10,234,712)
REPURCHASE AGREEMENTS 59.23%
$2,208,000 Goldman Sachs Pooled Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50% 01/02/98 $ 2,208,000
3,679,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50 01/02/98 3,679,000
192,000 JP Morgan Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.30 01/02/98 192,000
2,679,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.50 01/02/98 2,679,000
-----------
TOTAL REPURCHASE AGREEMENTS (Cost $8,758,000) $ 8,758,000
TOTAL INVESTMENTS IN SECURITIES
(Cost $18,992,712)* (Note 1) 128.44% $18,992,712
Other Assets and Liabilities, Net (28.44) (4,205,084)
------- -----------
TOTAL NET ASSETS 100.00% $14,787,628
======= ===========
</TABLE>
- --------------------------------------------------------------------------------
+ Yield to maturity.
* Cost for federal income tax purposes is the same as for financial statement
purposes.
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 18
US GOVERNMENT ALLOCATION FUND
The US 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. The Fund uses a proprietary investment model to assess
the relative attractiveness of U.S. Treasury bonds, U.S. Treasury notes and
money market instruments over time.
Q. What was the total return for the Fund for the year ended December 31, 1997?
A. The Fund recorded an 7.47% total return for the year.
Q. What happened to interest rates during the year?
A. There was considerable uncertainty regarding interest rates early in the
year. The bond market slumped in the first quarter in response to inflation
fears, prompting the Federal Reserve to tighten money policy with a 0.25%
increase in the federal funds target rate. The markets absorbed this news and
gradually yields began to fall for the benchmark 30-year Treasury bond and the
yield curve, which measures the spread in yields between short-term to long-term
instruments, began to flatten. Short-term rates will always be vulnerable to
swings in market expectations of Federal Reserve policy, but recent comments by
Fed Chairman Alan Greenspan suggest that no further rate hike is likely in the
immediate future. We expect rates to move lower as inflation fears recede, and
we may even see the Federal Reserve easing policy later in the year.
Q. Was this "flattened" yield curve reflected in the allocation?
A. Yes. Part of the model's analysis is to adjust for risk while weighing the
current relative value of an asset class. What this means, in a sense, is that
longer-term bonds are inherently more risky than shorter-term notes because the
prices of longer-term bonds are more susceptible to changes in interest rates.
Therefore, there has to be enough extra return to justify the additional risk of
investing in longer-term debt instruments. This year, the rewards did not
justify the risk. Early in the year, the allocation heavily favored the
intermediate-term Treasury notes and gradually shifted into a majority cash
position by the end of the year. The final allocation was 37% notes, 68% cash,
and 8% bonds.
17
<PAGE> 19
LAT US GOVERNMENT ALLOCATION FUND
<TABLE>
<CAPTION>
LAT U.S. LEHMAN IBC/DONOGHUE LEHMAN
GOVERNMENT BROTHERS MONEY FUND BROTHERS
ALLOCATION U.S. TREASURY AVERAGE U.S. TREASURY
FUND BOND INDEX NOTE INDEX
---------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
10000 10000 10000 10000
10005 9934 10028 10007
6/94 10000 9840 10058 10009
10164 10173 10090 10139
10190 10098 10123 10169
9/94 10061 9780 10158 10085
10054 9746 10195 10088
9985 9803 10234 10042
12/94 10041 9954 10277 10074
10204 10209 10322 10237
10449 10499 10369 10433
3/95 10518 10590 10416 10490
10643 10778 10464 10611
10955 11605 10512 10911
6/95 11029 11740 10560 10983
11015 11553 10608 10988
11109 11809 10654 11076
9/95 11209 12026 10701 11150
11310 12363 10747 11274
11388 12672 10794 11412
12/95 11487 13009 10841 11526
11533 13009 10886 11626
11419 12381 10931 11501
3/96 11402 12134 10975 11445
11343 11932 11019 11412
11301 11870 11063 11406
6/96 11427 12122 11107 11519
11452 12127 11151 11553
11452 11976 11196 11568
9/96 11646 12306 11241 11716
11890 12790 11286 11907
12034 13217 11331 12050
12/96 11945 12893 11376 11985
11978 12800 11422 12030
11982 12808 11467 12048
3/97 11839 12481 11513 11977
12008 12786 11561 12111
12118 12929 11608 12205
6/97 12252 13180 11657 12309
12506 13958 11706 12539
12445 13572 11755 12489
9/97 12586 13940 11804 12625
12731 14409 11854 12773
12749 14602 11904 12802
12/97 12838 14845 11954 12907
</TABLE>
Total Return for the Year Ended December 31, 1997: 7.47%
Three Year Average Annual Total Return: 8.54%
Average Annual Total Return Since Inception: 6.89%.
30 day SEC yield: 5.23% as of December 31, 1997.
- --------------------------------------------------------------------------------
1. Investors should note that the Fund 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.
2. The Lehman Brothers U.S. Treasury Bond Index is an unmanaged index
comprised of Treasury bonds with maturities between 10 and 30 years.
3. The IBC/Donoghue Money Fund Average is comprised of the average yields
of over 600 taxable money funds.
4. Lehman Brothers U.S. Treasury Note Index is an unmanaged index
comprised of U.S. Treasury 2-10 year notes.
5. 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 of less
than their original cost.
6. Yield, calculated as required by the SEC, is based on earnings of the
Fund's portfolio during the 30 days ended December 31, 1997.
7. During 1997, the Fund's adviser 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 and yield would have been lower.
18
<PAGE> 20
LIFE & ANNUITY TRUST U.S. GOVERNMENT ALLOCATION FUND--DECEMBER 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES--112.48%
U.S. TREASURY BILLS--68.03%
$3,048,000 U.S. Treasury Bills 4.71%+ 01/15/98 $ 3,041,711
323,000 U.S. Treasury Bills 5.00+ 02/05/98 321,393
3,059,000 U.S. Treasury Bills 5.00+ 02/26/98 3,034,266
6,159,000 U.S. Treasury Bills 5.01+ 01/22/98 6,140,274
78,000 U.S. Treasury Bills 5.02+ 02/19/98 77,416
3,618,000 U.S. Treasury Bills 5.10+ 03/05/98 3,585,912
52,000 U.S. Treasury Bills 5.13+ 03/26/98 51,384
-----------
$16,252,356
U.S. TREASURY BONDS--7.92%
$ 250,000 U.S. Treasury Bonds 10.75% 05/15/03 $ 306,953
300,000 U.S. Treasury Bonds 11.13 08/15/03 376,500
600,000 U.S. Treasury Bonds 11.88 11/15/03 780,375
300,000 U.S. Treasury Bonds 13.75 08/15/04 429,750
-----------
$ 1,893,578
U.S. TREASURY NOTES--36.53%
$2,150,000 U.S. Treasury Notes 5.75% 08/15/03 $ 2,152,017
1,000,000 U.S. Treasury Notes 5.88 02/15/04 1,009,063
1,800,000 U.S. Treasury Notes 6.25 02/15/03 1,841,063
1,150,000 U.S. Treasury Notes 7.25 05/15/04 1,241,281
1,150,000 U.S. Treasury Notes 7.25 08/15/04 1,243,079
750,000 U.S. Treasury Notes 7.88 11/15/04 838,360
300,000 U.S. Treasury Notes 12.38 05/15/04 404,344
-----------
$ 8,729,207
TOTAL U.S. TREASURY SECURITIES $26,875,141
(Cost $26,646,994)
TOTAL INVESTMENTS IN SECURITIES
(Cost $26,646,994)* (Notes 1 and 3) 112.48% $26,875,141
Other Assets and Liabilities, Net (12.48) (2,981,362)
------- -----------
TOTAL NET ASSETS 100.00% $23,893,779
======= ===========
</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 $228,960
Gross Unrealized Depreciation (813)
--------
NET UNREALIZED APPRECIATION $228,147
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 21
LIFE & ANNUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
U.S.
Asset Growth and Money Government
Allocation Income Market Allocation
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
In securities, at identified cost (Note 3)
(Includes repurchase agreements of $8,758,000
for the Money Market Fund) $84,739,465 $64,329,849 $18,992,712 $26,646,994
In securities, at market value $86,054,060 $68,847,648 $18,992,712 $26,875,141
Cash 860 1,316 2,562 421
Receivables:
Dividends and interest 441,151 95,331 64,875 207,112
Fund shares sold 1,122,949 3,341,544 80,553 120,137
Prepaid expenses 4,758 929 0 331
TOTAL ASSETS 87,623,778 72,286,768 19,140,702 27,203,142
LIABILITIES
Variation margin on futures contracts 19,700 0 0 0
Payables:
Investment securities purchased 0 125,118 0 0
Distribution to shareholders 1,025,129 172,105 80,553 120,139
Fund shares redeemed 0 0 4,238,947 3,142,712
Due to co-administrator (Note 2) 1,424 1,134 318 451
Due to adviser (Note 2) 55,415 40,308 7,523 13,939
Accrued expenses 16,254 4,235 25,733 32,122
TOTAL LIABILITIES 1,117,922 342,900 4,353,074 3,309,363
TOTAL NET ASSETS $86,505,856 $71,943,868 $14,787,628 $23,893,779
Net assets consist of:
Paid-in Capital $82,609,421 $64,221,389 $14,787,628 $23,559,783
Undistributed net realized gain on investments 1,863,490 3,204,680 0 105,849
Net unrealized appreciation of futures 718,350 0 0 0
Net unrealized appreciation of investments 1,314,595 4,517,799 0 228,147
TOTAL NET ASSETS $86,505,856 $71,943,868 $14,787,628 $23,893,779
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
(NOTE 4)
Net assets $86,505,856 $71,943,868 $14,787,628 $23,893,779
Shares outstanding 7,217,104 4,285,400 14,787,632 2,327,003
Net asset value and offering price $11.99 $16.79 $1.00 $10.27
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 22
LIFE & ANNUITY TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Asset Growth and Money U.S. Government
Allocation Income Market Allocation
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 0 $ 716,607 $ 0 $ 0
Interest 4,212,871 260,785 872,937 1,228,097
TOTAL INCOME 4,212,871 977,392 872,937 1,228,097
EXPENSES (NOTE 2)
Advisory fees 419,704 318,232 71,778 115,022
Administration fees 36,082 28,024 8,107 10,010
Custody fees 0 17,858 5,742 0
Portfolio accounting fees 0 59,430 35,141 0
Transfer agency fees 94,187 71,653 15,412 25,864
Legal and audit fees 28,977 24,361 19,591 22,206
Registration fees 4,131 1,000 0 1,000
Directors' fees 11,856 11,856 11,856 11,856
Other 2,095 1,556 2,569 715
TOTAL EXPENSES 597,032 533,970 170,196 186,673
Less: Waived Fees and Reimbursed Expenses (38,227) (189,332) (85,698) (63,992)
Net Expenses 558,805 344,638 84,498 122,681
NET INVESTMENT INCOME 3,654,066 632,754 788,439 1,105,416
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments and futures
contracts 8,763,882 6,848,993 0 149,427
Net unrealized appreciation of futures contracts 496,725 0 0 0
Net change in unrealized appreciation of investments 706,325 143,053 0 204,961
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 9,966,932 6,992,046 0 354,388
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,620,998 $7,624,800 $788,439 $1,459,804
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 23
LIFE & ANNUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Asset Growth and
Allocation Income
Fund Fund
-------------------------------- --------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $ 3,654,066 $ 2,121,841 $ 632,754 $ 321,626
Net realized gain (loss) on sale of investments and
futures contracts 8,763,882 2,464,924 6,848,993 670,537
Net unrealized appreciation of futures contracts 496,725 37,850 0 0
Net unrealized appreciation (depreciation) of
investments 706,325 (24,131) 143,053 3,407,928
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 13,620,998 4,600,484 7,624,800 4,400,091
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (3,654,066) (2,121,841) (632,754) (321,626)
From net realized gain on sales of investments (7,395,696) (2,300,431) (3,829,806) (514,688)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 28,067,836 25,372,586 33,001,835 19,876,206
Reinvestment of dividends 11,049,762 4,422,270 4,462,560 836,312
Cost of shares redeemed (6,979,919) (3,642,899) (2,063,405) (1,815,249)
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL SHARE
TRANSACTIONS (NOTE 4) 32,137,679 26,151,957 35,400,990 18,897,269
INCREASE IN NET ASSETS 34,708,915 26,330,169 38,563,230 22,461,046
NET ASSETS
Beginning net assets 51,796,941 25,466,772 33,380,638 10,919,592
ENDING NET ASSETS $86,505,856 $51,796,941 $71,943,868 $33,380,638
SHARES ISSUED AND REDEEMED:
Shares sold 2,314,085 2,210,668 1,974,920 1,407,558
Shares issued in reinvestment of dividends 914,141 385,749 261,363 56,387
Shares redeemed (548,327) (318,474) (127,163) (133,606)
NET INCREASE IN SHARES OUTSTANDING 2,679,899 2,277,943 2,109,120 1,330,339
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 24
LIFE & ANNUITY TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money U.S. Government
Market Allocation
Fund Fund
-------------------------------- --------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income $ 788,439 $ 442,922 $ 1,105,416 $ 470,850
Net realized gain (loss) on sale of investments 0 225 149,427 (3,569)
Net unrealized appreciation of futures contracts 0 0 0 0
Net unrealized appreciation (depreciation) of
investments 0 0 204,961 (32,071)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 788,439 443,147 1,459,804 435,210
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (788,439) (442,922) (1,105,416) (470,850)
From net realized gain on sales of investments 0 (225) (40,057) 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 20,957,328 15,213,897 12,942,563 8,754,298
Reinvestment of dividends 788,439 443,145 1,145,473 470,850
Cost of shares redeemed (19,625,090) (8,813,439) (4,035,922) (517,327)
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL SHARE
TRANSACTIONS (NOTE 4) 2,120,677 6,843,603 10,052,114 8,707,821
INCREASE IN NET ASSETS 2,120,677 6,843,603 10,366,445 8,672,181
NET ASSETS:
Beginning net assets 12,666,951 5,823,348 13,527,334 4,855,153
ENDING NET ASSETS $14,787,628 $12,666,951 $23,893,779 $13,527,334
SHARES ISSUED AND REDEEMED:
Shares sold 20,957,328 15,213,897 1,273,335 868,061
Shares issued in reinvestment of dividends 788,439 443,145 112,789 46,768
Shares redeemed (19,625,090) (8,813,439) (394,100) (51,054)
NET INCREASE IN SHARES OUTSTANDING 2,120,677 6,843,603 992,024 863,775
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 25
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Asset Allocation Fund
--------------------------------------------------------------
From inception
on April 15,
Year Ended Year Ended Year Ended 1994 to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.42 $ 11.27 $ 9.71 $10.00
Net investment income 0.60 0.56 0.55 0.30
Net realized and unrealized gain (loss) on investments 1.73 0.69 2.21 (0.19)
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 2.33 1.25 2.76 0.11
LESS DISTRIBUTIONS:
Dividends from net investment income (0.60) (0.56) (0.55) (0.30)
Distributions from net realized gain (1.16) (0.54) (0.65) (0.10)
------- ------- ------- ------
TOTAL FROM DISTRIBUTIONS (1.76) (1.10) (1.20) (0.40)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 11.99 $ 11.42 $ 11.27 $ 9.71
======= ======= ======= ======
Total Return* 20.88% 11.46% 28.95% 1.13%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $86,506 $51,797 $25,467 $7,464
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.80% 0.69% 0.41% 0.00%
Ratio of net investment income to average net assets 5.20% 5.34% 5.58% 6.30%
Portfolio turnover 156% 4% 97% 0%
Average commission rate paid(1) N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 0.85% 0.80% 1.22% 2.24%
Ratio of net investment income(loss) to average net assets
prior to waived fees and reimbursed expenses 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.
** Not annualized.
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 26
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Growth and Income Fund
--------------------------------------------------------------
From inception
on April 12,
Year Ended Year Ended Year Ended 1994 to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.34 $ 12.91 $ 10.30 $10.00
Net investment income 0.19 0.20 0.22 0.14
Net realized and unrealized gain (loss) on investments 2.48 2.68 2.77 0.30
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 2.67 2.88 2.99 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income (0.19) (0.20) (0.22) (0.14)
Distributions from net realized gain (1.03) (0.25) (0.16) 0.00
------- ------- ------- ------
TOTAL FROM DISTRIBUTIONS (1.22) (0.45) (0.38) (0.14)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 16.79 $ 15.34 $ 12.91 $10.30
======= ======= ======= ======
Total Return* 17.33% 22.44% 29.19% 4.47%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $71,944 $33,381 $10,920 $2,136
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.65% 0.60% 0.43% 0.00%
Ratio of net investment income to average net assets 1.19% 1.53% 2.05% 3.00%
Portfolio turnover 124% 95% 84% 21%
Average commission rate paid(1) $0.0725 $0.0810 N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses: 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: 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.
** Not annualized.
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 27
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Money Market Fund
-----------------------------------------------------------
From inception
on May 19,
Year Ended Year Ended Year Ended 1994 to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.05 0.05 0.05 0.03
Net realized and unrealized gain (loss) on investments 0.00 0.00 0.00 0.00
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.05) (0.05) (0.03)
Distributions from net realized gain 0.00 0.00 0.00 0.00
------- ------- ------ ------
TOTAL FROM DISTRIBUTIONS (0.05) (0.05) (0.05) (0.03)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ====== ======
Total Return* 5.04% 4.72% 5.41% 2.71%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $14,788 $12,667 $5,823 $1,492
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.53% 0.51% 0.42% 0.00%
Ratio of net investment income to average net assets 4.95% 4.64% 5.15% 4.63%
Portfolio turnover N/A N/A N/A N/A
Average commission rate paid(1) N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.07% 1.22% 3.83% 11.43%
Ratio of net investment income (loss) to average net
assets prior to waived fees and reimbursed expenses 4.41% 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.
** Not annualized.
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 28
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. Government Allocation Fund
-----------------------------------------------------------
From inception
on April 26,
Year Ended Year Ended Year Ended 1994 to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.13 $ 10.30 $ 9.63 $10.00
Net investment income 0.58 0.56 0.60 0.40
Net realized and unrealized gain (loss) on investments 0.15 (0.17) 0.77 (0.37)
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.73 0.39 1.37 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income (0.58) (0.56) (0.60) (0.40)
Distributions from net realized gain (0.01) 0.00 (0.10) 0.00
------- ------- ------ ------
TOTAL FROM DISTRIBUTIONS (0.59) (0.56) (0.70) (0.40)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.27 $ 10.13 $10.30 $ 9.63
======= ======= ====== ======
Total Return* 7.47% 3.99% 14.40% 0.41%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $23,894 $13,527 $4,855 $ 866
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.64% 0.60% 0.45% 0.00%
Ratio of net investment income to average net assets 5.75% 5.75% 5.82% 7.35%
Portfolio turnover 135% 222% 405% 130%
Average commission rate paid(1) N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 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 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.
** Not annualized.
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 29
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Life & Annuity Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end series management investment company.
The Trust was organized as a Delaware Business Trust on October 28, 1993. The
Trust consists of four separate diversified funds (the "Funds"): the Asset
Allocation, Growth and Income, Money Market, and U.S. Government Allocation
Funds.
The Funds are available exclusively as pooled funding vehicles for certain
participating life insurance companies offering variable annuity contracts and
variable life insurance policies.
The following significant accounting policies are consistently followed by the
Trust in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles ("GAAP") for investment
companies.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. These estimates 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. 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 System, 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").
28
<PAGE> 30
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
securities ("repurchase agreements") are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in each Fund's Portfolio of
Investments. The Funds may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank, N.A. ("WFB"). The
repurchase agreements must be fully collateralized based on values that are
marked to market daily. The collateral may be held by an agent bank under a
tri-party agreement. It is the custodian's responsibility to value collateral
daily and to take action to obtain additional collateral as necessary to
maintain market value equal to or greater than the resale price. 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 and U.S. Government Allocation Funds may purchase futures
contracts to gain exposure to market changes. This procedure may be more
efficient or cost effective than actually buying the securities. A futures
contract is an agreement between parties to buy or sell a security at a set
price on a future date. Upon entering into such a contract, a Fund is required
to pledge to the broker an amount of cash, U.S. Government obligations or other
high-quality debt securities equal to the minimum "initial margin" requirements
of the exchange on which the futures contract is traded. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such receipts or
payments are known as "variation margin" and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Pursuant to
regulations and/or published positions of the Securities and Exchange
Commission, the Asset Allocation Fund and the U.S. Government Allocation Fund
may be required to segregate cash or high quality money market instruments in
connection with futures transactions in an amount generally equal to the entire
value of the underlying contracts. Risks of entering into futures contracts
include 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. On December 31, 1997 the Asset Allocation Fund held the
following long futures contracts:
<TABLE>
<CAPTION>
Notional Net Unrealized
Contracts Type Expiration Date Contract Value Depreciation
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
18 S&P 500 Index March 1998 $ 4,405,950 $ 30,650
188 S&P 500 Index June 1998 $46,487,700 $687,700
</TABLE>
The Asset Allocation Fund has pledged to brokers U.S. Treasury bills for initial
margin requirements with a par value of $2,500,000.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of the Asset Allocation and Growth and
Income Funds, if any, are declared and distributed quarterly. Dividends from net
investment income of the U.S. Government Allocation Fund, if any, are declared
and distributed monthly. Dividends from net investment income of the Money
Market Fund, if any, are declared daily and distributed monthly. Distributions
to shareholders from net realized capital gains are declared and distributed
annually.
29
<PAGE> 31
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 December 31, 1997. The Funds
had no net capital loss carryforwards at December 31, 1997.
2. AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
The Trust has entered into advisory contracts on behalf of the Funds with WFB.
Pursuant to the contracts, WFB has agreed to provide the Funds with daily
portfolio management. Under the contracts with the Asset Allocation, Growth and
Income, and U.S. Government Allocation Funds, WFB is entitled to a monthly
advisory fee at an annual rate of 0.60% of such Funds' average daily net assets.
Under the contract with the Money Market Fund, WFB is entitled to a monthly
advisory fee at an annual rate of 0.45% of 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, monthly fees at the annual rates of 0.20% and 0.15% of
the average daily net assets of the Asset Allocation and U.S. Government
Allocation Funds, respectively.
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 Growth and Income and
Money Market Funds with WFB, whereby WFB is responsible for providing custody
and portfolio accounting services for such Funds. Pursuant to the contracts, WFB
is entitled to certain transaction charges plus an annual fee for custody
services at an annual rate of
30
<PAGE> 32
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
0.0167% of the average daily net assets of each Fund. For portfolio accounting
services, WFB is entitled to receive a monthly base fee from each such Fund of
$2,000 plus an annual fee of 0.07% of the first $50 million of each such Fund's
average daily net assets, 0.045% of the next $50 million and 0.02% of each such
Fund's average daily net assets in excess of $100 million.
The Trust has entered into a contract on behalf of the Funds with WFB, whereby
WFB provides transfer agency services for the Funds. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees at an annual rate of
0.14% of the average daily net assets of the Asset Allocation, Growth and Income
and U.S. Government Allocation Funds, and 0.10% of the average daily net assets
of the Money Market Fund. Prior to February 1, 1997, WFB was entitled to receive
transfer agency fees at an annual rate of 0.05% of the Funds' average daily net
assets.
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 0.04% and
0.02%, respectively, of each Fund's average daily net assets. Prior to May 1,
1997, Stephens provided substantially the same services as sole administrator to
the Funds and was entitled to receive a monthly fee at the annual rate of 0.03%
of each Fund's average daily net assets.
WAIVED FEES AND REIMBURSED EXPENSES
All amounts shown as waived fees and reimbursed expenses on the Statement of
Operations for the year ended December 31, 1997 were waived by WFB. Waived fees
and reimbursed expenses continue at the discretion of WFB and Stephens.
Certain officers and one director of the Trust are also officers of Stephens. As
of December 31, 1997, Stephens owned 3,663 shares of the Asset Allocation Fund,
2,887 shares of the Growth and Income Fund, 29,934 shares of the Money Market
Fund and 3,125 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 year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Asset Growth and U.S. Government
Allocation Income Allocation
AGGREGATE PURCHASES AND SALES: Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases at cost $54,025,001 $86,685,458 $16,909,477
Sales proceeds $59,730,665 $60,255,558 $17,437,324
- ------------------------------------------------------------------------------------------------------------------------
</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 for the years ended
December 31, 1997 and December 31, 1996 are disclosed in detail in the
Statements of Changes in Net Assets.
31
<PAGE> 33
LIFE & ANNUITY TRUST
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
5. SUBSEQUENT EVENTS
On October 30, 1997, the Board approved a name change of the Growth and Income
Fund to the Growth Fund, effective May 1, 1998. Additionally, effective May 1,
1998, the Asset Allocation and U.S. Government Funds will be charged portfolio
accounting fees at the same rates currently charged to the Growth and Income and
Money Market Funds.
On January 29, 1998, the Board approved a change to the administration and
co-administration agreements and the shareholder servicing agreements for the
Funds. WFB and Stephens will be entitled to receive 0.03% and 0.04%,
respectively, of each Fund' s average daily net assets for administration
services. Additionally, American Skandia Life Assurance Company will be entitled
to receive 0.25% of each Fund's average daily net assets for shareholder
services. These fee changes will take effect on May 1, 1998.
32
<PAGE> 34
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
LIFE & ANNUITY TRUST:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of the Asset Allocation Fund, Growth and
Income Fund, Money Market Fund and U.S. Government Allocation Fund (constituting
Life & Annuity Trust) as of December 31, 1997, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and financial highlights
for the periods indicated herein. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the aforementioned funds of Life & Annuity Trust as of December 31,
1997, the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
San Francisco, California
February 6, 1998
33
<PAGE> 35
[This page intentionally left blank.]
34
<PAGE> 36
American Skandia Life
Assurance Corporation
Tower One Corporate Drive
Shelton, CT 06484
--------------------------------------------------------------------------
BULK RATE
U.S. POSTAGE
PAID
SMITHTOWN, NY
PERMIT NO. 700
---------------------------
This report and the financial statements contained herein are
submitted for the general information of the contract holders of
the Stagecoach Variable Annuity, the Stagecoach Variable Annuity
Plus, and the Stagecoach Extra Credit Variable Annuity. If this
report is used for promotional purposes, distribution of the
report must be accompanied or preceded by a current prospectus.
For a prospectus containing more complete information, including
charges and expenses, call 1-800-680-8920. Read the prospectus
carefully before you invest.
(LOGO)PRINTED ON RECYCLED PAPER (C)1998 AMERICAN SKANDIA VA05001 (2/98)
