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LIFE & ANNUITY TRUST
PROSPECTUS
EQUITY VALUE FUND
MAY 1, 1998
EV PROS (5/98)
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EQUITY VALUE FUND
Life & Annuity Trust is an open-end series investment company. This
Prospectus contains information about one of the series of Life & Annuity
Trust--the Equity Value Fund, (the "Fund").
The EQUITY VALUE FUND seeks to provide investors with long-term capital
appreciation.
The Fund is available exclusively as a pooled funding vehicle for certain
participating life insurance companies (the "Participating Insurance
Companies") offering variable annuity contracts ("VA Contracts") and variable
life insurance policies ("VLI Policies").
SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT.
Please read this Prospectus, along with the prospectus for the VA Contract
or VLI Policy accompanying this Prospectus, before investing and retain it for
future reference. It sets forth concisely the information which a prospective
purchaser of a VA Contract or VLI Policy should know about the Fund before
making such a purchase. A Statement of Additional Information ("SAI") dated
May 1, 1998 for the Fund has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference. The SAI is available free
of charge by calling (800) 680-8920 or by writing to American Skandia, P.O.
Box 883, Shelton, Connecticut 06484-0883, Attn: Stagecoach Variable Annuity
Administration.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY
OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES
CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND ADMINISTRATOR TO THE FUND AND
IS COMPENSATED FOR PROVIDING THE FUND WITH CERTAIN OTHER SERVICES. WELLS
CAPITAL MANAGEMENT ("WCM"), AN AFFILIATE OF WELLS FARGO BANK, IS THE FUND'S
SUB-ADVISER. STEPHENS INC. ("STEPHENS"), WHICH IS NOT AFFILIATED WITH WELLS
FARGO BANK, IS THE CO-ADMINISTRATOR AND DISTRIBUTOR FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THESE AUTHORITIES PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS DATED MAY 1, 1998
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TABLE OF CONTENTS
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PAGE
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Participating Insurance Companies.......................................... 1
Investment Objectives and Policies......................................... 1
Investing in the Fund...................................................... 4
Dividends and Distributions................................................ 5
Management of the Fund..................................................... 5
Taxes...................................................................... 8
Fund Expenses.............................................................. 9
General Information........................................................ 9
Prospectus Appendix--Additional Investment Policies........................ A-1
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PARTICIPATING INSURANCE COMPANIES
The Fund is a funding vehicles for VA Contracts and VLI Policies offered by
the separate accounts of Participating Insurance Companies. Life & Annuity
Trust currently does not foresee any disadvantages to the holders of VA
Contracts and VLI Policies arising from the fact that the interests of the
holders of VA Contracts and VLI Policies may differ. Nevertheless, Life &
Annuity Trust's Board of Trustees intends to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise and to
determine what action, if any, should be taken in response to such conflicts.
The VA Contracts and VLI Policies are described in the separate prospectuses
issued by the Participating Insurance Companies. Life & Annuity Trust assumes
no responsibility for such prospectuses. Individual holders of VA Contracts
and VLI Policies are not the "shareholders" of or "investors" in the Fund.
Rather, the Participating Insurance Companies and their separate accounts are
the shareholders or investors, although such companies will pass through
voting rights to the holders of VA Contracts and VLI Policies. For a
discussion of the voting rights of holders of VA Contracts and VLI Policies,
please see the prospectuses of the Participating Insurance Companies.
INVESTMENT OBJECTIVES AND POLICIES
The Equity Value Fund's investment objective is to seek to provide investors
with long-term capital appreciation. The Fund pursues this objective by
investing primarily in equity securities, including common stocks and may
invest in debt instruments that are convertible into common stocks of both
domestic and foreign companies. The Fund may invest in large, well-established
companies and smaller companies with market capitalization exceeding $50
million. The Fund may invest up to 25% of its assets in American Depositary
Receipts and similar instruments. Income generation is a secondary
consideration.
Common Stocks. The Fund may purchase dividend paying stocks of particular
issuers when the issuer's dividend record may, in the investment adviser's
opinion, have a favorable influence on the market value of the securities. The
Fund also may purchase convertible securities with the same characteristics as
common stocks. As with all mutual funds, there can be no assurance that the
Fund, which is a diversified portfolio, will achieve its investment objective.
In selecting equity investments (which may include common stocks of both
domestic and foreign companies) for the Fund, the adviser selects companies
for investment using both quantitative and qualitative analysis to identify
those issuers that, in the adviser's opinion, exhibit below-average valuation
multiples, above-average financial strength, a strong position in their
industry and a history of steady profit growth.
Other Investments. The adviser also may select other equity securities in
addition to common stocks for investment by the Fund. Such other equity
securities are preferred stocks, high grade securities convertible into common
stocks, and warrants. The Fund will not invest more than 5% of its net assets
in warrants, no more than 2% of which will be invested in warrants which are
not listed on the New York or American Stock Exchanges. For temporary
defensive purposes, however, the Fund may invest in U.S. Government
obligations (as defined below), certificates of deposit, bankers' acceptances,
commercial paper, repurchase agreements (maturing in seven days or less) and
debt obligations of corporations (corporate bonds, debentures, notes and other
similar corporate debt instruments) that are rated investment grade or better
by S&P or Moody's.
The Fund also may hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits
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prescribed by the Investment Company Act of 1940, as amended (the "1940 Act"),
and cash, pending investment, to meet anticipated redemption requests or if
the investment adviser deems suitable investments for the Fund to be
unavailable. Such investments may be made in such proportions as, in the
opinion of the investment adviser, existing circumstances may warrant, and may
include obligations of foreign banks and foreign branches of U.S. banks.
A more complete description of the Fund's investments and investment
activities is contained in the "Prospectus Appendix -- Additional Investment
Policies" and in the SAI.
PERFORMANCE
The Fund's performance may be advertised in terms of average annual total
return and cumulative total return. These performance figures are based on
historical results calculated under uniform SEC formulas and are not intended
to indicate future performance. The actual return of a holder of a VA Contract
or VLI Policy is also affected by charges and fees imposed by the separate
accounts of Participating Insurance Companies. Any Fund advertising is
accompanied by performance information of the related insurance company
separate accounts which fund the VA Contracts or VLI Policies or by an
explanation that Fund performance information does not reflect separate
account fees and charges.
The Fund's total return is based on the overall dollar or percentage change
in value of a hypothetical investment in the Fund and assumes that all Fund
dividends and capital gain distributions are reinvested.
The Fund's annual report contains additional performance information and is
available upon request without charge from the Fund's distributor.
POTENTIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND
An investment in the Fund is not insured or guaranteed against loss of
principal. When prices of the securities that the Fund owns decline, so does
the value of the Fund's shares and the value of an investment in the Fund may
increase or decrease. As with all mutual funds, there can be no assurance that
the Fund will achieve its investment objective. Investors should be prepared
to accept some risk, including possible loss of principal, with the money they
invest in the Fund.
The debt instruments in the Fund's portfolios are subject to interest-rate
risk and credit risk. Interest-rate risk is the risk that increases in market
interest rates may adversely affect the value of the intermediate- and long-
term debt securities in which the Fund invests and hence the value of an
investment in the Fund. The values of such securities generally change
inversely to changes in market interest rates. During those periods in which a
high percentage of the Fund's portfolio is invested in long-term bonds, its
exposure to interest-rate risk is greater because the longer maturity of those
securities means their value generally is more sensitive to changes in market
interest rates than shorter-term debt securities. Credit risk is the risk that
issuers of the debt instruments in which the Fund invests may default on the
payment of principal and/or interest.
The stock investments of the Fund's portfolio are subject to equity market
risk. Equity market risk is the risk that common stock prices will fluctuate
or decline over short or even extended periods. The U.S. stock market tends to
be cyclical, with periods when stock prices generally rise and periods when
prices generally decline. Throughout most of 1997, the stock market, as
measured by the S&P 500 Index and other commonly used indices, was trading at
or close to record levels. There can be no guarantee that these performance
levels will continue. The Fund's investments in smaller sized companies
present greater risks than investments in larger sized companies with more
established operating histories and financial capacity.
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Investing in the securities of issuers in any foreign country, including
American Depository Receipts ("ADRs") and European Depository Receipts
("EDRs") and similar securities, involves special risks and considerations not
typically associated with investing in U.S. companies. These include
differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations (which may
include suspension of the ability to transfer currency from a country); and
political, social and monetary or diplomatic developments that could affect
U.S. investments in foreign countries. Additionally, dispositions of foreign
securities and dividends and interest payable on those securities may be
subject to foreign taxes, including withholding taxes. Foreign securities
often trade with less frequency and volume than domestic securities and,
therefore, may greater price volatility. Additional costs associated with an
investment in foreign securities may include higher custodial fees than apply
to domestic custodial arrangements and transaction costs of foreign currency
conversions. Changes if foreign exchange rates also will affect the value of
securities denominated or quoted in currencies other than the U.S. dollar. The
Fund's performance may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments.
There are special risks involved in investing in emerging-market countries.
Many investments in emerging markets can be considered speculative, and their
prices can be much more volatile than in the more developed nations of the
world. This difference reflects the greater uncertainties of investing in less
established markets and economies. In addition, the financial markets of
emerging markets countries are generally less well capitalized and thus
securities of issuers based in such countries may be less liquid. Further,
such markets may be vulnerable to high inflation and interest rates. Most are
heavily dependent on international trade, and some are especially vulnerable
to recessions in other countries. Some of these countries are also sensitive
to world commodity prices and may be subject to political and social
uncertainties.
Some of the permissible investments described throughout this Prospectus are
considered "derivative" securities because their value is derived, at least in
part, from the price of another security or a specified asset, index or rate.
Also, asset-backed securities issued or guaranteed by U.S. Government agencies
or instrumentalities and certain floating-and variable-rate instruments can be
considered derivatives. Some derivatives may be more sensitive than direct
securities to changes in interest rates or sudden market moves. Some
derivatives also may be susceptible to fluctuations in yield or value due to
their structure or contract terms.
Wells Fargo Bank uses a variety of internal risk management procedures to
ensure that derivatives use is consistent with the Fund's investment
objective, does not expose the Fund to undue risk and is closely monitored.
These procedures include providing periodic reports to the Board of Trustees
concerning the use of derivatives. Also, cash maintained by the Fund for
short- term liquidity needs (e.g., to meet anticipated redemption requests)
will, as a general matter, only be invested in U.S. Treasury bills, shares of
other mutual funds and repurchase agreements.
The use of derivatives by the Fund also is subject to broadly applicable
investment policies. For example, the Fund may not invest more than a
specified percentage of its assets in "illiquid securities," including those
derivatives that do not have active secondary markets. Nor may the Fund use
certain derivatives without establishing adequate "cover" in compliance with
SEC rules limiting the use of leverage.
See "Prospectus Appendix -- Additional Investment Policies" for further
discussion of the Funds' investments and related risks.
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INVESTING IN THE FUNDS
NET ASSET VALUE
The value of the Fund's shares is its "net asset value," or NAV. NAV is
computed by adding the value of the Fund's portfolio investments plus cash and
other assets, deducting liabilities and then dividing the result by the number
of shares outstanding. The NAV of the Fund is expected to fluctuate daily.
The Fund is open Monday through Friday and is closed on weekends. The Fund
is closed on standard New York Stock Exchange holidays. Unless otherwise
specified, the term "Business Day" when used in reference to the Fund refers
only to the days the Fund is open. Wells Fargo Bank calculates the Fund NAV as
of 1:00 p.m. (Pacific time) each Business Day.
Except for debt obligations with remaining maturities of 60 days or less,
which are valued at amortized cost (unless the Board of Trustees determines
that amortized cost does not represent fair value), the Fund's other assets
are valued at current market prices, or if such prices are not readily
available, at fair value as determined in good faith by Life & Annuity Trust's
Board of Trustees. Prices used for such valuations may be provided by
independent pricing services.
PURCHASES AND REDEMPTIONS
The separate accounts of the Participating Insurance Companies place orders
to purchase and redeem shares of the Fund based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA Contracts
and VLI Policies issued by the Participating Insurance Companies) to be
effected on that day pursuant to VA Contracts and VLI policies.
Orders received by the Fund or the Fund's transfer agent are effected on
each Business Day. For the Fund, purchase and redemption orders received
before 1:00 p.m. (Pacific time) are effected at the respective NAV per share
determined as of 1:00 p.m. (Pacific time) on that same day. Orders received
after 1:00 p.m. (Pacific time) for Fund shares are effected on the next
Business Day.
All orders for the purchase of shares are subject to acceptance or rejection
by Life & Annuity Trust. Payment for redemptions will be made by Life &
Annuity Trust's transfer agent on behalf of Life & Annuity Trust and the Fund
within seven days after the request is received. Life & Annuity Trust may
suspend the right of redemption or postpone the date of payment upon
redemption for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings, or during which trading is
restricted, or during which as determined by the SEC by rule or regulation) an
emergency exists as a result of which disposal or valuation of portfolio
securities is not reasonably practicable, or for such periods as the SEC or
the 1940 Act may otherwise permit.
Life & Annuity Trust does not assess any fees, either when it sells or when
it redeems its shares. Surrender charges, mortality and expense risk fees and
other charges may be assessed by Participating Insurance Companies under the
VA Contracts or VLI Policies. These fees and charges are described in the
Participating Insurance Companies' prospectuses.
Should any conflict between VA Contract and VLI Policy holders arise which
would require that a substantial amount of net assets be withdrawn from the
Fund, orderly portfolio management could be disrupted to the potential
detriment of the VA Contract and VLI Policy holders.
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DIVIDENDS AND DISTRIBUTIONS
The Fund determines the amounts of dividends of net investment income and
distributions of capital gains payable to its shareholders. Dividends and
distributions are automatically reinvested on the payment date for each
shareholder's account in additional shares of the Fund at NAV or are paid in
cash at the election of the Participating Insurance Company.
The Fund declares and pays a quarterly dividend of substantially all of its
net investment income. The Fund generally distributes any capital gains once a
year. Participating Insurance Companies will be informed by January 31 about
the amount and character of dividends and distributions of the previous year
from the Fund for federal income tax purposes.
MANAGEMENT OF THE FUND
Life & Annuity Trust was organized as a Delaware Business Trust on October
28, 1993. The Board of Trustees of Life & Annuity Trust supervises the Fund's
activities, monitors its contractual arrangements with various service-
providers and decides upon matters of general policy.
Life & Annuity Trust offers shares of the Fund only to Participating
Insurance Companies, and only Participating Insurance Companies and their
separate accounts are considered shareholders of, or investors in, the Fund.
Although the Participating Insurance Companies and their separate accounts are
the shareholders or investors, such companies will pass through voting rights
to their VA Contract and VLI Policy holders. For a discussion of the voting
rights of VA Contract and VLI Policy holders, please refer to the
Participating Insurance Companies' prospectuses.
When matters are submitted for shareholder vote, shareholders of the Fund
have one vote for each full share and fractional votes for fractional shares
held. A separate vote of the Fund is required on any matter affecting the Fund
on which shareholders are entitled to vote, such as approval of the Fund's
agreement with its investment adviser. Normally no annual meetings of
shareholders will be held unless and until such time as less than a majority
of Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees.
A more detailed description of the voting rights and attributes of the
shares is contained in the "Capital Stock" section of the Fund's SAI.
INVESTMENT ADVISER
The Fund is advised by Wells Fargo Bank. Wells Fargo Bank, one of the
largest banks in the United States, was founded in 1852 and is the oldest bank
in the western United States. As of December 31, 1997, Wells Fargo Bank and
its affiliates managed more than $62 billion of assets of individuals, trusts,
estates and institutions. Wells Fargo Bank is the investment adviser or sub-
adviser to several other registered, open-end management investment companies.
From time to time, the Fund, consistent with its investment objective,
policies and restrictions, may invest in securities of companies with which
Wells Fargo Bank has a lending relationship. Wells Fargo Bank, a wholly owned
subsidiary of Wells Fargo & Company, is located at 420 Montgomery Street, San
Francisco, California 94104.
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Wells Fargo Bank provides investment guidance and policy direction in
connection with the daily portfolio management of the Fund. Wells Fargo Bank
also furnishes the Board of Trustees with periodic reports on the Fund's
investment strategy and performance. For its services as investment adviser to
the Fund, Wells Fargo Bank is entitled to a monthly advisory fee at an annual
rate equal to 0.60% of the Fund's average daily net assets.
As of May 1, 1998, Wells Fargo Bank has engaged WCM to provide sub-advisory
services to the Fund. Wells Fargo Bank has retained authority over the
management of the Fund and the investment and disposition of its assets. As
compensation for its sub-advisory services, WCM is entitled to receive a
monthly fee equal to an annual rate of 0.25% of the first $200 million of the
Fund's average daily net assets, 0.20% of the next $200 million and 0.15% of
net assets over $400 million. WCM is located at 525 Market Street, 10th Floor,
San Francisco, CA 94105.
PORTFOLIO MANAGERS
Mr. Rex Wardlaw, as co-manager, has been responsible for the day-to-day
management of the portfolio of the Fund since May 1, 1998. Mr. Wardlaw joined
Wells Fargo Bank in 1986 and has eight years of investment experience. He is
the Private Client Services investment manager for the Portland office and is
responsible for stock market research in healthcare, basic industries and
transportation sectors. He holds an M.B.A. from the University of Oregon and a
B.A. from Northwest Nazarene College. Mr. Wardlaw is a chartered financial
analyst and a member of the Portland Society of Financial Analysts. He is also
a member of the Association for Investment management and Research and the
American Association of Individual Investors.
Mr. Allen Wisniewski, as co-manager, has been responsible for the day-to-day
management of the portfolio of the Fund since May 1, 1998. He also is
responsible for managing equity and balanced accounts for high-net-worth
individuals and pensions. Mr. Wisniewski joined Wells Fargo Bank in April 1987
with the acquisition of Bank of America's consumer trust services, where he
was a portfolio manager. He received his B.A. degree and M.B.A. degree in
economics and finance from the University of California at Los Angeles. He is
a member of the Los Angeles Society of Financial Analysts.
Morrison & Foerster LLP, counsel to Life & Annuity Trust and special counsel
to Wells Fargo Bank, has advised Life & Annuity Trust and Wells Fargo Bank
that Wells Fargo Bank, and its respective affiliates, may perform the services
contemplated by this Prospectus and the Advisory Contracts without violation
of the Glass-Steagall Act or other applicable banking laws or regulations.
Such counsel has pointed out, however, that there are no controlling judicial
or administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal
or state statutes, including the Glass-Steagall Act, and regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
as well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations could prevent Wells Fargo Bank,
and its respective affiliates from continuing to perform, in whole or in part,
such services. If Wells Fargo Bank were prohibited from performing any such
services, it is expected that the Trustees of Life & Annuity Trust would
recommend to the Fund's shareholders that they approve a new advisory
agreement with another entity or entities qualified to perform such services.
ADMINISTRATOR AND CO-ADMINISTRATOR
Wells Fargo Bank as administrator and Stephens as co-administrator provide
the Fund with administration services, including general supervision of the
Fund's operations, coordination of the other services provided to the Fund,
compilation of information for reports to the SEC and the state securities
commissions, preparation of proxy statements and shareholder reports, and
general supervision of data compilation in connection with preparing periodic
reports to Life &
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Annuity Trust's Trustees and officers. Wells Fargo Bank and Stephens also
furnish office space and certain facilities to conduct the Fund's business,
and Stephens compensates Life & Annuity Trust's Trustees, officers and
employees who are affiliated with Stephens. For these administration services,
Wells Fargo Bank and Stephens are entitled to receive monthly fees at the
annual rates of 0.03% and 0.04%, respectively, of the Fund's average daily net
assets. Wells Fargo Bank and Stephens may delegate certain of their
administration duties to sub-administrators.
SHAREHOLDER SERVICING AGENT
The Trust has entered into a Shareholder Servicing Agreement as of May 1,
1998, on behalf of the Fund with American Skandia Life Insurance Company, and
may enter into such Agreements with one or more other financial institutions
which desire to act as Servicing Agents. Pursuant to each such Shareholder
Servicing Agreement, the Servicing Agent, as agent for its customers, will,
among other things: automatically invest cash balances maintained in customer
accounts with the Servicing Agent into the Fund, and redeem shares out of the
Fund, in the amounts specified pursuant to agency agreements between the
Servicing Agent and its customers; maintain a single shareholder account for
the benefit of its customers with the Fund; provide sub-accounting services to
monitor and account for its customers' beneficial ownership of Fund shares
held in the Servicing Agent's shareholder account; answer customer inquiries
regarding account status and history, purchases and redemptions of shares of
the Fund, Fund performance and certain other matters pertaining to the Fund;
assist its customers in designating and changing account designations and
addresses; process Fund purchase and redemption transactions; forward and
receive funds in connection with purchases or redemptions of shares of the
Fund; provide periodic statements showing a customer's subaccount balance;
furnish (either separately or on an integrated basis with other reports sent
to a customer by the Servicing Agent) monthly statements and confirmations of
purchases and redemptions of Fund shares in the Servicing Agent's shareholder
account on behalf of the customer; forward to its customers proxy statements,
annual reports, updated prospectuses and other communications from the Fund to
shareholders as required; receive, tabulate and forward to the Trust proxies
executed by or on behalf of its customers with respect to meetings of
shareholders of the Fund; and provide such other related services, and
necessary personnel and facilities to provide all of the shareholder services
contemplated by the Shareholder Servicing Agreement, in each case, as the
Trust or a customer of the Servicing Agent may reasonably request. All
purchases and redemptions are effected through Stephens as the Fund's
Distributor.
For providing these services, each Servicing Agent is entitled to receive a
fee from the Fund, which may be paid periodically, of up to 0.25%, on an
annualized basis, of the average daily net assets of the Fund represented by
shares owned of record by the Servicing Agent on behalf of its customers, or
an amount which, when considered in conjunction with amounts payable pursuant
to the Fund's Distribution Agreement, equals the maximum amount payable to the
Servicing Agent under applicable laws, regulations or rules, whichever is
less. A Servicing Agent also may impose certain conditions on its customers,
subject to the terms of this Prospectus, in addition to or different from
those imposed by the Fund, such as requiring a minimum initial investment or
the payment of additional fees for additional services offered to the
customer. The exercise of voting rights and the delivery to customers of
shareholder communications will be governed by the customers' agency
agreements with the Servicing Agent. The Servicing Agent has agreed to forward
to its customers who are shareholders of the Fund appropriate prior written
disclosure of any fees that it may charge them directly and to provide written
notice at least 15 days prior to imposition of any transaction fees.
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DISTRIBUTOR
Stephens is the Fund's co-administrator and distributes the Fund's shares.
Stephens is a full service broker/dealer and investment advisory firm located
at 111 Center Street, Little Rock, Arkansas 72201. Stephens and its
predecessor have been providing securities and investment services for more
than 60 years. Additionally, they have been providing discretionary portfolio
management services since 1983. Stephens currently manages investment
portfolios for pension and profit sharing plans, individual investors,
foundations, insurance companies and university endowments.
Stephens, as the principal underwriter of the Fund within the meaning of the
1940 Act, has entered into a Distribution Agreement with Life & Annuity Trust
pursuant to which Stephens has the responsibility for distributing shares of
the Fund.
Stephens, as distributor of the Fund's shares, or the Participating
Insurance companies that offer VA Contracts and VLI Policies that are funded
by the Fund, bears all of the Fund's marketing expenses. These expenses
include the cost of printing prospectuses, statements of additional
information and other sales-related materials.
CUSTODIAN
Wells Fargo Bank serves as the custodian for the Fund. Wells Fargo Bank
performs these services at 525 Market Street, San Francisco, California 94105.
FUND ACCOUNTANT
Wells Fargo Bank serves as the Fund Accountant for the Fund and performs
these services at 525 Market Street, San Francisco, California 94105.
TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank serves as the Fund's transfer and dividend disbursing agent
and performs the transfer and dividend disbursing agency activities at 525
Market Street, San Francisco, California 94105.
TAXES
Distributions from the Fund's net investment income and net short-term
capital gain, if any, are taxable to the Fund's shareholders as ordinary
income. Distributions from the Fund's net long-term capital gains are taxable
to the Fund's shareholders as long-term capital gains. In general,
distributions will be taxable when paid, whether such distributions are taken
in cash or are automatically reinvested in additional Fund shares. However,
dividends declared in October, November or December of one year and
distributed in January of the following year will be taxable as if they were
paid by December 31 of the first year.
As described in the prospectuses of the Participating Insurance Companies,
individual holders of VA Contracts and VLI Policies may qualify for favorable
tax treatment. In order to qualify for such treatment, the Internal Revenue
Code of 1986, as amended (the "Code"), requires, among other things, that the
"separate accounts" of the Participating Insurance Companies, which maintain
and invest net proceeds form the VA Contracts and VLI Policies, to be
"adequately diversified." See "Taxation of a Separate Account of a
Participating Insurance Company" in the SAI. Subject to certain conditions,
for purposes of the "adequate diversification" test, shares of a
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Fund will not be treated as single investment. Rather, the separate account
will be treated as the owner of its proportionate share of each of the assets
of the Fund. The Fund intends to satisfy the relevant conditions of the Code
and Treasury Regulations so that its shares held in a separate account of a
Participating Insurance Company, and the VA Contracts and VLI Policies
underlying such account, may qualify for favorable tax treatment.
The foregoing discussion regarding taxes is based on tax laws which were in
effect as of the date of this Prospectus and summarizes only some of the
material federal income tax considerations affecting the Fund and its
shareholders. It is not intended as a substitute for careful tax planning and
does not discuss state, local or foreign income tax considerations; you should
consult your own tax advisor with respect to your specific tax situation.
Please see the SAI for further federal income tax considerations. Federal
income taxation of separate accounts of life insurance companies, VA Contracts
and VLI Policies is discussed in the Prospectuses of the Participating
Insurance Companies.
FUND EXPENSES
From time to time Wells Fargo Bank and Stephens may waive all or a portion
of the fees payable to them and reimburse expenses payable to others. Any such
waivers or reimbursements will reduce the Fund's expenses and, therefore, have
a favorable impact on the Fund's performance. Except for the expenses borne by
Wells Fargo Bank and Stephens, Life & Annuity Trust bears all costs of its
operations, including, shareholder servicing, transfer agency, custody and
administration fees, payments pursuant to any Plans, interest, fees and
expenses of independent auditors and legal counsel and any extraordinary
expenses. Expenses attributable to the Fund are charged against its assets.
General expenses of Life & Annuity Trust are allocated among all of the funds
of Life & Annuity Trust in a manner proportionate to the net assets of each
fund, on a transactional basis, or on such other basis as Life & Annuity Trust
in a manner proportionate to the net assets of each fund, on a transactional
basis, or on such other basis as Life & Annuity Trust's Board of Trustees
deems equitable.
GENERAL INFORMATION
The Fund's SAI and this Prospectus omit certain information contained in the
Registration Statement that the Fund has filed with the SEC under the
Securities Act of 1933 and the 1940 Act, and reference is hereby made to the
Registration Statement and its exhibits and amendments for further information
about the Fund and the shares offered hereby. The Registration Statement and
its exhibits and amendments are available for public inspection at the SEC in
Washington, D.C.
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PROSPECTUS APPENDIX -- ADDITIONAL INVESTMENT POLICIES
Set forth below is additional information about the Fund's permitted
investment activities and related risks. For further information please see
"Additional Permitted Investment Activities" in the SAI.
Certain Asset-Backed Securities
The Fund may purchase asset-backed securities unrelated to mortgage loans.
These asset-backed securities may consist of undivided fractional interests in
pools of consumer loans or receivables held in trust. Examples include
certificates for automobile receivables (CARS) and credit card receivables
(CARDS). Payments of principal and interest on these asset-backed securities
are "passed through" on a monthly or other periodic basis to certificate
holders and are typically supported by some form of credit enhancement, such
as a letter of credit, surety bond, limited guaranty, or subordination. The
extent of credit enhancement varies, but usually amounts to only a fraction of
the asset-backed security's par value until exhausted. Ultimately, asset-
backed securities are dependent upon payment of the consumer loans or
receivables by individuals, and the certificate holder frequently has no
recourse to the entity that originated the loans or receivables. The actual
maturity and realized yield will vary based upon the prepayment experience of
the underlying asset pool and prevailing interest rates at the time of
prepayment. Asset-backed securities are relatively new instruments and may be
subject to greater risk of default during periods of economic downturn than
other instruments. Also, the secondary market for certain asset-backed
securities may not be as liquid as the market for other types of securities,
which could result in a fund experiencing difficulty in valuing or liquidating
such securities.
Convertible Securities.
The Fund may invest in convertible securities that provide current income,
are issued by companies with the characteristics described above and have a
strong earnings and credit record. The Fund may purchase convertible
securities that are fixed-income debt instruments or preferred stocks, which
may be converted at a stated price within a specified period of time into a
certain quantity of the common stock of the same issuer. Convertible
Securities, while usually subordinated to similar nonconvertible securities,
are senior to common stocks in an issuer's capital structure. Convertible
Securities offer flexibility by providing the investor with a steady income
stream (generally yielding a lower amount than similar nonconvertible
securities and a higher amount than common stocks) as well as the opportunity
to take advantage of increases in the price of the issuer's common stock
through the conversion feature. Fluctuations in the convertible security's
price tend to correlate with changes in the market value of the common stock.
At most, 5% of a Fund's net assets will be invested in convertible debt
securities that are either rated below the four highest rating categories
(which includes securities also known as "junk bonds") by one or more
nationally recognized statistical rating organizations ("NRSROs"), such as
Moody's Investor Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P"), or unrated securities determined by Wells Fargo Bank to be of
comparable quality. Securities rated in the fourth highest rating category
(i.e., rated BBB by S&P or Baa by Moody's) are regarded by S&P as having an
adequate capacity to pay interest and repay principal, but changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make such repayments. Moody's considers such securities as having
speculative characteristics. For additional information relating to
investments in below investment-grade securities see "Additional Permitted
Investment Activities--Unrated, Downgraded and Below Investment-Grade
Investments" in the Fund's SAI.
Corporate Reorganizations
The Fund may invest in securities for which a tender or exchange offer has
been made or announced, and in securities of companies for which a merger,
consolidation, liquidation or similar
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reorganization proposal has been announced if, in the judgment of Wells Fargo
Bank, there is a reasonable prospect of capital appreciation significantly
greater than the added portfolio turnover expenses inherent in the short term
nature of such transactions. The principal risk associated with such
investments is that such offers or proposals may not be consummated within the
time and under the terms contemplated at the time of the investment, in which
case, unless such offers or proposals are replaced by equivalent or increased
offers or proposals which are consummated, the Funds may sustain a loss.
Custodial Receipts for Treasury Securities
The Fund may purchase participations in trusts that hold U.S. Treasury
securities (such as TIGRS and CATS) or other obligations where the trust
participations evidence ownership in either the future interest payments or
the future principal payments on the obligations. These participations are
normally issued at a discount to their "face value," and can exhibit greater
price volatility than ordinary debt securities because of the way in which
their principal and interest are returned to investors. Investments by a Fund
in such participations will not exceed 5% of the value of that Fund's total
assets.
Floating- and Variable-Rate Instruments
The Fund may purchase debt instruments with interest rates that are
periodically adjusted at specified intervals or whenever a benchmark rate or
index changes. These adjustments generally limit the increase or decrease in
the amount of interest received on the debt instruments. The floating- and
variable- rate instruments that the Fund may purchase include certificates of
participation in such instruments. Floating- and variable-rate instruments are
subject to interest-rate risk and credit risk.
The Fund also may hold floating- and variable-rate instruments that have
interest rates that re-set inversely to changing current market rates and/or
have embedded interest rate floors and caps that require the issuer to pay an
adjusted interest rate if market rates fall below or rise above a specified
rate. These instruments represent relatively recent innovations in the bond
markets, and the trading market for these instruments is less developed than
the markets for traditional types of debt instruments. it is uncertain how
these instruments will perform under different economic and interest-rate
scenarios. The market value of these instruments may be more volatile than
other types of debt instruments and may present greater potential for capital-
gain or loss. In some cases, it may be difficult to determine the fair value
of a structured or derivative instrument because of a lack of reliable
objective information and an established secondary market for some instruments
may not exist. See "Additional Permitted Investment Activities" in the SAI for
additional information.
Foreign Obligations and Securities
The Fund may invest up to 25% of its assets in high-quality, short-term debt
obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are denominated in and pay interest in U.S. dollars.
In addition, the Fund may invest up to 25% of its assets in securities of
foreign companies and foreign governmental issuers that are denominated in and
pay interest in U.S. dollars. These securities may take the form of American
Depositary Receipts ("ADRs"), Canadian Depositary Receipts ("CDRs"), European
Depositary Receipts ("EDRs"), International Depositary Receipts ("IDRs") and
Global Depositary Receipts ("GDRs") or other similar securities convertible
into securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs (sponsored or unsponsored)
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are receipts typically issued by a U. S. bank or trust company and traded on a
U.S. stock exchange, and CDRs are receipts typically issued by a Canadian bank
or trust company that evidence ownership of underlying foreign securities.
Issuers of unsponsored ADRs are not contractually obligated to disclose
material information in the U.S. and, therefore, such information may not
correlate to the market value of the unsponsored ADR. EDRs and IDRs are
receipts typically issued by European banks and trust companies, and GDRs are
receipts issued by either a U.S. or non-U.S. banking institution that evidence
ownership of the underlying foreign securities. Generally, ADRs in registered
form are designed for use in U.S. securities markets and EDRs and IDRs in
bearer form are designed primarily for use in Europe.
Investments in foreign securities involve certain considerations that are
not typically associated with investing in domestic securities. There may be
less publicly available information about a foreign issuer than about a
domestic issuer. Foreign issuers also are not generally subject to the same
accounting, auditing and financial reporting standards or governmental
supervision as domestic issuers. In addition, with respect to certain foreign
countries, taxes may be withheld at the source under foreign tax laws, and
there is a possibility of expropriation or confiscatory taxation, political,
social and monetary instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in
those countries.
Forward Commitments, When-Issued Purchases and Delay-Delivery Transactions
The Fund may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased
or sold on a when-issued, delayed-delivery or forward commitment basis involve
a risk of loss if the value of the security to be purchased declines, or the
value of the security to be sold increases, before the settlement date.
Although the Fund will generally purchase securities with the intention of
acquiring them, the Fund may dispose of securities purchased on a when-issued,
delayed-delivery or a forward commitment basis before settlement when deemed
appropriate by Wells Fargo Bank.
Futures Transactions
To the extent permitted by applicable regulations, the Fund is permitted to
use futures contracts and options on futures contracts as substitutes for
comparable market positions in the underlying securities. These contracts and
options may include stock index and interest rate futures contracts and
options thereon.
A futures contract obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock or interest-rate index at
the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of the underlying stocks or
instruments in the index occurs.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position
if the option is a call and a short position if the option is a put) at a
specified exercise price at any time during the option exercise period. Upon
exercise of the option, the writer/seller is required to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put). upon exercise of the option, the assumption of
offsetting futures positions by the writer/seller and holder/buyer of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account, which represents the amount by which the
market price of the futures contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the option
on the futures contract.
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Stock Index Futures and Options on Stock Index Futures. The Fund may invest
in stock index futures in order to protect the value of common stock
investments or to maintain liquidity, provided not more than 5% of its net
assets are committed to such transactions. A stock index future obligates the
seller to deliver (and the purchaser to take), effectively, an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical delivery of the
underlying stocks in the index is made. With respect to stock indices that are
permitted investments, each fund intends to purchase and sell futures
contracts on the stock index for which it can obtain the best price with
consideration also given to liquidity.
Loans of Portfolio Securities
The Fund may lend securities from its portfolio to brokers, dealers and
financial institutions (but not individuals) in order to increase the return
on the Fund's portfolio. The value of the loaned securities may not exceed
one-third of the Fund's total assets and loans of portfolio securities are
fully collateralized based on values that are marked-to-market daily. The Fund
will not enter into any portfolio security lending arrangement having a
duration of longer than one year. The principal risk of portfolio lending is
potential default or insolvency of the borrower. In either of these cases, the
Fund could experience delays in recovering securities or collateral or could
lose all or part of the value of the loaned securities. The Fund may pay
reasonable administrative and custodial fees in connection with loans of
portfolio securities and may pay a portion of the interest or fee earned
thereon to the borrower or a placing broker.
Money Market Instruments
The Fund may invest in the following types of high quality money market
instruments that have remaining maturities not exceeding one year: (i) U.S.
Government obligations; (ii) negotiable certificates of deposit, bankers'
acceptances and fixed time deposits and other obligations of domestic banks
(including foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured by
the FDIC; (iii) commercial paper rated at the date of purchase "P-1" by
Moody's or "A-1" or "A-1+" by S&P, or, if unrated, of comparable quality as
determined by Wells Fargo Bank, as investment adviser; and (iv) repurchase
agreements. The Fund also may invest in short-term U.S. dollar-denominated
obligations of foreign banks (including U.S. branches) that at the time of
investment: (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) are among the 75 largest foreign banks in
the world as determined on the basis of assets; (iii) have branches or
agencies in the United States; and (iv) in the opinion of Wells Fargo Bank, as
investment adviser, are of comparable quality to obligations of U.S. banks
which may be purchased by the Fund.
Options
The Fund may purchase or sell options on individual securities or options on
indices of securities as described below. The purchaser of an option risks a
total loss of the premium paid for the option if the price of the underlying
security does not increase or decrease sufficiently to justify exercise. The
seller of an option, on the other hand, will recognize the premium as income
if the option expires unrecognized but foregoes any capital appreciation in
excess of the exercise price in the case of a call option and may be required
to pay a price in excess of current market value in the case of a put option.
Call and Put Options on Specific Securities. The Fund may invest in call and
put options on a specific security. The Fund may purchase put and call options
listed on a national securities exchange and issued by the Options Clearing
Corporation in an amount not exceeding 5% of its net assets.
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A call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, an underlying security at the exercise price at
any time during the option period. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, an
underlying security at the exercise price at any time during the option
period. Investments by the Fund in off-exchange options will be treated as
"illiquid" and therefore subject to the Fund's policy of not investing more
than 15% of its net assets in illiquid securities.
The Fund may write covered call option contracts and secured put options as
Wells Fargo Bank deems appropriate. A covered call option is a call option for
which the writer of the option owns the security covered by the option.
Covered call options written by the Fund expose the Fund during the term of
the option (i) to the possible loss of opportunity to realize appreciation in
the market price of the underlying security or (ii) to possible loss caused by
continued holding of a security which might otherwise have been sold to
protect against depreciation in the market price of the security. If the Fund
writes a secured put option, it assumes the risk of loss should the market
value of the underlying security decline below the exercise price of the
option. The aggregate value of the securities subject to options written by
the Fund will not exceed 25% of the value of its assets. The use of covered
call options and securities put options will not be a primary investment
technique of the Fund, and they are expected to be used infrequently. If the
adviser is incorrect in its forecast of market value or other factors when
writing the foregoing options, a fund would be in a worse position than it
would have been had the foregoing investment techniques not been used.
The Fund may engage in unlisted over-the-counter options with broker/dealers
deemed creditworthy by the adviser. Closing transactions for such options are
usually effected directly with the same broker/dealer that effected the
original option transaction. The Fund bears the risk that the broker/dealer
will fail to meet its obligations. There is no assurance that a liquid
secondary trading market exists for closing out an unlisted option position.
Furthermore, unlisted options are not subject to the protections afforded
purchasers of listed options by the Options Clearing Corporation, which
performs the obligations of its members who fail to perform in connection with
the purchase or sale of options.
Other Investment Companies
The Fund may invest in shares of other open-end management investment
companies, up to the limits prescribed in Section 12(d) of the 1940 Act. Under
the 1940 Act, the Fund's investment in such securities currently is limited
to, subject to certain exceptions, (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's net assets with respect to any one
investment company and (iii) 10% of the Fund's net assets in aggregate. Other
investment companies in which the Fund invests can be expected to charge fees
for operating expenses such as investment advisory and administration fees,
that would be in addition to those charged by the Fund.
Privately Issued Securities (Rule 144A)
The Fund may invest in privately issued securities which may be resold in
accordance with Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities"). Rule 144A Securities are restricted securities which are not
publicly traded. Accordingly, the liquidity of the market for specific Rule
144A Securities may vary. Delay or difficulty in selling such securities may
result in a loss to a Fund. Privately issued securities that are determined by
the investment adviser to be "illiquid" are subject to the Funds' policy of not
investing more than 15% of its net assets in illiquid securities.
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Repurchase Agreements
The Fund may enter into repurchase transactions in which the seller of a
security to the Fund agrees to repurchase that security from such Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, often overnight or a few days, although it may extend over a number of
months. The Fund may enter into repurchase agreements only with respect to
securities that could otherwise be purchased by the Fund, and all repurchase
transactions must be collateralized. The Fund may incur a loss on a repurchase
transaction if the seller defaults and the value of the underlying collateral
declines or is otherwise limited or if receipt of the security or collateral
is delayed. The Fund may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank.
Temporary Investments
The Fund may hold a certain portion of its assets in cash or short-term
investments in order to maintain adequate liquidity for redemption requests or
other cash management needs or for temporary defensive purposes during periods
of unusual market volatility. The short-term investments that the funds may
purchase include, among other things, U.S. government obligations, shares of
other mutual funds, repurchase agreements, obligations of domestic banks and
short-term obligations of foreign banks, corporations and other entities.
U.S. Government Obligations
The Fund may invest in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government obligations").
Payment of principal and interest on U.S. Government Obligations (i) may be
backed by the full faith and credit of the United States ( as with U.S.
Treasury bills and GNMA certificates) or (ii) may be backed solely by the
issuing or guaranteeing agency or instrumentality itself (as with FNMA notes).
In the latter case investors must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
which agency or instrumentality may be privately owned. There can be no
assurance that the U.S. Government will provide financial support to its
agencies or instrumentalities where it is not obligated to do so. In addition,
U.S. Government Obligations are subject to fluctuations in market value due to
fluctuations in market interest rates. As a general
matter, the value of debt instruments, including U.S. Government Obligations,
declines when market interest rates increase and rises when market interest
rates decrease. Certain types of U.S. Government Obligations are subject to
fluctuations in yield or value due to their structure or contract terms.
INVESTMENT POLICIES
The Fund's investment objective, as set forth in the "Investment Objectives
and Policies" section, is fundamental; that is, it may not be changed without
approval by the vote of a majority of the Fund's outstanding voting
securities, as described under "Capital Stock" in the Fund's SAI. In addition,
any fundamental investment policy may not be changed without such shareholder
approval. If the Board of Trustees determines, however, that a substantive
change in a non-fundamental investment policy or strategy is in the best
interests of the Fund's shareholders, the Board may make such change without
shareholder approval and will disclose any such material changes in the Fund's
then-current prospectus.
As matters of fundamental policy, the Fund may: (i) not purchase securities
of any issuer (except U.S. Government obligations) if as a result, with
respect to 75% of its assets, more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer or the Fund
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would own more than 10% of the outstanding voting securities of such issuer;
(ii) borrow from banks up to 10% of the current value of its net assets for
temporary purposes only in order to meet redemptions, and these borrowings may
be secured by the pledge of up to 10% of the current value of its net assets
(but investments may not be purchased while any such outstanding borrowing in
excess of 5% of its net assets exists); and (iii) not invest 25% or more of
its assets (i.e., concentrate) in any particular industry, except that the
Fund may invest 25% or more of its assets in U.S. Government obligations. The
Fund may make loans in accordance with its investment policies.
With respect to Item (i) above, it may be possible that the aggregate
ownership by Life & Annuity Trust would exceed 10% of the outstanding voting
securities of an issuer. With respect to Item (ii) above, the Fund presently
does not intend to put at risk more than 5% of its assets during the coming
year.
As a matter of non-fundamental policy, the Fund may invest up to 15% of the
current value of its net assets in securities that are illiquid. For these
purposes, illiquid securities include, among others, (a) securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale, (b) fixed time deposits that are subject
to withdrawal penalties and that have maturities of more than seven days and
(c) repurchase agreements not terminable within seven days.
Illiquid Securities shall not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act") that
have been determined to be liquid by the adviser, pursuant to guidelines
established by the Trust's Board of Trustees, and commercial paper that is
sold under Section 4(2) of the 1933 Act that (i) is not traded flat or in
default as to interest or principal and (ii) is rated in one of the two
highest categories by at least two NRSROs and the adviser, pursuant to
guidelines established by the Trust's Board of Trustees, has determined the
commercial paper to be liquid; or (iii) is rated in one of the two highest
categories by one NRSRO and the adviser, pursuant to guidelines established by
the Trust's Board of Trustees, has determined that the commercial paper is of
equivalent quality and is liquid), if by any reason thereof the value of its
aggregate investment in such classes of securities will exceed 10% of its
total assets.
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