<PAGE> 1
Semi-Annual Report
STAGECOACH
VARIABLE ANNUITIES
June 30, 1999
Stagecoach Variable Annuity(TM)
Stagecoach Variable Annuity Plus(TM)
Stagecoach Extra Credit Variable Annuity(TM)
Stagecoach Variable Annuity Flex(TM)
NOT FDIC INSURED
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Contract Holders.................................. 2
Life & Annuity Trust Financial Statements................... 3
American Skandia Trust Financial Statements................. 55
Alger American Fund Financial Statements.................... 103
Montgomery Variable Series: Emerging Market Fund Financial
Statements................................................ 115
</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, Stagecoach Extra Credit Variable Annuity and Stagecoach
Variable Annuity Flex. If it is used for any other purpose, it must be
accompanied or preceded by a current prospectus, as applicable, which discloses
any charges and other important information about the Account, together with the
current applicable prospectus for the Life & Annuity Trust, the American Skandia
Trust, the Alger American Growth Fund, and the Montgomery Variable Series:
Emerging Market Fund.
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
STAGECOACH VARIABLE ANNUITY FLEX
SEMIANNUAL REPORT
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B
PRESIDENT'S LETTER
AUGUST 1999
DEAR INVESTOR:
As we close in on the new millennium, we remain optimistic about the
future. We also must remain ever aware that markets will continue to fluctuate,
sometimes quite wildly, as technology continues to change the face of the world
in general as well as the financial marketplace. Large cap growth stocks had a
phenomenal 1998 but have given back some of those advances in the last few
months. Emerging markets, which were badly battered in 1998, came back
tremendously in the first six months of 1999. This teaches us the lesson that
diversification across asset classes is critical.
Investing for the long term has been a theme upon which American Skandia
has built its business. We work with the best financial professionals to help
our investors reach their long-term savings goals. Bringing you the best
financial products and offering you the best in class money management is not
only our business objective, it is our passion. We only succeed as an
organization if you succeed in reaching your long-term savings goals. Providing
you with the investment tools to engage in asset allocation and diversification
across asset classes and management styles, has been the hallmark to our
success, and to your success in preparing for your long-term savings needs.
We have established investment breadth and selection as a cornerstone of
the American Skandia investment philosophy. Our continued commitment to you is
to seek to bring you the among the best in investment management. One of our
main objectives is to continue to monitor not only current investment options
for our contract owners, but to continue to assess the enhancing of our
investment offerings.
We look forward to the remainder of 1999 and to the possibilities 2000 will
bring. We will continue to strive toward our goal of providing you and your
financial advisors with the best investment choice and selection to help you
meet your long-term savings goals. Our commitment to you is to continue to
enhance one of the strongest lineups of money managers in the industry.
Best regards,
Gordon, C. Boronow
2
<PAGE> 4
LIFE & ANNUITY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1999
ASSET ALLOCATION FUND
EQUITY VALUE FUND
GROWTH FUND
MONEY MARKET FUND
STRATEGIC GROWTH FUND
U.S. GOVERNMENT ALLOCATION FUND
3
<PAGE> 5
LAT ASSET ALLOCATION FUND
The Life & Annuity Trust ("LAT") Asset Allocation Fund (the "Fund") seeks a
high level of total return over the long-term, including net realized and
unrealized capital gains and net investment income, consistent with reasonable
risk. The Fund invests in common stocks, U.S. Treasury bonds and money market
instruments. The Fund's investment model recommends the optimal mix of assets
designed for a long-term investment strategy.
The Asset Allocation Fund is a professionally managed portfolio, advised by
Wells Fargo Bank, N.A. (the "Bank"). Barclays Global Fund Advisors ("BGFA"),
which is not affiliated with the Bank, serves as investment sub-advisor. BGFA
uses an investment model developed and refined over the past 20 years that
analyzes extensive financial data from numerous sources and recommends the
portfolio allocation.
PERFORMANCE SUMMARY
For the six-month period ended June 30, 1999, the Fund reported a
cumulative total return of 6.10%. The Fund has three benchmarks representing
each of the major asset classes in which the Fund can invest. The S&P 500 Index
("S&P 500") returned 12.38%, the Lehman Brothers U.S. Treasury Bond Index lost
2.50%, and the IBC All Taxable Money Fund Average posted a 2.50% return over the
same period.
The Fund's performance during the period was impacted by increased
volatility in both the fixed income and equity markets; stocks bogged down by
ailing profits in the computer industry; rising treasury bond yields; and the
Federal Reserve Board's (the "Fed") interest rate hike.
Following the interest rate increase in June, the Fed took a neutral stance
in terms of future interest rate movements, and the stock and bond markets
rallied at the end of the period. Earlier in the period, U.S. financial markets
experienced increased volatility, driving the S&P 500 down and producing lows in
long bond yields not witnessed since August 1998.
However, the U.S. economy continued to grow, unemployment remained low and
the S&P 500 enjoyed a healthy gain during the second quarter of 1999. On the
other hand, bond markets experienced disappointing returns as the bear market
continued and interest rates remained at their highest levels in more than a
year. The decline in 30-year Treasury prices continued through the second half
of the six-month period, and during the last two months of the period yield
spreads of corporate bonds widened relative to comparable maturity Treasury
bonds.
During this six-month period, the Fund's share price increased from $13.45
on December 31, 1998, to $14.16 on June 30, 1999. The Fund distributed $0.11 per
share in dividend income and no capital gains during the period. Keep in mind
that past performance is no guarantee of future results.
AVERAGE ANNUAL TOTAL RETURN (AS OF JUNE 30, 1999)(1)
<TABLE>
<S> <C>
Year-to-Date 6.10%
1-Year 16.31%
5-Year 18.97%
Since Inception (4/15/94) 17.68%
</TABLE>
PORTFOLIO REVIEW
Every day the Fund's proprietary model determines the appropriate asset
allocation and recommends shifts in the Fund based on changing economic
conditions. As opportunities arise among the three asset classes, the investment
model will shift fund assets accordingly in 5 percent increments. At the end of
the period, the Fund had an asset allocation of 60% stocks and 40% bonds.
4
<PAGE> 6
Late in the period, the Fund reallocated several times to move from an
overweight in equities to a benchmark position as the period ended. These shifts
coincided with several significant trends or events, including strong equity
markets and attractive bond prices. As a result, the Fund was able to lock in
gains to outperform the benchmark.
Please keep in mind that it is not the volatility of the markets that
generate shifts in the Fund's mix, but rather the attempt to capture value from
an asset class based on, among other things, market and economic conditions.
TOP 10 HOLDINGS (AS OF JUNE 30, 1999)(2)
<TABLE>
<CAPTION>
NAME % OF PORTFOLIO
- ---- --------------
<S> <C>
U.S. Treasury Bond 8.00%, 11/15/21 4.0%
U.S. Treasury Bond 8.75%, 8/15/20 3.1%
Microsoft Corporation 2.5%
U.S. Treasury Bond 8.50%, 2/15/20 2.3%
U.S. Treasury Bond 8.13%, 8/15/19 2.2%
U.S. Treasury Bond 6.25%, 8/15/23 2.1%
U.S. T-Bond 6.00%, 2/15/26 2.1%
General Electric Company 2.0%
U.S. Treasury Bond 6.38%, 8/15/27 1.9%
U.S. Treasury Bond 6.13%, 11/15/27 1.9%
</TABLE>
STRATEGIC OUTLOOK
We believe the Fed's interest rate increase signals a slowing of the
economic boom, but the economy is still expected to be strong enough to sustain
above-average growth in coming months. However, growth is expected to slow
closer to 3% during the second half of the year, as the economy continues to
feel the effects of higher oil prices, reduced refinancing activity and the
latest interest-rate hikes.
The financial markets could be in for a period of more volatile trading, as
investors closely scrutinize the latest economic data for signs of slower
economic growth. Investors are bracing for at least one more rate hike by the
Fed sometime later this year, as it guides the economy toward what it believes
to be more sustainable growth and low inflation.
The Asset Allocation Model does not attempt to predict short-term price
movements, but relies on comparing the risk-adjusted "value" of stocks, bonds
and cash instruments. The Fund will continue to apply its quantitative
strategies to allocate assets among stocks, bonds and cash, taking into
consideration factors that affect the economy.
- ---------------
(1) These figures assume the contract owner is still invested at the end of the
reporting period. Investment return and principal value of an investment will
fluctuate so that an investor's units, when redeemed, may be worth more or less
than their original cost. Figures quoted represent past performance, which is no
guarantee of future results. Portfolio performance numbers are net of all
portfolio expenses, but do not reflect deduction of insurance account charges.
During the six-month reporting period ended June 30, 1999, the Fund's advisor
and administrator have voluntarily waived portions of their fees or assumed
responsibility for other expenses, which has reduced operating expenses for
shareholders. Without these reductions, which can be discontinued at any time,
the Fund's returns would have been lower.
The "S&P 500 Index" is a trademark of Standard & Poor's Corporation. The S&P 500
Index is an unmanaged index of 500 widely held common stocks, representing,
among others, industrial, financial, utility and transportation companies,
listed or traded on national exchanges or over-the-counter markets. The Lehman
Brothers U.S. Treasury Bond Index is an unmanaged index comprised of Treasury
bonds with maturities averaging between 10 and 30 years. The IBC All Taxable
Money Fund Average is comprised of the average yields of more than 600 taxable
money market funds. These Indexes do not incur expenses and are not available
directly for investment. Had these Indexes incurred operating expenses, their
performance would have been lower.
(2) Percentages reflect market value of portfolio.
5
<PAGE> 7
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS--59.61%
CAPITAL GOODS--12.93%
3,863 3COM Corporation+ $ 117,027 $ 103,094
1,591 Advanced Micro Devices Incorporated+ 33,433 28,737
2,087 American Electric Power Incorporated 95,296 78,393
11,662 Ameritech Corporation 580,510 857,157
957 Andrew Corporation+ 17,430 18,123
1,675 Apple Computer Incorporated+ 59,348 77,573
3,968 Applied Materials Incorporated+ 158,493 293,136
589 Autodesk Incorporated 23,623 17,412
881 Black & Decker Corporation 46,316 55,613
10,374 Boeing Company 442,625 458,401
239 Briggs & Stratton Corporation 11,237 13,802
1,677 Browning-Ferris Industries Incorporated 55,309 72,111
760 Case Corporation 33,216 36,575
3,775 Caterpillar Incorporated 194,758 226,500
34,134 Cisco Systems Incorporated+ 1,173,809 2,195,243
18,138 Compaq Computer Corporation 571,875 429,644
1,649 Computer Sciences Corporation+ 92,443 114,090
1,051 Cooper Industries Incorporated 59,504 54,652
1,450 Danaher Corporation 68,618 84,281
730 Data General Corporation+ 10,765 10,631
2,508 Deere & Company 119,632 99,380
2,379 Dover Corporation 83,067 90,997
516 EG&G Incorporated 14,153 18,383
4,601 Emerson Electric Company 283,549 289,288
768 Fluor Corporation 31,783 31,104
572 Foster Wheeler Corporation 10,602 8,080
1,890 Freeport McMoran Copper & Gold Incorporated Class B 27,291 33,902
1,686 Gateway Incorporated 93,438 99,474
1,327 General Dynamics Corporation 63,218 90,900
34,921 General Electric Company 3,108,041 3,946,073
814 Harris Corporation 32,452 31,899
10,824 Hewlett Packard Company 736,531 1,087,812
2,697 Illinois Tool Works Incorporated 171,781 221,154
3,435 IMS Health Incorporated 94,753 107,344
1,726 Ingersoll-Rand Company 81,437 111,543
35,439 Intel Corporation 1,596,884 2,108,621
19,403 International Business Machines Corporation 1,350,417 2,507,838
916 Johnson Controls Incorporated 51,918 63,490
964 KLA-Tencor Corporation+ 35,962 62,540
4,234 Lockheed Martin Corporation 213,365 157,717
1,561 LSI Logic Corporation+ 38,086 72,001
2,690 Micron Technology Incorporated+ 109,180 108,441
54,466 Microsoft Corporation+ 3,019,064 4,912,152
4,298 Minnesota Mining & Manufacturing Company 362,306 373,657
6,395 Motorola Incorporated 371,151 605,926
1,804 National Semiconductor Corporation+ 28,189 45,664
</TABLE>
6
<PAGE> 8
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
708 Navistar International+ $ 20,638 $ 35,400
1,213 New Century Energies Incorporated 57,061 47,080
691 Northrop Grumman Corporation+ 59,547 45,822
3,668 Novell Incorporated+ 48,476 97,202
1,893 Omnicom Group 102,474 151,440
1,309 Pall Corporation 27,290 29,043
2,922 Parametric Technology Corporation+ 67,025 40,543
1,168 Parker Hannifin Corporation 45,712 53,436
2,651 Paychex Incorporated 88,790 84,501
530 Pe Corp - Pe Biosystems Group 36,697 60,818
2,914 Pitney Bowes Incorporated 154,397 187,225
797 Raychem Corporation 26,774 29,489
3,584 Raytheon Company 198,484 252,224
1,997 Rockwell International Corporation 86,782 121,318
749 Scientific-Atlanta Incorporated 17,107 26,964
934 Sealed Air Corporation+ 45,607 60,593
2,082 Silicon Graphics Incorporated+ 26,103 34,093
712 Snap-On Incorporated 26,393 25,766
3,591 Southwest Airlines Company 75,587 111,770
8,301 Sun Microsystems Incorporated+ 254,144 571,731
526 Tektronix Incorporated 16,925 15,879
4,137 Tellabs Incorporated+ 151,254 279,506
4,144 Texas Instruments Incorporated 288,699 600,880
569 Thomas & Betts Corporation 28,092 26,885
633 Timken Company 18,187 12,344
629 Tupperware Corporation 15,493 16,040
6,072 Unilever NV 503,598 423,522
1,045 W W Grainger Incorporated 52,029 56,234
----------- -----------
$18,513,250 $26,008,296
CONSUMER--BASIC--8.17%
690 Allergan Incorporated $ 37,983 $ 76,590
1,040 Alza Corporation+ 46,159 52,910
13,940 American Home Products Corporation 704,678 801,550
6,272 Archer-Daniels-Midland Company 111,605 96,824
573 Bausch & Lomb Incorporated 29,370 43,835
2,693 Becton Dickinson & Company 99,339 80,790
3,018 Bestfoods 160,671 149,391
1,205 Biomet Incorporated+ 39,443 47,899
21,150 Bristol-Myers Squibb Company 1,202,453 1,489,753
4,745 Campbell Soup Company 246,592 212,932
1,267 Clorox Company 129,296 135,331
4,549 Coca-Cola Enterprises Incorporated 142,387 139,882
3,071 Colgate-Palmolive Company 269,041 303,261
6,224 Columbia HCA Healthcare Corporation 159,444 141,985
5,234 ConAgra Incorporated 150,660 139,355
2,634 Corning Incorporated 108,418 184,709
4,154 CVS Corporation 167,322 212,373
1,438 Darden Restaurants Incorporated 23,956 31,366
1,653 General Mills Incorporated 115,711 132,860
423 Great Atlantic & Pacific Tea Company 12,160 14,303
</TABLE>
7
<PAGE> 9
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
3,894 H J Heinz Company $ 208,245 $ 195,187
4,541 Healthsouth Corporation+ 103,726 67,831
1,470 Hershey Foods Corporation 98,104 87,281
1,902 Humana Incorporated+ 43,552 24,607
14,273 Johnson & Johnson 1,089,164 1,398,754
4,384 Kellogg Company 164,163 144,672
8,882 Kroger Company+ 216,895 248,141
11,706 Lilly (Eli) & Company 841,712 838,442
805 Mallinckrodt Incorporated 25,069 29,282
2,982 McKesson HBOC Incorporated 220,625 95,797
6,161 Medtronic Incorporated 393,441 479,788
25,148 Merck & Company Incorporated 1,625,322 1,860,952
501 Millipore Corporation 13,985 20,322
3,469 Nabisco Group Holdings 62,679 67,862
13,856 Pfizer Incorporated 1,547,592 1,520,696
5,394 Pharmacia and Upjohn Incorporated 250,297 306,447
25,750 Philip Morris Companies Incorporated 1,057,917 1,034,828
2,545 Pioneer Hi Bred International Incorporated 90,188 99,096
14,115 Procter & Gamble Company 1,185,458 1,259,764
1,410 Quaker Oats Company 79,190 93,589
3,532 Ralston-Purina Group 115,606 107,505
1 RJ Reynolds Tobacco Holdings 31 31
5,278 Safeway Incorporated+ 286,400 261,261
9,693 Sara Lee Corporation 271,076 219,910
15,641 Schering-Plough Corporation 726,975 828,973
238 Shared Medical System Corporation 14,380 15,530
934 St. Jude Medical Incorporated+ 31,036 33,274
1,282 Supervalu Incorporated 29,719 32,931
3,570 Sysco Corporation 90,101 106,431
3,337 Tenet Healthcare Corporation+ 99,865 61,943
1,856 United Healthcare Corporation 109,023 116,232
1,954 UST Incorporated 54,882 57,155
742 Wellpoint Health Networks 64,195 62,977
1,609 Winn-Dixie Stores Incorporated 63,310 59,432
1,236 Wm. Wrigley Jr Company 110,326 111,240
----------- -----------
$15,340,937 $16,436,062
CONSUMER--DISCRETIONARY--8.90%
688 Adobe Systems Incorporated $ 31,568 $ 56,524
426 Adolph Coors Company Class B 18,805 21,087
588 Alberto-Culver Company 15,930 15,656
4,480 Albertson's Incorporated 215,135 231,000
5,962 Allied Signal Incorporated 259,326 375,606
11,572 America Online Incorporated+ 1,048,735 1,278,706
1,720 AMR Corporation+ 116,926 117,390
1,876 AmSouth Bancorp 60,937 43,500
1,637 AutoZone Incorporated+ 49,397 49,315
2,832 Avon Products Incorporated 116,169 157,176
4,189 Boston Scientific Corporation+ 142,600 184,054
771 Brown-Forman Corporation 48,128 50,260
955 Brunswick Corporation 24,214 26,621
</TABLE>
8
<PAGE> 10
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
8,242 Cendant Corporation+ $ 156,337 $ 168,961
1,565 Ceridian Corporation 46,291 51,156
1,100 Circuit City Stores Incorporated 54,005 102,300
26,323 Coca-Cola Company 1,928,596 1,645,188
1,184 Consolidated Stores Corporation+ 37,904 31,968
789 Cooper Tire & Rubber Company 16,203 18,640
2,312 Costco Companies Incorporated+ 143,696 185,105
453 Cummins Engine Company Incorporated 20,280 25,878
4,754 Dayton-Hudson Corporation 227,757 309,010
1,471 Delta Air Lines Incorporated 83,256 84,766
1,136 Dillards Incorporated 38,981 39,902
2,407 Dollar General Corporation 61,950 69,803
11,959 DuPont (E.I.) de Nemours and Company 799,328 816,949
3,351 Eastman Kodak Company 245,374 227,030
730 Eaton Corporation 57,080 67,160
2,207 Federated Department Stores Incorporated+ 105,819 116,833
4,629 First Data Corporation 151,318 226,532
12,967 Ford Motor Company 659,932 731,825
925 Fruit Of The Loom - Limited+ 23,170 9,019
9,158 Gap Incorporated 264,507 461,334
6,876 General Motors Corporation 407,628 453,816
1,880 Genuine Parts Company 62,879 65,800
11,884 Gillette Company 635,109 487,244
1,665 Goodyear Tire & Rubber Company 102,767 97,923
735 Harcourt General Incorporated 38,647 37,898
1,396 Harrah's Entertainment Incorporated+ 27,439 30,712
2,102 Hasbro Incorporated 51,932 58,725
2,813 Hilton Hotels Corporation 49,067 39,909
1,153 International Flavors & Fragrances Incorporated 50,680 51,164
2,803 J C Penney Company Incorporated 167,843 136,121
5,232 K-Mart Corporation+ 88,974 86,001
765 King World Productions Incorporated+ 20,076 26,632
1,700 Kohls Corporation+ 97,211 131,219
2,324 Limited Incorporated 74,443 105,452
664 Liz Claiborne Incorporated 26,386 24,236
432 Longs Drug Stores Corporation 14,114 14,931
2,642 Marriott International 84,978 98,745
4,427 Mattel Incorporated 146,534 117,039
3,607 May Department Stores Company+ 149,234 147,436
961 Maytag Corporation 52,162 66,970
14,512 McDonald's Corporation 488,994 599,527
2,189 Mirage Resorts Incorporated+ 43,996 36,666
2,957 Newell Rubbermaid Incorporated 133,732 137,501
2,995 Nike Incorporated 139,122 189,621
1,545 Nordstrom Incorporated 51,145 51,758
15,412 Oracle Systems Corporation+ 308,485 572,171
868 PACCAR Incorporated 44,205 46,330
613 Pep Boys-Manny Moe & Jack 10,754 13,256
15,776 Pepsico Incorporated 599,494 610,334
503 Polaroid Corporation 15,632 13,895
583 Reebok International Limited+ 14,143 10,858
</TABLE>
9
<PAGE> 11
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
2,794 Rite Aid Corporation $ 96,498 $ 68,802
396 Russell Corporation 9,897 7,722
4,583 Seagram Company Limited 187,590 230,869
4,094 Sears Roebuck & Company 216,742 182,439
3,008 Service Corporation International 101,249 57,904
2,647 Solectron Corporation+ 124,548 176,522
238 Springs Industries Incorporated 9,996 10,383
2,080 Tandy Corporation 51,397 101,660
3,453 TJX Companies Incorporated 86,821 115,028
2,763 Toys "R" Us Incorporated+ 65,294 57,160
1,627 Tricon Global Restaurants Incorporated+ 62,259 88,061
1,251 TRW Incorporated 64,394 68,649
877 US Air Group Incorporated+ 56,754 38,204
1,239 V.F. Corporation 59,578 52,967
7,332 Viacom Incorporated+ 237,033 322,608
47,497 Wal-Mart Stores Incorporated 1,514,457 2,291,730
10,659 Walgreen's Company 230,157 313,108
9,062 Warner Lambert Company 605,099 628,676
1,324 Wendy's International Incorporated 31,281 37,486
850 Whirlpool Corporation 51,122 62,900
7,102 Xerox Corporation 378,065 419,462
----------- -----------
$15,707,690 $17,888,484
ENERGY & RELATED--3.71%
969 Amerada Hess Corporation $ 52,511 $ 57,656
5,420 Amgen Incorporated+ 206,755 329,943
1,368 Anadarko Petroleum Corporation 46,881 50,360
788 Ashland Incorporated 39,432 31,619
3,430 Atlantic Richfield Corporation 250,862 286,619
3,498 Baker Hughes Incorporated 91,172 117,183
1,873 Burlington Resources Incorporated 74,027 81,007
6,960 Chevron Corporation 578,598 662,505
1,201 CMS Energy Corporation 53,480 50,292
206 Eastern Enterprises 8,536 8,189
875 Eastman Chemical Company 51,129 45,281
25,909 Exxon Corporation 1,857,465 1,998,232
4,692 Halliburton Company 195,950 212,313
548 Helmerich & Payne Incorporated 12,990 13,049
908 Kerr McGee Corporation 47,586 45,570
8,398 Mobil Corporation 665,788 831,402
0 Octel Corporation+ 6 3
2,662 Phillips Petroleum Company 122,736 133,932
900 Rowan Companies Incorporated+ 18,182 16,594
22,934 Royal Dutch Petroleum Company - Sponsored ADR 1,210,450 1,381,758
5,806 Schlumberger Limited 368,047 369,770
1,087 Sigma Aldrich Corporation 36,656 37,434
1,024 Sunoco Incorporated 38,124 30,912
5,731 Texaco Incorporated 337,099 358,188
1,823 Thermo Electron Corporation+ 49,436 36,574
2,732 Union Pacific Resources Group Incorporated 45,461 44,566
</TABLE>
10
<PAGE> 12
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
2,550 Unocal Corporation $ 92,052 $ 101,044
3,337 USX-Marathon Group 106,481 108,661
810 W.R. Grace & Company+ 13,741 14,884
----------- -----------
$ 6,671,633 $ 7,455,540
FINANCE & RELATED--8.87%
1,467 Aetna Incorporated $ 113,292 $ 131,205
8,632 Allstate Corporation 370,779 309,673
4,788 American Express Corporation 494,953 623,039
2,724 American General Corporation 185,742 205,322
13,266 American International Group Incorporated 1,182,318 1,552,951
7,774 Associates First Capital Corporation 294,922 344,485
12,638 Banc One Corporation 665,314 752,751
18,583 Bank Of America Corporation 1,298,184 1,362,366
8,128 Bank of New York Incorporated 252,222 298,196
3,158 BankBoston Corporation 149,979 161,453
3,356 BB&T Corporation 116,811 123,123
1,277 Bear Stearns & Company Incorporated 61,801 59,700
2,136 Capital One Financial Corporation 88,886 118,949
4,335 Charles Schwab Corporation 165,446 476,308
8,943 Chase Manhattan Corporation 610,805 774,687
1,642 Chubb Corporation 117,602 114,119
2,129 CIGNA Corporation 150,643 189,481
36,054 Citigroup Incorporated 1,388,991 1,712,565
1,672 Comerica Incorporated 106,156 99,380
1,199 Countrywide Credit Industries Incorporated 54,287 51,257
7,385 Federal Home Loan Mortgage Corporation 357,015 428,330
10,950 Federal National Mortgage Association 684,028 748,706
10,351 First Union Corporation 588,667 486,497
7,102 Firstar Corporation 217,357 198,856
6,125 Fleet Financial Group Incorporated 248,167 271,797
2,726 Franklin Resources Incorporated 121,834 110,744
608 Golden West Financial 58,105 59,584
1,009 H&R Block Incorporated 43,987 50,450
2,422 Hartford Financial Services Group 130,614 141,233
5,074 Household International Incorporated 217,500 240,381
1,813 JP Morgan & Company Incorporated 221,897 254,727
4,834 KeyCorp 168,364 155,292
1,244 Lehman Brothers Holdings 81,271 77,439
2,204 Lincoln National Corporation 99,231 115,297
2,783 Marsh & McLennan Companies Incorporated 166,497 210,117
1,090 MBIA Incorporated 73,626 70,578
8,578 MBNA Corporation 192,307 262,701
5,603 Mellon Bank Corporation 189,917 203,809
1,694 Mercantile Bancorporation 85,315 96,770
3,855 Merrill Lynch & Company Incorporated 315,740 308,159
1,172 MGIC Investment Corporation 61,479 54,938
6,091 Morgan Stanley Dean Witter & Company 473,730 624,328
3,402 National City Corporation 227,281 222,831
1,236 Northern Trust Corporation 92,780 119,892
</TABLE>
11
<PAGE> 13
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
1,577 Painewebber Group Incorporated $ 67,460 $ 73,725
3,261 PNC Bank Corporation 179,400 187,915
1,555 Providian Financial Corporation 90,798 145,393
1,049 Republic New York Corporation 60,041 71,529
1,412 Safeco Corporation 62,623 62,305
1,749 SLM Holding Corporation 80,614 80,126
1,794 SouthTrust Corporation 71,849 68,845
2,486 St. Paul Companies Incorporated 95,790 79,086
1,679 State Street Corporation 114,889 143,345
1,846 Summit Bancorp 82,827 77,186
3,399 SunTrust Banks Incorporated 250,689 236,018
2,870 Synovus Financial Corporation 63,918 57,041
1,453 Torchmark Corporation 51,870 49,584
1,308 Transamerica Corporation 74,995 98,100
7,718 U.S. Bancorporation 299,684 262,412
2,195 Wachovia Corporation 180,578 187,810
6,354 Washington Mutual Incorporated 260,649 224,773
17,628 Wells Fargo & Company** 638,322 753,597
----------- -----------
$15,712,838 $17,833,256
GENERAL BUSINESS & RELATED--4.81%
2,873 AFLAC Incorporated $ 146,919 $ 137,545
2,135 Allegheny Teledyne Incorporated 46,662 48,304
705 American Greetings Corporation 31,626 21,238
2,768 AON Corporation 116,099 114,180
6,616 Automatic Data Processing Incorporated 233,652 291,104
2,558 BMC Software Incorporated+ 134,920 138,132
1,913 Cabletron Systems Incorporated+ 22,020 24,869
7,646 CBS Corporation+ 254,031 332,123
3,499 Clear Channel Communications Incorporated+ 196,938 241,212
7,943 Comcast Corporation 180,853 305,309
5,653 Computer Associates International Incorporated 275,344 310,915
6,044 Delphi Automotive Systems Corporation+ 105,651 112,192
821 Deluxe Corporation 28,161 31,968
1,034 Dow Jones & Company Incorporated 51,400 54,867
5,259 Electronic Data Systems Corporation 222,807 297,462
1,594 Equifax Incorporated 58,938 56,886
3,185 FDX Corporation+ 108,654 172,786
2,988 Gannett Company Incorporated 193,452 213,269
1,886 General Instrument Corporation+ 52,948 80,155
2,886 Homestake Mining Company 29,141 23,629
1,533 Interpublic Group Companies Incorporated 98,242 132,796
1,126 Jefferson Pilot Corporation 67,643 74,527
423 Jostens Incorporated 9,850 8,909
800 Knight-Ridder Incorporated 43,192 43,950
1,193 Loews Corporation 107,985 94,396
32,421 Lucent Technologies Incorporated 1,352,702 2,186,391
2,157 McGraw-Hill Incorporated 93,124 116,343
6,470 Media One Group Incorporated+ 291,252 481,206
563 Meredith Corporation 21,948 19,494
475 National Service Industries Incorporated 20,842 17,100
</TABLE>
12
<PAGE> 14
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
1,925 New York Times Company+ $ 64,368 $ 70,864
3,146 Nextel Communications Incorporated+ 84,116 157,890
1,467 Provident Companies Incorporated 53,756 58,680
1,426 RR Donnelley & Sons Company 59,772 52,851
4,998 Staples Incorporated+ 106,519 154,626
1,602 Textron Incorporated 122,007 131,865
12,729 Time Warner Incorporated 600,471 916,488
729 Times Mirror Company+ 44,181 43,193
1,252 Tribune Company 83,259 109,081
5,419 U.S. West Incorporated 287,858 318,366
5,159 United Technologies Corporation 259,514 369,836
1,528 UNUM Corporation 81,336 83,658
21,991 Walt Disney Company 776,490 677,598
6,514 Waste Management Incorporated 333,146 350,128
----------- -----------
$ 7,553,789 $ 9,678,381
MANUFACTURING PROCESSING--4.75%
16,191 Abbott Laboratories $ 661,988 $ 736,691
2,074 AES Corporation+ 83,156 120,551
2,458 Air Products & Chemicals Incorporated 97,787 98,935
2,400 Alcan Aluminum Limited 67,761 76,650
3,896 Alcoa Incorporated 145,842 241,065
5,028 Anheuser-Busch Incorporated 268,070 356,674
1,162 Apache Corporation 34,089 45,318
472 Asarco Incorporated 9,477 8,880
1,237 Avery Dennison Corporation 64,737 74,684
828 B.F. Goodrich Company 35,358 35,190
375 Ball Corporation 15,779 15,844
4,191 Barrick Gold Corporation 80,237 81,201
2,357 Battle Mountain Gold Company 12,382 5,745
3,118 Baxter International Incorporated 181,513 189,029
565 Bemis Company Incorporated 22,055 22,459
2,200 Best Buy Company Incorporated+ 145,256 148,500
1,519 Bethlehem Steel Corporation+ 15,853 11,677
579 C R Bard Incorporated 22,883 27,683
2,921 Cardinal Health Incorporated 199,735 187,309
6,592 Carnival Corporation 288,921 319,712
1,782 Cincinnati Financial Corporation 69,538 66,936
3,919 Compuware Corporation+ 142,948 124,673
3,467 Conseco Incorporated 135,991 105,527
1,289 Crown Cork & Seal Company 56,073 36,737
1,043 Cyprus Amax Minerals Company 14,631 15,841
27,096 Dell Computer Corporation+ 752,290 1,002,552
2,253 Dow Chemical Company 215,116 285,849
1,790 Dun & Bradstreet Corporation 54,023 63,433
1,348 Ecolab Incorporated 43,563 58,807
10,802 EMC Corporation+ 333,750 594,110
1,301 Engelhard Corporation 26,092 29,435
2,861 Fifth Third Bancorp 167,219 190,435
353 FMC Corporation+ 24,200 24,114
2,355 Fort James Corporation 95,352 89,196
</TABLE>
13
<PAGE> 15
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
1,819 Fortune Brands Incorporated $ 63,795 $ 75,261
608 Great Lakes Chemical Corporation 24,926 28,006
3,248 Guidant Corporation+ 128,626 167,069
1,168 HCR Manor Care+ 37,742 28,251
1,108 Hercules Incorporated 40,736 43,558
1,269 Honeywell Incorporated 102,857 147,045
2,278 Huntington Bancshares Incorporated 69,133 79,730
1,664 IKON Office Solutions Incorporated 26,812 24,960
2,016 Inco Limited 27,878 36,288
4,432 International Paper Company 198,636 223,816
965 ITT Industries Incorporated 34,537 36,791
1,209 Kansas City Southern Industries Incorporated 68,457 77,149
5,695 Kimberly-Clark Corporation 274,128 324,615
614 McDermott International Incorporated 19,876 17,346
1,126 Mead Corporation 36,452 47,011
419 Milacron Incorporated 9,657 7,752
6,720 Monsanto Company 340,734 265,020
53 Nacco Industries Incorporated 7,720 3,896
657 Nalco Chemical Company 22,814 34,082
1,866 Newmont Mining Corporation 42,173 37,087
975 Nucor Corporation 47,649 46,252
3,681 Occidental Petroleum Corporation 89,136 77,761
4,000 Office Depot Incorporated+ 90,124 88,250
1,684 Owens-Illinois Incorporated+ 62,446 55,046
2,569 Peoplesoft Incorporated+ 72,191 44,315
602 Phelps Dodge Corporation 34,848 37,286
3,426 Placer Dome Incorporated 40,938 40,470
1,854 PPG Industries Incorporated 118,740 109,502
1,671 Praxair Incorporated 75,669 81,775
729 Progressive Corporation 94,588 105,705
2,357 Regions Financial Corporation 84,368 90,597
678 Reynolds Metals Company 38,583 40,002
2,312 Rohm & Haas Company 85,936 99,127
2,488 Seagate Technology Incorporated+ 66,002 63,755
2,611 Sempra Energy 68,326 59,074
1,837 Sherwin Williams Company 56,058 50,977
588 Temple-Inland Incorporated 34,359 40,131
1,810 Tenneco Incorporated 66,401 43,214
8,672 Tyco International Limited 517,520 821,672
1,383 Union Carbide Corporation 65,980 67,421
1,494 Union Planters Corporation 72,170 66,763
2,841 Unisys Corporation+ 75,789 110,621
979 USX - US Steel Group 29,821 26,433
1,048 Watson Pharmaceuticals Incorporated 46,885 36,746
1,101 Westvaco Corporation 30,072 31,929
1,088 Worthington Industries Incorporated 15,711 17,884
----------- -----------
$ 8,241,664 $ 9,548,883
</TABLE>
14
<PAGE> 16
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
SHELTER & RELATED--0.95%
465 Armstrong World Industries Incorporated $ 30,882 $ 26,883
583 Boise Cascade Corporation 18,910 25,069
603 Centex Corporation 22,650 22,650
1,051 Champion International Corporation 46,879 50,317
719 Crane Company 21,949 22,604
413 Fleetwood Enterprises Incorporated 14,536 10,919
1,861 Georgia-Pacific Corporation 62,963 88,165
15,774 Home Depot Incorporated 700,979 1,016,437
539 Kaufman & Broad Home Corporation 13,672 13,408
1,156 Louisiana-Pacific Corporation 23,190 27,455
3,993 Lowe's Company Incorporated 168,316 226,353
3,694 Masco Corporation 104,331 106,664
564 Owens Corning Fiberglass Corporation 22,050 19,388
263 Potlatch Corporation 10,702 11,556
482 Pulte Corporation 12,700 11,146
970 Stanley Works 39,520 31,222
2,059 Weyerhaeuser Company 105,662 141,556
1,163 Willamette Industries Incorporated 40,108 53,571
----------- -----------
$ 1,459,999 $ 1,905,363
TECHNOLOGY--0.02%
800 Network Appliance Incorporated+ $ 41,989 $ 44,700
----------- -----------
TRANSPORTATION--0.33%
5,057 Burlington Northern Santa Fe $ 166,109 $ 156,767
2,287 CSX Corporation 107,538 103,630
1,767 Dana Corporation 83,792 81,392
3,635 Laidlaw Incorporated 39,075 26,808
4,065 Norfolk Southern Corporation 127,408 122,458
734 Ryder Systems Incorporated 22,449 19,084
2,682 Union Pacific Corporation 135,221 156,394
----------- -----------
$ 681,592 $ 666,533
UTILITIES--6.17%
3,029 Alltel Corporation $ 150,654 $ 216,574
1,480 Ameren Corporation 58,006 56,795
33,954 American Telephone & Telegraph Corporation 1,395,866 1,895,058
16,502 Bell Atlantic Corporation 804,860 1,078,818
20,182 BellSouth Corporation 734,687 946,031
1,618 Carolina Power & Light Company 68,646 69,271
2,293 Central & South West Corporation 61,132 53,599
1,515 Centurytel Incorporated 68,522 60,221
1,710 Cinergy Corporation 56,353 54,720
2,290 Coastal Corporation 78,422 91,600
903 Columbia Energy Group 48,255 56,607
2,473 Consolidated Edison Incorporated 113,693 111,903
1,050 Consolidated Natural Gas Company 56,702 63,788
1,596 Constellation Energy Group 48,950 47,282
</TABLE>
15
<PAGE> 17
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
1,587 Detroit Energy Company $ 64,242 $ 63,480
2,014 Dominion Resources Incorporated 81,831 87,231
3,900 Duke Energy Corporation 229,578 212,063
3,825 Edison International 108,493 102,319
3,738 Enron Corporation 209,523 305,582
2,595 Entergy Corporation 71,833 81,094
2,512 First Energy Corporation 74,682 77,872
1,000 Florida Progress Corporation 42,275 41,313
1,907 FPL Group Incorporated 116,278 104,170
1,896 Frontier Corporation 65,850 111,864
1,337 GPU Incorporated 52,054 56,405
10,412 GTE Corporation 608,785 788,058
19,847 MCI Worldcom Incorporated+ 1,090,051 1,711,804
2,045 Niagara Mohawk Holdings Incorporated 30,272 32,848
535 NICOR Incorporated 20,518 20,363
7,132 Nortel Networks Corporation 399,386 619,147
1,661 Northern States Power Company 45,304 40,175
376 Oneok Incorporated 12,836 11,938
3,243 PacifiCorp 69,450 59,590
2,079 PECO Energy Company 66,849 87,448
332 Peoples Energy Corporation 12,099 12,512
4,095 PG&E Corporation 127,613 133,088
1,642 PP & L Resources Incorporated 39,169 50,492
2,338 Public Services Enterprise Group 82,748 95,566
3,124 Reliant Energy Incorporated 91,364 86,301
20,969 SBC Communications Incorporated 926,693 1,216,202
1,154 Sonat Incorporated 41,709 38,226
7,457 Southern Company 200,125 197,611
9,224 Sprint Corporation (FON Group) 326,097 487,143
4,702 Sprint Corporation (PCS Group)+ 108,385 268,602
3,002 Texas Utilities Company 124,725 123,833
2,269 Unicom Corporation 79,822 87,498
4,582 Williams Companies Incorporated 146,466 195,021
----------- -----------
$ 9,511,853 $12,409,126
TOTAL COMMON STOCKS $99,437,234 $119,874,624
(Cost $99,437,231)
</TABLE>
16
<PAGE> 18
LIFE & ANNUITY TRUST ASSET ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES--37.83%
U.S. TREASURY BONDS--37.83%
$3,750,000 U.S. Treasury Bonds 5.25% 11/15/28 $ 3,324,038
1,600,000 U.S. Treasury Bonds 5.25 02/15/29 1,437,504
2,050,000 U.S. Treasury Bonds 5.50 08/15/28 1,877,021
4,200,000 U.S. Treasury Bonds 6.00 02/15/26 4,098,276
3,750,000 U.S. Treasury Bonds 6.13 11/15/27 3,724,800
4,150,000 U.S. Treasury Bonds 6.25 08/15/23 4,169,464
3,700,000 U.S. Treasury Bonds 6.38 08/15/27 3,791,353
1,100,000 U.S. Treasury Bonds 6.50 11/15/26 1,142,801
2,150,000 U.S. Treasury Bonds 6.63 02/15/27 2,270,594
1,650,000 U.S. Treasury Bonds 6.75 08/15/26 1,766,523
2,550,000 U.S. Treasury Bonds 6.88 08/15/25 2,764,353
2,650,000 U.S. Treasury Bonds 7.13 02/15/23 2,936,942
2,150,000 U.S. Treasury Bonds 7.25 08/15/22 2,407,334
2,050,000 U.S. Treasury Bonds 7.50 11/15/24 2,383,125
1,900,000 U.S. Treasury Bonds 7.63 11/15/22 2,214,982
2,150,000 U.S. Treasury Bonds 7.63 02/15/25 2,535,990
2,350,000 U.S. Treasury Bonds 7.88 02/15/21 2,789,521
6,600,000 U.S. Treasury Bonds 8.00 11/15/21 7,958,148
3,650,000 U.S. Treasury Bonds 8.13 08/15/19 4,408,507
2,200,000 U.S. Treasury Bonds 8.13 05/15/21 2,679,182
1,600,000 U.S. Treasury Bonds 8.13 08/15/21 1,950,752
3,700,000 U.S. Treasury Bonds 8.50 02/15/20 4,640,022
2,100,000 U.S. Treasury Bonds 8.75 05/15/20 2,698,500
4,750,000 U.S. Treasury Bonds 8.75 08/15/20 6,109,688
-------------
TOTAL U.S. TREASURY SECURITIES $ 76,079,420
(Cost $78,311,323)
SHORT-TERM INSTRUMENTS--1.78%
U.S. TREASURY BILLS--1.78%
$2,416,000 U.S. Treasury Bills 4.17% 07/15/99 $ 2,411,731
1,182,000 U.S. Treasury Bills 4.32 08/12/99 1,175,918
-------------
TOTAL SHORT-TERM INSTRUMENTS $ 3,587,649
(Cost $3,588,131)
TOTAL INVESTMENTS IN SECURITIES
(Cost $181,336,685)* (Notes 1 and 3) 99.22% $199,541,693
Other Assets and Liabilities, Net 0.78 1,574,782
------ ------------
TOTAL NET ASSETS 100.00% $201,116,475
====== ============
</TABLE>
- --------------------------------------------------------------------------------
** Security of an affiliate of the Fund with a cost of $638,322
+ 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 $ 23,129,812
Gross Unrealized Depreciation (4,924,842)
------------
NET UNREALIZED APPRECIATION $ 18,204,970
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 19
LAT EQUITY VALUE FUND
The Life & Annuity Trust ("LAT") Equity Value Fund (the "Fund") seeks to
provide investors with long-term capital appreciation. The Fund invests
primarily in common stocks, and may invest in debt securities that are
convertible into common stocks of both domestic and foreign companies,
implementing a value strategy that targets "out of favor" stocks. Our portfolio
managers believe these companies are underpriced relative to indicators, making
them hidden opportunities for capital appreciation.
Rex Wardlaw and Allen Wisniewski manage the LAT Equity Value Fund. Mr.
Wardlaw brings 12 years of investment experience to the Fund. He specializes in
value-style investing and has been managing investments at Wells Fargo and Wells
Capital Management since 1993. Mr. Wardlaw earned a BA in chemistry from
Northwest Nazarene College and an MBA with honors in finance from the University
of Oregon. He also is a Chartered Financial Analyst. Mr. Wisniewski received his
BA and MBA in economics and finance from the University of California at Los
Angeles. In his 14 years of experience in the securities industry his main focus
has been on equities. Mr. Wisniewski is a Chartered Financial Analyst and a
member of the Los Angeles Society of Financial Analysts. The fund managers work
together to bring disciplined investment experience to equity investing.
PERFORMANCE SUMMARY
The LAT Equity Value Fund reported a cumulative total return of 8.05%
during the six-month period ended June 30, 1999, underperforming its benchmark,
the S&P Index, which returned 12.38% over the same period.
Value stocks (which include many cyclical stocks) rebounded strongly in the
second quarter, with companies like Honeywell, IBM, Owens Illinois and Eaton
Corp. delivering strong performances. Financial and utility stocks represented a
larger portion of the portfolio, but performance in these sectors was limited by
the rising interest rate environment. Financial holdings were up only
marginally, and utilities were actually down for the second quarter of 1999 and
year-to-date. Overall, the portfolio is benefiting from greater investor focus
on fundamental valuations and a rotation into previously ignored stocks.
The Fund's share price increased from $9.55 on December 31, 1998, to $10.27
on June 30, 1999. The Fund distributed $0.05 per share in dividend income and no
capital gains were distributed during the six-month period. Keep in mind that
past performance is no guarantee of future results.
AVERAGE ANNUAL TOTAL RETURN (AS OF JUNE 30, 1999)(1)
<TABLE>
<S> <C>
Year-to-date 8.05%
1-Year 6.77%
Since Inception (5/1/98) 3.41%
</TABLE>
PORTFOLIO REVIEW
PORTFOLIO DATA
<TABLE>
<S> <C>
Number of Issues 62
Portfolio Turnover 57%
Weighted Median Market Cap ($B) $23.7
Weighted Average P/E (trailing 12-months) 24.7x
Weighted Average P/B 4.4x
</TABLE>
During the period, we increased the average market capitalization of the
portfolio, positioning the portfolio in more large cap value stocks, while
reducing our holdings of some underperforming smaller value stocks. We feel the
larger cap stocks have significant performance potential for the balance of this
year, boosted by a strong economy. We also increased our weighting in technology
issues, but in keeping with our management philosophy we added stocks with
compelling
18
<PAGE> 20
valuations, like Apple Computer and American Power Conversion. Another
significant addition to the Fund was Honeywell Corp., which we bought early in
the year.
TOP FIVE INDUSTRY HOLDINGS(2)
<TABLE>
<S> <C>
Finance & Related 25%
Utilities 15%
Capital Goods 13%
Energy & Related 9%
Consumer -- Discretionary 8%
</TABLE>
Honeywell Corp. has been our top performing stock this year. We also sold
several utility stocks early in the year, anticipating that a further increase
in interest rates would hurt performance of these stocks. We are currently
underweight in the pharmaceutical sector, as we feel there is very little of
compelling value there.
TOP 10 EQUITY HOLDINGS (AS OF JUNE 30, 1999)(2)
<TABLE>
<S> <C>
Mobil Corporation 4.3%
IBM Corporation 3.8%
AT&T Corporation 3.5%
Cigna Corporation 3.5%
Citigroup Incorporated 2.9%
GTE Corporation 2.8%
Chase Manhattan Corporation 2.7%
Raytheon Company Class B 2.7%
Ameritech Corporation 2.6%
SLM Holding Corporation 2.5%
</TABLE>
STRATEGIC OUTLOOK
We believe that the economy remains strong, and a majority of companies
have the potential to continue to report strong earnings growth for the balance
of this year. The Federal Reserve Board modestly raised short term interest
rates, tacitly acknowledging the strength of the economy and gently applying the
brakes (higher interest rates). These conditions bode well for the stocks in our
Fund, as our positions in financial, telecommunications, capital goods,
technology and energy companies should perform very well in the current market
environment. Our underweighted positions in pharmaceutical and consumer cyclical
companies reflect our belief that many of the companies in these sectors are
fairly valued and are not compelling investment opportunities at this time.
The overall outlook for the economy is good, with benign inflation and
healthy corporate earnings continuing. While the Y2K issue is not expected to be
a factor for any of the largest domestic companies, there are mixed signs about
the impact of Y2K on the latter half of this year. Some companies, like food and
beverage firms, are expecting to see a noticeable surge in orders for the year
end. Other companies, primarily technology firms, expect to see slowing sales as
firms slow their orders over year-end. In any event, the overall Y2K issue is
not expected to have a meaningful long term impact on the strength of the US
economy. As such, we expect the second half of 1999 to be strong, and expect
value stocks to continue to perform well relative to the market.
- ---------------
(1) These figures assume the contract owner is still invested at the end of the
reporting period. Investment return and principal value of an investment will
fluctuate so that an investor's units, when redeemed, may be worth more or less
than their original cost. Figures quoted represent past performance, which is no
guarantee of future results. Portfolio performance numbers are net of all
portfolio expenses, but do not reflect deduction of insurance account charges.
During the six-month reporting period ended June 30, 1999, the Fund's advisor
and administrator have voluntarily waived portions of their fees or assumed
responsibility for other expenses, which has reduced operating expenses for
shareholders. Without these reductions, which can be discontinued at any time,
the Fund's returns would have been lower.
The "S&P 500 Index" is a trademark of Standard & Poor's Corporation. The S&P 500
Index is an unmanaged index of 500 widely held common stocks representing, among
others, industrial, financial, utility, and transportation companies listed or
traded on national exchanges or over-the-counter markets. The Index does not
incur expenses and is not available directly for investment. Had this Index
incurred operating expenses, its performance returns would have been lower.
There is no guarantee that the Fund will continue to hold any one particular
security or stay invested in any one sector. The composition of the Fund's
portfolio is subject to change.
(2) Percentages reflect market value of portfolio.
19
<PAGE> 21
LIFE & ANNUITY TRUST EQUITY VALUE FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS--94.92%
CAPITAL GOODS--12.84%
7,825 Ameritech Corporation $ 445,113 $ 575,138
9,775 Apple Computer Incorporated+ 367,525 452,705
3,375 Emerson Electric Company 200,027 212,203
6,475 International Business Machines Corporation 550,178 836,894
4,900 Lockheed Martin Corporation 210,277 182,525
8,350 Raytheon Company 488,520 587,631
----------- -----------
$ 2,261,640 $ 2,847,096
CONSUMER-BASIC--3.50%
30,675 Foundation Health Systems Incorporated+ $ 420,330 $ 460,125
3,136 Philips Electronics 253,178 316,344
----------- -----------
$ 673,508 $ 776,469
CONSUMER-DISCRETIONARY--7.75%
4,450 DuPont (E.I.) de Nemours and Company $ 290,351 $ 303,991
4,675 Eaton Corporation 361,010 430,100
31,925 Food Lion Incorporated 318,664 369,133
3,500 General Motors Corporation 230,148 231,000
15,625 Rite Aid Corporation 398,329 384,766
----------- -----------
$ 1,598,502 $ 1,718,990
ENERGY & RELATED--9.01%
2,725 Atlantic Richfield Corporation $ 188,393 $ 227,708
1,250 Chevron Corporation 105,114 118,984
9,650 Mobil Corporation 855,181 955,350
3,950 Phillips Petroleum Company 180,547 198,734
2,900 Texaco Incorporated 172,641 181,250
9,700 USX -- Marathon Group 298,480 315,856
----------- -----------
$ 1,800,356 $ 1,997,882
FINANCE & RELATED--24.95%
1,725 American International Group Incorporated $ 206,788 $ 201,933
8,903 Banc One Corporation 475,070 530,285
5,625 Bank Of America Corporation 360,737 412,383
6,975 Chase Manhattan Corporation 478,408 604,209
8,600 CIGNA Corporation 672,612 765,400
13,738 Citigroup Incorporated 570,044 652,555
3,200 First Union Corporation 178,619 150,400
5,975 Hartford Financial Services Group 330,330 348,417
5,575 Household International Incorporated 267,543 264,116
3,925 Morgan Stanley Dean Witter & Company 364,572 402,313
12,275 SLM Holding Corporation 541,000 562,348
7,025 U.S. Bancorporation 247,399 238,850
6,825 Union BanCal Corporation 221,720 246,553
4,350 Washington Mutual Incorporated 177,498 153,881
----------- -----------
$ 5,092,340 $ 5,533,643
</TABLE>
20
<PAGE> 22
LIFE & ANNUITY TRUST EQUITY VALUE FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
GENERAL BUSINESS & RELATED--7.17%
12,550 American Power Conversion Corporation+ $ 191,575 $ 252,569
2,441 Delphi Automotive Systems Corporation+ 45,660 45,311
22,750 Fremont General Corporation 492,625 429,406
7,450 UNUM Corporation 416,431 407,888
8,480 Waste Management Incorporated 421,447 455,800
----------- -----------
$ 1,567,738 $ 1,590,974
MANUFACTURING PROCESSING--9.87%
3,075 Bowater Incorporated $ 154,954 $ 145,294
6,350 Conseco Incorporated 207,131 193,278
4,200 Fort James Corporation 160,862 159,075
4,450 Honeywell Incorporated 380,841 515,644
2,500 Mead Corporation 106,388 104,375
3,925 Montana Power Company 224,703 276,713
9,975 Owens-Illinois Incorporated+ 290,998 326,058
13,475 Sherwin Williams Company 377,909 373,931
3,625 Transocean Offshore Incorporated 94,609 95,156
----------- -----------
$ 1,998,395 $ 2,189,524
TRANSPORTATION--4.89%
8,300 Canadian National Railway Company $ 504,454 $ 556,100
11,450 Dana Corporation 496,995 527,416
----------- -----------
$ 1,001,449 $ 1,083,516
UTILITIES--14.94%
13,762 American Telephone & Telegraph Corporation $ 690,297 $ 768,091
4,400 Bell Atlantic Corporation 251,770 287,649
4,500 Columbia Energy Group 229,398 282,093
5,600 Enron Corporation 414,123 457,800
8,325 GTE Corporation 502,154 630,098
1,775 MCI Worldcom Incorporated+ 156,364 153,094
16,575 PacifiCorp 295,404 304,566
2,800 SBC Communications Incorporated 146,738 162,400
6,500 Texas Utilities Company 284,198 268,125
----------- -----------
$ 2,970,446 $ 3,313,916
TOTAL COMMON STOCKS $18,964,374 $21,052,010
(Cost $18,964,372)
</TABLE>
21
<PAGE> 23
LIFE & ANNUITY TRUST EQUITY VALUE FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
SHORT-TERM INSTRUMENTS--5.12%
REPURCHASE AGREEMENTS--5.12%
$668,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.92% 07/01/99 $ 668,000
11,000 HSBC Securities Incorporated Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.88 07/01/99 11,000
363,000 JP Morgan Securities Incorporated Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.90 07/01/99 363,000
95,000 Morgan Stanley & Company Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.80 07/01/99 95,000
-----------
TOTAL SHORT-TERM INSTRUMENTS $ 1,137,000
(Cost $1,137,000)
TOTAL INVESTMENTS IN SECURITIES
(Cost $20,101,372)* (Notes 1 and 3) 100.04% $22,189,010
Other Assets and Liabilities, Net (0.04) (9,790)
------ -----------
TOTAL NET ASSETS 100.00% $22,179,220
====== ===========
</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 $2,320,364
Gross Unrealized Depreciation (232,726)
----------
NET UNREALIZED APPRECIATION $2,087,638
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 24
LAT GROWTH FUND
The Life & Annuity Trust ("LAT") Growth Fund (the "Fund") seeks to earn
current income and achieve long-term capital appreciation by investing primarily
in common stocks and preferred stocks, and in debt securities that are
convertible into common stocks. The Fund maintains a large company emphasis and
the majority of the Fund's holdings consist of common stocks diversified among
industries and companies. These companies represent some of America's best known
firms with long histories of increased earnings.
Kelli Hill manages the Fund, and has 15 years of experience in the
securities industry. Before joining Wells Fargo in 1987, Ms. Hill was an
institutional equity trader for E.F. Hutton. Ms. Hill holds a BA degree in
international relations and economics from the University of Southern
California, and is a Chartered Financial Analyst Level II candidate.
PERFORMANCE SUMMARY
The LAT Growth Fund reported a cumulative total return of 10.85% during the
six-month period ended June 30, 1999, underperforming its benchmark, the S&P 500
Index, which returned 12.38% over the same period.
Although the large cap growth sector has lost some of its momentum, we will
maintain the Fund's strategy. Interest rates rose during the second half of the
period, and the equity markets experienced strong domestic and recovering
foreign economic conditions. Investors also gained confidence in a wider array
of stocks, marking a significant change from the extremely narrow range of stock
performance that existed throughout most of 1998 and early 1999.
The Fund's share price increased from $20.05 on December 31, 1998, to
$22.20 on June 30, 1999. The Fund distributed $0.01 per share in dividend income
and no capital gains during the six-month period. Keep in mind that past
performance is no guarantee of future results.
AVERAGE ANNUAL TOTAL RETURN (AS OF JUNE 30, 1999)(1)
<TABLE>
<S> <C>
Year-to-Date 10.85%
1-Year 22.10%
5-Year 22.86%
Since Inception (4/12/94) 21.56%
</TABLE>
PORTFOLIO REVIEW
PORTFOLIO DATA (AS OF JUNE 30, 1999)
<TABLE>
<S> <C>
Number of Issues 91
Portfolio Turnover 29%
Weighted Median Market Cap ($B) $77.8
Weighted Average P/E (trailing 12-months) 36.3x
Weighted Average P/B 9.0x
</TABLE>
TOP FIVE INDUSTRY HOLDINGS (AS OF JUNE 30, 1999)(2)
<TABLE>
<S> <C>
Capital Goods 18%
Finance & Related 14%
Consumer-Discretionary 13%
Utilities 11%
Consumer-Basic 9%
</TABLE>
23
<PAGE> 25
Clearly, the high quality growth stocks that investors have been willing to
buy at any price have found their way back to reasonable valuations. In this
environment, stock selection is the key to outperformance. Although the
healthcare industry was one of the worst performing sectors in the S&P 500,
health care stocks were the largest positive contributors to the Fund's
performance during the period, adding 56 basis points to relative performance.
The poorest performing stocks during the period were Gillette, Pfizer, Dell, EMC
and MCI WorldCom.
The largest equity position of the Fund as of June 30, 1999, was Microsoft
Corp., which has performed well. We feel our disciplined management style
contributed to the Fund's performance and we continue to focus on two main
factors: market capitalization and projected acceleration of earnings growth. We
plan to take advantage of these new market fundamentals by stressing stock
selection. Some good examples of these unrecognized growth stocks that
contributed positively to Fund performance are Interpublic Group, which was up
12%; Altera, which was up 31%; and Coastal Group, which was up 18%. We believe
this will be the key to potential outperformance in the near future.
Factors we consider when selecting stocks include company fundamentals,
such as technology leadership, low-cost production, market share and a strong
management team.
TOP 10 EQUITY HOLDINGS (AS OF JUNE 30, 1999)(2)
<TABLE>
<S> <C>
Microsoft Corporation 4.4%
General Electric Company 3.0%
Chase Manhattan Corporation 3.0%
American International Group, Incorporated 2.8%
Lucent Technologies Incorporated 2.2%
Wal Mart Stores Incorporated 2.1%
IBM Corporation 2.1%
Allied Signal Incorporated 2.0%
Intel Corporation 2.0%
SBC Communications 2.0%
</TABLE>
STRATEGIC OUTLOOK
Going forward, we hope to take advantage of the current market fundamentals
by stressing stock selection as well as sector selection. We expect high quality
growth stocks that sell at reasonable valuations may continue to perform well,
and unrecognized growth stocks derived through strategic stock selection may be
the key to our performance.
We believe stock selection will remain a very important element, especially
in light of valuation concerns. We will continue to focus on companies with
accelerated earnings that we believe to be consistent and stable.
- ---------------
(1) These figures assume the contract owner is still invested at the end of the
reporting period. Investment return and principal value of an investment will
fluctuate so that an investor's units, when redeemed, may be worth more or less
than their original cost. Figures quoted represent past performance, which is no
guarantee of future results. Portfolio performance numbers are net of all
portfolio expenses, but do not reflect deduction of insurance account charges.
During the six-month reporting period ended June 30, 1999, the Fund's advisor
and administrator have voluntarily waived portions of their fees or assumed
responsibility for other expenses, which has reduced operating expenses for
shareholders. Without these reductions, which can be discontinued at any time,
the Fund's returns would have been lower.
The "S&P 500 Index" is a trademark of Standard & Poor's Corporation. The S&P 500
Index is an unmanaged index of 500 widely held common stocks representing, among
others, industrial, financial, utility, and transportation companies listed or
traded on national exchanges or over-the-counter markets. The Index does not
incur expenses and is not available directly for investment. Had this Index
incurred operating expenses, its performance would have been lower.
There is no guarantee that the Fund will continue to hold any one particular
security or stay invested in any one sector. The composition of the Fund's
portfolio is subject to change.
(2) Percentages reflect market value of portfolio.
24
<PAGE> 26
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS--87.06%
CAPITAL GOODS--17.51%
34,080 Cisco Systems Incorporated+ $ 1,005,900 $ 2,191,770
21,744 Danaher Corporation 695,356 1,263,870
30,647 General Electric Company 2,381,880 3,463,111
14,593 Hewlett Packard Company 1,125,637 1,466,597
11,500 Ingersoll-Rand Company 647,483 743,188
38,476 Intel Corporation 1,830,653 2,289,322
18,912 International Business Machines Corporation 1,506,810 2,444,376
4,000 Johnson Controls Incorporated 256,240 277,250
56,523 Microsoft Corporation+ 2,474,513 5,097,668
8,232 Sun Microsystems Incorporated+ 474,693 566,979
3,801 Texas Instruments Incorporated 351,693 551,145
----------- ------------
$12,750,858 $ 20,355,276
CONSUMER--BASIC--9.19%
27,792 Bristol-Myers Squibb Company $ 1,532,724 $ 1,957,598
12,700 Colgate-Palmolive Company 945,684 1,254,124
14,926 Johnson & Johnson 1,046,074 1,462,747
4,802 Lilly (Eli) & Company 339,261 343,942
6,900 Medtronic Incorporated 540,865 537,337
18,500 Merck & Company Incorporated 1,024,230 1,368,999
9,505 Pfizer Incorporated 917,467 1,043,173
11,672 Procter & Gamble Company 965,585 1,041,725
16,700 Safeway Incorporated+ 793,663 826,649
16,000 Schering-Plough Corporation 659,210 848,000
----------- ------------
$ 8,764,763 $ 10,684,294
CONSUMER--DISCRETIONARY--12.53%
37,578 Allied Signal Incorporated $ 1,444,384 $ 2,367,414
11,811 America Online Incorporated+ 1,407,098 1,305,116
24,160 Coca-Cola Company 1,660,124 1,510,000
26,160 Dayton-Hudson Corporation 924,687 1,700,400
16,488 DuPont (E.I.) de Nemours and Company 1,043,043 1,126,337
10,900 Ford Motor Company 563,642 615,169
10,800 Gap Incorporated 224,586 544,050
18,988 Gillette Company 780,499 778,508
6,100 Kohls Corporation+ 441,012 470,844
15,500 McDonald's Corporation 490,465 640,344
14,400 Pepsico Incorporated 575,954 557,100
51,352 Wal-Mart Stores Incorporated 1,291,812 2,477,734
8,041 Xerox Corporation 398,752 474,922
----------- ------------
$11,246,058 $ 14,567,938
ENERGY & RELATED--6.10%
4,000 Amgen Incorporated+ $ 251,500 $ 243,500
14,745 Chevron Corporation 1,231,341 1,403,540
27,014 Exxon Corporation 1,773,315 2,083,455
11,862 Mobil Corporation 858,906 1,174,338
</TABLE>
25
<PAGE> 27
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
24,708 Royal Dutch Petroleum Company - Sponsored ADR $ 1,316,478 $ 1,488,657
5,200 Schlumberger Limited 305,293 331,175
5,902 Texaco Incorporated 335,832 368,875
----------- ------------
$ 6,072,665 $ 7,093,540
FINANCE & RELATED--14.42%
27,700 American International Group Incorporated $ 2,025,059 $ 3,242,631
11,200 Associates First Capital Corporation 484,796 496,300
14,401 Banc One Corporation 756,164 857,760
11,748 Charles Schwab Corporation 356,343 1,290,812
39,780 Chase Manhattan Corporation 2,340,057 3,445,943
32,400 Citigroup Incorporated 1,324,667 1,539,000
33,880 Federal Home Loan Mortgage Corporation 1,528,907 1,965,040
19,188 Federal National Mortgage Association 1,186,508 1,311,980
8,000 Firstar Corporation 229,612 224,000
6,500 Goldman Sachs Group Incorporated 372,239 469,625
27,438 Household International Incorporated 1,131,540 1,299,875
6,100 Morgan Stanley Dean Witter & Company 614,424 625,250
----------- ------------
$12,350,316 $ 16,768,216
GENERAL BUSINESS & RELATED--8.64%
5,457 AFLAC Incorporated $ 247,980 $ 261,254
10,800 Clear Channel Communications Incorporated+ 504,205 744,525
40,600 Fox Entertainment Group Incorporated+ 972,467 1,093,663
17,740 Gannett Company Incorporated 1,094,036 1,266,193
20,000 Infinity Broadcasting Corporation+ 410,000 595,000
7,000 Interpublic Group Companies Incorporated 525,632 606,375
38,343 Lucent Technologies Incorporated 1,465,931 2,585,756
10,200 Time Warner Incorporated 681,741 734,400
10,600 United Technologies Corporation 568,433 759,888
24,700 Walt Disney Company 796,632 761,069
12,000 Waste Management Incorporated 600,930 645,000
----------- ------------
$ 7,867,987 $ 10,053,123
MANUFACTURING PROCESSING--6.41%
16,236 Abbott Laboratories $ 605,906 $ 738,738
18,600 AES Corporation+ 774,212 1,081,125
13,100 Alcoa Incorporated 636,866 810,563
17,686 Baxter International Incorporated 943,571 1,072,214
23,068 Dell Computer Corporation+ 862,535 853,516
9,298 EMC Corporation+ 376,780 511,390
8,000 International Paper Company 403,934 404,000
11,254 Monsanto Company 477,046 443,830
16,200 Tyco International Limited 915,854 1,534,950
----------- ------------
$ 5,996,704 $ 7,450,326
SHELTER & RELATED--1.59%
15,300 Home Depot Incorporated $ 576,584 $ 985,894
15,250 Lowe's Company Incorporated 874,936 864,484
----------- ------------
$ 1,451,520 $ 1,850,378
</TABLE>
26
<PAGE> 28
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
UTILITIES--10.67%
21,723 American Telephone & Telegraph Corporation $ 849,428 $ 1,212,415
24,176 Bell Atlantic Corporation 1,124,654 1,580,506
10,000 Coastal Corporation 400,825 400,000
24,818 Edison International 656,443 663,882
20,998 GTE Corporation 1,035,061 1,589,286
25,339 MCI Worldcom Incorporated+ 1,179,796 2,185,489
10,724 Nortel Networks Corporation 595,756 930,977
32,968 PG&E Corporation 1,016,205 1,071,460
39,052 SBC Communications Incorporated 1,375,624 2,265,016
11,890 Williams Companies Incorporated 337,166 506,068
----------- ------------
$ 8,570,958 $ 12,405,099
TOTAL COMMON STOCKS $75,071,829 $101,228,190
(Cost $75,071,829)
</TABLE>
27
<PAGE> 29
LIFE & ANNUITY TRUST GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
<C> <S> <C> <C> <C>
SHORT-TERM INSTRUMENTS--9.10%
REPURCHASE AGREEMENTS--9.10%
$5,050,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.92% 07/01/99 $ 5,050,000
74,000 HSBC Securities Incorporated Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.88 07/01/99 74,000
5,217,000 JP Morgan Securities Incorporated Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.90 07/01/99 5,217,000
237,427 Morgan Stanley & Company Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.80 07/01/99 237,427
------------
TOTAL SHORT-TERM INSTRUMENTS
(Cost $10,578,427) $ 10,578,427
</TABLE>
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
OTHER--3.84%
UNIT INVESTMENT TRUST--3.84%
32,600 Standard & Poor's Depositary Receipt
(Cost $4,141,186) $ 4,141,186 $ 4,463,653
TOTAL INVESTMENTS IN SECURITIES
(Cost $89,791,442)* (Notes 1 and 3) 100.00% $116,270,270
Other Assets and Liabilities, Net 0.00 4,556
------ ------------
TOTAL NET ASSETS 100.00% $116,274,826
====== ============
</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 $26,857,993
Gross Unrealized Depreciation (379,165)
-----------
NET UNREALIZED APPRECIATION $26,478,828
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 30
LAT MONEY MARKET FUND
The Life & Annuity Trust ("LAT") Money Market Fund (the "Fund") seeks to
provide investors with a high level of income, while preserving capital and
liquidity, by investing in high-quality, short-term instruments. The Fund may
invest in repurchase agreements, commercial paper, corporate bonds, floating
rate bonds and certificates of deposit. The Fund is managed with the goal of
maintaining a stable share price of $1.00, however, there can be no assurance
that the Fund will meet this objective.
The Fund is managed by Michael Neitzke of Wells Capital Management. Mr.
Neitzke joined Wells Fargo Bank in 1996 from First Interstate Bank and Union
Capital Advisors. He has a BS degree in finance from California State
University, Los Angeles.
AVERAGE ANNUAL TOTAL RETURN (AS OF JUNE 30, 1999)(1)
<TABLE>
<S> <C> <C>
Year-to-Date 2.08%
1-Year 4.42%
5-Year 4.87%
Since Inception (5/19/94) 4.84%
</TABLE>
PERFORMANCE SUMMARY(2)
For the six-month period ended June 30, 1999, the Fund reported a
cumulative total return of 2.08%. The seven-day current yield for the Fund on
this date was 4.22%.
The Fund distributed $0.02 in dividend income and no capital gains during
the period. Keep in mind that past performance is no guarantee of future
results.
PORTFOLIO REVIEW
The Federal Open Market Committee met on June 30, 1999, and raised the
Federal Funds Rate from 4.75% to 5.00%. The last change was on November 17,
1998, when they lowered this key rate from 5.00% to 4.75%. On average, federal
funds traded at 4.76% in the second quarter, compared to 4.74% in the first
quarter of 1999.
The end of the period showed longer-dated paper beginning to reflect a more
valuable proposition, and is certainly more attractive than it was in the flat-
or inverted-curve environment. Earlier in the period, we took advantage of the
spread widening in the six- and nine-month sectors and added to our longer-dated
paper. As we focused on more immediate liquidity needs, and as shorter
maturities became relatively more attractive, the average maturities of the Fund
shortened. We are currently finding more value in paper maturing in the six
month sector.
STRATEGIC OUTLOOK
While yields rose in the second quarter of 1999, they are still
significantly lower than they were a year ago. Second quarter short-term agency
yields rose more than short Treasury yields, widening the spread between U.S.
Government agency securities, discount notes and T-Bills. The spread in the
three-month sector stood at 30 basis points from a year-end spread of 64 basis
points, while the one-year spread was a more attractive 50 basis points.
Overall, we do not expect to change our current strategy and will continue
to focus on high-quality issues. As always, we will continue to focus on capital
preservation and liquidity.
(1) These figures assume the contract owner is still invested at the end of the
reporting period. Figures quoted represent past performance, which is no
guarantee of future results. Portfolio performance numbers are net of all
portfolio expenses, but do not reflect deduction of insurance account charges.
During the six-month reporting period ended June 30, 1999, the Fund's advisor
and administrator have voluntarily waived portions of their fees or assumed
responsibility for other expenses, which has reduced operating expenses for
shareholders. Without these reductions, which can be discontinued at any time,
the Fund's returns would have been lower.
There is no guarantee that the Fund will continue to hold any one particular
security or stay invested in any one sector. The composition of the Fund's
portfolio is subject to change.
(2) Yield reflects fluctuations in interest rates on portfolio investments and
reflects fund expenses.
29
<PAGE> 31
LIFE & ANNUITY TRUST MONEY MARKET FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES--1.54%
FEDERAL HOME LOAN BANKS--1.54%
$ 500,000 Federal Home Loan Banks 4.79% 02/04/00 $ 499,097
-----------
(Cost $499,097)
CORPORATE BONDS & NOTES--11.30%
BANK & FINANCE--11.30%
$ 500,000 Abbey National Treasury Services 5.13% 05/04/00 $ 499,716
700,000 CC USA Incorporated 5.61 06/07/00 700,000
500,000 First Union National Bank 5.35 09/09/99 500,000
450,000 Huntington National Bank 6.10 11/29/99 452,164
500,000 IBM Credit Corporation 5.27 04/07/00 499,730
500,000 IBM Credit Corporation 5.57 08/17/99 499,956
500,000 Nationsbank N.A. 4.94 07/07/99 500,000
-----------
TOTAL CORPORATE BONDS & NOTES $ 3,651,566
(Cost $3,651,566)
SHORT-TERM INSTRUMENTS--87.98%
CERTIFICATES OF DEPOSITS--12.22%
$ 500,000 Bayerische Hypoverins Bank 5.27% 03/03/00 $ 499,741
1,200,000 Chase Manhattan Bank 4.93 10/05/99 1,200,000
450,000 Commerzbank 5.16 05/05/00 449,633
300,000 Commerzbank 5.22 05/12/00 299,888
1,000,000 Natexis Banque 5.28 12/07/99 1,000,086
500,000 RaboBank Nederland 5.13 03/24/00 499,824
-----------
$ 3,949,172
COMMERCIAL PAPER--55.78%
$ 900,000 Ace Overseas Corporation 5.05%+ 07/15/99 $ 898,233
500,000 Atlantis One Funding Corporation 4.83+ 07/15/99 499,061
1,000,000 Compass Securities LLC 5.19+ 12/17/99 975,633
1,200,000 Dorada Finance 5.12+ 09/24/99 1,185,493
1,000,000 Enterprise Funding 4.94+ 07/15/99 998,079
1,300,000 Falcon Asset 4.86+ 07/06/99 1,299,123
1,000,000 Ford Motor Credit Corporation 5.06+ 07/08/99 999,016
1,000,000 General Electric Capital Services Incorporated 4.82+ 07/08/99 999,063
1,300,000 Goldman Sachs Group 5.75+ 07/01/99 1,300,000
1,000,000 Grand Funding Corporation 5.05+ 07/19/99 997,475
1,200,000 JP Morgan & Company 4.83+ 07/09/99 1,198,712
1,200,000 Morgan Stanley 5.01+ 07/20/99 1,196,827
1,000,000 Moriarty Limited 5.14+ 09/15/99 989,147
1,200,000 National City Credit Corporation 4.81+ 07/14/99 1,197,916
1,000,000 Park Avenue Receivables 5.07+ 07/20/99 997,322
</TABLE>
30
<PAGE> 32
LIFE & ANNUITY TRUST MONEY MARKET FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
$1,300,000 Pooled Accounts 5.06%+ 07/15/99 $ 1,297,440
1,000,000 Thames Asset 4.96+ 08/11/99 994,351
-----------
$18,022,894
REPURCHASE AGREEMENTS--17.20
$2,408,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.92% 07/01/99 $ 2,408,000
483,000 HSBC Securities Incorporated Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.88 07/01/99 483,000
66,000 JP Morgan Securities Incorporated Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.90 07/01/99 66,000
2,600,274 Morgan Stanley & Company Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.80 07/01/99 2,600,274
-----------
$ 5,557,274
U.S. GOVERNMENT AGENCY NOTES--2.78%
$ 900,000 Federal National Mortgage Association+ 4.67% 07/15/99 $ 898,366
-----------
TOTAL SHORT-TERM INSTRUMENTS $28,427,706
(Cost $28,427,709)
TOTAL INVESTMENTS IN SECURITIES
(Cost $32,578,369)* (Notes 1 and 3) 100.82% $32,578,369
Other Assets and Liabilities, Net (0.82) (264,853)
------- -----------
TOTAL NET ASSETS 100.00% $32,313,516
======= ===========
</TABLE>
- --------------------------------------------------------------------------------
+ Yield to maturity.
* Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized appreciation consists of:
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 33
LAT STRATEGIC GROWTH FUND
The Life & Annuity Trust ("LAT") Strategic Growth Fund (the "Fund") seeks
to provide investors with an above-average level of long-term capital
appreciation. The Fund invests in equity securities of companies expected to
experience strong growth in revenues, earnings and assets. The Fund will hold
common stock issues spread across multiple industry groups, with the majority of
these holdings consisting of established growth companies, turn-around or
acquisition candidates, or attractive larger capitalization companies.
Tom Zeifang and Chris Greene manage the Fund. Mr. Zeifang joined Wells
Capital Management in 1995. Before that he spent three years as an analyst at
Fleet Investment Advisors and three years as an assistant portfolio manager at
Marine Midland Bank. Before joining Wells Capital Management in 1997, Mr. Greene
was an analyst for Hambrecht & Quist. He graduated with a BA degree in economics
from Claremont McKenna College.
PERFORMANCE SUMMARY
During the six-month period ended June 30, 1999, the Fund reported a
cumulative total return of 23.10%, outperforming its benchmark, the S&P 500
Index, which returned 12.38% over the same period.
Our emphasis on retail, oil service and semiconductor stocks contributed to
our performance in the second quarter. The Fund's disciplined focus on
earnings-driven growth stocks remains unchanged.
The Fund's share price increased during the period from $13.94 on December
31, 1998, to $17.16 on June 30, 1999. The Fund distributed no capital gains and
no dividend income during the period. Keep in mind that past performance is no
guarantee of future results.
AVERAGE ANNUAL TOTAL RETURNS (AS OF JUNE 30, 1999)(1)
<TABLE>
<S> <C>
Year-to-Date 23.10%
1-Year 34.07%
Since Inception (5/1/98) 59.19%
</TABLE>
PORTFOLIO REVIEW
PORTFOLIO DATA (AS OF JUNE 30, 1999)
<TABLE>
<S> <C>
Number of Issues 91
Portfolio Turnover 188%
Weighted Median Market Cap ($B) $6.7
Weighted Average P/E (trailing
12-months) 62.0x
Weighted Average P/B 12.1x
</TABLE>
The Fund benefited during the period from performance of the technology and
telecommunications sectors. Top performing companies include Nokia Corporation,
Intuit Inc., Teradyne, Inc., and America Online Inc.
TOP FIVE INDUSTRY HOLDINGS (AS OF JUNE 30, 1999)(2)
<TABLE>
<S> <C>
Capital Goods 24%
Consumer-Discretionary 8%
Finance & Related 7%
Consumer-Basic 4%
Utilities 1%
</TABLE>
32
<PAGE> 34
The Fund is managed with a mid-cap growth emphasis, focusing on companies
with attractive long-term earnings growth prospects.
TOP 10 EQUITY HOLDINGS (AS OF JUNE 30, 1999)(2)
<TABLE>
<S> <C>
Electronic Arts 4.2%
Teradyne, Incorporated 3.7%
Chancelor Media Corporation 3.7%
America Online Incorporated 3.4%
Nokia Corp. Sponsored ADR 2.8%
Micromuse Incorporated 2.6%
Intuit Incorporated 2.1%
Linear Technology Corporation 2.1%
Qualcomm Incorporated 1.8%
Yahoo Incorporated 1.8%
</TABLE>
STRATEGIC OUTLOOK
Going forward we hope to take advantage of the current market fundamentals
by stressing stock selection, as well as sector selection. We expect high
quality growth stocks that sell at reasonable valuations may continue to perform
well, and the selection of stocks with largely unrecognized growth stocks
derived through strategic stock selection may be the key to our performance.
Our strategy is to continue to overweight the retail sector, oil and gas
service sector (concentrating on natural gas companies), and communications
infrastructure sector. We will continue to underweight the software, related
information technology services, and healthcare services sectors. As always, we
will focus on growth companies that are characterized by dominant market share,
technological leadership and a strong management team.
- ---------------
(1) These figures assume the contract owner is still invested at the end of the
reporting period. Investment return and principal value of an investment will
fluctuate so that an investor's units, when redeemed, may be worth more or less
than their original cost. Figures quoted represent past performance, which is no
guarantee of future results. There may be some additional risk associated with
investments in smaller and/or newer companies because their shares tend to be
less liquid than securities of larger companies. Further, shares of small and
new companies are generally more sensitive to purchase and sales transactions
and changes in the issuer's financial conditions and, therefore, the prices of
such stocks may be more volatile than those of larger company stocks. Portfolio
performance numbers are net of all portfolio expenses, but do not reflect
deduction of insurance account charges.
During the six-month reporting period ended June 30, 1999, the Fund's advisor
and administrator have voluntarily waived portions of their fees or assumed
responsibility for other expenses, which has reduced operating expenses for
shareholders. Without these reductions, which can be discontinued at any time,
the Fund's returns would have been lower.
The "S&P 500 Index" is a trademark of Standard & Poor's Corporation. The S&P 500
Index is an unmanaged index of 500 widely held common stocks representing, among
others, industrial, financial, utility, and transportation companies listed or
traded on national exchanges or over-the-counter markets. The Index does not
incur expenses and is not available directly for investment. Had this Index
incurred operating expenses, its performance would have been lower.
There is no guarantee that the Fund will continue to hold any one particular
security or stay invested in any one sector. The composition of the Fund's
portfolio is subject to change.
(2) Percentages reflect market value of portfolio.
33
<PAGE> 35
LIFE & ANNUITY TRUST STRATEGIC GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
COMMON STOCKS--89.80%
CAPITAL GOODS--24.24%
220 Bed Bath & Beyond Incorporated+ $ 6,848 $ 8,470
200 Citrix Systems Incorporated 8,188 11,300
300 Diamond Offshore Drilling Incorporated 7,355 8,513
150 Doubleclick Incorporated 14,231 13,725
120 E*Trade Group Incorporated+ 2,651 4,793
250 Flextronics International Ltd+ 10,250 13,875
350 Galileo International Incorporated 17,047 18,703
100 IMS Health Incorporated 3,258 3,125
850 International Network Services+ 31,250 34,319
300 Lexmark International Group Incorporated Class A+ 16,287 19,819
300 Maxim Integrated Products Inc+ 15,056 19,950
500 Micron Technology Incorporated+ 20,153 20,156
600 Nokia Corp ADR 44,126 54,938
250 Omnicom Group 15,301 20,000
350 Pacific Gateway Exchange Incorporated+ 12,228 10,194
600 Parametric Technology Corporation+ 8,625 8,325
375 Paychex Incorporated 11,050 11,953
200 PMC-Sierra Incorporated+ 8,388 11,788
150 Qlogic Corporation+ 10,219 19,800
100 Sanmina Corporation+ 6,463 7,588
450 Sun Microsystems Incorporated+ 26,916 30,994
1,000 Teradyne Incorporated+ 50,893 71,750
100 Veritas Software Corporation+ 5,388 9,494
200 Yahoo Incorporated+ 28,500 34,450
---------- ----------
$ 380,671 $ 468,022
CONSUMER--BASIC--4.06%
600 Becton Dickinson & Company $ 22,173 $ 18,000
425 Corning Incorporated 20,487 29,803
100 Immunex Corporation+ 9,988 12,744
250 Mylan Laboratories Incorporated 7,083 6,625
300 Starbucks Corporation+ 7,500 11,269
---------- ----------
$ 67,231 $ 78,441
CONSUMER--DISCRETIONARY--7.94%
200 Abercrombie & Fitch Corporation $ 8,602 $ 9,600
600 America Online Incorporated+ 76,303 66,300
500 Dollar General Corporation 10,282 14,500
300 Family Dollar Stores Incorporated 5,593 7,200
200 Harley-Davidson Incorporated 9,966 10,875
116 Quintiles Transnational Corporation+ 2,674 4,872
250 Solectron Corporation+ 10,463 16,672
700 TJX Companies Incorporated 21,450 23,319
---------- ----------
$ 145,333 $ 153,338
</TABLE>
34
<PAGE> 36
LIFE & ANNUITY TRUST STRATEGIC GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
ENERGY & RELATED--1.34%
200 Anadarko Petroleum Corporation $ 7,866 $ 7,363
550 Baker Hughes Incorporated 13,361 18,425
---------- ----------
$ 21,227 $ 25,788
FINANCE & RELATED--6.69%
225 Capital One Financial Corporation $ 9,011 $ 12,530
250 Charles Schwab Corporation 16,308 27,469
600 Firstar Corporation 16,991 16,800
400 Metris Companies Incorporated 6,250 16,300
115 Northern Trust Corporation 9,480 11,155
275 Providian Financial Corporation 28,822 25,713
350 Waddle & Reed Financial 7,466 9,603
150 Zions Bancorporation 9,028 9,525
---------- ----------
$ 103,356 $ 129,095
GENERAL BUSINESS & RELATED--24.62%
120 AFLAC Incorporated $ 5,815 $ 5,745
1,400 American Power Conversion Corporation+ 23,188 28,175
400 ASM Lithography Holdings 18,575 23,750
550 BMC Software Incorporated+ 19,369 29,700
1,300 Chancelor Media Corporation+ 65,644 71,663
1,500 Electronic Arts Incorporated+ 75,213 81,375
225 Equifax Incorporated 7,668 8,030
262 Fiserv Incorporated+ 8,089 8,204
350 International Integration Incorporated+ 5,863 7,875
450 Intuit Incorporated+ 35,294 40,556
1,000 ITC Deltacom Incorporated+ 15,250 28,000
600 Linear Technology Corporation 27,745 40,350
50 Lycos Incorporated+ 4,469 4,594
1,500 Nvidia Corporation+ 26,688 28,688
750 Staples Incorporated+ 20,953 23,203
300 Terayon Communication System 13,538 16,763
75 Uniphase Corporation+ 6,183 12,450
300 Waste Management Incorporated 15,587 16,125
---------- ----------
$ 395,131 $ 475,246
</TABLE>
35
<PAGE> 37
LIFE & ANNUITY TRUST STRATEGIC GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
MANUFACTURING PROCESSING - 12.07%
250 AES Corporation+ $ 8,879 $ 14,530
300 Biogen Incorporated+ 13,806 19,293
200 Cardinal Health Incorporated 15,004 12,824
150 Centocor Incorporated+ 5,944 6,993
140 Cintas Corporation 10,430 9,405
800 Compuware Corporation+ 20,125 25,449
400 Guidant Corporation+ 22,045 20,574
300 Kansas City Southern Industries Incorporated 14,021 19,143
200 Novellus Systems Incorporated+ 12,763 13,649
250 Qualcomm Incorporated+ 11,464 35,874
800 Seagate Technology Incorporated+ 25,439 20,500
400 Weatherford International Incorporated+ 7,657 14,650
350 Xilinx Incorporated+ 14,138 20,038
---------- ----------
$ 181,715 $ 232,922
TECHNOLOGY--8.28%
200 Amazon.com Incorporated+ $ 26,280 $ 25,025
260 At Home Corporation 12,352 14,024
100 Ebay Incorporated 18,613 15,138
300 Extreme Networks Incorporated 14,128 17,419
1,000 Micromuse Incorporated+ 35,219 49,875
100 Network Appliance Incorporated+ 2,725 5,588
200 Network Solutions Incorporated+ 15,413 15,825
500 Nextcard Incorporated 16,844 16,969
---------- ----------
$ 141,574 $ 159,863
UTILITIES--0.56%
150 Alltel Corporation $ 9,359 $ 10,725
---------- ----------
TOTAL COMMON STOCKS $1,445,597 $1,733,440
(Cost $1,445,585)
</TABLE>
36
<PAGE> 38
LIFE & ANNUITY TRUST STRATEGIC GROWTH FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
SHORT-TERM INSTRUMENTS--6.37%
REPURCHASE AGREEMENTS--6.37%
$ 58,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.92% 07/01/99 $ 58,000
6,000 JP Morgan Securities Incorporated Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.90 07/01/99 6,000
59,000 Morgan Stanley & Company Repurchase Agreement -
102% Collateralized by U.S. Government Securities 4.80 07/01/99 59,000
----------
TOTAL SHORT-TERM INSTRUMENTS $ 123,000
(Cost $123,000)
</TABLE>
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C>
OTHER--4.87%
UNIT INVESTMENT TRUST--4.87%
1,200 Standard & Poors Depositary Receipt
(Cost $91,838) $ 91,838 $ 94,050
---------- ----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,660,423)* (Notes 1 and 3) 101.04% $1,950,490
Other Assets and Liabilities, Net (1.04) (20,088)
------ ----------
TOTAL NET ASSETS 100.00% $1,930,402
====== ==========
</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 $325,889
Gross Unrealized Depreciation (35,822)
--------
NET UNREALIZED APPRECIATION $290,067
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE> 39
LAT U.S. GOVERNMENT ALLOCATION FUND
The Life & Annuity Trust ("LAT") U.S. Government Allocation Fund (the
"Fund") seeks over the long-term a high level of total return, including net
realized and unrealized capital gains and net investment income, consistent with
reasonable risk. The Fund invests in long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes, and short-term money market instruments.
The Fund's investment model recommends the optimal mix of assets designed for a
long-term investment strategy.
The Fund is a professionally managed portfolio, advised by Wells Fargo
Bank, N.A. (the "Bank"). Barclays Global Fund Advisors ("BGFA"), which is not
affiliated with the Bank, serves as investment sub-advisor. BGFA uses an
investment model developed and refined over the past 20 years that analyzes
extensive financial data from numerous sources and recommends a portfolio
allocation.
PERFORMANCE SUMMARY
For the six-month period ended June 30, 1999, the Fund reported a
cumulative total return of -0.34%. The Fund has three benchmarks representing
each of the major asset classes in which the Fund can invest. The Lehman
Brothers U.S. Treasury Bond Index returned -2.50%, the Lehman Brothers U.S.
Treasury 1-3 Year Index returned 1.09%, and the IBC All Taxable Money Fund
Average posted a 2.50% return over the same period.
The Fund's performance during the period was impacted by continued low
inflation, a robust economy, tight labor markets and the Federal Reserve Board's
(the "Fed") interest rate increase at the end of the period.
While yields were pushed up sharply during the second half of the period
due to investor nervousness over inflation and the direction of interest rates,
speculation was laid to rest on the last day of the period with the Fed's
interest rate increase -- the first since March 1997. The Fed then took a
neutral stance in terms of the future direction of interest rates, to which the
stock and bond markets responded positively.
That response put a temporary hold on the eight-month decline in bond
prices, and pushed up the yield on the 30-year Treasury bond late in the period.
Mortgage-backed securities were among the best performers during the period, as
were corporate bonds and U.S. Government agency securities.
During this six-month period, the Fund's share price decreased from $10.21
on December 31, 1998, to $9.95 on June 30, 1999. The Fund distributed $0.23 per
share in dividend income and no capital gains during the period. Keep in mind
that past performance is no guarantee of future results.
AVERAGE ANNUAL TOTAL RETURN (AS OF JUNE 30, 1999)(1)
<TABLE>
<S> <C>
Year-to-Date -0.34%
1-Year 2.77%
5-Year 6.26%
Since Inception (4/26/94) 6.03%
</TABLE>
PORTFOLIO REVIEW
Every day the Fund's proprietary model analyzes extensive financial data
and market conditions to determine the optimal combination of bonds, notes and
money market instruments. As opportunities arise among the three asset classes,
the investment model will shift fund assets accordingly in 5 percent increments.
At the end of the period, the Fund had an asset allocation of 100% U.S. Treasury
notes.
During the period the Fund held higher-quality issues at a time when
lower-quality, small issues outperformed. This negatively impacted returns
relative to the Lehman Brothers U.S. Treasury 1-3 Year Index. In part, the
Fund's
38
<PAGE> 40
underweighted position was a consequence of the difficulties in obtaining and
valuing these less liquid issues. Going forward, Lehman Brothers is reducing the
number of lower-quality issues held by the U.S. Treasury 1-3 Year Index.
STRATEGIC OUTLOOK
We believe the Fed's interest rate increase signals a slowing of the
economic boom, but we expect the economy will be strong enough to sustain
above-average growth in coming months. The financial markets could be in for a
period of more volatile trading as investors closely scrutinize the latest
economic data for signs of slower economic growth. Investors are bracing for at
least one more interest rate increase by the Fed sometime later this year, as it
guides the economy toward what it believes to be more sustainable growth and low
inflation.
We will continue to invest in what we believe to be the most attractive mix
of securities by comparing the expected return, risk and correlation of long-,
intermediate- and short-term Treasuries. The Fund will utilize yield-spread
opportunities between long-term bonds, intermediate-term notes and money market
instruments. Overall, we feel the Fund is well positioned and we expect it to
produce solid, long-term performance.
- ---------------
(1) These figures assume the contract owner is still invested at the end of the
reporting period. Investment return and principal value of an investment will
fluctuate so that an investor's units, when redeemed, may be worth more or less
than their original cost. Figures quoted represent past performance, which is no
guarantee of future results. Portfolio performance numbers are net of all
portfolio expenses, but do not reflect deduction of insurance account charges.
During the six-month reporting period ended June 30, 1999, the Fund's advisor
and administrator have voluntarily waived portions of their fees or assumed
responsibility for other expenses, which has reduced operating expenses for
shareholders. Without these reductions, which can be discontinued at any time,
the Fund's returns would have been lower.
The Lehman Brothers U.S. Treasury Bond Index is an unmanaged index comprised of
Treasury bonds with maturities averaging between 10 and 30 years. The Lehman
Brothers U.S. Treasury Note Index is an unmanaged index comprised of U.S.
Treasury 2- to 10-year notes. The IBC All Taxable Money Fund Average is
comprised of the average yields of more than 600 taxable money market funds.
These Indexes do not incur expenses and are not available directly for
investment. Had these Indexes incurred operating expenses, their performance
would have been lower.
39
<PAGE> 41
LIFE & ANNUITY TRUST U.S. GOVERNMENT ALLOCATION FUND--JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES--45.52%
FEDERAL AGENCY--OTHER--8.04%
$3,000,000 Tennessee Valley Authority 6.38% 06/15/05 $ 3,011,730
-----------
SHORT-TERM FEDERAL AGENCIES--37.48%
$4,000,000 Federal Home Loan Bank 6.09% 06/02/06 $ 3,931,280
1,050,000 Federal Home Loan Mortgage Corporation 5.95 01/19/06 1,027,026
5,000,000 Federal Home Loan Mortgage Corporation 6.75 05/30/06 5,071,850
4,100,000 Federal National Mortgage Association 5.75 06/15/05 4,000,042
-----------
$14,030,198
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $17,041,928
(Cost $17,213,316)
U.S. TREASURY SECURITIES--50.29%
U.S. TREASURY BONDS--14.88%
$2,000,000 U.S. Treasury Bonds 5.63% 02/15/06 $ 1,970,000
200,000 U.S. Treasury Bonds 8.25 05/15/05 204,156
800,000 U.S. Treasury Bonds 10.75 08/15/05 994,496
750,000 U.S. Treasury Bonds 11.63 11/15/04 946,755
350,000 U.S. Treasury Bonds 12.00 05/15/05 452,578
350,000 U.S. Treasury Bonds 13.75 08/15/04 470,313
450,000 U.S. Treasury Notes 9.38 02/15/06 531,675
-----------
$ 5,569,973
U.S. TREASURY NOTES--35.41%
$1,850,000 U.S. Treasury Notes 5.88% 11/15/05 $ 1,850,000
1,300,000 U.S. Treasury Notes 6.50 05/15/05 1,339,806
2,050,000 U.S. Treasury Notes 6.50 08/15/05 2,113,099
1,300,000 U.S. Treasury Notes 6.88 05/15/06 1,368,651
1,250,000 U.S. Treasury Notes 7.25 08/15/04 1,329,688
2,750,000 U.S. Treasury Notes 7.50 02/15/05 2,960,540
2,100,000 U.S. Treasury Notes 7.88 11/15/04 2,296,875
-----------
$13,258,660
TOTAL U.S. TREASURY SECURITIES $18,828,633
(Cost $19,147,959)
TOTAL INVESTMENTS IN SECURITIES
(Cost $36,361,275)* (Notes 1 and 3) 95.81% $35,870,561
Other Assets and Liabilities, Net 4.19 1,568,180
------ -----------
TOTAL NET ASSETS 100.00% $37,438,741
====== ===========
</TABLE>
- --------------------------------------------------------------------------------
* Cost for federal income tax purposes is the same as for financial statement
purposes and net unrealized depreciation consists of:
<TABLE>
<S> <C> <C>
Gross Unrealized Appreciation $ 52,803
Gross Unrealized Depreciation (543,516)
---------
NET UNREALIZED DEPRECIATION $(490,714)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE> 42
LIFE & ANNUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
U.S.
Asset Equity Money Strategic Government
Allocation Value Growth Market Growth Allocation
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
In securities, at market value
(Includes repurchase agreements of
$5,557,274 for the Money Market
Fund) $199,541,655 $22,189,010 $116,270,270 $32,578,369 $1,950,490 $35,870,561
Cash 5,834 4,783 6,954 12,490 3,776 1,245,175
Receivables:
Dividends and interest 1,531,268 24,482 90,261 108,675 261 440,952
Fund shares sold 1,206,865 45,042 65,888 106,894 0 157,974
Investment securities sold 658,989 0 0 0 0 0
Due from co-administrator 0 0 0 0 1,397 0
TOTAL ASSETS 202,944,611 22,263,317 116,433,373 32,806,428 1,955,924 37,714,662
LIABILITIES
Payables:
Investment securities purchased 694,586 0 0 0 0 0
Distribution to shareholders 936,029 39,937 29,785 106,894 0 157,974
Fund shares redeemed 0 0 0 326,334 133 46,474
Due to co-administrator (Note 2) 6,305 684 3,647 1,033 59 1,212
Due to adviser 137,187 15,530 90,925 19,502 0 26,281
Accrued expenses 54,029 27,946 44,190 39,149 25,330 43,980
TOTAL LIABILITIES 1,828,136 84,097 168,547 492,912 25,522 275,921
TOTAL NET ASSETS $201,116,475 $22,179,220 $116,264,826 $32,313,516 $1,930,402 $37,438,741
NET ASSETS CONSIST OF:
Paid-in Capital $176,243,512 $20,403,748 $ 82,589,945 $32,313,516 $1,362,234 $38,296,675
Undistributed net investment income 0 0 0 0 (4,578) 0
Undistributed net realized gain (loss)
on investments 6,667,993 (312,166) 7,196,053 0 282,679 (367,220)
Net unrealized appreciation
(depreciation) of investments 18,204,970 2,087,638 26,478,828 0 290,067 (490,714)
TOTAL NET ASSETS $201,116,475 $22,179,220 $116,264,826 $32,313,516 $1,930,402 $37,438,741
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets $201,116,475 $22,179,220 $116,264,826 $32,313,516 $1,930,402 $37,438,741
Shares outstanding 14,201,405 2,159,687 5,237,570 32,313,520 112,495 3,761,237
Net asset value and offering price $14.16 $10.27 $22.20 $1.00 $17.16 $9.95
INVESTMENT AT COST (NOTE 3) $181,336,685 $20,101,372 $ 89,791,442 $32,578,369 $1,660,423 $36,361,275
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE> 43
LIFE & ANNUITY TRUST
STATEMENT OF OPERATIONS -- FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
U.S.
Asset Equity Money Strategic Government
Allocation Value Growth Market Growth Allocation
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 857,961 $ 151,158 $ 525,532 $ 0 $ 1,547 $ 0
Interest 1,445,624 18,651 122,961 701,595 2,218 1,026,872
TOTAL INCOME 2,303,585 169,809 648,493 701,595 3,765 1,026,872
EXPENSES (NOTE 2)
Advisory fees 521,974 47,101 316,876 63,028 4,551 111,516
Administration fees 82,184 7,761 49,354 13,267 729 17,129
Custody fees 0 1,311 13,283 4,075 127 0
Shareholder Servicing 217,489 19,619 132,031 35,016 1,896 46,465
Portfolio accounting fees 47,895 17,394 41,048 21,705 12,432 24,911
Transfer agency fees 121,794 10,986 73,938 14,006 1,062 26,020
Legal and audit fees 44,265 11,097 38,126 9,474 11,871 14,137
Registration fees 841 1,415 946 720 1,766 245
Directors' fees 1,499 1,510 169 1,512 1,510 1,505
Shareholder Reports 8,413 1,101 6,046 1,852 1,863 2,677
Other 1,533 879 740 309 1,198 455
TOTAL EXPENSES 1,047,887 120,174 672,557 164,964 39,005 245,060
Less: Waived Fees and Reimbursed Expenses (212,728) (33,852) (91,618) (44,516) (30,662) (61,041)
Net Expenses 835,159 86,322 580,939 120,448 8,343 184,019
NET INVESTMENT INCOME (LOSS) 1,468,426 83,487 67,554 581,147 (4,578) 842,853
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES
Net realized gain (loss) on sale of
investments 6,664,509 (230,452) 7,256,700 0 209,096 (421,865)
Net change in unrealized appreciation
(depreciation) of investments 2,330,099 1,645,696 3,606,015 0 125,045 (510,759)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES 8,994,608 1,415,244 10,862,715 0 334,141 (932,624)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $10,463,034 $1,498,731 $10,930,269 $581,147 $329,563 $ (89,771)
- --------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE> 44
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Asset Allocation Fund Equity Value Fund Growth Fund
----------------------------- --------------------------------- -----------------------------
(Unaudited) (Unaudited) From May 1, 1998 (Unaudited)
For the Six For the For the Six (commencement For the Six For the
Months Ended Year Ended Months Ended of operations) to Months Ended Year Ended
June 30, 1999 Dec. 31, 1998 June 30, 1999 Dec. 31, 1998 June 30, 1999 Dec. 31, 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
Operations:
Net investment income (loss) $ 1,468,426 $ 3,009,495 $ 83,487 $ 53,366 $ 67,554 $ 437,253
Net realized gain (loss) on
sale of investments and
futures 6,664,509 9,956,845 (230,452) (81,714) 7,256,700 3,245,542
Net unrealized appreciation
(depreciation) of futures 0 (718,350) 0 0 0 0
Net unrealized appreciation
(depreciation) of
investments 2,330,099 14,560,276 1,645,696 441,942 3,606,015 18,355,014
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS 10,463,034 26,808,266 1,498,731 413,594 10,930,269 22,037,809
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,468,426) (3,009,495) (83,487) (53,366) (67,554) (437,253)
From net realized gain on
sales of investments 0 (11,816,851) 0 0 0 (6,510,869)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 35,466,932 44,467,683 10,896,565 11,413,266 7,386,130 13,257,592
Reinvestment of dividends 1,468,421 14,826,346 83,488 53,366 67,553 6,948,122
Cost of shares redeemed (1,054,419) (1,540,872) (1,287,605) (755,332) (2,978,294) (6,312,547)
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS
(NOTE 4) 35,880,934 57,753,157 9,692,448 10,711,300 4,475,389 13,893,167
INCREASE (DECREASE) IN NET
ASSETS 44,875,542 69,735,077 11,107,692 11,071,528 15,338,104 28,982,854
NET ASSETS:
Beginning net assets 156,240,933 86,505,856 11,071,528 0 100,926,722 71,943,868
ENDING NET ASSETS $201,116,475 $156,240,933 $22,179,220 $11,071,528 $116,264,826 $100,926,722
ENDING BALANCE OF
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
SHARES ISSUED AND REDEEMED:
Shares sold 2,555,692 3,380,397 1,120,026 1,234,474 344,672 729,308
Shares issued in
reinvestment of dividends 104,823 1,141,331 8,582 5,850 3,135 368,338
Shares redeemed (77,213) (120,729) (128,464) (80,781) (144,957) (348,326)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING 2,583,302 4,400,999 1,000,144 1,159,543 202,850 749,320
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE> 45
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money Market Fund Strategic Growth Fund U.S. Government Allocation Fund
----------------------------- --------------------------------- --------------------------------
(Unaudited) (Unaudited) From May 1, 1998 (Unaudited)
For the Six For the For the Six (commencement For the Six For the
Months Ended Year Ended Months Ended of operations) to Months Ended Year Ended
June 30, 1999 Dec. 31, 1998 June 30, 1999 Dec. 31, 1998 June 30, 1999 Dec. 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
Operations:
Net investment income
(loss) $ 581,147 $ 807,850 $ (4,578) $ (2,719) $ 842,853 $ 1,423,346
Net realized gain (loss)
on sale of investments
and futures 0 551 209,096 78,925 (421,865) 508,242
Net unrealized
appreciation
(depreciation) of
futures 0 0 0 0 0 0
Net unrealized
appreciation
(depreciation) of
investments 0 0 125,045 165,022 (510,759) (208,102)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS 581,147 808,401 329,563 241,228 (89,771) 1,723,486
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (581,147) (807,850) 0 0 (842,853) (1,423,346)
From net realized gain on
sales of investments 0 (551) 0 (2,623) 0 (559,446)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 20,686,419 29,184,120 1,054,633 1,365,012 8,254,525 23,067,397
Reinvestment of dividends 581,147 808,401 0 2,623 842,855 1,982,792
Cost of shares redeemed (15,272,875) (18,461,324) (657,623) (402,411) (5,457,224) (13,953,453)
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE
TRANSACTIONS (NOTE 4) 5,994,691 11,531,197 397,010 965,224 3,640,156 11,096,736
INCREASE (DECREASE) IN NET
ASSETS 5,994,691 11,531,197 726,573 1,203,829 2,707,532 10,837,430
NET ASSETS:
Beginning net assets 26,318,825 14,787,628 1,203,829 0 34,731,209 23,893,779
ENDING NET ASSETS $ 32,313,516 $ 26,318,825 $ 1,930,402 $ 1,203,829 $ 37,438,741 $ 34,731,209
ENDING BALANCE OF
UNDISTRIBUTED NET
INVESTMENT INCOME (LOSS) $ 0 $ 0 $ (4,578) $ 0 $ 0 $ 0
SHARES ISSUED AND REDEEMED:
Shares sold 20,686,422 29,184,121 70,118 119,988 814,218 2,221,098
Shares issued in
reinvestment of
dividends 581,147 808,531 0 214 83,777 192,599
Shares redeemed (15,272,875) (18,461,454) (43,968) (33,857) (537,858) (1,339,600)
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING 5,994,694 11,531,198 26,150 86,345 360,137 1,074,097
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE> 46
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Asset Allocation Fund
---------------------------------------------------------------
(Unaudited)
Six Months
Ended Year Ended Year Ended Year Ended Year Ended
June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.45 $ 11.99 $ 11.42 $ 11.27 $ 9.71
Net investment income (loss) 0.11 0.34 0.60 0.56 0.55
Net realized and unrealized gain (loss) on investments 0.71 2.60 1.73 0.69 2.21
-------- -------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.82 2.94 2.33 1.25 2.76
LESS DISTRIBUTIONS:
Dividends from net investment income (0.11) (0.34) (0.60) (0.56) (0.55)
Distributions from net realized gain 0.00 (1.14) (1.16) (0.54) (0.65)
-------- -------- ------- ------- -------
TOTAL FROM DISTRIBUTIONS (0.11) (1.48) (1.76) (1.10) (1.20)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.16 $ 13.45 $ 11.99 $ 11.42 $ 11.27
======== ======== ======= ======= =======
TOTAL RETURN (NOT ANNUALIZED)* 6.10% 25.26% 20.88% 11.46% 28.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $201,116 $156,241 $86,506 $51,797 $25,467
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.96% 0.92% 0.80% 0.69% 0.41%
Ratio of net investment income to average net assets 1.68% 2.62% 5.20% 5.34% 5.58%
Portfolio turnover 27% 29% 156% 4% 97%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.20% 1.11% 0.85% 0.80% 1.22%
Ratio of net investment income (loss) to average net
assets prior to waived fees and reimbursed expenses 1.44% 2.43% 5.15% 5.23% 4.77%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total returns do not include any sales charges.
The accompanying notes are an integral part of these financial statements.
45
<PAGE> 47
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Equity Value Fund Growth Fund
---------------------------- ---------------------------------------------------------------
(Unaudited) From inception (Unaudited)
Six Months on May 1, Six Months
Ended 1998 Ended Year Ended Year Ended Year Ended Year Ended
June 30, to Dec. 31, June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.55 $ 10.00 $ 20.05 $ 16.79 $ 15.34 $ 12.91 $ 10.30
Net investment income (loss) 0.05 0.07 0.01 0.09 0.19 0.20 0.22
Net realized and unrealized
gain (loss) on investments 0.72 (0.45) 2.15 4.65 2.48 2.68 2.77
------- ------- -------- -------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.77 (0.38) 2.16 4.74 2.67 2.88 2.99
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.05) (0.07) (0.01) (0.09) (0.19) (0.20) (0.22)
Distributions from net realized
gain 0.00 0.00 0.00 (1.39) (1.03) (0.25) (0.16)
------- ------- -------- -------- ------- ------- -------
TOTAL FROM DISTRIBUTIONS (0.05) (0.07) (0.01) (1.48) (1.22) (0.45) (0.38)
------- ------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.27 $ 9.55 $ 22.20 $ 20.05 $ 16.79 $ 15.34 $ 12.91
======= ======= ======== ======== ======= ======= =======
TOTAL RETURN (NOT ANNUALIZED)* 8.05% (3.76%) 10.85% 28.81% 17.33% 22.44% 29.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $22,179 $11,072 $116,265 $100,927 $71,944 $33,381 $10,920
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average
net assets 1.09% 1.09% 1.10% 1.04% 0.65% 0.60% 0.43%
Ratio of net investment income
to average net assets 1.06% 1.54% 0.13% 0.51% 1.19% 1.53% 2.05%
Portfolio turnover 57% 27% 29% 69% 124% 95% 84%
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 1.52% 2.52% 1.27% 1.18% 1.01% 1.12% 2.02%
Ratio of net investment income
(loss) to average net assets
prior to waived fees and
reimbursed expenses 0.63% 0.11% (0.04)% 0.37% 0.83% 1.01% 0.46%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total returns do not include any sales charges.
The accompanying notes are an integral part of these financial statements.
46
<PAGE> 48
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
Money Market Fund
---------------------------------------------------------------
(Unaudited)
Six Months
Ended Year Ended Year Ended Year Ended Year Ended
June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.02 0.05 0.05 0.05 0.05
Net realized and unrealized gain (loss) on investments 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.02 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.05)
Distributions from net realized gain 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ----------
TOTAL FROM DISTRIBUTIONS (0.02) (0.05) (0.05) (0.05) (0.05)
------- ------- ------- ------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ==========
TOTAL RETURN (NOT ANNUALIZED)* 2.08% 4.77% 5.04% 4.72% 5.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $32,314 $26,319 $14,788 $12,667 $ 5,823
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Ratio of expenses to average net assets 0.86% 0.82% 0.53% 0.51% 0.42%
Ratio of net investment income to average net assets 4.15% 4.62% 4.95% 4.64% 5.15%
Portfolio turnover N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 1.18% 1.28% 1.07% 1.22% 3.83%
Ratio of net investment income (loss) to average net
assets prior to waived fees and reimbursed expenses 3.83% 4.16% 4.41% 3.93% 1.74%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total returns do not include any sales charges.
The accompanying notes are an integral part of these financial statements.
47
<PAGE> 49
LIFE & ANNUITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
<TABLE>
<CAPTION>
Strategic Growth Fund U.S. Government Allocation Fund
------------------------------ ---------------------------------------------------------------
(Unaudited) (Unaudited)
Six Months From Inception Six Months
Ended on May 1, Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1998 to Dec. 31, June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 13.94 $ 10.00 $ 10.21 $ 10.27 $ 10.13 $ 10.30 $ 9.63
Net investment income (loss) (0.05) (0.03) 0.23 0.48 0.58 0.56 0.60
Net realized and unrealized
gain (loss) on investments 3.27 4.00 (0.26) 0.10 0.15 (0.17) 0.77
------- ------- ------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 3.22 3.97 (0.03) 0.58 0.73 0.39 1.37
LESS DISTRIBUTIONS:
Dividends from net investment
income 0.00 0.00 (0.23) (0.48) (0.58) (0.56) (0.60)
Distributions from net
realized gain 0.00 (0.03) 0.00 (0.16) (0.01) 0.00 (0.10)
------- ------- ------- ---------- ---------- ---------- ----------
TOTAL FROM DISTRIBUTIONS 0.00 (0.03) (0.23) (0.64) (0.59) (0.56) (0.70)
------- ------- ------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 17.16 $ 13.94 $ 9.95 $ 10.21 $ 10.27 $ 10.13 $ 10.30
======= ======= ======= ========== ========== ========== ==========
Total Return (not annualized)* 23.10% 39.74% (0.34%) 5.86% 7.47% 3.99% 14.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $ 1,930 $ 1,204 $37,439 $ 34,731 $ 23,894 $ 13,527 $ 4,855
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average
net assets 1.10% 1.09% 0.99% 0.95% 0.64% 0.60% 0.45%
Ratio of net investment
income to average net
assets (0.60%) (0.72%) 4.54% 4.70% 5.75% 5.75% 5.82%
Portfolio turnover 188% 200% 62% 230% 135% 222% 405%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets prior to waived
fees and reimbursed
expenses 5.14% 13.44% 1.32% 1.23% 0.97% 1.18% 2.46%
Ratio of net investment
income (loss) to average
net assets prior to waived
fees and reimbursed
expenses (4.64%) (13.07%) 4.21% 4.42% 5.42% 5.17% 3.81%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total returns do not include any sales charges.
The accompanying notes are an integral part of these financial statements.
48
<PAGE> 50
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Life & Annuity Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end series management investment company.
The Trust was organized as a Delaware Business Trust on October 28, 1993. The
Trust consists of six separate diversified funds (the "Funds"): the Asset
Allocation, Equity Value, Growth (formerly Growth and Income), Money Market,
Strategic Growth and U.S. Government Allocation Funds. The Funds are available
exclusively as pooled funding vehicles for certain participating life insurance
companies offering variable annuity contracts and variable life insurance
policies.
The following significant accounting policies are consistently followed by the
Company 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. Actual results could differ from those
estimates.
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, 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. 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 as required by the Internal
Revenue Code of 1986, as amended (the "Code").
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
securities ("repurchase agreements") are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in each Fund's Portfolio of
Investments. The Funds may participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank, N.A. ("WFB"). The
repurchase agreements must be fully collateralized based on values that are
marked to market daily. The collateral may be held by an agent bank under a
tri-party agreement. It is the custodian's responsibility to value collateral
daily and to take action to obtain additional
49
<PAGE> 51
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
collateral as necessary to maintain market value equal to or greater than the
resale price. Any repurchase agreements held in the Funds are collateralized by
instruments such as U.S. Treasury or federal agency obligations.
FUTURES CONTRACTS
The Asset Allocation, Equity Value and U.S. Government Allocation Funds may
purchase futures contracts to gain exposure to market changes. This procedure
may be more efficient or cost-effective than actually buying the securities. A
futures contract is an agreement between parties to buy or sell a security at a
set price on a future date. Upon entering into such a contract, a Fund is
required to pledge to the broker an amount of cash, U.S. Government obligations
or other high-quality debt securities equal to the minimum "initial margin"
requirements of the exchange on which the futures contract is traded. Pursuant
to the contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
Fund as unrealized gains or losses. Futures contracts are marked to market daily
at their respective settlement prices determined by the relevant exchange. When
the contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Pursuant to regulations and/or published
positions of the Securities and Exchange Commission, these Funds may be required
to segregate cash or high quality money market instruments in connection with
futures transactions in an amount generally equal to the entire value of the
underlying contracts. Risks of entering into futures contracts include the
possibility that there may be an illiquid market and that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of the Asset Allocation, Equity Value, and
Growth Funds, if any, are declared and distributed quarterly. Dividends from net
investment income of the Money Market Fund, if any, are declared daily and
distributed monthly. Dividends from net investment income of the Strategic
Growth Fund, if any, are declared and distributed annually. Dividends from net
investment income of the U.S. Government Allocation Fund, if any, are declared
and distributed monthly. Distributions to shareholders from net realized capital
gains are declared and distributed annually.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by
the Fund. The differences between the income or gains distributed on a book
versus tax basis are shown as excess distributions of net investment income and
net realized gain on sales of investments in the accompanying Statements of
Changes in Net Assets. The amount of distributions from net investment income
and net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from GAAP. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent that these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
FEDERAL INCOME TAXES
Each Fund of the Trust is treated as a separate entity for federal income tax
purposes. It is the policy of each Fund to continue to qualify as a regulated
investment company by complying with the provisions applicable to regulated
investment companies, as defined in the Code, and to make distributions of
substantially all of its investment company taxable income and any net realized
capital gains (after reduction for capital loss carryforwards) sufficient to
relieve it
50
<PAGE> 52
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
from all, or substantially all, federal income taxes. Accordingly, no provision
for federal income taxes was required at June 30, 1999. The following Funds had
an estimated net capital loss carryforward at June 30, 1999:
<TABLE>
<CAPTION>
Capital Loss
FUND Year Expires Carryforwards
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Value Fund 2006 $79,556
2007 230,452
Government Allocation 2007 421,865
</TABLE>
2. AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES
The Trust has entered into advisory contracts on behalf of the Funds with WFB.
Pursuant to the contracts, WFB has agreed to provide the Funds with daily
portfolio management. Under the contracts with the Asset Allocation, Equity
Value, Growth, Strategic Growth, and U.S. Government Allocation Funds, WFB is
entitled to a monthly advisory fee at an annual rate of 0.60% of such Funds'
average daily net assets. Under the contract with the Money Market Fund, WFB is
entitled to a monthly advisory fee at an annual rate of 0.45% of such Fund's
average daily net assets.
Wells Capital Management Incorporated ("WCM"), a wholly-owned subsidiary of WFB,
currently acts as investment sub-advisor to the Equity Value, Growth, Money
Market and Strategic Growth Funds. WCM is entitled to receive from WFB, as
compensation for its sub-advisory services to the Equity Value, Growth and
Strategic Growth Funds, a monthly fee at the annual rate of 0.25% of the Funds'
average daily net assets up to $200 million, 0.20% for the next $200 million and
0.15% of the Fund's average daily net assets in excess of $400 million. WCM is
entitled to receive from WFB, as compensation for its sub-advisory services to
the Money Market Fund, a monthly fee at the annual rate of 0.05% of the Funds'
average daily net assets up to $960 million and 0.04% of the Funds' average
daily net assets in excess of $960 million. WCM's minimum annual fee is $120,000
for each Fund. This minimum annual fee does not increase the advisory fees paid
by the Funds to WFB.
Barclays Global Fund Advisors ("BGFA"), a wholly-owned subsidiary of Barclays
Global Investors, N.A. ("BGI") and indirect subsidiary of Barclays Bank PLC,
currently acts as sub-adviser to the Asset Allocation and U.S. Government
Allocation Funds. BGFA is entitled to receive from WFB, as compensation for its
sub-advisory services to the Asset Allocation Fund, a monthly fee at the annual
rate of 0.15% the Fund's average daily net assets up to $900 million and 0.10%
of the average daily net assets in excess of $900 million. For its sub-advisory
services to the U.S. Government Allocation Fund, BGFA is entitled to receive a
monthly fee at the annual rate of 0.05% of the Fund's average daily net assets
up to $75 million, 0.04% for the next $75 million and 0.03% of the Fund's
average daily net assets in excess of $150 million.
BGI, a wholly-owned subsidiary of Barclays Global Investors Holdings Inc.,
currently acts as custodian to the Asset Allocation and U.S. Government
Allocation Funds. BGI will not be entitled to receive compensation for its
custodial services so long as BGFA is entitled to receive compensation for
providing investment sub-advisory services to such Funds.
June 1999, the Trust has entered into contracts on behalf of the Equity Value,
Growth, Money Market and Strategic Growth Funds with Norwest Bank Minnesota N.A.
("Norwest"), whereby Norwest Bank is responsible for providing custody services
for such Funds. Pursuant to the contracts, Norwest Bank is entitled to an annual
fee for custody services at an annual rate of 0.0167% of the average daily net
assets of each Fund and an additional fixed fee for certain funds. Prior to June
4, 1999, WFB performed the above services for the same fees.
51
<PAGE> 53
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
The Trust has entered into contracts on behalf of the Funds with WFB, whereby
WFB is responsible for providing portfolio accounting services for the Funds.
Pursuant to the contracts, WFB is entitled to receive a monthly base fee from
each such Fund of $2,000 plus an annual fee of 0.07% of the first $50 million of
each such Fund's average daily net assets, 0.045% of the next $50 million and
0.02% of each such Fund's average daily net assets in excess of $100 million.
The Trust has entered into contracts on behalf of the Funds with WFB, whereby
WFB provides transfer agency services for the Funds. Under the transfer agency
contract, WFB is entitled to receive transfer agency fees at an annual rate of
0.14% of the average daily net assets of the Asset Allocation, Equity Value,
Growth, Strategic Growth and U.S. Government Allocation Funds, and 0.10% of the
average daily net assets of the Money Market Fund.
The Trust has entered into contracts on behalf of the Funds with WFB, whereby
WFB provides shareholder services to the Funds. Pursuant to the contracts, WFB
is entitled to receive shareholder servicing fees at an annual rate of 0.25% of
the average daily net assets of each Fund.
On March 25, 1999, the Trust entered into an Administration Agreement with WFB
on behalf of the Funds. Under the Administration Agreement, WFB will act as sole
Administrator of the Funds and is entitled to receive monthly fees at an annual
rate of 0.15% of the average daily net assets of the Funds. Prior to March 25,
1999, the Trust had entered into administration agreements on behalf of the
Funds whereby WFB as administrator and Stephens Inc. ("Stephens") as co-
administrator provided the Funds with administrative services. For these
services, WFB and Stephens were entitled to receive monthly fees at the annual
rates of 0.03% and 0.04%, respectively, of each Fund's average daily net assets.
WAIVED FEES AND REIMBURSED EXPENSES
Waived fees and reimbursed expenses for the six months ended June 30, 1999 were
as follows:
<TABLE>
<CAPTION>
Expenses Reimbursed Fees Waived
FUND by Stephens by WFB
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Fund $0 $212,728
Equity Value Fund 0 33,852
Growth Fund 0 91,618
Money Market Fund 0 44,516
Strategic Growth Fund $10,168 20,494
U.S. Government Allocation Fund 0 61,041
</TABLE>
Certain officers and one trustee of the Trust are also officers of Stephens. As
of June 30, 1999, Stephens owned 4,103 shares of the Asset Allocation Fund,
10,107 shares of the Equity Value Fund, 3,117 shares of the Growth Fund, 31,553
shares of the Money Market Fund, 10,024 shares of the Strategic Growth Fund and
3,362 shares of the U.S. Government Allocation Fund.
52
<PAGE> 54
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for the Funds
for the six months ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
AGGREGATE PURCHASES AND SALES at Cost Proceeds
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Allocation Fund $81,532,085 $47,322,401
Equity Value Fund 17,755,844 8,825,834
Growth Fund 29,500,999 30,325,181
Strategic Growth Fund 3,065,111 2,785,302
U.S. Government Allocation Fund 40,723,774 10,817,813
</TABLE>
The Money Market Fund, not reflected in this schedule, trades exclusively in
short-term securities.
4. CAPITAL SHARE TRANSACTIONS
The Trust has authorized an unlimited number of no par value shares of capital
stock. Capital share transactions for each of the Funds are disclosed in detail
in the Statements of Changes in Net Assets.
5. SUBSEQUENT EVENTS
On March 25, 1999, the Board of Directors of the Company approved the
reorganization of the Funds into new portfolios of Wells Fargo Variable Trust.
The reorganization is part of a larger plan to consolidate the Life & Annuity
Trust with the Norwest Select Trust following last November's merger of Wells
Fargo & Company and Norwest Corporation. The Company will present the
reorganization to Company shareholders for their approval at a special
shareholders' meeting that is planned for August 1999.
On June 3, 1999, WFB and Forum Accounting Services ("Forum") entered into an
agreement, whereby WFB desires that Forum performs certain fund accounting
services for WFB with respect to each Fund and Class thereof. A monthly per fund
fee of $5,000 and an additional monthly fee for each additional Class of any
Fund above one of $1,000 will be charged to the Fund. In addition to the per
fund fees, a basis point fee of 0.0025% of the average annual daily net assets
of each Fund will also be charged. The Company, on behalf of the applicable
Fund, reimburses Forum for all out-of-pocket and ancillary expenses reasonably
incurred in providing the services described in the Fund Accounting Agreement.
On July 17, 1999, Boston Financial Data Services ("BFDS") replaced WFB as the
transfer agent for the Trust. Under the transfer agency contract, BFDS is
entitled to receive, on a monthly basis transfer agency fees based on the number
of accounts and transactions of each Fund. WFB will continue to provide
sub-transfer agency services to the Funds.
53
<PAGE> 55
American Skandia Life BULK RATE
Assurance Company U.S. POSTAGE
Tower One Corporate Drive PAID
Shelton, CT 06484 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,
Stagecoach Variable Annuity Plus, Stagecoach Extra Credit Variable Annuity, and
the Stagecoach Variable Annuity Flex. If this report is used for promotional
purposes, distribution of the report must be accompanied or proceeded 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.
Printed on Recycled Paper @1999 American Skandia VA05001 (8/99)
