<PAGE>
[LETTER HEAD OF KPMG APPEARS HERE]
Independent Auditors' Report
To the Board of Trustees of
Life & Annuity Trust:
We have examined management's assertion that the Asset Allocation Fund, Equity
Value Fund, Growth Fund, Money Market Fund, Strategic Growth Fund, and U.S.
Government Allocation Fund (constituting Life & Annuity Trust) (collectively the
"Funds") complied with the requirements of subsections (b) and (c) of Rule 17f-2
under the Investment Company Act of 1940 as of June 30, 1999, included in the
accompanying Management Statement regarding Compliance with Certain Provisions
of the Investment Company Act of 1940. Management is responsible for the Funds'
compliance with those provisions. Our responsibility is to express an opinion
on management's assertion about the Funds' compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Funds' compliance with those
requirements and performing such other procedures as we considered necessary in
the circumstances. Included among our procedures were the following tests
performed as of June 30, 1999 and for the period from February 28, 1999 (the
date of our last examination) through June 30, 1999, with respect to securities
transactions:
. Confirmation of all securities with the custodians, Norwest Bank Minnesota,
N.A. and Barclays Global Investors, N.A.;
. Confirmation or examination of underlying documentation of all securities
purchased but not received;
. Reconciliation of all securities to the books and records of the Funds and the
custodians;
. Testing of a selected sample of security transactions to determine if they
were properly recorded.
<PAGE>
We believe that our examination provides a reasonable basis for our opinion.
Our examination does not provide a legal determination on the Funds' compliance
with the specified requirements.
In our opinion, management's assertion that the Funds were in compliance with
the above mentioned provisions of Rule 17f-2 of the Investment Company Act of
1940 as of June 30, 1999 and for the period from February 28, 1999 (the date of
our last examination) through June 30, 1999, is fairly stated in all material
respects.
This report is intended solely for the information and use of management of Life
& Annuity Trust and the Securities and Exchange Commission and is not intended
to and should not be used by anyone other than these specified parties.
July 26, 1999 KPMG LLP
<PAGE>
--------------------------------
/ OMB APPROVAL /
--------------------------------
/ OMB Number: 3235-0360 /
/ Expires: June 30, 1997 /
/ Estimated average burden /
/ hours per response 0.05 /
-------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-17f-2
Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies
Pursuant to Rule 17f-2[17 CFR 270.17f-2]
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
1. Investment company act file number: Date examination completed:
8188 June 30, 1999
--------------------------------------------------------------------------------
2. State identification number:
--------------------------------------------------------------------------------
AL AK AZ AR CA CO
--------------------------------------------------------------------------------
CT DE DC FL GA HI
--------------------------------------------------------------------------------
ID IL IN IA KS KY
--------------------------------------------------------------------------------
LA ME MD MA MI MN
--------------------------------------------------------------------------------
MS MO MT NE NV NH
--------------------------------------------------------------------------------
NJ NM NY NC ND OH
--------------------------------------------------------------------------------
OK OR PA RI SC SD
--------------------------------------------------------------------------------
TN TX UT VT VA WA
--------------------------------------------------------------------------------
WV WI WY PUERTO RICO
--------------------------------------------------------------------------------
Other (specify):
--------------------------------------------------------------------------------
3. Exact name of investment company as specified in registration statement:
Life and Annuity Trust
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Address of principal executive office (number, street, city, state, zip code):
111 Center Street, Little Rock, Arkansas 72201
--------------------------------------------------------------------------------
</TABLE>
INSTRUCTIONS:
This Form must be completed by investment companies that have custody of
securities or similar investments.
Investment Company:
1. All items must be completed by the investment company.
2. Give this Form to the independent public accountant who, in compliance with
Rule 17f-2 under the Act and applicable state law, examines securities and
similar investments in the custody of the investment company.
Accountant:
3. Submit this Form to the Securities and Exchange Commission and appropriate
state securities administrators when filing the certificate of accounting
required by Rule 17f-2 under the Act and applicable state law. File the
original and one copy with the Securities and Exchange Commission's principal
office in Washington D.C., one copy with the regional office for the region
in which the investment company's principal business operations are
conducted, and one copy with the appropriate state administrator(s), if
applicable.
THIS FORM MUST BE GIVEN TO YOUR INDEPENDENT PUBLIC ACCOUNTANT
