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COVA SELECT EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
(PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY
DESCRIPTION SHARES MARKET VALUE
- --------------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS - 98.8%
AEROSPACE & DEFENSE - 6.0%
Allied Signal Inc. 1,100 $ 62,838
Boeing Company 1,000 87,125
General Motors Corp. Class H 1,220 73,353
Rohr Inc. * 5,600 116,900
---------------------
340,216
---------------------
BANKING - 6.8%
Banc One Corp 1,640 55,760
Citicorp 210 17,351
Corestates Financial Corp 855 32,918
First Chicago NBD Corporation 1,000 39,125
First Union Corp.(N.E.) 620 37,743
Great Western Financial 3,170 75,684
Nationsbank Corporation 1,530 126,416
---------------------
384,997
---------------------
BEVERAGES, FOOD & TOBACCO - 8.6%
Kellogg Co. 400 29,300
Pepsico, Inc. 1,500 53,063
Philip Morris Companies, Inc. 1,540 160,160
Ralston Purina Group 1,600 102,600
Sara Lee Corp 2,000 64,750
Unilever 500 72,563
---------------------
482,436
---------------------
BUILDING MATERIALS - 2.5%
Owens Corning 1,540 66,220
USG Corporation-New * 2,700 75,263
---------------------
141,483
---------------------
CHEMICALS - 5.1%
Albemarle Corp. 4,800 87,600
Du Pont (E.I.) De Nemours 1,700 134,503
Union Carbide Corp. 1,630 64,793
---------------------
286,896
---------------------
COMMUNICATIONS - 2.5%
MCI Communications Corporation 3,170 81,231
SBC Communications, Inc. 1,200 59,100
---------------------
140,331
---------------------
COMPUTER SOFTWARE & PROCESSING - 0.7%
Autodesk Inc. 1,400 41,825
---------------------
COMPUTERS & INFORMATION - 1.7%
International Business Machines 410 40,590
Sun Microsystems, Inc. * 920 54,165
---------------------
94,755
---------------------
ELECTRIC UTILITIES - 3.0%
Entergy Corporation * 1,000 $ 28,375
Pacific Gas & Electric 3,500 81,375
Pinnacle West Capital Corp. 900 27,338
Potomac Electric Power 100 2,650
Wisconsin Energy Corp. 1,000 28,875
---------------------
168,613
---------------------
ELECTRICAL EQUIPMENT - 3.3%
General Instrument Corp. * 4,810 138,889
Grainger WW Inc. 600 46,500
---------------------
185,389
---------------------
ELECTRONICS - 2.4%
Anixter International Inc. * 3,380 50,278
Johnson Controls 600 41,700
Perkin-Elmer Corporation 900 43,425
---------------------
135,403
---------------------
ENTERTAINMENT & LEISURE - 1.3%
Mirage Resorts Inc. * 1,330 71,820
---------------------
ENVIRONMENTAL CONTROLS - 2.7%
Browning-Ferris Industries Inc. 1,800 52,200
WMX Technologies Inc. 3,100 101,525
---------------------
153,725
---------------------
FINANCIAL SERVICES - 1.8%
A.G. Edwards, Inc. 1,220 33,093
Dean Witter Discover & Co. 1,220 69,845
---------------------
102,938
---------------------
HEALTH CARE PROVIDERS - 3.7%
Columbia/HCA Healthcare Corp. 3,000 160,125
United Healthcare Corp. 900 45,450
---------------------
205,575
---------------------
HEAVY MACHINERY - 2.1%
Cooper Industries Inc. 2,800 116,200
---------------------
HOUSEHOLD PRODUCTS - 2.1%
Procter & Gamble Co. 1,300 117,813
---------------------
INDUSTRIAL - DIVERSIFIED - 2.1%
ITT Industries Inc. 2,600 65,325
Teledyne, Inc. 1,500 54,188
---------------------
119,513
---------------------
INSURANCE - 3.2%
Capital Re Corp. 1,800 66,150
Providian Corp. 2,700 115,763
---------------------
181,913
---------------------
MEDIA - BROADCASTING & PUBLISHING - 3.9%
Tele-Communications,Inc. Series A * 4,600 $ 83,375
Turner Broadcasting System Class B 1,800 49,500
U.S. West Media Group * 2,760 50,370
Viacom Inc. Class B * 1,000 38,875
---------------------
222,120
---------------------
MEDICAL SUPPLIES - 2.5%
Forest Laboratories Inc. * 920 35,535
Humana,Inc. * 5,900 105,463
---------------------
140,998
---------------------
METALS - 0.4%
Aluminum Company of America 410 23,524
---------------------
OFFICE EQUIPMENT - 1.6%
EMC Corp. * 2,750 51,219
Softkey International Inc. * 2,000 37,875
---------------------
89,094
---------------------
OIL & GAS - 10.3%
Anadarko Petroleum Corp. 1,500 87,000
British Petroleum Plc 1,000 106,875
Chevron Corporation 1,000 59,000
Diamond Shamrock R & M 2,760 79,695
Exxon Corporation 1,400 121,625
Texaco Inc. 1,200 100,650
Transcanada Pipeline Ltd. 1,640 24,190
---------------------
579,035
---------------------
PHARMACEUTICALS - 3.9%
American Home Products Corp. 920 55,315
Pfizer, Inc. * 700 49,963
Warner Lambert Co. 2,040 112,200
---------------------
217,478
---------------------
RETAILERS - 5.1%
Melville Corp. 1,200 48,600
The Limited Inc. 400 8,600
Toys "R" Us, Inc. Holding Co. * 2,460 70,110
Wal-Mart Stores Inc. 6,200 157,325
---------------------
284,635
---------------------
TELEPHONE SYSTEMS - 5.0%
Ameritech Corp. 1,000 59,375
AT & T Corporation 2,400 148,800
Nynex Corp. 1,500 71,250
---------------------
279,425
---------------------
TEXTILES, CLOTHING & FABRICS - 1.6%
Collins & Aikman Corp. * 14,630 87,780
---------------------
TRANSPORTATION - 2.9%
Conrail, Inc. 300 $ 19,913
Consolidated Freightways Inc. 2,400 50,700
Union Pacific Corp. 1,300 90,838
---------------------
161,451
---------------------
TOTAL Common and Preferred Stocks (Cost $5,655,088) 5,557,381
---------------------
TOTAL INVESTMENTS - 98.8%
(Cost $5,655,088) 5,557,381
Other Assets and Liabilities (net) - 1.2% 66,436
---------------------
TOTAL NET ASSETS - 100.0% $ 5,623,817
=====================
</TABLE>
Portfolio Footnotes:
* Non-income producing security as this stock currently does not declare
dividends.
COVA SERIES TRUST
SELECT EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at value (Note 1) (identified cost, $5,655,088) $ 5,557,381
Cash 42,932
Receivable for investments sold 24,686
Dividends receivable 14,668
Interest receivable 1,503
Receivable from Investment Adviser (Note 2) 6,355
Other assets 44
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 5,647,569
LIABILITIES
Payable for securities purchased $ 22,222
Accrued expenses 1,530
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 23,752
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 5,623,817
- ------------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 5,721,723
Accumulated net realized loss (356)
Unrealized depreciation of investments (computed on the basis of identified cost) (97,707)
Undistributed net investment income 157
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 5,623,817
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($5,623,817 / 568,413 shares of capital stock outstanding) (Note 3) $9.89
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
SELECT EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the Period Ended June 30, 1996 (UNAUDITED) *
INVESTMENT INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
Dividends (net of foreign withholding tax of $66) $ 27,211
Interest 8,414
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 35,625
Expenses:
Investment Advisory Fee (Note 2) 10,320
Custody 7,170
Audit 346
Shareholder Reporting 95
Trustee Fees and Expenses (Note 2) 2,909
Legal 31
Miscellaneous 1,067
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 21,938
Less expenses reimbursed by Cova Life and/or the Adviser 10,242
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 11,696
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 23,929
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized loss from security transactions
Proceeds from sales $ 3,466,499
Cost of securities sold (3,466,855)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized loss (356)
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation of investments
Beginning of period $ 0
End of period (97,707)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (97,707)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (98,063)
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (74,134)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fund commenced operations on April 2, 1996
See notes to financial statements
Cova Series Trust
Select Equity Portfolio
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended June 30, 1996 (Unaudited) *
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 23,929
Realized loss from security transactions (356)
Net unrealized depreciation on investments
during the period (97,707)
- -----------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (74,134)
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (23,772)
Net realized gain from security transactions 0
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (23,772)
- -----------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 2,211,680
Net asset value of shares issued through
Dividend reinvestment 23,772
cost of shares repurchased (1,513,729)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 721,723
- -----------------------------------------------------------------------------------------------------------------------
Total increase in net sssets 623,817
NET ASSETS:
Beginning of the period 5,000,000
- -----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $157) $ 5,623,817
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fund commenced operations on April 2, 1996
See Notes to Financial Statements
COVA SERIES TRUST
SELECT EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
For the Period Ended June 30, 1996 (UNAUDITED) *
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.042
Net realized and unrealized loss
on investments (0.110)
Total from investment operations (0.068)
---------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from net investment income (0.042)
Distributions from net realized gain 0.000
Total distributions (0.042)
---------------------------------------------------------------------
NET ASSET VALUE, end of period $ 9.890
- ------------------------------------------------------------------------------
TOTAL RETURN (0.68%)
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------
Net Assets, end of period (000) $ 5,624
RATIOS TO AVERAGE NET ASSETS (1)
- ------------------------------------------------------------------------------
Expenses 0.85%**
Net investment income 1.74%**
PORTFOLIO TURNOVER RATE: 65.22%
- ------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID (2): $0.0375
- ------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
** Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 1.59%**
Ratio of Net Investment Income to Average Net Assets: 1.00%**
(2) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.
COVA SERIES TRUST
SELECT EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Select Equity Portfolio (the "Fund") is organized as a separate
sub-trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The investment objective
of the Select Equity Portfolio is to seek long-term growth of both capital and
income by investing in a portfolio of common stocks which are considered by the
Investment Adviser to have potential for capital appreciation and dividend
growth. The Trust commenced operations on December 11, 1989. The Fund commenced
operations on April 2, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
SELECT EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with J.P. Morgan Investment Management Inc. (the
"Sub-adviser") for investment advisory services in connection with the
management of the Fund. The Adviser supervises the Sub-adviser's performance of
advisory services and will make recommendations to the Board of Trustees with
respect to the retention or renewal of the sub-advisory agreement. The Adviser
pays for the cost pursuant to the sub-advisory agreement and the cost of
compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based on the average daily net assets as follows:
Average Daily Net Assets % Per Annum
------------------------ -----------
First $50 million .75 of 1%
Over $50 million .65 of 1%
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
SELECT EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. Capital Transactions
At June 30, 1996, paid in surplus aggregated $5,721,723.
Transactions in shares were as follows:
Period Ended
June 30,
1996 *
------------
Beginning Shares 500,000
------------
Shares Sold 218,045
Shares Issued through
Dividend Reinvestment 2,403
Shares Repurchased (152,035)
------------
Net Increase in Shares
Outstanding 68,413
------------
Ending Shares 568,413
* Fund commenced operations on April 2, 1996
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term securities, for the period ended June 30, 1996 were
$9,121,944 and $3,466,499, respectively.
COVA LARGE CAP STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
(PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY
DESCRIPTION SHARES MARKET VALUE
- --------------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS - 99.2%
AEROSPACE & DEFENSE - 4.7%
Allied Signal Inc. 3,000 $ 171,375
Boeing Company 2,900 252,663
Cummins Engine Comm 300 12,113
General Dynamics 300 18,600
General Motors Corp. Class H 2,600 156,325
Lockheed Martin Corporation 700 58,800
McDonnell Douglas Corp. 700 33,950
Raytheon Co. 600 30,975
---------------------
734,801
---------------------
AIRLINES - 0.2%
AMR Corp. - Del * 300 27,300
---------------------
AUTOMOTIVE - 2.7%
Cooper Tire & Rubber Co. 300 6,675
Dana Corp. 300 9,300
Eaton Corp. 600 35,175
Ford Motor Co. 5,000 161,875
General Motors Corporation 3,200 167,600
Goodyear Tire & Rubber Co. 600 28,950
Paccar Inc. 300 14,700
---------------------
424,275
---------------------
BANKING - 6.9%
Banc One Corp. 1,900 64,600
Bancorp Hawaii Inc. 200 7,200
Bankamerica Corp. 1,700 128,775
Barnett Banks,Inc. 400 24,400
Baybanks Inc. 300 32,325
Beneficial Corp. 200 11,225
Central Fidelity Banks Inc. 300 6,825
Citicorp. 2,200 181,775
Corestates Financial Corp. 1,000 38,500
Crestar Financial Corp. 200 10,675
Dime Bancorp, Inc. * 500 6,500
First Chicago NBD Corporation 1,500 58,688
First Tennessee Nat'L Corp. 300 9,188
First Union Corp.(N.E.) 1,300 79,138
First Virginia Banks,Inc. 200 8,000
Firstar Corporation 300 13,838
Fleet Financial Group, Inc. 1,200 52,200
Golden West Financial Corp. 300 16,800
Great Western Financial 600 14,325
Greenpoint Financial Corp. 200 5,650
H. F. Ahmanson & Company 500 $ 13,500
Key Corp. 1,100 42,625
Mercantile Bancorporation 300 13,350
Mercantile Bankshares 200 5,100
Nationsbank Corporation 1,300 107,413
PNC Bank Corp. 1,600 47,600
Regions Financial Corp. 300 14,025
Republic New York Corp. 300 18,675
Southern National Corp. 500 15,875
Standard Federal Bancorp. 100 3,850
TCF Financial Corporation 200 6,650
Union Planters Corp. 200 6,075
Washington Mutual, Inc. 300 8,963
---------------------
1,074,328
---------------------
BEVERAGES, FOOD & TOBACCO - 9.0%
Anheuser Busch 1,200 90,000
Coca-Cola Co. 4,200 205,275
CPC International Inc. 800 57,600
Kellogg Co. 600 43,950
Nabisco Holdings Corp. Class A 300 10,613
Pepsico, Inc. 8,200 290,075
Philip Morris Companies, Inc. 4,100 426,400
Ralston Purina Group 600 38,475
Sara Lee Corp. 1,200 38,850
Seagrams Co. Ltd. 2,100 70,613
Unilever 900 130,613
---------------------
1,402,464
---------------------
BUILDING MATERIALS - 0.3%
Owens Corning 400 17,200
Sherwin Williams Co. 600 27,900
USG Corporation-New * 300 8,363
---------------------
53,463
---------------------
CHEMICALS - 3.5%
Air Products & Chemicals 500 28,875
Albemarle Corp. 300 5,475
Crompton & Knowles Corp. 400 6,700
Cytec Industries Inc. * 100 8,550
Dow Chemical Company 1,200 91,200
Du Pont (E.I.) De Nemours 2,800 221,550
Georgia Gulf Corp. 200 5,850
Imc Global Inc. 500 18,813
International Flavors & Fragrances 600 28,575
Lyondell Petro Chemical 400 9,650
Morton International, Inc. 1,600 59,600
PPG Industries 100 4,875
Rohm & Haas Company 300 $ 18,825
Union Carbide Corp. 700 27,825
---------------------
536,363
---------------------
COMMERCIAL SERVICES - 0.3%
Ogden Corp. 500 9,063
Service Corp.International 700 40,250
---------------------
49,313
---------------------
COMMUNICATIONS - 1.0%
Airtouch Communications Inc. * 400 11,300
Cox Communications Class A * 300 6,488
MCI Communications Corporation 2,800 71,750
Paging Network Inc. Telecom * 500 12,000
SBC Communications, Inc. 1,200 59,100
---------------------
160,638
---------------------
COMPUTER SOFTWARE & PROCESSING - 2.9%
Autodesk Inc. 100 2,988
Cisco Systems, Inc. * 2,300 130,202
First Data Corporation 1,200 95,550
Microsoft Corporation * 500 60,063
Oracle Corp. * 3,800 149,863
Sybase Inc. * 400 9,450
---------------------
448,116
---------------------
COMPUTERS & INFORMATION - 2.8%
Compaq Computer * 1,300 64,025
Digital Equipment Corporation * 900 40,500
International Business Machines 2,700 267,300
Read-Rite Corp. * 200 2,825
Sun Microsystems, Inc. * 1,000 58,875
---------------------
433,525
---------------------
CONTAINERS & PACKAGING - 0.3%
Crown Cork & Seal Inc. 1,200 54,000
---------------------
COSMETICS & PERSONAL CARE - 0.1%
Ecolab Inc. 300 9,900
---------------------
ELECTRIC UTILITIES - 3.1%
Allegheny Power System Inc. 500 15,438
Baltimore Gas and Electric 600 17,025
Consolidated Edison of N.Y. 1,000 29,250
Dominion Resources Inc. 700 28,000
DTE Energy Company 600 18,525
Edison International 1,800 31,725
Entergy Corporation 900 25,538
FPL Group,Inc. 800 36,800
Houston Industries Inc. 1,000 24,625
Illinova Corporation 300 $ 8,625
New England Electric System 200 7,275
Niagara Mohawk Power Corp. 600 4,650
Northeast Utilities 500 6,688
Northern States Power Co. 600 29,625
P P & L Resources Inc. 700 16,538
Pacific Gas & Electric 1,700 39,525
Pinnacle West Capital Corp. 400 12,150
Portland General Electric 200 6,175
Potomac Electric Power 1,000 26,500
Southern Company 2,600 64,025
Unicom Corporation 900 25,088
Western Resources, Inc. 200 5,975
---------------------
479,765
---------------------
ELECTRICAL EQUIPMENT - 3.2%
Advanta Corporation 100 4,525
Amp Inc. 1,200 48,150
Applied Materials, Inc. * 500 15,250
Duracell International Inc. 700 30,188
Emerson Electric 300 27,113
General Electric Company * 3,200 276,800
General Instrument Corp. * 700 20,213
Grainger WW Inc. 400 31,000
Raychem Corp. 500 35,938
Scientific Atlanta Inc. 400 6,200
---------------------
495,377
---------------------
ELECTRONICS - 2.9%
Altera Corp. * 200 7,600
Anixter International Inc. * 300 4,463
Input/Output Inc. * 100 3,238
Intel Corporation 3,500 257,031
Johnson Controls 400 27,800
Motorola, Inc. 800 50,300
National Semiconductor Corp. * 700 10,850
Perkin-Elmer Corporation 500 24,125
Sensormatic Electronics Corp. 400 6,550
Texas Instruments 900 44,888
Xilinx, Inc. * 400 12,700
---------------------
449,545
---------------------
ENTERTAINMENT & LEISURE - 2.2%
Hasbro Inc. 200 7,150
Mattel 2,100 60,113
Mirage Resorts Inc. * 500 27,000
Walt Disney Company 4,000 251,500
---------------------
345,763
---------------------
ENVIRONMENTAL CONTROLS - 0.7%
Browning-Ferris Industries Inc. 2,200 $ 63,800
WMX Technologies Inc. 1,400 45,850
---------------------
109,650
---------------------
FINANCIAL SERVICES - 2.5%
A.G. Edwards, Inc. 300 8,138
Bear Stearns Companies,Inc. 500 11,813
Charter One Financial Inc. 200 6,975
Dean Witter Discover & Co. 800 45,800
Federal Home Loan Mortgage Corp. 800 68,400
Federal National Mortgage Assn. 5,000 167,500
First Usa Inc. 300 16,500
Mercury Financial Co. 800 10,200
Northern Trust 300 17,325
Paine Webber Inc. 500 11,875
Salomon Inc. 500 22,000
Wilmington Trust Corp. 200 6,488
---------------------
393,014
---------------------
FOOD RETAILERS - 0.1%
Albertson's Inc. * 200 8,275
---------------------
FOREST PRODUCTS & PAPER - 1.1%
Bowater, Inc. 200 7,525
Champion International 600 25,050
Georgia-Pacific Corp. 400 28,400
International Paper Co. 1,600 59,000
James River Corp. 500 13,188
Louisiana Pacific Corp. 700 15,488
Mead Corp. 300 15,563
---------------------
164,214
---------------------
HEALTH CARE PROVIDERS - 2.8%
Apria Healthcare Group * 600 18,825
Columbia/HCA Healthcare Corp. 4,300 229,513
Health Management Associates * 1,200 24,300
Tenet Healthcare Corporation 2,500 53,438
United Healthcare Corp. 2,100 106,050
---------------------
432,126
---------------------
HEAVY MACHINERY - 1.1%
Caterpiller Tractor Inc. 1,400 94,850
Cooper Industries Inc. 800 33,200
Ingersoll Rand Co. 800 35,000
Parker-Hannifin Corp. 300 12,713
---------------------
175,763
---------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 0.2%
Whirlpool Corp. 600 $ 29,775
---------------------
HOUSEHOLD PRODUCTS - 2.8%
Black & Decker Corp. 700 27,038
Colgate-Palmolive Co. 800 67,800
Procter & Gamble Co. 3,800 344,375
---------------------
439,213
---------------------
INDUSTRIAL - DIVERSIFIED - 1.4%
ITT Industries Inc. 1,300 32,663
Teledyne, Inc. 600 21,675
Tenneco Inc. 1,800 92,025
Trinova Corp. 200 6,675
Tyco Lab. 1,600 65,200
---------------------
218,238
---------------------
INSURANCE - 3.7%
Allstate Corp. 1,900 86,688
American General Corp. 1,400 50,925
American International Group 400 39,450
Chubb Corp. 1,200 59,850
Cigna Corp. 400 47,150
First Colony Corp. 300 9,300
ITT Hartford Group Inc. 700 37,275
Lincoln National Corp. 700 32,375
MBIA Inc. 200 15,575
Providian Corp. 600 25,725
Safeco Corp. 700 24,763
St. Paul Cos. 500 26,750
The Pmi Group Inc. 200 8,500
Torchmark Corp. 400 17,500
Travelers Inc. 2,000 91,250
USlife Corp. 200 6,575
---------------------
579,651
---------------------
MEDIA - BROADCASTING & PUBLISHING - 2.3%
Comcast Corp. 1,100 20,350
R.R. Donnelley & Sons. 900 31,388
Tele-Communications,Inc. Series A * 3,600 65,250
Turner Broadcasting System Class B 4,100 112,750
U.S. West Media Group * 2,800 51,100
Viacom Inc. Class B * 2,000 77,750
---------------------
358,588
---------------------
MEDICAL SUPPLIES - 0.9%
Bausch & Lomb,Inc. 600 25,500
Biomet, Inc. * 1,300 18,688
Forest Laboratories Inc. * 400 15,450
Humana,Inc. * 1,800 $ 32,175
Manor Care Inc. 700 27,563
Stryker Corp. 700 15,925
---------------------
135,301
---------------------
MEDICAL & BIO-TECHNOLOGY - 0.1%
Vivra Inc. * 400 13,150
---------------------
METALS - 1.2%
Aluminum Company of America 1,400 80,325
Bethlehem Steel Corp. * 900 10,688
Inland Stl Inds Inc. 400 7,850
Nucor Corp. 400 20,250
Phelps Dodge Corp. 500 31,188
Reynolds Metals Company 500 26,063
Usx-Us Steel Group Inc. 500 14,188
---------------------
190,552
---------------------
MINING - 0.2%
Inco Ltd. 900 29,025
Smith International * 100 3,013
---------------------
32,038
---------------------
OFFICE EQUIPMENT - 1.9%
Bay Networks * 900 23,175
EMC Corp. * 1,200 22,350
Harris Corp. Inc. 200 12,200
Hewlett-Packard Company 2,300 229,138
Ryder System 400 11,250
Softkey International Inc. * 200 3,788
---------------------
301,901
---------------------
OIL & GAS - 9.6%
Amoco Corporation 1,700 123,038
Anadarko Petroleum Corp. 200 11,600
Apache Corp. 300 9,863
Ashland Inc. 200 7,925
Atlantic Richfield Co. 600 71,100
Chevron Corporation 2,300 135,700
Columbia Gas System 400 20,850
Diamond Shamrock R & M 100 2,888
El Paso Natural Gas Co. 200 7,700
Enron Corporation 1,700 69,488
Exxon Corporation 4,600 399,625
Mobil Corp 1,400 156,975
Occidental Petro 600 14,850
Panenergy Corp. 1,000 32,875
Phillips Petroleum Co. 400 16,750
Pogo Producing Co. 100 3,813
Royal Dutch Petroleum Co. 1,900 $ 292,125
Sun Co. Inc. 300 9,113
Texaco Inc. 900 75,488
Unocal Corp. 900 30,375
---------------------
1,492,141
---------------------
PHARMACEUTICALS - 6.6%
Alza Corp. * 700 19,163
American Home Products Corp. 4,600 276,575
Johnson & Johnson 800 39,600
Merck & Co., Inc. 1,200 77,550
Pfizer, Inc. 4,200 299,775
Schering-Plough Corp. 2,600 163,150
Southtrust Corp. 400 11,250
Warner Lambert Co. 2,200 121,000
Watson Pharmaceutical, Inc. * 300 11,363
---------------------
1,019,426
---------------------
RETAILERS - 5.0%
Circuit City Stores, Inc. 600 21,675
Dayton-Hudson Corp. 100 10,313
Fastenal Co. 200 8,700
Federated Department Stores * 1,100 37,538
Jones Apparel Group Inc. * 200 9,825
J.C. Penney Company, Inc. 1,300 68,250
Lowes Co's, Inc. 900 32,513
Melville Corp. 600 24,300
Nine West Group Inc. * 200 10,225
Price/Costco Inc. * 1,100 23,788
Sears Roebuck 2,300 111,838
The Limited Inc. 1,600 34,400
Toys "R" Us, Inc. Holding Co. * 1,600 45,600
Wal-Mart Stores Inc. 13,200 334,950
---------------------
773,915
---------------------
TELEPHONE SYSTEMS - 6.8%
Ameritech Corp. 2,300 136,563
AT & T Corporation 6,600 409,200
Bell Atlantic Corp. 1,700 108,375
GTE Corporation. 4,000 179,000
Nynex Corp. 1,800 85,500
Sprint Corp. 1,700 71,400
U.S. West Inc. 2,000 63,750
---------------------
1,053,788
---------------------
TEXTILES, CLOTHING & FABRICS - 0.3%
Fruit of The Loom Inc. * 500 $ 12,750
VF Corp. 500 29,813
Warnaco Group Inc. Class A 400 10,300
---------------------
52,863
---------------------
TRANSPORTATION - 1.4%
Burlington Northern Santa Fe 700 56,613
Caliber Systems Inc. * 200 6,800
Carnival Corp. 700 20,213
Conrail, Inc. 400 26,550
Consolidated Freightways Inc. 200 4,225
CSX Corp. 500 24,125
Federal Express Corp. * 200 16,400
Union Pacific Corp. 1,000 69,875
---------------------
224,801
---------------------
TOTAL Common and Preferred Stocks (Cost $15,230,809) 15,377,319
---------------------
TOTAL INVESTMENTS - 99.2%
(Cost $15,230,809) 15,377,319
Other Assets and Liabilities (net) - 0.8% 126,224
---------------------
TOTAL NET ASSETS - 100.0% $ 15,503,543
=====================
</TABLE>
Portfolio Footnotes:
* Non-income producing security as this stock currently does not declare
dividends.
See notes to financial statements
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $15,230,809) $ 15,377,319
Cash 88,118
Receivable for investments sold 7,456
Dividends receivable 28,180
Interest receivable 481
Receivable from Investment Adviser (Note 2) 13,852
Other assets 32
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 15,515,438
LIABILITIES
Payable for securities purchased $ 7,428
Accrued expenses 4,467
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 11,895
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 15,503,543
- ---------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 15,226,061
Accumulated net realized gain 130,029
Unrealized appreciation of investments (computed on the basis of identified cost) 146,509
Undistributed net investment income 944
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 15,503,543
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($15,503,543 / 1,522,101 shares of capital stock outstanding) (Note 3) $10.19
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
STATEMENT OF OPERATIONS
For the Period Ended June 30, 1996 (UNAUDITED) *
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign withholding tax of $878) $ 83,181
Interest 14,795
- -------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 97,976
Expenses:
Investment Advisory Fee (Note 2) 23,690
Custody 17,782
Audit 1,039
Shareholder Reporting 286
Trustee Fees and Expenses (Note 2) 2,909
Legal 94
Miscellaneous 3,054
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses 48,854
Less expenses reimbursed by Cova Life and/or the Adviser 21,524
- -------------------------------------------------------------------------------------------------------------------------------
Net expenses 27,330
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 70,646
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from security transactions
Proceeds from sales $ 1,698,330
Cost of securities sold (1,568,301)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain 130,029
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments
Beginning of period $ 0
End of period 146,509
- -------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 146,509
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 276,538
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 347,184
- -------------------------------------------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended June 30, 1996 (UNAUDITED) *
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS:
<S> <C>
Operations:
Net investment income $ 70,646
Realized gain from security transactions 130,029
Net unrealized appreciation on investments
during the period 146,509
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 347,184
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (69,702)
Net realized gain from security transactions 0
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (69,702)
- -----------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 175,472
Net asset value of shares issued through
dividend reinvestment 69,702
Cost of shares repurchased (19,113)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 226,061
- -----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 503,543
NET ASSETS:
Beginning of the period 15,000,000
- -----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $944) $ 15,503,543
- -----------------------------------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For the Period Ended June 30, 1996 (UNAUDITED) *
<S> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.047
Net realized and unrealized gain
on investments 0.190
Total from investment operations 0.237
--------------------------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from net investment income (0.046)
Distributions from net realized gain 0.000
Total distributions (0.046)
--------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.191
- -----------------------------------------------------------------------------------------------
TOTAL RETURN 2.36%
- -----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------
Net Assets, end of period (000) $ 15,504
RATIOS TO AVERAGE NET ASSETS (1)
- -----------------------------------------------------------------------------------------------
EXPENSES 0.75%**
Net investment income 1.94%**
PORTFOLIO TURNOVER RATE: 11.23%
- -----------------------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID (2): $0.0306
- -----------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
** Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 1.34%**
Ratio of Net Investment Income to Average Net Assets: 1.35%**
(2) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
Notes to Financial Statements
June 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Large Cap Stock Portfolio (the "Fund") is organized as a
separate sub-trust, is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
investment objective of the Large Cap Stock Portfolio is to seek long-term
growth of both capital and income by investing in a portfolio of common stocks
which are considered by the Investment Adviser to have potential for capital
appreciation and dividend growth. The Trust commenced operations on December 11,
1989. The Fund commenced operations on April 2, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
Notes to Financial Statements (Continued)
June 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with J.P. Morgan Investment Management Inc. (the
"Sub-adviser") for investment advisory services in connection with the
management of the Fund. The Adviser supervises the Sub-adviser's performance of
advisory services and will make recommendations to the Board of Trustees with
respect to the retention or renewal of the sub-advisory agreement. The Adviser
pays for the cost pursuant to the sub-advisory agreement and the cost of
compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee of .65 of 1% per annum, based on the average daily net
assets.
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
Notes to Financial Statements (Continued)
June 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996, paid in surplus aggregated $15,226,061.
Transactions in shares were as follows:
Period Ended
June 30,
1996 *
-----------
Beginning Shares 1,500,000
-----------
Shares Sold 17,124
Shares Issued through
Dividend Reinvestment 6,843
Shares Repurchased (1,866)
-----------
Net Increase in Shares
Outstanding 22,101
-----------
Ending Shares 1,522,101
-----------
* Fund commenced operations on April 2, 1996
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term securities, for the period ended June 30, 1996 were
$16,799,111 and $1,698,330, respectively.
COVA SMALL CAP STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
(PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY
DESCRIPTION SHARES MARKET VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 97.9%
AEROSPACE & DEFENSE - 1.3%
Orbital Sciences Corp. * 2,100 $ 34,125
Rohr Inc. * 1,800 37,575
Special Devices Inc. * 300 4,800
---------------------
76,500
---------------------
AIRLINES - 1.4%
Mesa Airlines Inc. * 6,800 80,750
---------------------
AUTOMOTIVE - 3.5%
Excel Industries Inc. 2,900 36,250
Intermet Corp. * 5,300 73,847
Kaydon Corp. 900 38,700
Modine Manufacturing Co. 300 7,950
Simpson Industries 4,500 41,625
Wabash National Corp. 100 1,775
---------------------
200,147
---------------------
BANKING - 6.7%
Banknorth Group Inc. 900 30,825
CCB Financial Corp. 300 15,375
Colonial Bancgroup Inc. 1,400 46,900
Commerce Bancorp Inc. NJ 500 11,750
Community First Bankshares 500 11,750
First Colorado Bancorp 900 11,925
First Hawaiian Inc. 300 8,550
GBC Bancorp California 1,300 30,063
Irwin Financial Corp. 200 7,850
Mark Twain Bancshares Inc. 500 18,500
Mountain Parks Financial Corp. * 300 8,100
National Commerce Bancorp 1,600 50,400
Roosevelt Financial Group Inc. 3,000 57,750
Silicon Valley Bancshares * 400 10,300
Trustco Bank Corp.NY 1,100 21,175
Westamerica Bancorp 900 45,225
---------------------
386,438
---------------------
BEVERAGES, FOOD & TOBACCO - 3.8%
Coors (Adolph) 600 10,725
Dekalb Genetics Corp.Class B 5,700 148,200
Dreyers Grand Ice Cream Inc. 400 12,600
Eskimo Pie Corp. 1,400 24,850
Kensey Nash Corp. * 1,000 13,375
Riviana Foods Inc. 500 7,563
Sanderson Farms Inc. 300 3,750
---------------------
221,063
---------------------
BUILDING MATERIALS - 0.0%
Amcast Industrial Corp. 100 $ 2,025
---------------------
CHEMICALS - 2.1%
A Schulman Inc. 1,000 24,500
Bush Boake Allen Inc. * 1,000 21,750
General Chemical Group Inc. 1,000 20,250
Petrolite Corp. 100 3,144
Synalloy Corp. 300 4,875
Tetra Technologies Inc. * 2,800 49,000
---------------------
123,519
---------------------
COMMERCIAL SERVICES - 2.2%
Devry Inc. * 1,200 54,000
Equity Corporation International * 400 10,800
Pinkertons Inc. * 500 11,563
Robert Half International Inc. * 1,200 33,450
Stewart Enterprises Inc. 450 14,063
---------------------
123,876
---------------------
COMMUNICATIONS - 4.0%
Analogy Inc. * 1,000 7,250
Applied Digital Access Inc. * 1,900 19,950
Comdial Corp. * 3,600 31,050
Digital Microwave Corp. * 1,800 29,925
International Cabletel Inc. * 500 14,750
Leasing Solutions Inc. * 1,000 15,750
Metrocall Inc. * 500 5,563
Mobile Media * 1,800 21,825
Omnipoint Corp. * 200 5,213
Paging Network Inc. Telecom * 2,900 69,600
Premiere Technologies Inc. * 300 9,450
---------------------
230,326
---------------------
COMPUTER SOFTWARE & PROCESSING - 5.1%
Adept Technology Inc. * 2,300 32,200
Avid Technology Inc. * 400 7,400
DST Systems Inc. * 500 16,000
Edify Corporation * 100 2,650
Isocor * 300 4,575
Landmark Graphics Corp. * 1,100 21,175
Mathsoft Inc. * 1,500 8,813
Mentor Graphics Corporation * 2,400 39,000
Metromail Corp. * 400 8,950
Network General Corporation * 2,400 51,600
Neurocrine Biosciences, Inc. * 100 825
Oak Technology Inc. * 1,500 14,063
Parcplace Systems Inc. * 1,400 $ 12,775
Pinnacle Systems Inc. * 900 18,675
Powercerv Corp. * 1,000 12,250
Rational Software Corp. * 600 32,250
Security First Network Bank * 100 3,300
Verity, Inc. * 200 5,750
---------------------
292,251
---------------------
ELECTRIC UTILITIES - 1.8%
Central Hudson Gas & Electric 2,200 68,750
Central Louisiana Electric Inc. 1,200 31,950
---------------------
100,700
---------------------
ELECTRICAL EQUIPMENT - 2.9%
Advanced Technology Material * 3,000 40,500
Applied Power Inc. Class A 2,700 75,600
Bolder Electrical Equipment * 400 5,100
Broadband Technologies Inc. * 900 29,025
Encore Wire Corp. * 1,500 15,750
---------------------
165,975
---------------------
ELECTRONICS - 3.2%
Affinity Technology Group * 200 1,700
Brooktree Corp. * 2,500 26,250
FEI Company * 600 7,575
Input/Output Inc. * 1,100 35,613
Itron Inc. * 500 14,188
SDL Inc. * 1,900 52,725
Sierra Semiconductor * 300 3,488
WH Brady Co. Class A 1,900 42,275
---------------------
183,814
---------------------
ENTERTAINMENT & LEISURE - 2.8%
Ascent Entertainment Group * 1,400 35,350
Imax Corp. * 1,200 44,100
Johnson Worldwide Associates * 1,500 20,625
Leslie's Poolmart * 1,000 17,500
SCP Pool Corp. * 400 7,200
Wms Industries Inc. * 1,500 36,938
---------------------
161,713
---------------------
ENVIRONMENTAL CONTROLS - 0.8%
Dames & Moore Inc. 2,300 27,888
Sevenson Environmental Svcs. 1,000 17,375
---------------------
45,263
---------------------
FINANCIAL SERVICES - 2.8%
Charter One Financial Inc. 1,700 59,288
Imc Mortgage Company * 800 18,000
Litchfield Financial Corp. 600 8,400
Pinnacle Financial Services 500 $ 10,625
Rollins Truck Leasing Corp. 2,300 23,863
Southwest Securities Group Inc. 1,200 13,950
WFS Financial Inc. * 1,200 27,000
---------------------
161,126
---------------------
FOOD RETAILERS - 0.8%
Penn Traffic Co. * 2,000 17,000
Starbucks Corporation * 1,000 28,250
---------------------
45,250
---------------------
FOREST PRODUCTS & PAPER - 0.2%
Caraustar Industries Inc. 400 10,600
Universal Forest Products, Inc. 100 1,038
---------------------
11,638
---------------------
HEALTH CARE PROVIDERS - 2.1%
Affymetrix Inc. * 300 4,575
Cardiac Pathways Corp. * 100 1,450
Diagnostic Health Services, Inc. * 300 2,025
Safety First Inc. * 3,100 25,963
Sierra Health Services, Inc. * 500 15,750
Sterling House Corp. * 600 11,400
Summit Care Corp. * 2,400 52,800
Virus Research Institute, Inc. * 600 5,475
---------------------
119,438
---------------------
HEAVY MACHINERY - 2.0%
Asyst Technologies Inc. * 400 7,500
Credence Systems Corp. * 2,000 26,875
Gardner Denver Machinery Inc. * 1,500 39,563
Idex Corp. 100 3,800
Infocus Systems Inc. * 100 2,425
Kuhlman Corporation 300 5,213
Measurex Corp. 1,000 29,250
---------------------
114,626
---------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 2.1%
Aaron Rents Inc. Class B 500 6,313
Bush Industries Class A 600 20,400
D.R. Horton Inc. * 4,812 50,526
Landec Corp. * 200 3,800
Micrel Inc. * 2,500 41,875
---------------------
122,914
---------------------
HOUSEHOLD PRODUCTS - 0.6%
Libbey Inc. 1,200 33,300
---------------------
INDUSTRIAL - DIVERSIFIED - 0.5%
ABC Rail Products Corp. * 300 $ 6,488
Fisher Scientific 300 11,250
Strategic Distribution Inc. * 1,100 8,663
---------------------
26,401
---------------------
INSURANCE - 5.9%
Capital Re Corp. 5,100 187,425
Chartwell Re Corporation 300 6,638
MMI Companies Inc. 3,300 101,888
Renaissancere Holdings Ltd. 1,400 43,050
---------------------
339,001
---------------------
LODGING - 0.8%
Doubletree Corp. * 400 14,200
Extended Stay America Inc. * 1,000 31,500
---------------------
45,700
---------------------
MEDIA - BROADCASTING & PUBLISHING - 3.3%
Banta Corp. 1,600 40,400
Books-A-Million Inc. * 1,000 8,375
Consolidated Graphics Inc. * 1,900 41,325
Ditgital Generation Systems * 300 2,869
Heartland Wireless Comm Inc. * 500 11,875
Heritage Media Corp.Class A * 500 19,938
K-III Communications Corp. * 1,700 21,250
Norwood Promotional Products * 400 9,000
People's Choice TV Corp. * 1,500 27,375
SJW Corp. 100 3,325
Wireless One, Inc. * 300 5,400
---------------------
191,132
---------------------
MEDICAL SUPPLIES - 4.3%
Aksys Ltd * 100 1,525
Aspen Technologies, Inc. * 200 11,000
Biofield Corp. * 600 8,175
Cellpro Inc. * 1,400 25,200
Eclipse Surgical Tech Inc. * 200 2,750
Heartstream Inc. * 1,000 13,750
Keravision Inc. * 2,000 31,250
Mariner Health Group Inc. * 2,000 36,750
Nabi Inc. * 1,400 13,300
Physio-Control International Corp. * 500 8,813
Research Medical Inc. * 1,600 35,400
Sangstat Medical Corp. * 1,500 25,500
Sola International * 500 14,375
Somatogen Inc. * 1,400 19,775
---------------------
247,563
---------------------
MEDICAL & BIO-TECHNOLOGY - 1.0%
Neurogen Corp. * 500 $ 12,875
Professional Sports Care Management * 600 4,500
Sequana Therapeutics Inc. * 1,300 20,150
Sunrise Assisted Living Inc. * 200 4,800
Targeted Genetics Corp. * 1,000 4,750
Tripos Inc. * 1,500 13,125
---------------------
60,200
---------------------
METALS - 2.9%
Commercial Metals Co. 3,800 126,350
Oregon Steel Mills 1,600 22,000
Schnitzer Steel Inds Inc.-A 600 16,050
---------------------
164,400
---------------------
MINING - 0.5%
Smith International * 700 21,088
TPC Corporation * 1,400 10,150
---------------------
31,238
---------------------
OFFICE EQUIPMENT - 3.8%
Actel Corporation * 2,000 37,000
Acxiom Corp. * 1,000 34,125
Checkfree Corp. * 300 5,963
Cks Group, Inc. * 200 6,450
Edmark Corp. * 300 6,000
Gemstar International Group Ltd * 100 3,000
Inso Corporation * 400 20,950
May & Speh Inc. * 1,400 22,050
Metatools Inc. * 300 7,050
Mylex Corp. * 1,400 24,850
ON Technology Corp. * 1,900 19,475
P-Com Inc. * 700 22,050
Telxon Corp. 200 2,350
Vanstar Corporation * 600 10,050
---------------------
221,363
---------------------
OIL & GAS - 4.3%
Camco International, Inc. 500 16,938
Devon Energy Corporation 1,400 34,300
Flores & Rucks, Inc. * 700 24,150
K N Energy 600 20,100
New Jersey Resources Corp. 200 5,750
Newfield Exploration Company * 500 19,438
Pogo Producing Co. 300 11,438
Providence Energy Corp. 1,400 24,150
Texas Meridian Resources Corp. * 1,900 17,100
Trico Marine Services Inc. * 300 6,675
United Cities Gas Co. 2,300 $ 34,788
Vastar Resources Inc. 500 18,688
Vintage Petroleum Inc. 100 2,550
Wicor Inc. 300 11,325
---------------------
247,390
---------------------
PHARMACEUTICALS - 2.8%
Houghten Pharmaceuticals * 1,000 8,000
Hubco Inc. 1,200 25,350
Human Genome Sciences Inc. * 600 22,050
Idec Pharmaceuticals Corp. * 300 6,938
Imagyn Medical, Inc. * 200 2,200
Incyte Pharmaceuticals Inc. * 1,000 38,563
Microcide Pharmaceuticals, Inc. * 100 1,275
Onyx Pharmaceuticals, Inc. * 400 3,200
Vertex Pharmaceuticals Inc. * 1,000 30,375
Vical Inc. * 1,400 22,400
---------------------
160,351
---------------------
REAL ESTATE - 7.7%
Amresco Inc. 1,000 17,125
Associated Estates Realty Cp 1,000 21,000
Beacon Properties Corp 300 7,688
Capstone Capital Trust Inc. 1,500 30,750
CBL & Associates Properties 400 8,950
Chelsea GCA Realty Inc. 1,000 31,750
Colonial Properties Trust 1,400 33,950
Columbus Realty Trust 1,500 29,063
Developers Divers Realty Corp 1,000 31,875
Gables Residential Trust 1,200 28,200
Healthcare Realty Trust 1,400 33,250
Highwood Properties Inc. 500 13,813
Kimco Realty Corp. 300 8,475
Liberty Property Trust 1,500 29,813
Macerich Company 400 8,400
Merry Land & Investment Co. 1,000 21,000
Oasis Residential Inc. 1,200 26,250
Patriot American Hospitality 400 11,850
ROC Communities Inc. 200 4,775
Starwood Lodging Trust 400 14,550
Storage Trust Realty 1,000 20,500
Wellsford Residential Property 400 9,000
---------------------
442,027
---------------------
RESTAURANTS - 0.8%
Landry's Seafood Restaurants * 500 12,375
Nimbus CD International Inc. * 1,100 14,438
Papa John's Int'l. Inc. * 300 $ 14,625
Planet Hollywood International * 100 2,700
---------------------
44,138
---------------------
RETAILERS - 4.3%
BMC West Corp. * 300 5,138
Catherines Stores Corp. * 2,600 25,675
Charming Shoppes Inc. * 3,800 26,838
Fresenius Usa Inc. * 2,700 58,050
Garden Ridge Corp. * 500 25,250
One Price Clothing Stores * 2,400 13,200
Petco Animal Supplies Inc. * 200 5,750
Planar Systems Inc. * 2,800 39,900
The Sports Authority Inc. * 300 9,825
Urban Outfitters Inc. * 1,400 35,350
---------------------
244,976
---------------------
TEXTILES, CLOTHING & FABRICS - 0.8%
Collins & Aikman Corp. * 2,500 15,000
Donna Karan International Inc. * 500 14,000
Wolverine World Wide 300 9,750
Worldtex Inc. * 900 5,400
---------------------
44,150
---------------------
TRANSPORTATION - 1.0%
American Freightways Corp. * 1,500 16,688
Genesee & Wyoming Inc-Cl A * 400 8,200
USA Truck Inc. * 400 4,200
Werner Enterprises Inc. 1,100 28,600
---------------------
57,688
---------------------
WATER COMPANIES - 1.1%
Aquarion Company 400 9,900
Culligan Water Technologies * 500 19,000
E-Town Corporation 500 13,875
Southern California Water Co. 1,000 22,000
---------------------
64,775
---------------------
TOTAL Common and Preferred Stocks (Cost $5,586,640) 5,635,145
---------------------
TOTAL INVESTMENTS - 97.9%
(Cost $5,586,640) 5,635,145
Other Assets and Liabilities (net) - 2.1% 118,800
---------------------
TOTAL NET ASSETS - 100.0% $ 5,753,945
=====================
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock currently does not declare
dividends.
See notes to financial statements
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $5,586,640) $ 5,635,145
Cash 347,697
Receivable for investments sold 21,985
Dividends receivable 6,416
Interest receivable 2,324
Receivable from Investment Adviser (Note 2) 7,877
---------------------------------------------------------------------------------------------------------------------------------
Total assets 6,021,444
LIABILITIES
Payable for securities purchased $ 265,916
Accrued expenses 1,583
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 267,499
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 5,753,945
---------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 5,588,427
Accumulated net realized gain 117,062
Unrealized appreciation of investments (computed on the basis of identified cost) 48,505
Distributions in excess of net investment income (49)
---------------------------------------------------------------------------------------------------------------------------------
Total $ 5,753,945
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($5,753,945 / 549,862 shares of capital stock outstanding) (Note 3) $10.46
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
STATEMENT OF OPERATIONS
For the Period Ended June 30, 1996 (UNAUDITED) *
INVESTMENT INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
Dividends $ 17,224
Interest 10,481
---------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 27,705
Expenses:
Investment Advisory Fee (Note 2) 12,076
Custody 9,211
Audit 350
Shareholder Reporting 96
Trustee Fees and Expenses (Note 2) 2,909
Legal 32
Miscellaneous 1,111
---------------------------------------------------------------------------------------------------------------------------------
Total expenses 25,785
Less expenses reimbursed by Cova Life and/or the Adviser 12,292
---------------------------------------------------------------------------------------------------------------------------------
Net expenses 13,493
---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 14,212
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from security transactions
Proceeds from sales $ 1,724,009
Cost of securities sold (1,606,947)
---------------------------------------------------------------------------------------------------------------------------------
Net realized gain 117,062
---------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments
Beginning of period $ 0
End of period 48,505
---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 48,505
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 165,567
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 179,779
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fund commenced operations on April 2, 1996
See notes to financial statements
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended June 30, 1996 (UNAUDITED) *
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 14,212
Realized gain from security transactions 117,062
Net unrealized appreciation on investments
during the period 48,505
----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 179,779
----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (14,261)
Net realized gain from security transactions 0
----------------------------------------------------------------------------------------------------------------------
Total distributions (14,261)
----------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 2,074,229
Net asset value of shares issued through
dividend reinvestment 14,261
Cost of shares repurchased (1,500,063)
----------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 588,427
----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 753,945
NET ASSETS:
Beginning of the period 5,000,000
----------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess
of net investment income of $49) $ 5,753,945
----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fund commenced operations on April 2, 1996
See Notes to Financial Statements
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
FINANCIAL HIGHLIGHTS
For the Period Ended June 30, 1996 (UNAUDITED) *
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.026
Net realized and unrealized gain
on investments 0.460
Total from investment operations 0.486
-----------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from net investment income (0.026)
Distributions from net realized gain 0.000
Total distributions (0.026)
-----------------------------------------------------------------------
NET ASSET VALUE, end of period $ 10.460
- --------------------------------------------------------------------------------
TOTAL RETURN 4.86%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------
Net Assets, end of period (000) $ 5,754
RATIOS TO AVERAGE NET ASSETS (1)
- --------------------------------------------------------------------------------
Expenses 0.95%**
Net investment income 1.00%**
PORTFOLIO TURNOVER RATE: 31.50%
- --------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID (2): $0.0336
- --------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
** Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 1.82%**
Ratio of Net Investment Income to Average Net Assets: 0.13%**
(2) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.
See notes to financial statements
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
Notes to Financial Statements
June 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Small Cap Stock Portfolio (the "Fund") is organized as a
separate sub-trust, is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
investment objective of the Small Cap Stock Portfolio is to provide a high total
return from a portfolio of equity securities of small companies. Total return
will consist of realized and unrealized capital gains and losses plus income.
The Portfolio invests primarily in the common stock of small U.S. companies. The
Trust commenced operations on December 11, 1989. The Fund commenced operations
on April 2, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with J.P. Morgan Investment Management Inc. (the
"Sub-adviser") for investment advisory services in connection with the
management of the Fund. The Adviser supervises the Sub-adviser's performance of
advisory services and will make recommendations to the Board of Trustees with
respect to the retention or renewal of the sub-advisory agreement. The Adviser
pays for the cost pursuant to the sub-advisory agreement and the cost of
compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee of .85 of 1% per annum, based on the average daily net
assets.
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996, paid in surplus aggregated $5,588,427.
Transactions in shares were as follows:
Period Ended
June 30,
1996 *
------------
Beginning Shares 500,000
------------
Shares Sold 190,781
Shares Issued through
Dividend Reinvestment 1,363
Shares Repurchased (142,282)
------------
Net Increase in Shares
Outstanding 49,862
------------
Ending Shares 549,862
------------
* Fund commenced operations on April 2, 1996
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term securities, for the period ended June 30, 1996 were
$7,193,587 and $1,724,009, respectively.
COVA INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
(Percentage of Net Assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SECURITY
DESCRIPTION SHARES MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 81.3%
AUSTRALIA - 3.1%
Broken Hill Proprietary 3,800 $ 52,475
National Australia Bank Ltd. 13,800 127,442
News Corporation Ltd. 2,800 15,867
Western Mining Corp. Holding Ltd. 4,200 30,039
----------------
225,823
----------------
BELGIUM - 2.1%
Delhaize Le PS. 143 7,152
Electrabel 178 38,058
Fortis AG 190 24,957
Generale De Banque SA 60 20,853
Petrofina Sa NPV 90 28,245
Powerfin SA 50 6,855
Solvay Et Cie 'A' NPV 40 24,577
----------------
150,697
----------------
DENMARK - 0.4%
Carlsberg As - B 150 8,836
Den Danske Bank * 130 8,723
Sophus Berendsen 70 9,372
----------------
26,931
----------------
FINLAND - 0.5%
Nokia AB 'A' 400 14,770
Rautaruukki OY 1,100 8,005
Sampo Insurance Co. - 'A' Free 100 5,895
Upm-Kymmeme * 450 9,377
----------------
38,047
----------------
FRANCE - 11.4%
Air Liquide French 220 38,880
AXA Company 12 657
Bic 150 21,318
Bouygues 400 44,638
Canal Plus 100 24,477
Castorama Dubois Investissem 160 31,542
Christian Dior SA 230 29,960
Cie Generale Des Eaux 530 59,249
Compagnie De Saint Goban 150 20,093
Credit Local De France 600 48,877
Elf Sanofi 500 37,503
Essilor International 110 31,181
Groupe Danone 300 45,436
Lagardere Groupe 1,900 49,019
Peugeot SA 125 16,744
Promodes 270 77,900
Schneider SA * 575 30,183
Seita 700 $ 32,118
Sidel 90 22,904
Societe Generale French 390 42,916
Societe National Elf-Aquitaine 400 29,443
Total Cie Francaise Petroles 680 50,476
Union Assurancesfederale SA 350 43,209
----------------
828,723
----------------
GERMANY - 11.9%
Ava Allg Handels Der Verbrau 60 18,354
BASF AG German 440 125,913
Bilfinger and Berger 50 21,117
Deutsche Pfandbrief & Hypobk 2,500 99,007
GEA Preferred Shares 130 42,547
Henkel Kgaa 150 64,831
Hoesch Warrants * 107 10,136
Muenchener Rueckversicherungs 60 123,939
Siemens AG 1,500 80,225
Veba AG 2,230 118,637
Volkswagen AG 430 159,966
----------------
864,672
----------------
HONG KONG - 4.0%
Cheung Kong 15,000 108,032
Hong Kong Telecom 10,400 18,675
HSBC Holdings Plc 5,600 84,643
Swire Pacific Ltd, Class A 9,500 81,307
----------------
292,657
----------------
IRELAND - 0.7%
Bank of Ireland 2,500 17,042
Crh Plc 1,000 10,064
Irish Life Plc * 3,000 11,933
Smurfit (Jefferson) Group 5,000 13,498
----------------
52,537
----------------
ITALY - 2.5%
Assicurazione Generali Itl 1,500 34,776
ENI SPA 5,600 27,964
Fiat SPA 10,600 35,778
Istituto Mobiliare Italiano 4,400 37,001
Telicom Italia SPA 22,100 47,588
----------------
183,107
----------------
JAPAN - 14.4%
Alps Electronics Co. 1,000 12,161
Asahi Bank Ltd. 2,000 23,225
Chugai Pharm Co. 2,000 19,568
Dai-Ichi Kangyo Bank 1,000 18,653
Daiwa Bank * 3,000 20,793
Ebaba Corportation 2,000 $ 32,003
Familymart 300 13,386
Fujitsu Ltd 1,000 9,144
Fukui Bank 5,000 28,848
Heiwa Real Estate 2,000 16,459
Hitachi Ltd * 5,000 46,633
Hitachi Transport System 1,000 10,972
Hokkaido Takushoku Bank 4,000 12,143
Honshu Paper Co. 1,000 7,105
Itoham Foods 2,000 15,270
Izumiya Co. Ltd. 2,000,000 26,882
Japan Airport Terminal 1,000 14,173
Kyodo Printing Co. 2,000 23,591
Marubeni Corp. 2,000 10,972
Matsushita Electric Industry 2,000 37,306
Mitsubishi Heavy 3,000 26,142
Mitsui Mining & Smelting 6,000 24,578
Mitsui Toatsu Chemical 9,000 35,633
Nagoya Railroad Co. 3 4,509
Nippon Steel Corp. * 10,000 34,380
Nippon Telegraph and Telephone Corp. 1 7,425
Nissan Motors * 3,000 26,690
Nomura Securities Co. Ltd. 2,000 39,135
Okumura 2,000 16,751
Ono Pharmaceutical 500 17,236
Ryoyo Electro Corp. 1,000 21,579
Sagami Railway 3,000 13,880
Sakura Bank Ltd. 4,000 44,621
Sanwa Bank 1,000 18,562
Showa Shell Sekiyu K.K. 1,000 10,424
Sony Corp. 400 26,370
Sumitomo Bank 1,000 19,385
Sumitomo Forestry 1,000 14,630
Takashimaya Co. 1,000 15,544
Toho Gas 3,000 10,040
Tohoku Electric Power 500 11,201
Tokio Marine & Fire Insurance 2,000 26,700
Tokyo Electric Power Co. Inc. 1,000 25,419
Toyo Construction 4,000 20,445
Toyo Trust & Banking 3,000 30,997
Toyota Motor Co. * 2,000 50,107
Tsubakimoto Chain 2,000 13,661
UBE Industries Ltd. 7,000 26,690
Yokohyama Rubber Co. Ltd. 2,000 12,563
----------------
1,044,584
----------------
LUXEMBOURG - 0.2%
Arbed * 100 $ 11,457
----------------
MALAYSIA - 1.4%
Commerce Asset Holdings Cv1.75 * 40,000 49,876
Sime Darby Berhad 19,000 52,556
----------------
102,432
----------------
NETHERLANDS - 4.3%
ABN Amro Holdings 350 18,798
Aegon NV 407 18,757
DSM NV 200 19,877
International Nederlanden Group 175 5,223
Koninklijke Hoogovens 500 18,528
Philips Electronics NV 270 8,786
Royal Dutch Petroleum Co. 780 120,556
Royal PTT Nederland NV 500 18,939
Unilever NV 350 50,689
Wolters Kluwer N.V. 276 31,379
----------------
311,532
----------------
NORWAY - 1.3%
Kvaerner B Free 500 19,340
Norsk Hydro 850 41,655
Nycomed ASA 'B' Shares * 400 5,548
Orkla A/S-B-Aksjer 220 10,713
Uni-Storebrand AS - A Shares * 3,200 14,400
----------------
91,656
----------------
SINGAPORE - 1.5%
Singapore Airlines Ltd-Foreign 5,000 52,799
United Overseas Bank 6,000 57,406
----------------
110,205
----------------
SPAIN - 2.6%
Banco Pastor 300 18,754
Banco Popular Espanola 120 21,417
Bankinter - Banco Interc ESP 140 15,676
Fuerzas Electricas Cataluna 3,570 29,151
Hidroelectrica Del Cantabrico 500 17,425
Iberdrola I S.A. 1,780 18,290
Repsol S.A. * 1,000 34,811
Telefonica De Espana 1,715 31,626
----------------
187,150
----------------
SWITZERLAND - 3.9%
Fischer 15 17,344
Nestle 30 34,304
Roche Holding AG 6 45,827
Sandoz AG 72 82,445
Schw Rueckversicherungs 35 $ 35,989
Schweizerische Bankverein 217 42,889
Schweizerischer Bankverein Warrants 40 128
SGS Soc Gen Surveillance-B 9 21,569
----------------
280,495
----------------
UNITED KINGDOM - 15.1%
Abbey National 3,300 27,727
Allied Colloids Group Plc 5,000 10,173
Allied Domecq Plc 3,500 24,570
Amersham International Plc 800 12,959
Barclay's Plc 1,800 21,596
Boc Group 1,000 14,343
Britannic Assce * 1,400 15,634
British Aerospace Plc 1,400 21,232
British Gas Corp. 4,500 12,580
British Petroleum Co. Plc 4,250 37,261
British Telecommunications Plc 5,500 29,470
BTR Limited 6,600 25,985
B.A.T. Industries 3,400 26,456
Cable & Wireless Plc 2,000 13,217
General Electric Plc 3,800 20,450
Glaxo Wellcome Plc 4,950 66,615
Glynwed International Plc 2,300 11,288
Guardian Royal Exchange 7,000 26,962
Guinness Plc 4,000 29,074
Hillsdown Holdings Plc 8,000 21,743
HSBC Holdings Plc 1,700 26,614
Hyder Plc 2,000 22,163
Kingfisher Plc 2,100 21,086
Ladbroke Group 5,000 13,861
Lloyds Tsb Group Plc 5,800 28,375
Lucas Industries Plc * 3,000 10,553
Marks & Spencer Plc 2,450 17,903
Mb-Caradon Plc 4,800 16,065
MEPC 3,000 18,917
National Grid Holdings 5,500 14,564
National Power Plc 2,950 23,825
National Westminster 2,550 24,376
Pearson Plc 1,500 15,469
Peninsular & Orient Steam 900 6,786
Racal Electronics 2,000 9,474
Rank Organization 3,050 23,969
Reuters Holdings Plc 2,300 27,827
Rolls Royce Plc 4,200 14,612
RTZ Corp. 1,800 26,642
Sainsbury (J) Plc 4,000 $ 23,545
Sears Plc 9,000 13,838
Shell Transport & Trading 2,100 30,756
Smithkline Beecham Plc 2,851 30,481
Standard Chartered Plc 900 8,960
Tarmac Plc 10,400 17,929
Tesco Plc * 5,200 23,744
Thorn Emi Plc * 900 25,076
Tomkins Plc 5,000 18,715
Unilever Limited 1,400 27,832
Vodafone Group Plc 7,400 27,526
Zeneca Group Plc 650 14,370
----------------
1,095,188
----------------
TOTAL Common and Preferred Stocks (Cost $5,710,279) 5,897,893
----------------
TOTAL INVESTMENTS - 81.3%
(Cost $5,710,279) 5,897,893
Other Assets and Liabilities (net) - 18.7% 1,354,067
----------------
TOTAL NET ASSETS - 100.0% $ 7,251,960
================
Portfolio Footnotes:
* Non-income producing security as this stock currently does not declare dividends.
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $5,710,279) $ 5,897,893
Cash 898,141
Cash denominated in foreign currencies (cost, $96,235) 97,697
Receivable for investments sold 581,209
Receivable for Trust shares sold 91,126
Dividends receivable 48,202
Interest receivable 3,104
Net open forward currency contracts 4,741
Receivable from Investment Adviser (Note 2) 19,334
- -------------------------------------------------------------------------------------------------------------------------------
Total assets 7,641,447
LIABILITIES
Payable for securities purchased $ 387,938
Accrued expenses 1,549
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 389,487
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 7,251,960
- -------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 7,056,120
Accumulated net realized loss (20,609)
Unrealized appreciation of investments (computed on the basis of identified cost) 193,046
Undistributed net investment income 23,403
- -------------------------------------------------------------------------------------------------------------------------------
Total $ 7,251,960
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($7,251,960 / 702,142 shares of capital stock outstanding) (Note 3) $10.33
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period Ended June 30, 1996 (UNAUDITED) *
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign withholding tax of $14,134) $ 86,332
Interest 11,595
Amortization (23,333)
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 74,594
Expenses:
Investment Advisory Fee (Note 2) 11,866
Custody 20,722
Audit 350
Shareholder Reporting 96
Trustee Fees and Expenses (Note 2) 2,909
Legal 32
Miscellaneous 1,078
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 37,053
Less expenses reimbursed by Cova Life and/or the Adviser 23,792
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 13,261
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 61,333
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Realized gain from security transactions
Proceeds from sales $ 1,795,020
Cost of securities sold (1,792,465)
-------------------
Net realized gain from security transactions 2,555
Realized loss from foreign currency related transactions (23,164)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized loss (20,609)
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments, forward currency contracts
and other net assets
Beginning of period $ 0
End of period 193,046
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 193,046
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 172,437
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 233,770
- -----------------------------------------------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended June 30, 1996 (UNAUDITED)*
INCREASE (DECREASE) IN NET ASSETS:
<S> <C>
Operations:
Net investment income $ 61,333
Realized loss from investments and foreign currency transactions (20,609)
Net unrealized appreciation
on investments, forward currency contracts,
foreign currency and other assets. 193,046
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 233,770
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (37,930)
Net realized gain from security transactions 0
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (37,930)
- ---------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 3,208,532
Net asset value of shares issued through
dividend reinvestment 37,930
Cost of shares repurchased (1,190,342)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 2,056,120
- ---------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,251,960
NET ASSETS:
Beginning of the period 5,000,000
- ---------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $23,403) $ 7,251,960
- ---------------------------------------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
</TABLE>
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
<S> <C>
For the Period Ended June 30, 1996 (UNAUDITED)*
Per Share Operating Performance:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000
- ------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.089
Net realized and unrealized gain
on investments 0.300
Total from investment operations 0.389
---------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income (0.055)
Distributions from net realized gain 0.000
Total distributions (0.055)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.334
- ------------------------------------------------------------------------------------------------
TOTAL RETURN 3.85%
- ------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------
Net Assets, end of period (000) $ 7,252
RATIOS TO AVERAGE NET ASSETS (1)
- ------------------------------------------------------------------------------------------------
Expenses 0.95%**
Net investment income 4.40%**
PORTFOLIO TURNOVER RATE: 33.07%
- ------------------------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID (2): $0.0063
- ------------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
** Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 2.66%**
Ratio of Net Investment Income to Average Net Assets: 2.69%**
(2) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of shares
purchased and sold during the period for which commissions were charged.
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the International Equity Portfolio (the "Fund") is organized as a
separate sub-trust, is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
investment objective of the International Equity Portfolio is to provide a high
total return from a portfolio of equity securities of foreign corporations.
Total return will consist of realized and unrealized capital gains and losses
plus income. The Trust commenced operations on December 11, 1989. The Fund
commenced operations on April 2, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
F. FORWARD FOREIGN CURRENCY CONTRACTS - The International Equity Portfolio may
enter into forward foreign currency contracts to hedge future movements in
certain foreign currency exchange rates. A forward currency contract is a
commitment to purchase or sell a foreign currency at a future date at a set
price. The forward currency contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded by the Fund as a
unrealized gain or loss. 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. Risks arise
from the possible inability of counterparties to meet the terms of their
contracts and from movements in currency values and interest rates.
G. CURRENCY TRANSLATION - Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the rate of exchange at the end
of the period. Purchases and sales of securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income is
translated at rates of exchange prevailing when accrued.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with J.P. Morgan Investment Management Inc. (the
"Sub-adviser") for investment advisory services in connection with the
management of the Fund. The Adviser supervises the Sub-adviser's performance of
advisory services and will make recommendations to the Board of Trustees with
respect to the retention or renewal of the sub-advisory agreement. The Adviser
pays for the cost pursuant to the sub-advisory agreement and the cost of
compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based on the average daily net assets as follows:
Average Daily Net Assets % Per Annum
First $50 million .85 of 1%
Over $50 million .75 of 1%
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996 paid in surplus aggregated $7,056,120.
Transactions in shares were as follows:
Period Ended
June 30,
1996 *
------
Beginning Shares 500,000
-------
Shares Sold 313,795
Shares Issued through
Dividend Reinvestment 3,673
Shares Repurchased (115,326)
--------
Net Increase in Shares
Outstanding 202,142
-------
Ending Shares 702,142
-------
* Fund commenced operations on April 2, 1996.
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term securities, for the period ended June 30, 1996 were
$7,526,077 and $1,795,020, respectively.
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
5. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Portfolio had entered into forward foreign currency
contracts for hedging purposes. A forward foreign currency contract
contractually obligates the Fund to deliver currencies at specified future
dates. The following contracts were open at June 30, 1996.
<TABLE>
<CAPTION>
Foreign Unrealized
Contract Settlement Appreciation/
Value Date Value (Depreciation)
----- ---- ----- --------------
<S> <C> <C> <C> <C>
Purchases
Japanese Yen $ 25,000 7/11/96 $ 24,515 $ (485)
Sales
Belgian Franc $ 56,667 7/11/96 $ $ (427)
57,094
Japanese Yen $ 242,081 7/11/96 $ 236,428 $ 5,653
---------- --------
$ 293,522 $ 5,226
========== ========
</TABLE>
COVA QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
(PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PAR SECURITY
AMOUNT DESCRIPTION COUPON MATURITY MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC BONDS AND DEBT SECURITIES - 92.6%
BONDS - 9.9%
150,000 Caterpillar Cmt 6.300 05/25/02 $ 149,523
100,000 Cmccm 1996 - 3 A 7.040 02/15/04 101,553
100,000 Columbia Gas System 7.620 11/28/25 94,015
100,000 Midland Bank Plc 7.625 06/15/06 101,213
100,000 Trans Financial Bank N.A 6.320 10/17/97 99,538
----------------------
545,842
----------------------
MEDIUM TERM SECURITIES - 3.7%
200,000 Ford Motor Credit Mtn 7.470 07/29/99 204,386
----------------------
MORTGAGED BACK SECURITIES - 40.6%
150,000 Fed Home Loan Mortgage Corp 6.500 09/15/23 143,212
149,663 Federal National Mortgage Assn 6.500 11/25/07 144,473
142,763 Federal National Mortgage Assn 9.000 04/01/26 149,008
203,291 Federal National Mortgage Assn 6.500 02/01/26 190,393
151,116 Federal National Mortgage Assn 6.000 02/01/26 137,420
151,499 Federal National Mortgage Assn 7.500 09/01/25 149,746
260,000 Federal Home Loan Mortgage Corp Gold Cmtmt 8.000 08/01/26 261,706
100,000 First Omni Bank 96-A Cla 6.650 09/15/03 99,976
270,000 Federal Home Loan Mortgage Assn Cmtmt 7.500 07/01/26 266,456
201,681 Government National Mortgage Assn 7.000 04/15/26 193,675
504,313 Government National Mortgage Assn 7.500 03/15/26 497,532
----------------------
2,233,597
----------------------
ASSET BACKED SECURITIES - 6.8%
175,000 Premier Auto Trust 6.150 03/06/00 173,535
100,000 Sears Credit Account Master Trust 6.500 10/15/03 100,327
100,000 World Omni Auto Lease Sec 6.300 06/25/02 99,625
----------------------
373,487
----------------------
U.S. TREASURY SECURITIES - 31.6%
75,000 U.S. Treasury Bond 8.125 08/15/19 84,170
300,000 U.S. Treasury Note 5.750 10/31/97 299,250
885,000 U.S. Treasury Note 6.250 02/15/03 869,235
140,000 U.S. Treasury Note 5.750 08/15/03 133,354
150,000 U.S. Treasury Note 6.500 05/15/05 147,938
75,000 U.S. Treasury Note 6.250 05/31/00 74,531
110,000 U.S. Treasury Note 8.500 02/15/20 128,253
----------------------
1,736,731
----------------------
TOTAL Domestic Bonds and Debt Securities (Cost $5,124,463) 5,094,043
----------------------
FOREIGN BONDS AND DEBT SECURITIES - 3.3%
CANADA - 2.5%
150,000 Quebec Province 7.125 02/09/24 137,680
----------------------
ITALY - 0.8%
50,000 Italy Global Bond 6.875 09/27/23 45,188
----------------------
TOTAL Foreign Bonds and Debt Securities (Cost $185,162) 182,868
----------------------
TOTAL INVESTMENTS - 95.9%
(Cost $5,309,625) 5,276,911
Other Assets and Liabilities (net) - 4.1% 225,330
----------------------
TOTAL NET ASSETS - 100.0% $ 5,502,241
======================
</TABLE>
COVA QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The following table summarizes the portfolio composition at June 30,
1996, based upon quality ratings issued by Standard & Poor's. For
securities not rated by Standard & Poor's, the Moody rating is used.
PORTFOLIO COMPOSITION BY CREDIT QUALITY
--------------------------------------------------------------------
U.S. Gov't and Agency Obligations 73.3 %
AAA 2.8
AA 0.9
A 8.4
BBB 3.7
NR 10.9
---------
100.0 %
---------
See notes to financial statements
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $5,309,625) $ 5,276,911
Cash 682,377
Receivable for investments sold 260,508
Receivable for Trust shares sold 5,912
Interest receivable 56,785
Receivable from Investment Adviser (Note2) 6,774
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 6,289,267
Liabilities
Payable for securities purchased $ 785,544
Accrued expenses 1,482
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 787,026
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 5,502,241
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets:
Paid in Surplus (Note 3) $ 5,566,285
Accumulated net realized loss (32,527)
Unrealized depreciation of investments (computed on the basis of identified cost) (32,831)
Undistributed net investment income 1,314
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 5,502,241
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value and Redemption Price Per Share
($5,502,241 / 557,273 shares of capital stock outstanding) (Note 3) $9.87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
STATEMENT OF OPERATIONS
For the Period Ended June 30, 1996 (UNAUDITED) *
INVESTMENT INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
Interest $ 77,399
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 77,399
Expenses:
Investment Advisory Fee (Note 2) 6,696
Custody 5,782
Audit 347
Shareholder Reporting 95
Trustee Fees and Expenses (Note 2) 2,909
Legal 31
Miscellaneous 1,017
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 16,877
Less expenses reimbursed by Cova Life and/or the Adviser 8,963
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 7,914
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 69,485
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized loss from security transactions
Proceeds from sales $ 3,385,729
Cost of securities sold (3,418,256)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized loss (32,527)
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation of investments
Beginning of period $ 0
End of period (32,831)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (32,831)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (65,358)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,127
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fund commenced operations on April 2, 1996
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended June 30, 1996 (UNAUDITED) *
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 69,485
Realized loss from security transactions (32,527)
Net unrealized depreciation on investments
during the period (32,831)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,127
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (68,171)
Net realized gain from security transactions 0
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (68,171)
- -----------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 532,308
Net asset value of shares issued through
dividend reinvestment 68,171
Cost of shares repurchased (34,194)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 566,285
- -----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 502,241
Net Assets:
Beginning of the period 5,000,000
- -----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $1,314) $ 5,502,241
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fund commenced operations on April 2, 1996
See Notes to Financial Statements
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
For the Period Ended June 30, 1996 (UNAUDITED) *
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.126
Net realized and unrealized loss
on investments (0.130)
Total from investment operations (0.004)
---------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from net investment income (0.124)
Distributions from net realized gain 0.000
Total distributions (0.124)
---------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.872
- ------------------------------------------------------------------------------
TOTAL RETURN (0.06%)
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------
Net Assets, end of period (000) $ 5,502
RATIOS TO AVERAGE NET ASSETS (1)
- ------------------------------------------------------------------------------
Expenses 0.65%**
Net investment income 5.70%**
PORTFOLIO TURNOVER RATE: 67.58%
- ------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
** Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 1.39%**
Ratio of Net Investment Income to Average Net Assets: 4.96%**
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Quality Bond Portfolio (the "Fund") is organized as a separate
sub-trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The investment objective
of the Quality Bond Portfolio is to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity. Total return will consist
of income plus realized and unrealized capital gains and losses. The Trust
commenced operations on December 11, 1989. The Fund commenced operations on
April 2, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with J.P. Morgan Investment Management Inc. (the
"Sub-adviser") for investment advisory services in connection with the
management of the Fund. The Adviser supervises the Sub-adviser's performance of
advisory services and will make recommendations to the Board of Trustees with
respect to the retention or renewal of the sub-advisory agreement. The Adviser
pays for the cost pursuant to the sub-advisory agreement and the cost of
compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based on the average daily net assets as follows:
Average Daily Net Assets % Per Annum
------------------------- -----------
First $75 million .55 of 1%
Over $75 million .50 of 1%
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996, paid in surplus aggregated $5,566,285.
Transactions in shares were as follows:
Period Ended
June 30,
1996 *
-------------
Beginning Shares 500,000
-------------
Shares Sold 53,813
Shares Issued through
Dividend Reinvestment 6,904
Shares Repurchased (3,444)
-------------
Net Increase in Shares
Outstanding 57,273
-------------
Ending Shares 557,273
-------------
* Fund commenced operations on April 2, 1996
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term securities, for the period ended June 30, 1996 were
$8,739,060 and $3,385,729, respectively.
COVA BOND DEBENTURE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
(PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PAR/SHARE SECURITY
AMOUNT DESCRIPTION COUPON MATURITY MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
COMMON AND PREFERRED STOCKS - 4.4%
BANKING - 1.7%
500 First Chicago NBD Corporation (Conv. Pfd) $ 33,313
-----------------
INDUSTRIAL - DIVERSIFIED - 1.8%
600 Corning Delaware (Conv. Pfd) 34,275
-----------------
MEDIA - BROADCASTING & PUBLISHING - 0.9%
1,000 Westinghouse Electric (Conv. Pfd) (144A) 17,875
-----------------
TOTAL COMMON AND PREFERRED STOCKS (COST $85,223) 85,463
-----------------
DOMESTIC BONDS AND DEBT SECURITIES - 57.5%
AEROSPACE & DEFENSE - 4.2%
20,000 Be Aerospace 9.875% 02/01/06 19,775
60,000 UNC Inc. (144A) 11.000% 06/01/06 61,050
-----------------
80,825
-----------------
BUILDING MATERIALS - 1.0%
20,000 Essex Group 10.000% 05/01/03 19,950
-----------------
CHEMICALS - 5.1%
50,000 Acetex Corp 9.750% 10/01/03 49,500
50,000 Texas Petrochemical 11.125% 07/01/06 50,000
-----------------
99,500
-----------------
COMMUNICATIONS - 6.1%
50,000 Comcast Cellular 0.000% 03/05/00 34,500
20,000 Metrocall Inc. 10.375% 10/01/07 18,800
75,000 MFS Communications Corp. 0.000% 01/15/06 45,563
20,000 Vanguard Cellular System 9.375% 04/15/06 19,500
-----------------
-----------------
118,363
-----------------
COMPUTER SOFTWARE & PROCESSING - 1.3%
50,000 Automatic Data Processing Inc. (Conv.) 0.000% 02/20/12 25,000
-----------------
ELECTRICAL EQUIPMENT - 1.5%
30,000 Broadband Technology (Conv.) (144A) 5.000% 05/15/01 29,541
-----------------
ELECTRONICS - 1.1%
20,000 Exide Electronics Group 11.500% 03/15/06 21,300
-----------------
ENTERTAINMENT & LEISURE - 6.0%
20,000 Aztar Corp. 11.000% 10/01/02 20,850
50,000 Majestic Star (144A) 12.750% 05/15/03 54,250
20,000 Showboat Marina Casino 13.500% 03/15/03 21,600
20,000 Trump Atlantic City 11.250% 05/01/06 20,200
-----------------
116,900
-----------------
FOREST PRODUCTS & PAPER - 7.3%
50,000 Four M Corp.(144A) 12.000% 06/01/06 51,625
40,000 Owens-Illinois, Inc. 10.000% 08/01/02 41,000
20,000 Repap Wisconsin 9.875% 05/01/06 17,850
10,000 SD Warren Company 12.000% 12/15/04 10,650
20,000 Sweetheart Cup 10.500% 09/01/03 19,900
-----------------
141,025
-----------------
HEALTH CARE PROVIDERS - 4.5%
50,000 Genesis Health 9.750% 06/15/05 $ 50,872
20,000 Healthsource Inc. (Conv.) 5.000% 03/01/03 15,850
20,000 Integrated Health Services (Conv.) 6.000% 01/01/03 19,400
-----------------
86,122
-----------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 1.0%
20,000 Interface Inc. 9.500% 11/15/05 19,050
-----------------
MEDIA - BROADCASTING & PUBLISHING - 6.0%
20,000 Cablevision Systems 9.250% 11/01/05 18,700
25,000 Grupo Televisa (144A) 11.875% 05/15/06 25,563
25,000 Scholastic Corp. (Conv.) (144A) 5.000% 08/15/05 26,289
50,000 Viacom International 8.000% 07/07/06 46,250
-----------------
116,802
-----------------
MEDICAL SUPPLIES - 2.2%
100,000 Roche Holdings, Inc. (Conv.) (144A) 0.000% 04/20/10 42,500
-----------------
METALS - 1.9%
35,000 Oregon Steel Mills 11.000% 06/15/03 36,138
-----------------
MISCELLANEOUS - 1.1%
20,000 Alvey Systems 11.375% 01/31/03 20,500
-----------------
OIL & GAS - 7.2%
25,000 Crown Cent Petro 10.875% 02/01/05 25,313
70,000 Mesa Operating Co. 10.625% 07/01/06 70,000
20,000 Pennzoil Co. Exchange: Chevron (Conv.) 4.750% 10/01/03 21,500
20,000 Pogo Producing Co. (Conv.) (144A) 5.500% 06/15/06 21,653
-----------------
138,466
-----------------
TOTAL Domestic Bonds and Debt Securities (Cost $1,116,455) 1,111,982
-----------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 13.1%
100,000 Federal National Mortgage Assn. 8.500% 02/01/05 104,632
150,000 U.S. Treasury Bond 6.500% 08/15/05 147,797
-----------------
252,429
-----------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (COST $252,331) 252,429
-----------------
TOTAL INVESTMENTS - 75.0%
(COST $1,454,009) 1,449,874
OTHER ASSETS AND LIABILITIES (NET) - 25.0% 484,222
-----------------
TOTAL NET ASSETS - 100.0% $ 1,934,096
=================
</TABLE>
COVA BOND DEBENTURE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
The following table summarizes the portfolio composition at June 30,
1996, based upon quality ratings issued by Standard & Poor's. For
securities not rated by Standard & Poor's, the Moody rating is used.
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION BY CREDIT QUALITY
-----------------------------------------------------------------------------------------------------------
<S> <C>
U.S. Gov't and Agency Obligations 17.4%
AA 1.7
A 2.4
BBB 5.6
BB 16.4
B 46.3
NR 10.2
---------
100.0%
---------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $1,454,009) $ 1,449,874
Cash 681,726
Receivable for Trust shares sold 13,252
Dividends receivable 100
Interest receivable 24,984
Receivable from Investment Adviser (Note 2) 3,289
- --------------------------------------------------------------------------------------------------------------------------------
Total assets 2,173,225
LIABILITIES
Payable for securities purchased $ 238,939
Accrued expenses 190
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 239,129
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,934,096
- --------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 1,915,848
Accumulated net realized gain 21,975
Unrealized depreciation of investments (computed on the basis of identified cost) (4,135)
Undistributed net investment income 408
- --------------------------------------------------------------------------------------------------------------------------------
Total $ 1,934,096
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($1,934,096 / 189,259 shares of capital stock outstanding) (Note 3) $10.22
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period Ended June 30, 1996 (UNAUDITED) *
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 649
Interest 17,037
- --------------------------------------------------------------------------------------------------------------------------
Total Investment Income $ 17,686
Expenses:
Investment Advisory Fee (Note 2) 1,590
Custody 1,130
Audit 35
Shareholder Reporting 10
Trustee Fees and Expenses (Note 2) 2,909
Legal 3
Miscellaneous 149
- --------------------------------------------------------------------------------------------------------------------------
Total expenses 5,826
Less expenses reimbursed by Cova Life and/or the Adviser 4,023
- --------------------------------------------------------------------------------------------------------------------------
Net expenses 1,803
- --------------------------------------------------------------------------------------------------------------------------
Net investment income $ 15,883
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Realized gain from security transactions
Proceeds from sales $ 580,574
Cost of securities sold (558,599)
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain 21,975
- --------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation of investments
Beginning of period $ 0
End of period (4,135)
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (4,135)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 17,840
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 33,723
- --------------------------------------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
</TABLE>
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended June 30, 1996 (UNAUDITED)*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 15,883
Realized gain from security transactions 21,975
Net unrealized depreciation on investments
during the period (4,135)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 33,723
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (15,475)
Net realized gain from security transactions 0
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (15,475)
- -----------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 1,876,041
Net asset value of shares issued through
dividend reinvestment 15,475
Cost of shares repurchased (475,668)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 1,415,848
- -----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,434,096
NET ASSETS:
Beginning of the period 500,000
- -----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income
of $408) $ 1,934,096
- -----------------------------------------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For the Period Ended June 30, 1996 (UNAUDITED) *
<S> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000
- -------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.085
Net realized and unrealized gain
on investments 0.220
Total from investment operations 0.305
----------------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from net investment income (0.083)
Distributions from net realized gain 0.000
Total distributions (0.083)
----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.222
- -------------------------------------------------------------------------------------
TOTAL RETURN 3.03%
- -------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000) $ 1,934
RATIOS TO AVERAGE NET ASSETS (1)
- -------------------------------------------------------------------------------------
Expenses 0.85%**
Net investment income 7.50%**
PORTFOLIO TURNOVER RATE: 67.49%
- -------------------------------------------------------------------------------------
* Fund commenced operations on April 2, 1996
** Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 2.75%**
Ratio of Net Investment Income to Average Net Assets: 5.60%**
</TABLE>
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Bond Debenture Portfolio (the "Fund") is organized as a separate
sub-trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The investment objective
of the Bond Debenture Portfolio is to produce a high total return through a
professionally-managed portfolio consisting primarily of convertible and
discount debt securities. The Trust commenced operations on December 11, 1989.
The Fund commenced operations on April 2, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with Lord Abbett & Co. (the "Sub-adviser") for investment
advisory services in connection with the management of the Fund. The Adviser
supervises the Sub-adviser's performance of advisory services and will make
recommendations to the Board of Trustees with respect to the retention or
renewal of the sub-advisory agreement. The Adviser pays for the cost pursuant to
the sub-advisory agreement and the cost of compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee of .75 of 1% per annum, based on the average daily net
assets.
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996, paid in surplus aggregated $1,915,848
Transactions in shares were as follows:
Period Ended
June 30,
1996 *
------
Beginning Shares 50,000
------
Shares Sold 184,525
Shares Issued through
Dividend Reinvestment 1,514
Shares Repurchased (46,780)
-------
Net Increase in Shares
Outstanding 139,259
-------
Ending Shares 189,259
-------
* Fund commenced operations on April 2, 1996
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term notes, for the period ended June 30, 1996 were $2,010,711
and $580,574, respectively.
COVA STOCK INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
(PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SECURITY
DESCRIPTION SHARES MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 96.7%
ADVERTISING - 0.1%
Interpublic Group Inc. 1,400 $ 65,625
---------------------
AEROSPACE & DEFENSE - 2.6%
Allied Signal Inc. 4,800 274,200
Boeing Company 5,800 505,325
General Dynamics 1,400 86,800
Lockheed Martin Corporation 3,200 268,800
McDonnell Douglas Corp. 3,800 184,300
Northrop Grumman Corp. 1,100 74,938
Raytheon Co. 4,400 227,150
Rockwell International 4,000 229,000
United Technologies 2,300 264,500
---------------------
2,115,013
---------------------
AIRLINES - 0.4%
AMR Corp. - Del * 1,600 145,600
Delta Air Lines, Inc. 1,100 91,300
Southwest Airlines Inc. 2,900 84,463
---------------------
321,363
---------------------
AUTOMOTIVE - 2.7%
Chrysler Corporation 6,000 372,000
Dana Corp. 2,000 62,000
Eaton Corp. 1,500 87,938
Ford Motor Co. 17,800 576,275
General Motors Corporation 12,700 665,163
Genuine Parts 3,300 150,975
Goodyear Tire & Rubber Co. 3,200 154,400
TRW Inc. 1,500 134,813
---------------------
2,203,564
---------------------
BANKING - 6.7%
Banc One Corp. 7,310 248,540
Bank of Boston Corporation 1,800 89,100
Bank of New York 3,500 179,375
Bankamerica Corp. 6,400 484,800
Bankers Trust New York Corp. 1,300 96,038
Barnett Banks,Inc. 2,000 122,000
Beneficial Corp. 1,000 56,125
Boatmens Bancshares Inc. 2,400 96,300
Chase Manhattan Corporation 7,532 531,948
Citicorp 6,400 528,800
Corestates Financial Corp. 2,600 100,100
First Chicago NBD Corporation 5,253 205,524
First Union Corp.(N.E.) 4,925 299,809
Fleet Financial Group, Inc. 4,862 $ 211,497
Golden West Financial Corp. 1,100 61,600
Great Western Financial 2,000 47,750
H. F. Ahmanson & Company 1,500 40,500
J P Morgan & Co. Inc. 3,000 253,875
Key Corp. 4,300 166,625
MBNA Corp. 3,750 106,875
Mellon Bank Corp. 2,300 131,100
National City Corp. 3,000 105,375
Nationsbank Corporation 3,900 322,238
Norwest Corporation 5,600 195,300
PNC Bank Corp. * 4,000 119,000
Suntrust Banks Inc. 4,600 170,200
Wachovia Corp. 3,000 131,250
Wells Fargo & Co. 1,600 382,200
---------------------
5,483,844
---------------------
BEVERAGES, FOOD & TOBACCO - 8.8%
American Brands Inc. 3,000 136,125
Anheuser Busch. 3,900 292,500
Archer Daniels Midland 9,100 174,038
Campbell Soup Co. 4,500 317,250
Coca-Cola Co. 41,600 2,033,200
Conagra Inc. 4,300 195,113
CPC International Inc. 2,400 172,800
General Mills Co. 2,700 147,150
Heinz H.J. Co. 5,450 165,544
Hershey Foods Corp. 1,700 124,738
Kellogg Co. 3,000 219,750
Pepsico, Inc. 26,000 919,750
Philip Morris Companies, Inc. 13,200 1,372,800
Pioneer Hi-Bred International 1,300 68,738
Quaker Oats Co. 2,600 88,725
Ralston Purina Group. 1,800 115,425
Sara Lee Corp. 6,600 213,675
Seagrams Co. Ltd. 5,900 198,388
Sysco Corp. 3,300 113,025
UST, Inc. 3,500 119,875
Wrigley William Jr Company 2,000 101,000
---------------------
7,289,609
---------------------
BUILDING MATERIALS - 0.1%
Sherwin Williams Co. 1,700 79,050
---------------------
CHEMICALS - 3.3%
Air Products & Chemicals 2,000 $ 115,500
Dow Chemical Company 4,500 342,000
Du Pont (E.I.) De Nemours 9,000 712,125
Eastman Chemical Company 1,700 103,488
FMC Corp. * 1,100 71,775
Grace W.R. & Co. 1,800 127,575
Great Lakes Chemical Corp. 1,400 87,150
Hercules Inc. 2,000 110,500
International Flavors & Fragrances 2,000 95,250
Monsanto Co. 10,500 341,250
Morton International, Inc. 2,700 100,575
Nalco Chemical 1,500 47,250
PPG Industries 3,500 170,625
Praxair, Inc. 2,800 118,300
Rohm & Haas Company 1,200 75,300
Union Carbide Corp. 2,400 95,400
---------------------
2,714,063
---------------------
COMMERCIAL SERVICES - 0.3%
CUC International Inc. * 3,300 117,150
Service Corp.International 2,000 115,000
---------------------
232,150
---------------------
COMMUNICATIONS - 1.7%
Airtouch Communications Inc. * 8,800 248,600
Alltel Corp. 3,700 113,775
DSC Communications * 2,300 69,288
ITT Corp. * 1,900 125,875
Loral Space & Communications * 3,200 43,600
MCI Communications Corporation 11,500 294,688
SBC Communications, Inc. 9,600 472,800
---------------------
1,368,626
---------------------
COMPUTER SOFTWARE & PROCESSING - 3.9%
Automatic Data Processing Inc. 5,700 220,163
Cisco Systems, Inc. * 9,700 549,224
Computer Associates International Inc. 4,100 292,125
Computer Sciences Corp. * 1,200 89,700
First Data Corporation 4,000 318,500
Microsoft Corporation * 9,800 1,177,225
Novell Inc. * 6,500 90,188
Oracle Corp. * 11,700 461,419
---------------------
3,198,544
---------------------
COMPUTERS & INFORMATION - 1.9%
Apple Computer Inc. 2,200 46,200
Compaq Computer * 4,500 221,625
Digital Equipment Corporation * 2,600 $ 117,000
International Business Machines 8,900 881,100
Silicon Graphics * 2,900 69,600
Sun Microsystems, Inc. * 3,300 194,288
---------------------
1,529,813
---------------------
CONGLOMERATES - 0.2%
Textron Inc. 1,700 135,788
---------------------
CONTAINERS & PACKAGING - 0.3%
Avery-Dennison Corp. 1,300 71,338
Crown Cork & Seal Inc. 1,800 81,000
Temple Inland Inc. 1,200 56,100
---------------------
208,438
---------------------
COSMETICS & PERSONAL CARE - 0.7%
Avon Products Inc. 2,600 117,325
Gillette Co. 7,100 442,863
---------------------
560,188
---------------------
ELECTRIC UTILITIES - 3.2%
Allegheny Power System Inc. 3,200 136,400
Baltimore Gas and Electric 3,100 87,963
Carolina Power & Light Co. 2,500 95,000
Central & South West Corp. 3,600 104,400
Cinergy Corp. 1,900 60,800
Consolidated Edison of N.Y. 3,900 114,075
Dominion Resources Inc. 3,100 124,000
DTE Energy Company 1,900 58,663
Duke Power Company 3,500 179,375
Edison International 6,900 121,613
Entergy Corporation 3,100 87,963
FPL Group,Inc. 3,600 165,600
General Public Utilities 2,300 81,075
Houston Industries Inc. 5,000 123,125
Northern States Power Co. 800 39,500
Ohio Edison Company 3,400 74,375
Pacific Gas & Electric 6,400 148,800
Pacificorp 4,000 89,000
Peco Energy Company 3,800 98,800
Public Service Ent Group Inc. 4,400 120,450
Southern Company 10,900 268,413
Texas Utilities Company 3,100 132,525
Unicom Corporation 2,700 75,263
Union Electric Co. 1,900 76,475
---------------------
2,663,653
---------------------
ELECTRICAL EQUIPMENT - 4.2%
Amp Inc. 4,400 $ 176,550
Applied Materials, Inc. * 3,400 103,700
Emerson Electric 4,400 397,650
General Electric Company 27,300 2,361,450
Grainger WW Inc. 1,000 77,500
Northern Telecom Ltd. 4,400 239,250
Westinghouse Electric 7,200 135,000
---------------------
3,491,100
---------------------
ELECTRONICS - 2.7%
Advanced Micro Devices * 1,900 25,888
Honeywell Inc. 2,600 141,700
Intel Corporation. 14,100 1,035,469
Johnson Controls 1,100 76,450
Micron Technology, Inc. 3,800 98,325
Motorola, Inc. 10,000 628,750
National Semiconductor Corp. * 2,500 38,750
Texas Instruments 3,700 184,538
---------------------
2,229,870
---------------------
ENTERTAINMENT & LEISURE - 1.5%
Brunswick Corp. Inc. 1,900 38,000
Hasbro Inc. 1,900 67,925
Mattel 5,750 164,594
Time Warner Inc. 7,200 282,600
Walt Disney Company 11,043 694,329
---------------------
1,247,448
---------------------
ENVIRONMENTAL CONTROLS - 0.5%
Browning-Ferris Industries Inc. 4,200 121,800
WMX Technologies Inc. 8,400 275,100
---------------------
396,900
---------------------
FINANCIAL SERVICES - 2.3%
American Express Co. 8,300 370,388
Block, H,& R. Inc. 2,100 68,513
Dean Witter Discover & Co. 3,100 177,475
Federal Home Loan Mortgage Corp. 3,100 265,050
Federal National Mortgage Assn. 18,500 619,750
Household International Inc. 1,900 144,400
Merrill Lynch & Company 3,100 201,888
Salomon Inc. 1,800 79,200
---------------------
1,926,664
---------------------
FOOD RETAILERS - 0.6%
Albertson's Inc. 4,700 194,463
American Stores Co. 2,500 103,125
Kroger Co. * 2,500 98,750
Winn Dixie 2,100 $ 74,288
---------------------
470,626
---------------------
FOREST PRODUCTS & PAPER - 0.9%
Champion International 2,000 83,500
Georgia-Pacific Corp. 1,700 120,700
International Paper Co. 4,700 173,313
Louisiana Pacific Corp. 2,000 44,250
Mead Corp. 1,000 51,875
Union Camp Corp. 1,400 68,250
Westvaco Corp. 2,200 65,725
Weyerhauser Co. 4,000 170,000
---------------------
777,613
---------------------
HEALTH CARE PROVIDERS - 1.3%
Columbia/HCA Healthcare Corp. 7,700 410,988
Medtronic, Inc. 4,200 235,200
Tenet Healthcare Corporation * 3,700 79,088
United Healthcare Corp. * 3,100 156,550
U.S. Healthcare, Inc. 2,700 148,500
---------------------
1,030,326
---------------------
HEAVY CONSTRUCTION - 0.2%
Fluor Corp. 1,400 91,525
Masco Corp. 2,900 87,725
---------------------
179,250
---------------------
HEAVY MACHINERY - 0.9%
Caterpiller Tractor Inc. 3,500 237,125
Cooper Industries Inc. 2,200 91,300
Deere & Co. 4,800 192,000
Ingersoll Rand Co. 2,200 96,250
Pall Corp. 2,200 53,075
Parker-Hannifin Corp. 1,500 63,563
---------------------
733,313
---------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 0.1%
Whirlpool Corp. 1,600 79,400
---------------------
HOUSEHOLD PRODUCTS - 1.9%
Black & Decker Corp. 1,500 57,938
Clorox Co.-Del. 1,100 97,488
Colgate-Palmolive Co. 2,200 186,450
Newell Co. 2,800 85,750
Premark International Inc. 1,100 20,350
Procter & Gamble Co. 10,800 978,750
Rubbermaid Inc. 2,700 73,575
Tupperware Corporation * 1,100 46,475
---------------------
1,546,776
---------------------
INDUSTRIAL - DIVERSIFIED - 1.5%
Corning Inc. 4,300 $ 165,013
Dover Corp. 2,400 110,700
Eastman Kodak Company 5,600 435,400
Illinois Tool Works Inc. 2,400 162,300
ITT Industries Inc. 2,100 52,763
Tenneco Inc. 3,400 173,825
Tyco Lab 2,900 118,175
---------------------
1,218,176
---------------------
INSURANCE - 3.8%
Aetna Life & Casualty 1,900 135,850
Allstate Corp. 7,500 342,188
American General Corp. 3,800 138,225
American International Group 6,900 680,513
Chubb Corp. 2,500 124,688
Cigna Corp. 1,100 129,663
General Re Corp. 1,400 213,150
ITT Hartford Group Inc. 2,000 106,500
Jefferson Pilot Corp. 1,500 77,438
LIncoln National Corp. 1,700 78,625
Loews Corp. 1,800 141,975
Marsh & McLennan Cos Inc. 1,300 125,450
Providian Corp. 2,100 90,038
Safeco Corp. * 2,300 81,363
St. Paul Cos. 1,300 69,550
Torchmark Corp. 1,500 65,625
Transamerica Corp. 1,200 97,200
Travelers Inc. 8,250 376,406
Unum Corp. 1,300 80,925
---------------------
3,155,372
---------------------
LODGING - 0.3%
Harrah's Entertainment Inc. * 1,900 53,675
Hilton Hotels 900 101,250
Marriott International Inc. 2,400 129,000
---------------------
283,925
---------------------
MEDIA - BROADCASTING & PUBLISHING - 1.8%
Comcast Corp. 3,500 64,750
Deluxe Corporation 1,800 63,900
Dow Jones & Co. Inc. 2,300 96,025
Dun & Bradstreet Corporation 3,400 212,500
Gannett Co. Inc. 2,900 205,175
Knight-Ridder Inc. * 1,100 79,750
McGraw-Hill Companies Inc. 2,200 100,650
Moore Corp.Ltd. 2,300 43,413
R.R. Donnelley & Sons 3,100 $ 108,113
Tele-Communications,Inc. Series A * 6,000 108,750
Tribune Co. 1,300 94,413
U.S. West Media Group * 7,100 129,575
Viacom Inc. Class B * 4,600 178,825
---------------------
1,485,839
---------------------
MEDICAL SUPPLIES - 0.6%
Baxter International, Inc. 5,000 236,250
Becton Dickinson & Co. 1,200 96,300
Boston Scientific Corporation * 2,800 126,000
MallInckrodt Group Inc. 1,800 69,975
---------------------
528,525
---------------------
METALS - 1.4%
Alcan Aluminum Ltd. 4,800 146,400
Aluminum Company of America 3,500 200,813
Barrick Gold Corp 6,400 173,600
Engelhard Corp. 2,700 62,100
Homestake Mining Co. 3,600 61,650
Newmont Mining 2,200 108,625
Nucor Corp. 1,500 75,938
Phelps Dodge Corp. 1,500 93,563
Placer Dome Inc. 4,600 109,825
Reynolds Metals Company 1,200 62,550
Usx-Us Steel Group Inc. 1,500 42,563
---------------------
1,137,627
---------------------
MINING - 0.7%
Cyprus Amax Minerals Co. * 1,900 42,988
Inco Ltd. 2,100 67,725
Minnesota Mining & Manufacturing 7,000 483,000
---------------------
593,713
---------------------
OFFICE EQUIPMENT - 1.8%
Alco Standard Corporation 2,200 99,550
Hewlett-Packard Company 9,100 906,588
Pitney Bowes, Inc. 3,100 148,025
Xerox Corp. 5,400 288,900
---------------------
1,443,063
---------------------
OIL & GAS - 9.1%
Amerada Hess Corp. 1,800 96,525
Amoco Corporation 8,100 586,238
Ashland Inc. 1,500 59,438
Atlantic Richfield Co. 2,700 319,950
Baker Hughes, Inc. 2,500 82,188
Burlington Resources Inc. 2,300 98,900
Chevron Corporation 10,000 590,000
Coastal Corp. 2,000 $ 83,500
Consolidated Natural Gas 1,800 94,050
Dresser Industries, Inc. 4,000 118,000
Enron Corporation 4,300 175,763
Exxon Corporation 18,800 1,633,250
Halliburton Company 2,000 111,000
Kerr - Mcgee Corp. 900 54,788
Mobil Corp. 6,000 672,750
Occidental Petro 5,100 126,225
Panenergy Corp. 2,500 82,188
Phillips Petroleum Co. 4,600 192,625
Royal Dutch Petroleum Co. 8,600 1,322,250
Schlumberger Ltd. 4,100 345,425
Sonat, Inc. 1,800 81,000
Sun Co. Inc. 1,800 54,675
Texaco Inc. 4,200 352,275
Unocal Corp. 4,400 148,500
USX-Marathon Group 5,200 104,650
Western Atlas Inc. * 1,000 58,250
Williams Companies, Inc. 1,900 94,050
---------------------
7,738,453
---------------------
PHARMACEUTICALS - 8.4%
Abbott Laboratories 13,300 578,550
American Home Products Corp. 10,400 625,300
Amgen, Inc. * 4,500 243,000
Bristol-Myers Squibb Co. 8,900 801,000
Eli Lilly & Company 9,000 585,000
Johnson & Johnson 21,600 1,069,200
Merck & Co., Inc. 20,300 1,311,888
Pfizer, Inc. 10,800 770,850
Pharmacia & Upjohn Inc. * 7,000 310,625
Schering-Plough Corp. 6,300 395,325
Warner Lambert Co. 4,800 264,000
---------------------
6,954,738
---------------------
RESTAURANTS - 0.7%
Darden Restaurants Inc. 2,600 27,950
McDonald's Corporation 11,200 523,600
---------------------
551,550
---------------------
RETAILERS - 4.9%
Circuit City Stores, Inc. 1,700 61,413
Dayton-Hudson Corp. 1,400 144,375
Dillard Dept. Stores 2,300 83,950
Gap Stores 5,300 170,263
Harcourt General Inc. 1,300 65,000
Home Depot 8,000 $ 432,000
J.C. Penney Company, Inc. 4,400 231,000
K Mart Corp. 8,000 99,000
Kimberly-Clark Corporation 4,406 340,364
Lowes Co's, Inc. 3,000 108,375
May Dept Stores 5,000 218,750
Melville Corp. 2,300 93,150
Nordstrom Inc. 1,300 57,850
Price/Costco Inc. * 4,100 88,663
Sears Roebuck 6,400 311,200
Tandy Corp. 1,200 56,850
The Limited Inc. 4,800 103,200
Toys "R" Us, Inc. Holding Co. * 4,700 133,950
Walgreen Co. 4,100 137,350
Wal-Mart Stores Inc. 43,300 1,098,738
---------------------
4,035,441
---------------------
TELEPHONE SYSTEMS - 6.0%
Ameritech Corp. 8,900 528,438
AT & T Corporation 25,800 1,599,600
Bell Atlantic Corp. * 6,700 427,125
Bellsouth Corporation * 16,300 690,713
GTE Corporation 13,800 617,550
Nynex Corp. * 7,100 337,250
Pacific Telesis Group 6,700 226,125
Sprint Corp. 6,400 268,800
U.S. West Inc. 7,400 235,875
---------------------
4,931,476
---------------------
TEXTILES, CLOTHING & FABRICS - 0.5%
Nike, Inc. 2,400 246,600
Payless Shoesource Inc. * 800 25,400
Reebok International Ltd. 1,200 40,350
VF Corp. 1,400 83,475
---------------------
395,825
---------------------
TRANSPORTATION - 1.2%
Burlington Northern Santa Fe 2,600 210,275
Conrail, Inc. 1,300 86,288
CSX Corp. 4,000 193,000
Federal Express Corp. * 1,100 90,200
Norfolk Southern Corp. 1,900 161,025
Union Pacific Corp. 3,500 244,563
---------------------
985,351
---------------------
TOTAL Common and Preferred Stocks (Cost $60,837,776) 79,717,691
---------------------
REPURCHASE AGREEMENT - 3.1%
J. P. Morgan U.S. Gov't Repurchase Agreement
U.S. Treasury Bond, $2,165,000 par, 8.75% coupon,
due 08/15/20, dated 08/15/90, to be sold on 07/01/96
at $2,579,160 2,578,000 $ 2,578,000
---------------------
TOTAL Repurchase Agreement (Cost $2,578,000) 2,578,000
---------------------
TOTAL INVESTMENTS - 99.9%
(Cost $63,415,776) 82,295,691
Other Assets and Liabilities (net) - 0.1% 109,655
---------------------
TOTAL NET ASSETS - 100.0% $ 82,405,346
=====================
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock currently does not declare dividends.
</TABLE>
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $63,415,776) $ 82,295,691
Net variation margin on financial futures contracts (Note 5) 11,250
Receivable for Trust shares sold 2,008
Dividends receivable 143,861
Interest receivable 1,349
Options at market value (Net premiums paid of $274) (Note 5) 1,680
----------------------------------------------------------------------------------------------------------------------------
Total assets 82,455,839
LIABILITIES
Investment advisory fee payable (Note 2) $ 4,299
Accrued expenses 46,194
----------------------------------------------------------------------------------------------------------------------------
Total liabilities 50,493
----------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 82,405,346
----------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 60,841,570
Accumulated net realized gain 2,631,685
Unrealized appreciation of investments, futures, and options
(computed on the basis of identified cost) 18,928,045
Undistributed net investment income 4,046
----------------------------------------------------------------------------------------------------------------------------
Total $ 82,405,346
----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($82,405,346 / 5,467,823 shares of capital stock outstanding) (Note 3) $15.07
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign withholding tax of $4,175) $ 920,074
Interest 149,745
---------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 1,069,819
Expenses:
Investment Advisory Fee (Note 2) 218,658
Custody 54,754
Audit 6,230
Shareholder Reporting 1,713
Trustee Fees and Expenses (Note 2) 4,909
Legal 2,281
Miscellaneous 2,977
---------------------------------------------------------------------------------------------------------------------------------
Total expenses 291,522
Less expenses reimbursed by Cova Life and/or the Adviser 27,097
---------------------------------------------------------------------------------------------------------------------------------
Net expenses 264,425
---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 805,394
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from security transactions, futures contracts, and option contracts
Proceeds from sales $ 9,541,793
Cost of securities sold (7,293,671)
--------------
Net realized gain from security transactions 2,248,122
Realized gain from futures contracts and option contracts 349,140
---------------------------------------------------------------------------------------------------------------------------------
Net realized gain from security transactions, futures contracts, and
option contracts 2,597,262
---------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments, futures contracts, and option contracts
Beginning of period $ 14,053,341
End of period 18,928,045
---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures contracts, and option contracts
during the period 4,874,704
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments, futures contracts, and option contracts 7,471,966
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 8,277,360
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 (UNAUDITED) DECEMBER 31, 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 805,394 $ 1,434,217
Realized gain from security transactions, futures contracts, and
option contracts 2,597,262 2,287,911
Net unrealized appreciation on investments, futures contracts, and
option contracts 4,874,704 14,416,467
-----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 8,277,360 18,138,595
-----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (801,348) (1,434,217)
Net realized gain from security transactions 0 (2,274,444)
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (801,348) (3,708,661)
-----------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 4,786,520 50,283,187
Net asset value of shares issued through
dividend reinvestment 801,348 3,708,661
Cost of shares repurchased (16,641,934) (19,249,305)
-----------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets
derived from capital share transactions (11,054,066) 34,742,543
-----------------------------------------------------------------------------------------------------------------------------
Total increase/(decrease) in net assets (3,578,054) 49,172,477
NET ASSETS:
Beginning of the period 85,983,400 36,810,923
-----------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $4,046 and $0, respectively) $ 82,405,346 $ 85,983,400
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
NOVEMBER 1, 1991
(COMMENCEMENT OF
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, INVESTMENT
JUNE 30, 1996 OPERATIONS) TO
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) 1995 1994 1993 1992 DECEMBER 31, 1991
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 13.842 $ 10.592 $ 11.115 $10.552 $10.572 $ 10.000
---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.148 0.260 0.311 0.205 0.172 0.038
Net realized and unrealized gain
(loss) on investments 1.230 3.630 (0.337) 0.726 0.477 0.534
Total from investment operations 1.378 3.890 (0.026) 0.931 0.649 0.572
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from net investment income (0.148) (0.260) (0.311) (0.205) (0.210) -
Distributions from net realized gain - (0.380) (0.180) (0.163) (0.459) -
Return of capital distributions - - (0.006) - - -
Total distributions (0.148) (0.640) (0.497) (0.368) (0.669) -
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, end of period 15.072 $13.842 $10.592 $ 11.115 $10.552 $ 10.572
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 9.96% 36.87% (0.11%) 8.84% 6.22% 5.70%
---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (In millions) $ 82.4 $ 86.0 $ 36.8 $ 91.3 $35.0 $ 6.8
RATIOS TO AVERAGE NET ASSETS (1)
---------------------------------------------------------------------------------------------------------------------------
Expenses 0.60%* 0.61% 0.58% 0.60% 0.59% 0.40%*
Net investment income 1.84%* 2.41% 2.23% 2.29% 2.54% 3.02%*
PORTFOLIO TURNOVER RATE: 1.20% 3.94% 47.05% 44.09% 85.73% -
---------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID (2): $0.0317 - - - - -
---------------------------------------------------------------------------------------------------------------------------
* Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 0.67%* 0.78% 0.80% 0.74% 1.21% 1.84%*
Ratio of Net Investment Income to Average
Net Assets: 1.77%* 2.24% 2.01% 2.15% 1.92% 1.58%*
(2) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.
</TABLE>
See notes to financial statements
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Stock Index Portfolio (the "Fund") is organized as a separate
sub-trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The Trust's investment
objective is to achieve investment results that approximate the aggregate price
and yield performance of the Standard & Poor's 500 Composite Stock Price Index
by investing in common stocks, stock index futures contracts and options on
stock index futures contracts, and certain short-term fixed income securities
such as cash reserves. The Trust commenced operations on December 11, 1989. The
Fund commenced operations on November 1, 1991.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of timing differences related to open option and future
transactions at year end.
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on options and futures
transactions. Any short-term capital gains and a portion of option and futures
gains would be included in ordinary income for tax purposes.
Distributions are automatically reinvested in Fund shares.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with Van Kampen American Capital Investment Advisory
Corporation (the "Sub-adviser") for investment advisory services in connection
with the management of the Fund. The Adviser supervises the Sub-adviser's
performance of advisory services and will make recommendations to the Board of
Trustees with respect to the retention or renewal of the sub-advisory agreement.
The Adviser pays for the cost pursuant to the sub-advisory agreement and the
cost of compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based of .50 of 1% per annum, based on the average daily
net assets.
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996 and December 31, 1995, paid in surplus aggregated $60,841,570
and $71,895,636, respectively.
Transactions in shares were as follows:
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---- ----
Beginning Shares 6,210,939 3,477,141
--------- ---------
Shares Sold 332,422 3,889,063
Shares Issued through
Dividend Reinvestment 53,172 271,456
Shares Repurchased (1,128,710) (1,426,721)
---------- ----------
Net Increase/(Decrease) in
Shares Outstanding (743,116) 2,733,798
-------- ---------
Ending Shares 5,467,823 6,210,939
--------- ---------
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term notes, for the six months ended June 30, 1996 were
$7,330,144 and $9,541,793, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All the Fund's portfolio holdings, include
derivative instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on investments. Upon
disposition, a realized gain or loss is recognized accordingly, except for
exercised option contracts where the recognition of gain or loss is postponed
until the disposal of the security underlying the option contract.
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Summarized below are the specific types of derivative financial instruments used
by the Fund.
A. OPTION CONTRACTS - An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Fund
to provide the return of an index without purchasing all of the securities
underlying the index or as a substitute for purchasing or selling specific
securities.
Transactions in options for the six months ended June 30, 1996, were as follows:
Contracts Premium
--------- -------
Outstanding at
December 31, 1995 36 ($23,298)
Options Written
and Purchased (Net) 114 49,804
Options Terminated in
Closing
Transactions (Net) (144) 18,995
---- ------
Outstanding at June 30, 1996 6 $ 45,501
--- ---- - ----------
The related futures contracts of the options outstanding at June 30, 1996, and
their descriptions and market values are as follows:
Expiration
Month / Market
Exercise Value
Contracts Price of Options
--------- ----- ----------
S&P 500
Index Futures
Written Puts 3 Sept. 96 / $25 $ (4,230)
--- ---------
Purchased Calls 3 Sept. 96 / $25 $ 5,910
--- ---------
6 $ 1,680
--- ---------
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
B. FUTURES CONTRACTS - A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures on the S&P 500 index and typically closes the
contract prior to the delivery date. These contracts are generally used to
provide the return of an index without purchasing or selling all of the
securities underlying the index or as a substitute for purchasing or selling
specific securities.
The fluctuation in market value of the contracts is settled daily through a cash
margin account. Realized gains and losses are recognized when the contracts are
closed or expire.
Transactions in futures contracts for the six months ended June 30, 1996, were
as follows:
Contracts
---------
Outstanding at December 31, 1995 11
Futures Opened 47
Futures Closed (52)
---
Outstanding at June 30, 1996 6
---
The futures contracts outstanding as of June 30, 1996 and the description and
unrealized appreciation is as follows:
Nominal Unrealized
Contracts Value Appreciation
--------- ----- ------------
S&P 500 Index Futures
Sept. 1996 - Buys to Open 6 $2,030,400 $ 46,725
--- ---------- ------------
COVA HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
(Percentage of Net Assets)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Par/Share Security
Amount Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC BONDS AND DEBT SECURITIES - 87.0%
AEROSPACE & DEFENSE - 3.4%
200,000 Sequa Corp. 9.625% 10/15/99 $ 201,250
350,000 Sequa Corp. 9.375% 12/15/03 338,625
86,000 Talley Industries Inc. 0.000% 10/15/05 68,800
400,000 Talley Manufacturing & Technical Corp. 10.750% 10/15/03 419,000
------------------
1,027,675
------------------
AIRLINES - 1.3%
400,000 U.S. Air Inc. 8.625% 09/01/98 392,000
------------------
AUTOMOTIVE - 1.0%
300,000 Exide Corp. 10.750% 12/15/02 306,000
------------------
BUILDING MATERIALS - 4.4%
300,000 American Standard Inc. 10.875% 05/15/99 317,250
50,000 Owens-Illinois, Inc. 10.250% 04/01/99 51,125
450,000 Owens-Illinois, Inc. 11.000% 12/01/03 484,875
450,000 Schuller International Group Inc. 10.875% 12/15/04 484,313
------------------
1,337,563
------------------
CHEMICALS - 2.5%
534,000 G I Holdings Inc. 10.000% 02/15/06 523,320
250,000 Trans-Resources 11.875% 07/01/02 240,625
------------------
763,945
------------------
COMMUNICATIONS - 8.9%
500,000 Centennial Cellular 10.125% 05/15/05 483,750
200,000 Echostar Communications 0.000% 06/01/04 146,000
200,000 Fonorola Inc. 12.500% 08/15/02 217,000
300,000 Intermedia Communications of Florida, Inc. 12.500% 05/15/06 166,500
150,000 Intermedia Communications of Florida, Inc. 13.500% 06/01/05 168,000
100,000 International Cabletel Inc. 0.000% 02/01/06 56,500
600,000 IXC Communications Inc. 13.000% 10/01/05 630,000
100,000 Metrocall Inc. 10.375% 10/01/07 94,000
100,000 Panamsat L.P. 9.750% 08/01/00 104,000
200,000 Panamsat L.P. 0.000% 08/01/03 175,000
100,000 Pricecellular Wireless Corp. 0.000% 10/01/03 79,500
300,000 Pricecellular Wireless Corp. 0.000% 11/15/01 271,500
250,000 Teleport Communications 0.000% 07/01/07 145,625
------------------
2,737,375
------------------
COMPUTER SOFTWARE & PROCESSING - 1.2%
350,000 Computervision 11.375% 08/15/99 362,250
------------------
CONTAINERS & PACKAGING - 1.9%
40,000 Anchor Glass Container Corp. 10.250% 06/30/02 30,400
11,000 Silgan Holdings 0.000% 12/15/02 11,110
500,000 U.S. Can Co. 13.500% 01/15/02 537,500
------------------
579,010
------------------
COSMETICS & PERSONAL CARE - 2.4%
210,000 Playtex FP Group 9.000% 12/15/03 197,400
450,000 Revlon Consumer Products Corp. 9.375% 04/01/01 443,250
100,000 Revlon Consumer Products Corp. 10.875% 07/15/10 101,625
------------------
742,275
------------------
ELECTRIC UTILITIES - 3.2%
100,000 Aes Corp. 0.000% 07/15/06 100,000
350,000 California Energy Inc. 9.875% 06/30/03 359,625
200,000 El Paso Electric Co. 8.900% 02/01/06 $ 198,500
300,000 Midland Funding Corp. II 11.750% 07/23/05 317,250
------------------
975,375
------------------
ELECTRONICS - 1.8%
450,000 Bell & Howell Holdings Co. 0.000% 03/01/05 309,375
250,000 Exide Electronics Group 11.500% 03/15/06 248,750
------------------
558,125
------------------
ENTERTAINMENT & LEISURE - 6.0%
100,000 Agrosy Gaming (144A) 13.250% 06/01/04 101,500
450,000 Ballys Park Place Funding 9.250% 03/15/04 481,500
350,000 Grand Casinos 10.125% 12/01/03 362,250
300,000 Harvey Casinos 10.625% 06/01/06 301,500
250,000 Hollywood Casino Inc. 12.750% 11/01/03 251,250
325,000 Trump Atlantic City 11.250% 05/01/06 328,250
------------------
1,826,250
------------------
ENVIRONMENTAL CONTROLS - 0.6%
100,000 Envirosource Inc. 9.750% 06/15/03 92,000
100,000 Norcal Waste Systems Inc. 12.500% 11/15/05 106,000
------------------
198,000
------------------
FINANCIAL SERVICES - 1.4%
400,000 TENET HEALTHCARE CORPORATION 10.125% 03/01/05 424,000
------------------
FOOD RETAILERS - 2.6%
500,000 Pantry Inc. 12.000% 11/15/00 432,500
400,000 Pathmark Stores Inc. 9.625% 05/01/03 377,500
------------------
810,000
------------------
FOREST PRODUCTS & PAPER - 0.7%
200,000 SD Warren Company 12.000% 12/15/04 213,000
------------------
HEALTH CARE PROVIDERS - 3.3%
50,000 Community Health Systems 10.250% 11/30/03 52,750
250,000 Merit Behavioral Care 11.500% 11/15/05 262,500
500,000 Ornda Healthcorp 12.250% 05/15/02 543,125
150,000 Paracelsus Healthcare Corp. 9.875% 10/15/03 148,500
------------------
1,006,875
------------------
HEAVY CONSTRUCTION - 0.7%
200,000 Communications & Power Corp. 12.000% 08/01/05 212,500
------------------
HEAVY MACHINERY - 0.3%
100,000 Agco Corp. 8.500% 03/15/06 97,000
------------------
INDUSTRIAL - DIVERSIFIED - 1.2%
400,000 Jordan Industries Inc. 10.375% 08/01/03 379,000
------------------
INSURANCE - 1.5%
475,000 Americo Life Inc. 9.250% 06/01/05 448,875
------------------
LODGING - 1.5%
425,000 California Hotel Financial Corp. 11.000% 12/01/02 450,500
------------------
MEDIA - BROADCASTING & PUBLISHING - 16.3%
100,000 Cablevision Systems, Corp. 10.750% 04/01/04 103,500
150,000 Cablevision Systems, Corp. 10.500% 05/15/16 146,250
100,000 Century Communications Corp. 0.000% 03/15/03 49,000
150,000 Century Communications Corp. 9.750% 02/15/02 150,000
200,000 Century Communications Corp. 11.875% 10/15/03 213,000
300,000 Comcast Corp. 9.375% 05/15/05 $ 291,750
400,000 Continental Cablevision 8.300% 05/15/06 412,000
500,000 Heritage Media Services 11.000% 06/15/02 532,500
500,000 Insight Communications Co. L.P. 11.250% 03/01/00 496,250
300,000 International Cabletel 0.000% 04/15/05 197,564
150,000 K-III Communications Corp. 10.250% 06/01/04 152,250
225,000 K-III Communications Corp. 10.625% 05/01/02 235,688
600,000 Mobile Media Communications. 0.000% 12/01/03 429,000
500,000 SCI Television 11.000% 06/30/05 522,500
500,000 Viacom International 10.250% 09/15/01 543,350
350,000 Young Broadcasting Inc. 9.000% 01/15/06 312,375
200,000 Young Broadcasting 10.125% 02/15/05 192,500
------------------
4,979,477
------------------
MEDICAL & BIO-TECHNOLOGY - 0.9%
250,000 Coast Hotels & Casino 13.000% 12/15/02 272,188
------------------
METALS - 3.6%
400,000 Armco Inc. 11.375% 10/15/99 413,000
150,000 Carbide/Graphite Group Inc. 11.500% 09/01/03 163,125
350,000 Easco Corp. 10.000% 03/15/01 353,500
200,000 Republic Engineered Steel 9.875% 12/15/01 187,500
------------------
1,117,125
------------------
MINING - 1.4%
425,000 Giant Industries 9.750% 11/15/03 417,563
------------------
OIL & GAS - 3.5%
175,000 Clark R&M Holdings 0.000% 02/15/20 120,965
500,000 Coda Energy Inc. 10.500% 04/01/06 497,500
100,000 Triton Energy Corp. 0.000% 11/01/97 90,500
360,000 Triton Energy Corp. 0.000% 12/15/00 351,000
------------------
1,059,965
------------------
RESTAURANTS - 1.1%
400,000 Flagstar Corp. 10.750% 09/15/01 350,000
------------------
RETAILERS - 6.2%
300,000 Hosiery Corp. 13.750% 08/01/02 324,000
300,000 Loehmann's, Inc. 11.875% 05/15/03 310,500
500,000 Petroleum Heat & Power 12.250% 02/01/05 552,500
630,000 Thrifty Payless Inc. 12.250% 04/15/04 708,750
------------------
1,895,750
------------------
TEXTILES, CLOTHING & FABRICS - 0.5%
170,000 Dan River Inc. 10.125% 12/15/03 164,050
------------------
U.S. GOVERNMENT - 1.7%
500,000 U.S. Treasury Note 9.000% 05/15/98 525,313
------------------
TOTAL Domestic Bonds and Debt Securities (Cost $26,678,262) 26,629,024
------------------
FOREIGN BONDS AND DEBT SECURITIES - 6.6%
CANADA - 3.8%
200,000 Doman Industries Limited 8.750% 03/15/04 181,000
500,000 Fundy Cable Ltd. 11.000% 11/15/05 508,750
450,000 Rogers Communications Inc. 10.875% 04/15/04 459,000
------------------
1,148,750
------------------
INDONESIA - 1.1%
300,000 Tjiwi Kimia International 13.250% 08/01/01 $ 336,000
------------------
LUXEMBOURG - 0.5%
300,000 Millicom International Cellular 144A 0.000% 06/01/06 160,500
------------------
NETHERLANDS - 0.9%
300,000 Fresh Del Monte 10.000% 05/01/03 279,000
------------------
UNITED KINGDOM - 0.3%
150,000 Telewest Plc. 0.000% 10/01/07 89,250
------------------
TOTAL Foreign Bonds and Debt Securities (Cost $2,044,272) 2,013,500
------------------
------------------
EQUITIES - 2.6%
COMMUNICATIONS - 0.9%
350 Intermedia Communications of Florida, Inc. 8,750
226 Panamsat Corp. 257,640
------------------
266,390
------------------
ELECTRIC UTILITIES - 0.3%
1,000 El Paso Electric Co. Pfd 11.40% 105,500
------------------
ELECTRONICS - 0.0%
250 Exide Electronics Group 1,282
------------------
ENTERTAINMENT & LEISURE - 0.0%
653 Casino America Inc.-Warrants 653
------------------
FOOD RETAILERS - 0.3%
3,177 Super Markets General Holding 81,014
------------------
MEDIA - BROADCASTING & PUBLISHING - 1.1%
930 American Telecasting Inc. 5,115
3,274 Cablevision Systems 330,674
------------------
335,789
------------------
RETAILERS - 0.0%
300 Hosiery Corp. 1,500
------------------
TOTAL Equities (Cost $774,253) 792,128
-----------------
TOTAL INVESTMENTS - 96.2%
(Cost $29,496,787) 29,434,652
Other Assets and Liabilities (net) - 3.8% 1,171,683
------------------
TOTAL NET ASSETS - 100.0% $ 30,606,335
==================
</TABLE>
COVA HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
The following table summarizes the portfolio composition at June 30,
1996, based upon quality ratings issued by Standard & Poor's. For
securities not rated by Standard & Poor's, the Moody rating is used.
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION BY CREDIT QUALITY
--------------------------------------------------------------------
<S> <C>
U.S. Gov't and Agency Obligations 1.8%
BB 33.9
B 59.2
CCC 2.1
NR 3.0
---------
100.0%
---------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $29,496,787) $ 29,434,652
Cash 795,528
Receivable for investments sold 101,375
Receivable for Trust shares sold 3,230
Interest receivable 611,271
Receivable from Investment Adviser (Note 2) 16,735
--------------------------------------------------------------------------------------------------------------------------------
Total assets 30,962,791
LIABILITIES
Payable for securities purchased $ 345,538
Accrued expenses 10,918
--------------------------------------------------------------------------------------------------------------------------------
Total liabilities 356,456
--------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 30,606,335
--------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 31,766,524
Accumulated net realized loss (1,106,271)
Unrealized depreciation of investments (computed on the basis of identified cost) (62,135)
Undistributed net investment income 8,217
--------------------------------------------------------------------------------------------------------------------------------
Total $ 30,606,335
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($30,606,335 / 2,965,491 shares of capital stock outstanding) (Note 3) $10.32
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 42,859
Interest 1,780,740
--------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 1,823,599
Expenses:
Investment Advisory Fee (Note 2) 137,435
Custody 44,060
Audit 2,646
Shareholder Reporting 727
Trustee Fees and Expenses (Note 2) 4,909
Legal 2,281
Miscellaneous 103
--------------------------------------------------------------------------------------------------------------------------------
Total expenses 192,161
Less expenses reimbursed by Cova Life and/or the Adviser 36,395
--------------------------------------------------------------------------------------------------------------------------------
Net expenses 155,766
--------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,667,833
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from security transactions
Proceeds from sales $ 26,302,803
Cost of securities sold (25,891,576)
--------------------------------------------------------------------------------------------------------------------------------
Net realized gain from security transactions 411,227
--------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation of investments
Beginning of period $ 743,563
End of period (62,135)
--------------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (805,698)
--------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (394,471)
--------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,273,362
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 (UNAUDITED) DECEMBER 31, 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 1,667,833 $ 2,747,034
Realized gain from security transactions 411,227 137,302
Net unrealized appreciation (depreciation)
on investments during the period (805,698) 1,523,562
-------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,273,362 4,407,898
-------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (1,667,100) (2,739,550)
Net realized gain from security transactions 0 -
-------------------------------------------------------------------------------------------------------------------------------
Total distributions (1,667,100) (2,739,550)
-------------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 13,880,042 14,408,614
Net asset value of shares issued through
dividend reinvestment 1,667,100 2,739,550
Cost of shares repurchased (21,062,489) (1,956,676)
-------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets
derived from capital share transactions (5,515,347) 15,191,488
-------------------------------------------------------------------------------------------------------------------------------
Total increase/(decrease) in net assets (5,909,085) 16,859,836
Net Assets:
Beginning of the period 36,515,420 19,655,584
-------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net income
of $8,217 and $7,484, respectively) $ 30,606,335 $ 36,515,420
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
December 11, 1989
SIX MONTHS ENDED (COMMENCEMENT
INVESTMENT
OPERATIONS) TO
JUNE 30, 1996 YEAR ENDED DECEMBER 31, DECEMBER 31,
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) 1995 1994 1993 1992 1991 1990 1989
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.446 $ 9.823 $ 11.287 $ 10.445 $ 10.410 $ 9.073 $ 9.974 $ 10.000
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.492 0.949 0.978 1.028 1.250 1.124 1.085 0.053
Net realized and unrealized gain
(loss) on investments (0.130) 0.621 (1.464) 1.170 0.658 1.337 (0.901) (0.026)
Total from investment operations 0.362 1.570 (0.486) 2.198 1.908 2.461 0.184 0.027
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income (0.492) (0.947) (0.978) (1.028) (1.250) (1.124) (1.085) (0.053)
Distributions from net
realized gain - - - (0.328) (0.623) - - -
Total distributions (0.492) (0.947) (0.978) (1.356) (1.873) (1.124) (1.085) (0.053)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, end of period $ 10.316 $ 10.446 $ 9.823 $ 11.287 $ 10.445 $ 10.410 $ 9.073 $ 9.974
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.50% 16.69% (4.52%) 21.98% 19.12% 28.31% 1.86% 0.23%*
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(In millions) $ 30.6 $ 36.5 19.7 $ 18.8 $ 5.4 $ 3.8 $ 2.9 $ 2.5
Ratios to Average Net Assets (1)
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses 0.85%* 0.86% 0.86% 0.84% 0.87% 0.86% 1.01% 0.95%*
Net investment income 9.14%* 9.50% 9.48% 8.97% 11.67% 11.31% 11.43% 9.67%*
PORTFOLIO TURNOVER RATE: 76.94% 118.90% 200.06% 213.09% 157.42% 147.57% 28.32% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
* Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average
Net Assets: 1.05%* 1.09% 1.16% 1.38% 1.79% 1.91% 2.42% 9.42%*
Ratio of Net Investment Income to
Average Net Assets: 8.94%* 9.27% 9.18% 8.43% 10.75% 10.25% 10.01% 1.19%*
</TABLE>
See notes to financial statements
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the High Yield Portfolio (the "Fund") is organized as a separate
sub-trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is the maximization of total investment return through income and
capital appreciation. The Trust and Fund commenced operations on December 11,
1989.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments are stated at values using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of less than 60 days are valued at
amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain in a segregated account with its custodian assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME AND EXPENSES - Interest income and expenses are recorded on
an accrual basis. Dividend income is recorded on the ex-dividend date. Bond
discount is amortized over the expected life of each applicable security.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with Van Kampen American Capital Investment Advisory
Corporation (the "Sub-adviser") for investment advisory services in connection
with the management of the Fund. The Adviser supervises the Sub-adviser's
performance of advisory services and will make recommendations to the Board of
Trustees with respect to the retention or renewal of the sub-advisory agreement.
The Adviser pays for the cost pursuant to the sub-advisory agreement and the
cost of compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based on the average daily net assets as follows:
Average Daily Net Assets % Per Annum
----------------------------------- ---------------
First $500 million .75 of 1%
Over $500 million .65 of 1%
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One is a separate investment account offered by
Cova Financial Services Life Insurance Co. At June 30, 1996, Cova Variable
Annuity Account One owned all shares of beneficial interest of the Fund.
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996 and December 31, 1995, paid in surplus aggregated $31,766,524
and $37,281,871, respectively.
Transactions in shares were as follows:
Six Months EndedYear Ended
June 30, December 31,
1996 1995
-------------- ------------
Beginning Shares 3,495,538 2,000,944
--------- ---------
Shares Sold 1,323,321 1,420,820
Shares Issued through
Dividend Reinvestment 159,825 267,010
Shares Repurchased (2,013,193) (193,236)
---------- --------
Net Increase/(Decrease)
in Shares Outstanding (530,047) 1,494,594
-------- ---------
Ending Shares 2,965,491 3,495,538
--------- ---------
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term notes, for the six months ended June 30, 1996 were
$24,825,741 and $26,302,803, respectively.
COVA QUALITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
(Percentage of Net Assets)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PAR SECURITY
AMOUNT DESCRIPTION COUPON MATURITY MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC BONDS AND DEBT SECURITIES - 87.1%
ASSET BACKED SECURITIES - 2.7%
1,000,000 American Express Master Trust 5.375% 07/15/01 $ 953,179
500,000 Signet Credit Card Master Trust 1994-4 A 6.800% 12/15/00 505,495
-----------------
1,458,674
-----------------
BONDS - 49.2%
1,000,000 Advanta Bank Corp. 6.520% 04/30/98 997,430
1,000,000 Advanta Corp.Med Term Nts Ncl 7.000% 05/01/01 992,170
2,000,000 Air Production & Chemicals 8.350% 01/15/02 2,134,040
1,000,000 Aramark Services 8.150% 05/01/05 1,027,367
3,000,000 Bank of Boston Corporation 5.550% 08/28/98 2,991,438
2,000,000 Comdisco Inc. 5.750% 05/22/98 2,003,110
900,000 Ford Motor Credit 5.730% 01/13/05 798,750
1,000,000 General Electric Capital Corp. 5.800% 04/01/08 1,039,606
1,928,000 Jet Equipment Trust 8.160% 12/15/96 1,946,393
1,000,000 Lockheed Martin Corporation 6.550% 05/15/99 998,950
1,000,000 New England Education Loan Marketing 6.125% 07/17/98 991,159
1,000,000 New Jersey Bell Telephone 6.800% 12/15/24 904,546
2,000,000 Ngc Corporation 6.750% 12/15/05 1,904,594
2,000,000 Public Service Co. of Co. 7.125% 06/01/06 1,987,720
1,000,000 Service Corp.International 6.75% 6.750% 06/01/01 993,110
1,000,000 Societe Generale-NY 7.4% 7.400% 06/01/06 999,210
1,000,000 Sprint Corp. 8.125% 07/15/02 1,054,145
2,000,000 Wal-Mart Stores Inc. 6.750% 05/24/02 1,984,132
1,000,000 Willamette Indus Wmtt 7.850% 07/01/26 1,014,496
-----------------
26,762,366
-----------------
MORTGAGED BACK SECURITIES - 9.7%
875,868 Citicorp Mortgage Securities, 6.250% 08/25/24 871,900
67,860 Federal Home Loan Mortgage Corp. 8.000% 09/01/08 68,538
361,222 Federal Home Loan Bank 4.140% 06/04/98 347,141
2,000,000 Federal National Mortgage Assn. 6.630% 09/03/98 2,004,480
1,000,000 Federal National Mortgage Assn. 6.625% 03/21/06 974,320
100,000 Federal National Mortgage Assn. 7.500% 12/25/19 99,321
72,848 Federal National Mortgage Assn. 8.000% 09/01/03 74,350
65,335 Federal National Mortgage Assn. 8.500% 07/01/19 67,131
162,700 Government National Mortgage Assn. 9.000% 01/15/20 170,427
600,000 Prudential Home Mortgage 7.375% 08/25/23 579,683
-----------------
5,257,291
-----------------
MUNICIPAL SECURITIES - 1.8%
1,000,000 New York, New York 6.228% 02/01/99 984,385
-----------------
U.S. TREASURY SECURITIES - 23.7%
4,000,000 U.S. Treasury Bond 6.875% 08/15/25 3,958,744
1,650,000 U.S. Treasury Bond 6.250% 08/15/23 1,495,313
2,000,000 U.S. Treasury Note 5.625% 11/30/00 1,936,250
1,000,000 U.S. Treasury Note 6.375% 03/31/01 995,625
1,000,000 U.S. Treasury Note 6.375% 05/15/99 1,002,811
2,500,000 U.S. Treasury Note 6.250% 02/15/03 2,455,465
1,000,000 U.S. Treasury Note 6.875% 03/31/00 1,015,311
-----------------
12,859,519
-----------------
TOTAL Domestic Bonds and Debt Securities (Cost $46,884,436) 47,322,235
-----------------
FOREIGN BONDS AND DEBT SECURITIES - 11.1%
AUSTRALIA - 1.8%
1,000,000 Telstra Corp. Ltd. 6.500% 11/28/05 $ 951,976
----------------
COLOMBIA - 1.9%
1,060,000 Financira Energ Nacional 6.625% 12/13/96 1,058,502
----------------
FRANCE - 3.9%
2,000,000 Credit Foncier De France 8.000% 01/14/02 2,095,756
----------------
UNITED KINGDOM - 3.5%
2,000,000 Cable & Wireless Plc. 6.500% 12/16/03 1,903,752
----------------
TOTAL Foreign Bonds and Debt Securities (Cost $6,046,152) 6,009,986
----------------
REPURCHASE AGREEMENT - 1.9%
J. P. Morgan U.S. Gov't Repurchase Agreement
U.S. Treasury Bond, $888,000 par, 8.75% coupon,
due 05/15/17, dated 05/15/87, to be sold on 07/01/96
at $1,030,464 5.400% 07/01/96 1,030,000
----------------
TOTAL Repurchase Agreement (Cost $1,030,000) 1,030,000
----------------
TOTAL INVESTMENTS - 100.1%
(Cost $53,960,588) 54,362,221
Other Assets and Liabilities (net) - -0.1% (35,269)
----------------
TOTAL NET ASSETS - 100.0% $ 54,326,952
=================
</TABLE>
COVA QUALITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The following table summarizes the portfolio composition at June 30,
1996, based upon quality ratings issued by Standard & Poor's. For
securities not rated by Standard & Poor's, the Moody rating is used.
Portfolio Composition by Credit Quality
-----------------------------------------------------------
U.S. Gov't and Agency Obligations 31.3%
AAA 3.7
AA 10.8
A 18.8
BBB 28.1
NR 7.3
---------
100.%
---------
See notes to financial statements
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $53,960,588) $ 54,362,221
Cash 918
Receivable for investments sold 118,695
Interest receivable 892,652
------------------------------------------------------------------------------------------------------------------------------
Total assets 55,374,486
LIABILITIES
Payable for securities purchased $ 999,540
Payable for Trust shares redeemed 35,654
Investment advisory fee payable (Note 2) 1,216
Accrued expenses 11,124
------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,047,534
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 54,326,952
------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 54,779,831
Accumulated net realized loss (864,426)
Unrealized appreciation of investments (computed on the basis of identified cost) 401,633
Undistributed net investment income 9,914
------------------------------------------------------------------------------------------------------------------------------
Total $ 54,326,952
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($54,326,952 / 5,226,601 shares of capital stock outstanding) (Note 3) $10.39
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 1,526,673
-----------------------------------------------------------------------------------------------------------------------------
Total investment income $ 1,526,673
Expenses:
Investment Advisory Fee (Note 2) 114,440
Custody 31,561
Audit 2,870
Shareholder Reporting 790
Trustee Fees and Expenses (Note 2) 4,909
Legal 2,281
-----------------------------------------------------------------------------------------------------------------------------
Total expenses 156,851
Interest expense 3,430
Less expenses reimbursed by Cova Life and/or the Adviser 19,355
-----------------------------------------------------------------------------------------------------------------------------
Net expenses 140,926
-----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,385,747
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized loss from security transactions
Proceeds from sales $ 64,143,404
Cost of securities sold (65,196,407)
-----------------------------------------------------------------------------------------------------------------------------
Net realized loss from security transactions (1,053,003)
-----------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation of investments
Beginning of period $ 1,371,877
End of period 401,633
-----------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (970,244)
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments (2,023,247)
-----------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (637,500)
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 (UNAUDITED) DECEMBER 31, 1995
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 1,385,747 $ 2,493,847
Realized gain/(loss) from security transactions (1,053,003) 453,622
Net unrealized depreciation on investments
during the period (970,244) 3,164,151
------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (637,500) 6,111,620
------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (1,375,833) (2,493,847)
Net realized gain from security transactions 0 -
------------------------------------------------------------------------------------------------------------------------------
Total distributions (1,375,833) (2,493,847)
------------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 22,556,884 22,566,180
Net asset value of shares issued through
dividend reinvestment 1,375,833 2,493,847
Cost of shares repurchased (8,983,295) (21,223,354)
------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 14,949,422 3,836,673
------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 12,936,089 7,454,446
NET ASSETS:
Beginning of the period 41,390,863 33,936,417
------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $9,914 and $0, respectively) $ 54,326,952 $ 41,390,863
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) 1995 1994 1993
-----------------------------------------------------------
<S> <C>
Net Asset Value, beginning of year $ 10.871 9.815 10.886 10.699
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.306 0.667 0.603 0.641
Net realized and unrealized gain
(loss) on investments (0.480) 1.056 (1.071) 0.518
Total from investment operations (0.174) 1.723 (0.468) 1.159
-------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income (0.306) (0.667) (0.603) (0.641)
Distributions from net realized gain - - - (0.331)
Total distributions (0.306) (0.667) (0.603) (0.972)
-------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $ 10.391 10.871 9.815 10.886
--------------------------------------------------------------------------------------------------------------------------------
Total Return (1.61%) 17.99% (4.33%) 11.04%
--------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
--------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (In millions) $ 54.3 $ 41.4 $ 33.9 $ 51.1 $
Ratios to Average Net Assets (1)
--------------------------------------------------------------------------------------------------------------------------------
Operating expenses 0.60%* 0.60% 0.59% 0.60%
Interest expense 0.01%* 0.05% N/A N/A
Net investment income 6.07%* 6.42% 5.69% 5.82%
Portfolio turnover rate: 137.51% 219.46% 177.63% 318.40%
---------------------------------------------------------------------------------------------------------------------------------
* Annualized
(1) If certain expenses had not been assumed
by Cova Life and/or the Adviser,
total return would have been lower and
the ratios would have been as follows:
Ratio of Expenses to Average Net Assets: 0.69%* 0.75% 0.68% 0.70%
Ratio of Net Investment Income to Average Net Assets: 5.98%* 6.27% 5.60% 5.73%
N/A - Prior to 1995, interest expense was imaterial and
subsequently netted against interest income.
</TABLE>
See notes to financial statements
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS DECEMBER 11, 1989
(COMMENCEMENT OF
INVESTMENT
YEAR ENDED DECEMBER 31, OPERATIONS) TO
PER SHARE OPERATING PERFORMANCE: 1992 1991 1990 DECEMBER 31, 1989
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of year 10.618 $ 9.969 $ 9.930 $ 10.000
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.696 0.753 0.713 0.043
Net realized and unrealized gain
(loss) on investments 0.081 0.649 0.039 (0.070)
Total from investment operations 0.777 1.402 0.752 (0.027)
-------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income (0.696) (0.753) (0.713) (0.043)
Distributions from net realized gain - - - -
Total distributions (0.696) (0.753) (0.713) (0.043)
-------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period 10.699 $ 10.618 $ 9.969 $ 9.930
--------------------------------------------------------------------------------------------------------------------------
Total Return 7.61% 14.71% 7.99% (0.27%)
--------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
--------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (In millions) 24.1 $ 6.8 $ 6.1 $ 2.5
Ratios to Average Net Assets (1)
--------------------------------------------------------------------------------------------------------------------------
Operating expenses 0.60% 0.60% 0.74% 0.70%*
Interest expense N/A N/A N/A N/A *
Net investment income 6.87% 7.45% 7.64% 7.83%*
Portfolio turnover rate: 231.91% 12.86% 59.25% 0.00%
--------------------------------------------------------------------------------------------------------------------------
* Annualized
(1) If certain expenses had not been assumed
by Cova Life and/or the Adviser,
total return would have been lower and
the ratios would have been as follows:
Ratio of Expenses to Average Net Assets: 0.88% 1.10% 1.53% 9.15%*
Ratio of Net Investment Income to Average Net Assets: 6.59% 6.96% 6.85% (0.62%)*
N/A - Prior to 1995, interest expense was imaterial and
subsequently netted against interest income.
</TABLE>
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
Notes to Financial Statements
June 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Quality Income Portfolio (the "Fund") is organized as a separate
sub-trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek a high level of current income, consistent with safety of
principal, by investing in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentality's or in various investment grade
debt obligations including mortgage pass-through certificates and collateralized
mortgage obligations. The Trust and Fund commenced operations on December 11,
1989.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments are stated at value using market quotations,
or if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of less than 60 days are valued at
amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Interest income and expenses are recorded on
an accrual basis. Bond premium and original discount are amortized over the
expected life of each applicable security.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains transactions. Any short-term capital gains would be included in
ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with Van Kampen American Capital Investment Advisory
Corporation (the "Sub-adviser") for investment advisory services in connection
with the management of the Fund. The Adviser supervises the Sub-adviser's
performance of advisory services and will make recommendations to the Board of
Trustees with respect to the retention or renewal of the sub-advisory agreement.
The Adviser pays for the cost pursuant to the sub-advisory agreement and the
cost of compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based on the average daily net assets as follows:
Average Daily Net Assets % Per Annum
------------------------ - ---------
First $500 million .50 of 1%
Over $500 million .45 of 1%
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996 and December 31, 1995, paid in surplus aggregated $54,779,831
and $41,324,208 respectively.
Transactions in shares were as follows:
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---- ----
Beginning Shares 3,807,302 3,457,435
--------- ---------
Shares Sold 2,141,401 2,141,344
Shares Issued through
Dividend Reinvestment 130,798 238,868
Shares Repurchased (852,900) (2,030,345)
-------- ----------
Net Increase in Shares
Outstanding 1,419,299 349,867
--------- -------
Ending Shares 5,226,601 3,807,302
--------- ---------
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term notes, for the six months ended June 30, 1996 were
$79,712,113 and $64,143,404, respectively.
The Fund utilizes an investment technique called reverse repurchase agreements
for cash management purposes. In a reverse repurchase agreement, the Fund sells
securities and agrees to repurchase them at a mutually agreed upon date and
price. During the reverse repurchase agreement period, the Fund continues to
receive principal and interest payments on these securities but pays interest to
the counter-party based upon a short-term interest rate. The average daily
balance of reverse repurchase agreements during the period was approximately
$92,775 with an average interest rate of 4.694%.
5. MORTGAGE AND ASSET BACKED SECURITIES
A Mortgage Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participation's in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies -- Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation
(FHLMC) or Federal Home Loan Bank (FHLB).
<TABLE>
<CAPTION>
COVA MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
(Percentage of Net Assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Par Security
Amount Description Maturity Coupon Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS - 99.0%
BANKERS ACCEPTANCES - 7.0%
1,000,000 Nationsbank Corporation 08/05/96 4.860% $ 995,005
1,553,422 Union Bank of L.A. 10/07/96 5.260% 1,530,725
----------------
2,525,730
----------------
CERTIFICATE OF DEPOSIT - 2.7%
1,000,000 ABN Ambro 07/08/96 5.260% 999,666
----------------
COMMERCIAL PAPER - 31.5%
1,500,000 American General Finance 07/29/96 5.328% 1,500,000
1,000,000 Assoc Corp.Na 08/12/96 5.300% 993,522
1,000,000 Comm Credit Co. 07/08/96 5.320% 998,670
1,500,000 Ford Motor Credit 07/17/96 5.290% 1,496,033
1,500,000 GE Capital 07/31/96 5.290% 1,492,946
1,000,000 Heller Financial 07/24/96 5.440% 996,222
1,500,000 IBM Credit Corp. 07/12/96 5.315% 1,500,000
1,500,000 John Deere Cap 08/21/96 5.330% 1,500,000
1,000,000 Merrill Lynch & Company 07/22/96 5.290% 996,620
----------------
11,474,013
----------------
U.S. GOVERNMENT AGENCIES - 38.0%
1,500,000 Federal Home Loan Bank 09/27/96 5.170% 1,480,613
2,000,000 Federal Home Loan Bank 09/04/96 4.880% 1,981,835
8,690,000 Federal Home Loan Mortgage Corp. 07/01/96 5.520% 8,687,335
1,500,000 Federal Home Loan Mortgage Corp. 09/16/96 5.340% 1,482,423
220,000 Student Loan Marketing Assn. Floater 3M Treas. Bill (Wkly Reset) 11/20/97 5.450% 219,582
----------------
13,851,788
----------------
VARIABLE RATE DEMAND OBLIGATION - 19.8%
1,200,000 Baptist Health System of S. Florida 05/15/25 5.600% 1,200,000
1,000,000 Health Insurance Plan Gr New York 07/01/20 5.550% 1,000,000
1,500,000 Mississippi Business Financial Corp. 02/01/19 5.550% 1,500,000
1,000,000 New York New York 10/01/18 5.200% 1,000,000
1,000,000 Student Loan Marketing Assn. Floater (Wkly Reset) 09/12/96 5.250% 1,000,000
1,500,000 Virginia State Housing Development Authority 03/01/02 5.550% 1,500,000
----------------
7,200,000
----------------
TOTAL Short-Term Investments (Cost $36,051,197) 36,051,197
TOTAL INVESTMENTS - 99.0%
(Cost $36,051,197) 36,051,197
Other Assets and Liabilities (net) - 1.0% 338,680
TOTAL NET ASSETS - 100.0% $ 36,389,877
================
</TABLE>
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market value (Note 1) $ 36,051,197
Cash 104,606
Receivable for Trust shares sold 134,412
Interest receivable 122,144
Receivable from Investment Adviser (Note 2) 14,864
------------------------------------------------------------------------------------------------------------------------------
Total assets 36,427,223
LIABILITIES
Accrued expenses $ 37,346
------------------------------------------------------------------------------------------------------------------------------
Total liabilities 37,346
------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 36,389,877
------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 36,465,435
Accumulated net realized loss (75,558)
------------------------------------------------------------------------------------------------------------------------------
Total $ 36,389,877
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($36,389,877 / 36,465,435 shares of capital stock outstanding) (Note 3) $1.00
------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
</TABLE>
See notes to financial statements
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For The Six Months Ended June 30, 1996 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 878,921
- -----------------------------------------------------------------------------------------------
Total investment income $ 878,921
Expenses:
Investment Advisory Fee (Note 2) 80,461
Custody 19,661
Audit 2,460
Shareholder Reporting 677
Trustee Fees and Expenses (Note 2) 4,909
Legal 2,281
Miscellaneous 3,269
- -----------------------------------------------------------------------------------------------
Total expenses 113,718
Less expenses reimbursed by Cova Life and/or the Advisor 95,325
- -----------------------------------------------------------------------------------------------
Net expenses 18,393
- -----------------------------------------------------------------------------------------------
Net investment income $ 860,528
- -----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 860,528
- -----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
June 30, 1996 (Unaudited) December 31, 1995
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 860,528 $ 3,052,192
Realized gain from security transactions 0 34,345
-------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 860,528 3,086,537
-------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (860,528) (3,052,192)
-------------------------------------------------------------------------------------------------------------------------------
Total distributions (860,528) (3,052,192)
-------------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 24,763,801 27,981,115
Net asset value of shares issued through
dividend reinvestment 860,528 3,052,192
Cost of shares repurchased (23,616,948) (72,571,677)
-------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 2,007,381 (41,538,370)
-------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,007,381 (41,504,025)
NET ASSETS:
Beginning of the period 34,382,496 75,886,521
-------------------------------------------------------------------------------------------------------------------------------
End of period $ 36,389,877 $ 34,382,496
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JULY 1, 1991
(COMMENCEMENT OF
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, INVESTMENT
JUNE 30, 1996 OPERATIONS) TO
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) 1995 1994 1993 1992 DECEMBER 31, 1991
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.03 0.06 0.04 0.03 0.04 0.03
Net realized and unrealized gain
(loss) on investments - - - - - -
Total from investment operations 0.03 0.06 0.04 0.03 0.04 0.03
-----------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income (0.03) (0.06) (0.04) (0.03) (0.04) (0.03)
Distributions from net realized gain - - - - - -
Total distributions (0.03) (0.06) (0.04) (0.03) (0.04) (0.03)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 2.65% 6.01% 4.23% 3.24% 3.88% 2.75%
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (In millions) $ 36.4 $ 34.4 $ 75.9 $ 6.6 4.0 $ 5.4
RATIOS TO AVERAGE NET ASSETS (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.11%* 0.11% 0.10% 0.10% 0.10% 0.09%*
Net investment income 5.28%* 5.68% 4.37% 3.23% 3.63% 5.11%*
- ------------------------------------------------------------------------------------------------------------------------------------
* Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 0.71%* 0.64% 0.68% 0.86% 1.30% 1.11%*
Ratio of Net Investment Income to Average Net Assets: 4.69%* 5.25% 3.79% 2.47% 2.43% 4.10%*
</TABLE>
See notes to financial statements
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Money Market Portfolio (the "Fund") is organized as a separate
sub-trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The investment objective
of the Money Market Portfolio is to provide high current income consistent with
the preservation of capital and liquidity through investment in a broad range of
money market instruments. The Trust commenced operations on December 11, 1989.
The Fund commenced operations on July 1, 1991.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments are valued at amortized cost, which
approximates market value. Under this valuation method, a portfolio instrument
is valued at cost and any discount or premium is amortized on a straight line
basis to the maturity of the instrument.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
Interest income and expenses are recorded on an accrual basis.
C. DISTRIBUTION OF INCOME AND GAINS - The Fund declares dividends from net
investment income daily and automatically reinvests such dividends daily. Net
realized gains, if any, are distributed annually.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with Van Kampen American Capital Investment Advisory
Corporation (the "Sub-adviser") for investment advisory services in connection
with the management of the Fund. The Adviser supervises the Sub-adviser's
performance of advisory services and will make recommendations to the Board of
Trustees with respect to the retention or renewal of the sub-advisory agreement.
The Adviser pays for the cost pursuant to the sub-advisory agreement and the
cost of compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based on the average daily net assets as follows:
Average Daily Net Assets % Per Annum
------------------------ -----------
First $500 million .50 of 1%
Over $500 million .40 of 1%
The Adviser has voluntarily undertaken to waive its monthly fee. In addition,
the Adviser has voluntarily undertaken to waive or otherwise reimburse the Fund
for its operating expenses, exclusive of brokerage or other portfolio
transaction expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996 and December 31, 1995, paid in surplus aggregated $36,465,435
and $34,458,054, respectively.
Transactions in shares were as follows:
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---- ----
Beginning Shares 34,458,054 75,996,424
---------- ----------
Shares Sold 24,763,801 27,981,115
Shares Issued through
Dividend Reinvestment 860,528 3,052,192
Shares Repurchased (23,616,948) (72,571,677)
----------- -----------
Net Increase/Decrease in
Shares Outstanding 2,007,381 (41,538,370)
--------- -----------
Ending Shares 36,465,435 34,458,054
---------- ----------
COVA GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
(Percentage of Net Assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Share Security
Amount Description Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 89.4%
ADVERTISING - 0.6%
3,100 Omnicom Group $ 144,150
----------------------
AEROSPACE & DEFENSE - 1.9%
3,500 Allied Signal Inc. 199,938
3,400 Boeing Company 296,225
----------------------
496,163
----------------------
AUTOMOTIVE - 3.3%
6,900 Chrysler Corporation 427,800
1,200 General Motors Corporation 62,850
3,200 Magna International 147,200
4,400 Stewart & Stevenson Services 100,100
1,400 TRW Inc. 125,825
----------------------
863,775
----------------------
BANKING - 4.7%
3,200 Bankamerica Corp. 242,400
2,100 Beneficial Corp. 117,863
2,200 Chase Manhattan Corporation 155,375
1,400 Citicorp 115,675
6,300 Corp Bancaria De Espana 138,600
2,600 First Bank System,Inc. 150,800
3,800 Fleet Financial Group, Inc. 165,300
1,600 Nationsbank Corporation 132,200
----------------------
1,218,213
----------------------
BEVERAGES, FOOD & TOBACCO - 6.4%
1,600 Campbell Soup Co. 112,800
3,900 Coca Cola Femsa 111,638
4,000 Coca-Cola Co. 195,500
800 Kellogg Co. 58,600
11,600 Nabisco Holdings Corp. Class A 410,350
4,800 Philip Morris Companies, Inc. 499,200
4,600 Quaker Oats Co. 156,975
2,200 Ralston Purina Group 141,075
----------------------
1,686,138
----------------------
CHEMICALS - 4.1%
2,500 Grace W.R. & Co. 177,188
2,200 Hercules Inc. 121,550
9,000 Monsanto Co. 292,500
2,000 Olin Corp. 178,500
4,000 Praxair, Inc. 169,000
2,300 Sigma Aldrich Corp. 123,050
----------------------
1,061,788
----------------------
COMMUNICATIONS - 4.4%
6,000 Cable & Wireless Plc. 118,500
5,000 Ericson L M Telephone 107,500
5,625 Frontier Corporation 172,266
5,400 Loral Space & Communications * 73,575
3,900 Lucent Technologies 147,713
3,900 MCI Communications Corporation 99,938
3,300 Nokia Corp. 122,100
1,300 SBC Communications, Inc. 64,025
4,500 Teleport Communications * 86,063
2,300 Tellabs Inc. * 153,813
----------------------
1,145,493
----------------------
2,900 BMC Software, Inc. * $ 173,275
3,500 Cisco Systems, Inc. * 198,173
4,100 Computer Associates International Inc. 292,125
1,400 Microsoft Corporation * 168,175
----------------------
831,748
----------------------
CONTAINERS & PACKAGING - 0.9%
5,100 Crown Cork & Seal Inc. 229,500
----------------------
ELECTRIC UTILITIES - 3.2%
3,200 Allegheny Power System Inc. 98,800
3,200 CMS Energy Corporation 98,800
1,100 Duke Power Company 56,375
2,500 Edison International 44,063
4,000 Houston Industries Inc. 98,500
5,400 National Power Plc ADR 131,625
2,600 Nipsco Industries, Inc. 104,650
3,850 Peco Energy Company 100,100
5,150 Powergen Plc - ADR 106,863
----------------------
839,776
----------------------
ELECTRICAL EQUIPMENT - 3.2%
3,900 General Electric Company 337,350
7,800 General Instrument Corp. * 225,225
1,400 Linear Technology Corp. 42,000
3,500 Newbridge Network Corp. * 229,250
----------------------
833,825
----------------------
ELECTRONICS - 2.9%
4,400 General Signal 166,650
3,700 Honeywell Inc. 201,650
2,500 Intel Corporation 183,594
1,400 Oak Industries Inc. 41,475
3,400 Perkin-Elmer Corporation 164,050
----------------------
757,419
----------------------
ENTERTAINMENT & LEISURE - 0.4%
1,700 Walt Disney Company 106,888
----------------------
ENVIRONMENTAL CONTROLS - 0.7%
5,200 WMX Technologies Inc. 170,300
----------------------
FINANCIAL SERVICES - 3.0%
4,800 Block, H,& R. Inc. 156,600
4,200 Comerica Inc. 187,425
7,500 Federal National Mortgage Assn. 251,250
2,600 Student Loan Marketing Assn. 192,400
----------------------
787,675
----------------------
FOOD RETAILERS - 0.4%
3,100 The Vons Co. Inc. * 115,863
----------------------
FOREST PRODUCTS & PAPER - 0.6%
2,800 Mead Corp. 145,250
----------------------
HEAVY CONSTRUCTION - 1.6%
2,400 Fluor Corp. 156,900
3,200 Foster Wheeler Corporation 143,600
3,700 Masco Corp. 111,925
----------------------
412,425
----------------------
HEAVY MACHINERY - 0.4%
2,600 Cooper Industries Inc. $ 107,900
----------------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 0.4%
7,900 Sunbeam Corp. 116,525
----------------------
HOUSEHOLD PRODUCTS - 1.1%
1,400 Colgate-Palmolive Co. 118,650
6,000 Rubbermaid Inc. 163,500
----------------------
282,150
----------------------
INDUSTRIAL - DIVERSIFIED - 1.4%
1,000 Eastman Kodak Company 77,750
2,000 Illinois Tool Works Inc. 135,250
3,200 York International Corp. 165,600
----------------------
378,600
----------------------
INSURANCE - 4.3%
4,400 Allstate Corp. 200,750
2,800 American International Group 276,150
6,500 Everest Re Holdings 168,188
4,900 Horace Mann Educators 155,575
2,000 MBIA Inc. 155,750
3,550 Travelers Inc. 161,969
----------------------
1,118,382
----------------------
MEDIA - BROADCASTING & PUBLISHING - 1.5%
4,800 Deluxe Corporation 170,400
2,000 Dun & Bradstreet Corporation 125,000
1,500 Tribune Co. 108,938
----------------------
404,338
----------------------
MEDICAL SUPPLIES - 0.7%
4,000 Baxter International, Inc. 189,000
----------------------
METALS - 0.4%
1,800 Phelps Dodge Corp. 112,275
----------------------
OFFICE EQUIPMENT - 2.3%
3,100 Dynatech Corp. * 100,750
800 Harris Corp. Inc. 48,800
1,100 Hewlett-Packard Company 109,588
5,400 Softkey International Inc. * 102,263
4,500 Xerox Corp. 240,750
----------------------
602,151
----------------------
OIL & GAS - 9.0%
3,000 Amerada Hess Corp. 160,875
6,300 Apache Corp. 207,113
3,700 Chevron Corporation 218,300
3,200 Exxon Corporation 278,000
2,300 Mobil Corp. 257,888
6,000 Pacific Enterprises 177,750
4,000 Panenergy Corp. 131,500
1,800 Royal Dutch Petroleum Co. 276,750
6,300 Texaco Inc. 528,413
2,200 Williams Companies Inc. 174,625
----------------------
2,411,214
----------------------
PHARMACEUTICALS - 6.0%
4,400 Abbott Laboratories $ 191,400
3,000 Amgen, Inc. * 162,000
3,300 Astra AB A Shares ADR 145,717
2,700 Bristol-Myers Squibb Co. 243,000
2,080 Merck & Co., Inc. 134,420
3,100 Pfizer, Inc. 221,263
5,400 Pharmacia & Upjohn Inc. 239,625
2,200 Schering-Plough Corp. 138,050
2,500 Teva Pharmaceutical 94,688
----------------------
1,570,163
----------------------
REAL ESTATE - 1.0%
3,100 Debartolo Realty Corp. 49,988
8,600 Healthcare Realty Trust 204,250
----------------------
254,238
----------------------
RESTAURANTS - 0.7%
1,800 McDonald's Corporation 84,150
6,000 Wendys International Inc. 111,750
----------------------
195,900
----------------------
RETAILERS - 6.4%
4,400 Dillard Dept. Stores 160,600
9,200 Federated Department Stores * 313,950
2,100 Gap Stores 67,463
3,900 Gymboree Corp. * 118,950
3,300 Home Depot 178,200
4,400 May Dept Stores 192,500
2,200 Nordstrom Inc. 97,900
3,500 Sears Roebuck 170,188
3,700 Talbots Inc. 119,788
2,100 Tandy Corp. 99,488
5,100 Toys "R" Us, Inc. Holding Co. * 145,350
----------------------
1,664,377
----------------------
TELEPHONE SYSTEMS - 4.7%
3,200 Ameritech Corp. 190,000
6,300 AT & T Corporation 390,600
3,200 Cincinnati Bell, Inc. 166,800
2,200 GTE Corporation 98,450
2,200 Southern New England Telecom 92,400
2,500 Sprint Corp. 100,625
5,400 Telefonos De Mexico 180,900
----------------------
1,219,775
----------------------
TEXTILES, CLOTHING & FABRICS - 2.3%
5,200 Adidas AG (144A) 218,468
5,950 Canadian Natl Railway 109,331
9,600 Canadian Pacific 211,200
3,500 Donnkenny Inc. * 68,250
----------------------
607,249
----------------------
TRANSPORTATION - 1.3%
3,000 Conrail, Inc. 199,125
1,900 Union Pacific Corp. 132,763
----------------------
331,888
----------------------
TOTAL Common and Preferred Stocks (Cost $21,214,904) 23,412,514
----------------------
DOMESTIC BONDS AND DEBT SECURITIES - 4.9%
AIRLINES - 0.5%
100,000 Continental Airlines (144A) 6.750%04/15/06 $ 120,000
----------------------
BEVERAGES, FOOD & TOBACCO - 0.6%
150,000 Grand Metropolitan (144A) 6.500%01/31/00 163,500
----------------------
COMMUNICATIONS - 0.9%
1,700 MFS Communications Corp. 8.000%05/31/99 107,950
420,000 U.S. Cellular Corp. 0.000%06/15/15 140,700
----------------------
248,650
----------------------
FINANCIAL SERVICES - 0.4%
100,000 MBL International Fin. 3.000%11/30/02 116,750
----------------------
INDUSTRIAL - DIVERSIFIED - 1.1%
350,000 ADT Operations Inc. (144A) 0.000%07/06/10 192,063
200,000 News America Holdings 0.000%03/11/13 97,250
----------------------
289,313
----------------------
PHARMACEUTICALS - 1.0%
400,000 Roche Holdings, Inc. (144A) 0.000%04/20/10 170,000
50,000 Sandoz (144A) 2.000%10/06/02 52,750
----------------------
222,750
----------------------
RETAILERS - 0.4%
2,100 K-Mart Financing 7.750%06/15/16 113,925
----------------------
TOTAL Domestic Bonds and Debt Securities (Cost $1,209,997) 1,274,888
----------------------
SHORT-TERM INVESTMENTS - 5.4%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 5.4%
705,000 Student Loan Marketing Assn. 5.450%07/01/96 704,680
700,000 U.S. Treasury Bill 0.000%07/25/96 697,562
----------------------
1,402,242
----------------------
TOTAL Short-Term Investments (Cost $1,402,242) 1,402,242
----------------------
TOTAL INVESTMENTS - 99.6%
(Cost $23,827,143) 26,089,644
Other Assets and Liabilities (net) - 0.4% 107,055
----------------------
TOTAL NET ASSETS - 100.0% $ 26,196,699
======================
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock currently does not declare dividends.
</TABLE>
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at value (Note 1) (identified cost, $23,827,143) $ 26,089,644
Cash 5,246
Receivable for investments sold 230,897
Receivable for daily variation margin on open
financial futures contracts (Note 5) 3,750
Receivable for Trust shares sold 52,860
Dividends receivable 50,772
Interest receivable 7,192
Receivable from Investment Adviser (Note 2) 15,961
Other assets 2,839
---------------------------------------------------------------------------------------------------------------------------------
Total assets 26,459,161
LIABILITIES
Payable for securities purchased $ 255,989
Accrued expenses 6,473
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 262,462
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 26,196,699
---------------------------------------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS:
Paid in Surplus (Note 3) $ 23,164,297
Accumulated net realized gain 763,179
Unrealized appreciation of investments (computed on the basis of identified cost) 2,267,778
Undistributed net investment income 1,445
---------------------------------------------------------------------------------------------------------------------------------
Total $ 26,196,699
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($26,196,699 / 1,974,078 shares of capital stock outstanding) (Note 3) $13.27
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $2,687) $ 217,730
Interest 73,870
---------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 291,600
Expenses:
Investment Advisory Fee (Note 2) 67,803
Custody 29,908
Audit 1,511
Shareholder Reporting 416
Trustee Fees and Expenses (Note 2) 4,909
Legal 2,281
Miscellaneous 92
---------------------------------------------------------------------------------------------------------------------------------
Total expenses 106,920
Less expenses reimbursed by Cova Life and/or the Adviser 27,818
---------------------------------------------------------------------------------------------------------------------------------
Net expenses 79,102
---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 212,498
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from security transactions and futures contracts
Proceeds from sales $ 11,580,297
Cost of securities sold (10,857,955)
--------------
Net realized gain from security transactions 722,342
Realized gain from futures contracts 34,427
---------------------------------------------------------------------------------------------------------------------------------
Net realized gain from security transactions 756,769
---------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments and futures contracts
Beginning of period $ 1,748,247
End of period 2,267,778
---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts during
the period 519,531
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts 1,276,300
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,488,798
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 (UNAUDITED) DECEMBER 31, 1995
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 212,498 $ 286,149
Realized gain from security transactions and futures contracts 756,769 1,601,769
Net unrealized appreciation on
investments and futures contracts 519,531 1,973,073
------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,488,798 3,860,991
------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders reinvested in capital shares
Net investment income (211,053) (294,561)
Net realized gain from security transactions 0 (1,277,017)
------------------------------------------------------------------------------------------------------------------------------
Total distributions (211,053) (1,571,578)
------------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3):
Proceeds from shares sold 9,883,305 6,076,696
Net asset value of shares issued through
dividend reinvestment 211,053 1,571,578
Cost of shares repurchased (4,899,711) (1,155,316)
------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions 5,194,647 6,492,958
------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 6,472,392 8,782,371
Net Assets:
Beginning of the period 19,724,307 10,941,936
------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $1,445 and $0, respectively) $ 26,196,699 $ 19,724,307
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MAY 1, 1992
(COMMENCEMENT OF
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, INVESTMENT
JUNE 30, 1996 OPERATIONS) TO
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) 1995 1994 1993 DECEMBER 31, 1992
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 2.512 $ 10.306 $ 11.170 $ 10.282 $ 10.000
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.108 0.224 0.331 0.182 0.125
Net realized and unrealized gain
(loss) on investments 0.760 3.089 (0.864) 1.371 0.444
Total from investment operations 0.868 3.313 (0.533) 1.553 0.569
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from net investment income (0.108) (0.232) (0.323) (0.182) 0.125
Distributions from net realized gain - (0.875) (0.008) (0.483) 0.162
Total distributions (0.108) (1.107) (0.331) (0.665) 0.287
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.272 $ 12.512 $ 10.306 $ 11.170 $ 10.282
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.94% 32.24% (4.54%) 15.01% 5.67%*
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (In millions) $ 26.2 $ 19.7 $ 10.9 $ 6.5 $ 2.6
RATIOS TO AVERAGE NET ASSETS (1)
- --------------------------------------------------------------------------------------------------------------------------------
Expenses 0.70%* 0.69% 0.70% 0.69% 0.70%*
Net investment income 1.88%* 2.05% 3.47% 1.84% 2.27%*
PORTFOLIO TURNOVER RATE: 53.06% 180.11% 326.01% 135.92% 99.93%
- --------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID (2): $0.0554 - - - -
- --------------------------------------------------------------------------------------------------------------------------------
* Annualized
(1) If certain expenses had not been assumed by Cova Life and/or the Adviser,
total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets: 0.95%* 1.19% 1.49% 2.05% 3.69%*
Ratio of Net Investment Income to Average Net Assets: 1.63%* 1.55% 2.68% 0.47% (0.73%)*
(2) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.
</TABLE>
See notes to financial statements
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the "Trust") (formerly the Van Kampen Merritt Series Trust)
under which the Growth and Income Portfolio (the "Fund") is organized as a
separate sub-trust, is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
investment objective of the Growth and Income Portfolio is to seek long-term
growth of both capital and income by investing in a portfolio of common stocks
which are considered to have potential for capital appreciation and dividend
growth. The Trust commenced operations on December 11, 1989. The Fund commenced
operations on May 1, 1992.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, estimates obtained from yield data relating to instruments or
securities with similar characteristics in accordance with procedures
established in good faith by the Board of Trustees. Short-term securities with
remaining maturities of less than 60 days are valued at amortized cost.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME AND EXPENSES - Dividend income is recorded on the
ex-dividend date and interest income and expenses are recorded on an accrual
basis.
D. FEDERAL INCOME TAXES - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Net realized gains or losses may differ from financial and tax reporting
purposes primarily as a result of timing differences related to open futures
transactions at year end.
E. DISTRIBUTION OF INCOME AND GAINS - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund shares.
Distributions from net realized gains for book purposes may include short-term
capital gains and futures transactions. Any short-term capital gains and a
portion of futures gains would be included in ordinary income for tax purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement with Cova Investment
Advisory Corporation (the "Adviser"), pursuant to which the Adviser manages the
investment operations of the Trust's affairs. The Adviser has entered into a
sub-advisory agreement with Van Kampen American Capital Investment Advisory
Corporation (the "Sub-adviser") for investment advisory services in connection
with the management of the Fund. The Adviser supervises the Sub-adviser's
performance of advisory services and will make recommendations to the Board of
Trustees with respect to the retention or renewal of the sub-advisory agreement.
The Adviser pays for the cost pursuant to the sub-advisory agreement and the
cost of compensating officers of the Trust.
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser a monthly fee based on the average daily net assets as follows:
Average Daily Net Assets % Per Annum
------------------------ -----------
First $500 million .60 of 1%
Over $500 million .50 of 1%
The Adviser has voluntarily undertaken to reimburse the Fund for its operating
expenses, exclusive of advisory fees, brokerage or other portfolio transaction
expenses or expenses of litigation, indemnification, taxes, or other
extraordinary expenses, to the extent that they exceed .10% of the average daily
net assets of the Fund.
Cova Variable Annuity Accounts One and Five are separate investment accounts
offered by Cova Financial Services Life Insurance Co. and Cova Financial Life
Insurance Co. (collectively "Cova Life"), respectively. At June 30, 1996, Cova
Variable Annuity Accounts One and Five owned all shares of beneficial interest
of the Fund.
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
3. CAPITAL TRANSACTIONS
At June 30, 1996 and December 31, 1995, paid in surplus aggregated $23,164,297
and $17,969,650, respectively.
Transactions in shares were as follows:
Six Months Ended Year Ended
June 30, December 31,
1996 1995
---- ----
Beginning Shares 1,576,436 1,061,698
--------- ---------
Shares Sold 419,129 489,524
Shares Issued through
Dividend Reinvestment 15,904 126,226
Shares Repurchased (37,391) (101,012)
------- --------
Net Increase in Shares
Outstanding 397,642 514,738
------- -------
Ending Shares 1,974,078 1,576,436
--------- ---------
4. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term notes, for the six months ended June 30, 1996 were
$16,824,022 and $11,580,297, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All the Fund's portfolio holdings, include
derivative instruments, are marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on investments. Upon
disposition, a realized gain or loss is recognized accordingly.
COVA SERIES TRUST
GROWTH AND INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Summarized below are the specific types of derivative financial instruments used
by the Fund.
A. FUTURES CONTRACTS - A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in stock index futures. These contracts are generally
used to provide the return of an index without purchasing all of the securities
underlying the index or as a substitute for purchasing or selling specific
securities.
The fluctuation in market value of the contracts is settled daily through a cash
margin account. Realized gains and losses are recognized when the contracts are
closed or expire.
Transactions in futures contracts for the six months ended June 30, 1996, were
as follows:
Contracts
---------
Outstanding at December 31, 1995 2
Futures Opened 4
Futures Closed (4)
----
Outstanding at June 30, 1996 2
----
The futures contracts outstanding as of June 30, 1996 and the description and
unrealized appreciation is as follows:
Nominal Unrealized
Contracts Value Appreciation
--------- ----- ------------
S&P 500 Index Futures
Sept. 1996 - Buys to Open 2 $ 676,800 $ 5,000
--- ---------- -----------
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