<PAGE>
1
February 11, 1999
LETTER FROM THE PRESIDENT
1998 -- STAYING THE COURSE
Perhaps no year in recent memory better defined the value of taking a long-term
view on investing than 1998. Investors who stayed the course throughout the
markets' mid-year declines and subsequent fourth quarter rallies, in large part,
were rewarded for the patience and discipline.
A Quick Review
Enclosed in this year's annual report are comments from the firms and
individuals who manage the portfolios in which you have the opportunity to
participate. I encourage you to read these comments carefully. I think you will
recognize, as I have, that the portfolio managers, analysts and economists who
manage these portfolios share your long-term view on investing. Many market
analysts were convinced that the historic performance of the previous three
years would not continue in 1998. During the first and second quarters, however,
the Dow Jones Industrial Average (DJIA) and Standard & Poor's 500 Index both
achieved record performance milestones in their respective histories. During the
third quarter, we were introduced to some new terminology in the investment
community. Phrases such as "Asian Flu" influenced performance in the markets in
more than just the technology sector. By late August, most of the years' gains
had been erased due to global economic uncertainty. The market experienced what
is known as a "correction." Generally, the term correction is reserved for a
market decline of nearly 20% from its previous high. Investors flight to quality
was a reaction to the slumping stock market as investors moved to Treasury
securities, pushing the benchmark bond's yield index to a 30-year low. However,
investors with a steady hand on the wheel began to experience one of the most
rapid market rebounds in history. With the Federal Reserve cutting major
short-term interest rates three times within a seven-week period and a small
group of blue-chip and tech-stocks propelling the market forward, the S&P 500
posted a fourth straight year of double-digit gains and finished the year with a
28.58% return. By design, your variable annuity with Cova is a long-term
investment vehicle built to weather the short-term fluctuations in domestic and
international equity and fixed income markets. Again, I submit that no year
could better illustrate this fact than last year. Most importantly, however,
your variable annuity offers you the potential for long-term rewards. The wide
array of investment choices, encompassing domestic and international equity
markets (managed with different objectives and styles) and domestic and global
bond markets, offers you the potential to capitalize on the investment expertise
of some of the most well-respected money management firms in the world. And, of
course, the fact that your assets are in a variable annuity means that your
investment has a chance to grow without currently being taxed.
Our Commitment Runs Deep
While it is easy to strictly focus on the financial results of one investment or
another, especially in a year like 1998, we at Cova have always taken to heart
the ultimate reasons why thousands of individuals take the time to sit down with
their financial advisors to chart a course for their future...freedom, control
and security. In addition, as a part of a sound financial plan, your investment
with us can help you reach your ultimate personal goals. As always, we consider
it a privilege that you have entrusted Cova to play an important role in your
future.
Sincerely,
/s/ L.J. Stensrud
L.J. Stensrud
President & CEO
P.S. Enclosed with your annual report is a supplement to your prospectus that
introduces the new portfolios available to you from AIM Advisors and Franklin
Templeton.
<PAGE>
2
Small Cap Stock Portfolio For the year ended 12/31/98
Managed by J.P. Morgan Investment Management
Letter to Policyholders
The Small Cap Stock Portfolio returned -5.40%(1) for the year ended December 31,
1998. The Russell 2000 Index(2) returned -2.57% during this time period.
After sinking to a 27-month low on October 8, the Russell 2000 Index staged one
of its strongest rallies in recent history. Since reaching its low, the Russell
2000 Index surged more than 35%, finishing the quarter up 16.3%. In fact, the
fourth quarter was the strongest period for the Russell 2000 Index since the
first quarter of 1991. The rally was widespread and stimulated by four events:
(1) the Federal Reserve's interest rate cuts, (2) perceived cheap valuations,
(3) decent earnings prospects for small cap companies, and (4) seasonal investor
buying patterns.
Overall this year, the small cap market experienced a considerable amount of
volatility. The stellar returns of this past quarter alone were not sufficient
to reverse the weak results of the second and third quarters. Recapping the
year, the Russell 2000 Index returned +10% in the first quarter, - 5% in the
second quarter, -20% in the third quarter, +16% in the fourth quarter.
Well-established trends persisted as growth stocks (+1.2%) edged out value
stocks (-6.5%).
Stock selection in the technology and basic industry sectors proved favorable
for the Portfolio in 1998. A significant contributor within the technology
sector was SDL Inc, up 217% in the fourth quarter, which rallied on the
announcement of an upside earnings surprise, a stock buy-back program, new
management appointments, and the company's increased focus on the
telecommunications markets. Similarly, performance during the first three
quarters was boosted by holdings in seed manufacturer Dekalb Genetics, as the
stock rose following the announcement that the company would be acquired by
Monsanto Corporation.
For 1999, we expect moderation with respect to earnings, economic growth, and
share price appreciation. Positive seasonal trends and monetary conditions
should support the market as we enter the new year. However, any one of a
plethora of macro-economic or political uncertainties has the potential to
deflect stocks from extending their recent gains. The small cap market has
lagged the S&P 500 Index(3) by 30% for the year, marking the fifth consecutive
year of underperformance. However, our internal valuations as well as current
price-to-earnings ratios are both at historical extremes in favor of small caps.
Given both the prolonged underperformance of the small cap market and relative
valuation, we continue to believe small cap stocks are undervalued relative to
large cap stocks.
James B. Otness
Portfolio Manager
J.P. Morgan Investment Management Inc.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The Russell 2000 Index is an unmanaged index consisting of the stocks of
2000 U.S.-based companies. The Index does not include fees or expenses and is
not available for direct investment.
(3) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- -------------------------------------------------------
<S> <C>
Renaissance RE Holdings Ltd. 1.7%
- -------------------------------------------------------
DR Horton Inc. 1.5
- -------------------------------------------------------
Mueller Industries Inc. 1.4
- -------------------------------------------------------
Concentric Network Corp. 1.4
- -------------------------------------------------------
Caraustar Industries Inc. 1.4
- -------------------------------------------------------
BankUTD Corp. 1.3
- -------------------------------------------------------
Capital Re Corp. 1.3
- -------------------------------------------------------
Alternative Living Services Inc. 1.2
- -------------------------------------------------------
Commercial Metals Co. 1.2
- -------------------------------------------------------
Human Genome Sciences Inc. 1.2
- -------------------------------------------------------
</TABLE>
[PIE CHART]
Sector Allocation (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Software Technology Banks REITs Consumer Communications Basic Utilities Drugs Insurance Other
Hardware Services Industry
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.83 9.81 7.4 6.91 5.84 5.63 5.56 5.34 5.30 4.16 33.22
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
3
Small Cap Stock Portfolio, managed by
J.P. Morgan Investment Management vs. Russell 2000 Index
Growth Based on $10,000(+)
[LINE CHART]
JPM small cap vs Russell 2000 plot points
JPM Small Cap Russell 2000
<TABLE>
<S> <C> <C>
10000 10000
Jun-96 9955 9967
10091 10001
Dec-96 10825 10521
10089 9977
Jun-97 11630 11595
13371 13320
Dec-97 13135 12874
14739 14169
Jun-98 13753 13508
10797 10787
Dec-98 12426 12546
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Average Annual Return(1)
- ----------------------------------------------------------------------------
1 Year Since inception(+)
- ----------------------------------------------------------------------------
<S> <C> <C>
Small Cap Stock Portfolio,
managed by JPMIM -5.40% 8.47%
- ----------------------------------------------------------------------------
Russell 2000 -2.57% 8.87%
- ----------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from date of initial public offering, May 1, 1996.
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the Small Cap
Stock Portfolio managed by J.P. Morgan Investment Management (JPMIM) and the
return on the investment will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
4
QUALITY BOND PORTFOLIO For the year ended 12/31/98
MANAGED BY J.P. MORGAN INVESTMENT MANAGEMENT
Letter to Policyholders
The Quality Bond Portfolio provided a total return of 8.37%(1) for the year
ended December 31, 1998. The Salomon Brothers Broad Investment-Grade Bond
Index(2) returned 8.72% for the same time period.
Throughout 1998, the U.S. economy continued its strong growth. The ongoing Asian
contagion brought liquidity concerns causing investors to seek the relative
safety of U.S. Treasuries, which outperformed almost everything else except
money market securities in the third quarter. The Federal Reserve cut interest
rates three times in the space of 6 weeks in September, October and November.
Such action eased liquidity constraints and helped to restore investor
confidence.
The Portfolio's performance benefited from adding to corporate and
mortgage-backed securities during the year. In addition, our decision to
maintain the Portfolio's long duration position also contributed positively to
performance. The Portfolio's allocation to U.S. Treasuries in the third quarter
enhanced returns as investors 'fled to quality' from the continued Asian
contagion. As corporate and mortgage-backed securities performed particularly
well toward the end of the year, we modestly reduced the Portfolio's exposure to
these sectors. We actively traded residential mortgages as they offered tactical
opportunities at the year end.
In the global economy in 1999 we continue to look for sluggish overall growth in
global GDP and no growth in manufacturing. In the U.S., while we are impressed
with the persistent strength we are seeing currently, we continue to believe
that the ongoing slowdown in manufacturing will lead to more modest growth in
the coming year, with U.S. GDP growth for the year targeted at 1.5%. Though the
risk of an abrupt slowdown is present, prompted by either a stock market
correction or a current account induced currency crisis, the more likely outcome
is an undramatic slowing of activity.
We expect the Fed to be responsive to the slowing economy by continuing to ease
monetary policy through the year, causing the yield curve to steepen and overall
interest rate levels to decline. By year end 1999 our most likely scenario is
for Fed funds to be in the area of 4.00% and 30-year U.S. Treasury yields to be
slightly below 5.00%.
HARRIET T. HUBER
Portfolio Manager
J.P. Morgan Investment Management Inc.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The Salomon Brothers Broad Investment-Grade Bond Index (BIG) is a
market-capitalized weighted index which includes fixed-rate Treasury, government
sponsored, corporate (Baa3/BBB or better) and mortgage securities. The index
does not reflect any expenses.
[PIE CHART]
PORTFOLIO COMPOSITION (% of portfolio market value)
As of 12/31/98
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Treasury Agency AAA AA A BBB BB
- --------------------------------------------------------------------------------
28.6 33.8 12.9 2.1 12.5 9.2 0.9
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
5
QUALITY BOND PORTFOLIO, MANAGED BY J.P. MORGAN INVESTMENT MANAGEMENT
VS. SALOMON BROTHERS BROAD INVESTMENT-GRADE BOND INDEX
Growth Based on $10,000(+)
[LINE CHART]
<TABLE>
JPM qual bond vs Salomon plot points
JPM Quality Bond Salomon
<S> <C> <C>
10000 10000
Jun-96 10095 10129
10140 10318
Dec-96 10577 10629
10488 10574
Jun-97 10845 10955
11190 11319
Dec-97 11495 11652
11706 11840
Jun-98 11983 12114
12481 12617
Dec-98 12469 12668
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Average Annual Return(1)
- ----------------------------------------------------------------------------
1 Year Since inception(+)
- ----------------------------------------------------------------------------
<S> <C> <C>
Quality Bond Portfolio,
managed by JPMIM 8.37% 8.68%
- ----------------------------------------------------------------------------
Salomon Brothers BIG Index 8.72% 9.27%
- ----------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from date of initial public offering, May 1, 1996.
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the Quality Bond
Portfolio managed by J.P. Morgan Investment Management (JPMIM) and the return on
the investment will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
6
SELECT EQUITY PORTFOLIO For the year ended 12/31/98
MANAGED BY J.P. MORGAN INVESTMENT MANAGEMENT
Letter to Policyholders
The Select Equity Portfolio returned 22.56%(1) for the year ended December 31,
1998. The S&P 500 Index(2) returned 28.58% during this period.
The U.S. stock market ended a very volatile year in a rally driven by size and
growth. The largest 50 stocks outperformed the rest of the market, gaining 40%
versus the 17% for the other 450 stocks in the S&P 500 Index. U.S. stock markets
staged an impressive rise during the fourth quarter, driving results for the
full year and extending the S&P 500 Index's streak of 20% or more returns to an
unprecedented four years. Liquidity flooded financial markets as the Federal
Reserve cut interest rates three times in the space of 6 weeks in September,
October and November. As such, early fourth quarter stock market advances were
fairly broad based. However, gains that elevated the S&P 500 Index to a record
1,241 became increasingly more narrow as analysts lowered earnings expectations
and as interest rates stagnated.
The persistence of these patterns has led to a very narrow market - a
challenging environment for active managers, particularly those relying on
valuation-driven stock selection techniques. Against this backdrop, and relative
to most value managers, the Select Equity Portfolio delivered very solid
results.
Stock selection in the technology sector proved favorable for the Portfolio in
1998. Within the S&P 500 Index, technology was one of only four sectors to
outperform the Index for the year. Prospects for growth appeared better,
particularly as the PC industry worked its way through an inventory correction.
Evidence that Y2K would be a net boost to tech spending, at least for the first
half of 1999, also emboldened investors. Meanwhile, internet stocks scaled new
heights amid frenzied trading, and offered a new rationale for multiple
expansion among some of the larger, more established technology companies
including EMC Corp., Sun Microsystems, Compaq Computer, and IBM - all overweight
positions in the Portfolio.
Portfolio holdings in the consumer staple sector also boosted performance.
Anheuser Busch shares rallied on news of volume and pricing gains and Philip
Morris stock rose with the announcement of a tobacco settlement.
Energy stocks were among the weaker constituents of the S&P 500 Index as well as
of the Portfolio. Late-breaking potential catalysts, including Exxon's $75B
acquisition of Mobil as well as the attack on Iraq, failed to reinvigorate
interest in the sector as oil prices remained depressed. Portfolio holdings
skewed towards refining (Tosco and Valero Energy) and oil service stocks
(Input/Output) detracted from performance as shares of large, integrated oil
companies fared better in this environment.
For 1999, we expect moderation with respect to earnings, economic growth, and
share price appreciation. Positive seasonal trends and monetary conditions
should support the market as we enter the new year. However, any one of a
plethora of macro uncertainties has the potential to deflect stocks from
extending their recent gains: the impeachment of the president, the impact of
the Euro, the year 2000 problem, or further international financial turmoil
(Brazil, Japan) or hostilities (Iraq).
MICHAEL J. KELLY
Portfolio Manager
J.P. Morgan Investment Management Inc.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- -------------------------------------------------------
<S> <C>
Monsanto 3.3%
- -------------------------------------------------------
BankAmerica 3.2
- -------------------------------------------------------
American Home Products 3.0
- -------------------------------------------------------
MCI Worldcom 3.0
- -------------------------------------------------------
Philip Morris 3.0
- -------------------------------------------------------
IBM 2.8
- -------------------------------------------------------
Bristol Myers Squibb 2.7
- -------------------------------------------------------
Mobil 2.6
- -------------------------------------------------------
Procter & Gamble 2.6
- -------------------------------------------------------
Waste Management 2.5
- -------------------------------------------------------
</TABLE>
[PIE CHART]
SECTOR ALLOCATION (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Technology Drugs Finance Consumer Staple Telephone Multi-Industry Energy Services Retail Insurance Other
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16.91 11.68 11.09 10.08 8.29 7.87 7.17 6.26 5.81 3.49 11.35
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
7
SELECT EQUITY PORTFOLIO, MANAGED BY
J.P. MORGAN INVESTMENT MANAGEMENT VS. S&P 500 INDEX
Growth Based on $10,000(+)
[LINE CHART]
JPM select equity vs S&P 500 plot points
JPM Sel Equity S&P 500
<TABLE>
<S> <C> <C>
10000 10000
Jun-96 9852 10297
10004 10615
Dec-96 10837 11500
10932 11808
Jun-97 12966 13870
14372 14909
Dec-97 14224 15337
15930 17476
Jun-98 16147 18053
14384 16257
Dec-98 17496 19719
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Average Annual Return(1)
- ------------------------------------------------------------------------------
1 Year Since inception(+)
- ------------------------------------------------------------------------------
<S> <C> <C>
Select Equity Portfolio,
managed by JPMIM 22.56% 23.30%
- ------------------------------------------------------------------------------
S&P 500 Index 28.58% 28.99%
- ------------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from date of initial public offering, May 1, 1996.
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the Select Equity
Portfolio managed by J.P. Morgan Investment Management (JPMIM) and the return on
the investment will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
8
Large Cap Stock Portfolio For the year ended 12/31/98
Managed by J.P. Morgan Investment Management
Letter to Policyholders
The Large Cap Stock Portfolio returned 32.31%(1) for the year ended December 31,
1998. The S&P 500(2) returned 28.58% during this time period.
The U.S. stock market ended a very volatile year in a rally driven by size and
growth. The largest 50 stocks outperformed the rest of the market, gaining 40%
versus the 17% for the other 450 stocks in the S&P 500 Index. U.S. stock markets
staged an impressive rise during the fourth quarter, driving results for the
full year and extending the S&P 500 Index's streak of 20% or more returns to an
unprecedented four years. Liquidity flooded financial markets as the Federal
Reserve cut interest rates three times in the space of 6 weeks in September,
October and November. As such, early fourth quarter stock market advances were
fairly broad based. However, gains that elevated the S&P 500 Index to a record
1,241 became increasingly more narrow as analysts lowered earnings expectations
and as interest rates stagnated.
While 1998 was difficult for most active managers, stock selection and risk
control were the main contributors to the Portfolio's outperformance. In
particular, the Portfolio's holding in drug stock Warner Lambert benefited
performance as sales of its cholesterol-reducing drug Lipitor surpassed the $1
billion market. Favorable stock selection in the consumer cyclical and telephone
sectors enhanced performance also. In particular, the Portfolio's holding in
Chrysler positively impacted performance as that company agreed to merge with
Daimler-Benz. The Portfolio's overweight position in Worldcom enhanced returns
on news of an approved merger with MCI. In the latter part of the year, our
decision to underweight money center banks and brokerage stocks within the
finance sector had a positive impact on the Portfolio's performance. Stocks in
these sectors traded sharply lower due to the financial and economic meltdown in
emerging markets, the declining U.S. stock market, and the large potential
losses from exposure to the hedge fund, LongTerm Capital Management. Conversely,
the Portfolio's holding in Monsanto held back performance in the last quarter,
as the company announced its decision to end merger talks with American Home
Products. Monsanto will now be forced to issue equity, since its balance sheet
has been weakened by $8 billion of seed acquisitions.
For 1999, we expect moderation with respect to earnings, economic growth, and
share price appreciation. Positive seasonal trends and monetary conditions
should support the market as we enter the new year. However, any one of a
plethora of macro uncertainties has the potential to deflect stocks from
extending their recent gains: the impeachment of the president, the impact of
the Euro, the year 2000 problem, or further international financial turmoil
(Brazil, Japan) or hostilities (Iraq).
James Wiess
Portfolio Manager
J.P. Morgan Investment Management Inc.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
Top 10 Portfolio Holdings by Market Value
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- ------------------------------------------------------------------
<S> <C>
Intel 2.9%
- ------------------------------------------------------------------
Microsoft 2.7
- ------------------------------------------------------------------
Bristol Myers Squibb 2.3
- ------------------------------------------------------------------
General Electric 2.3
- ------------------------------------------------------------------
IBM 2.3
- ------------------------------------------------------------------
Cisco Systems 2.2
- ------------------------------------------------------------------
AT&T 2.2
- ------------------------------------------------------------------
MCI Worldcom 2.2
- ------------------------------------------------------------------
Philip Morris 2.2
- ------------------------------------------------------------------
Lucent Technologies 2.0
- ------------------------------------------------------------------
</TABLE>
[PIE CHART]
Top 10 Portfolio Sectors (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Data Finance Drugs Consumer Telephone Multi-Sector/ Retail Energy Services Insurance Other
Processing/ Staple Misc. Industrial
Electronics
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17.42 11.82 11.18 8.90 8.40 7.71 6.67 6.21 5.90 3.44 12.35
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
9
Large Cap Stock Portfolio, managed by
J.P. Morgan Investment Management vs. S&P 500 Index
Growth Based on $10,000(+)
[line CHART]
JPM Large Cap vs. S&P 500 plot points
<TABLE>
<CAPTION>
JPM Large Cap S&P 500
<S> <C> <C>
10000 10000
Jun-96 10237 10297
10419 10615
Dec-96 11467 11500
11724 11808
Jun-97 13863 13870
14902 14909
Dec-97 15238 15337
17516 17476
Jun-98 18192 18053
16400 16257
Dec-98 20161 19719
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Average Annual Return(1)
- -------------------------------------------------------------------------------
1 Year Since inception(+)
- -------------------------------------------------------------------------------
<S> <C> <C>
Large Cap Stock Portfolio,
managed by JPMIM 32.31% 30.02%
- -------------------------------------------------------------------------------
S&P 500 Index 28.58% 28.99%
- -------------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from date of initial public offering, May 1, 1996.
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the Large Cap
Stock Portfolio managed by J.P. Morgan Investment Management (JPMIM) and the
return on the investment will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
10
INTERNATIONAL EQUITY PORTFOLIO For the year ended 12/31/98
Managed by J.P. Morgan Investment Management
Letter to Policyholders
The International Equity Portfolio returned 14.07%(1) for the year ended
December 31, 1998. The Portfolio underperformed the benchmark MSCI EAFE Index(2)
return of 20.00% for the same time period.
International equity markets achieved a very credible return over the course of
1998, despite a very difficult period during the summer months. European equity
markets, in particular, started the year in a strong fashion, reflecting the
continued optimism over the prospects for corporate profits. During the summer
months, global market turmoil spread from Asia to Russia to Latin America,
calling into question the near-term earnings estimates in equity markets, both
developed and emerging around the world. Continental European markets suffered
much of the pain, as investor sentiment waned. However, the global market
turmoil of the third quarter turned to global market euphoria in the fourth
quarter as markets everywhere rallied strongly. Stocks were helped by moves to
ease monetary policy in the U.S. and Europe, with the Fed cutting the overnight
rate twice during the quarter, and towards year-end, the European Central Bank
orchestrating a coordinated rate cut. While many continue to worry about a
slowing global economy, the quick responses from central banks and the
overreaction to negative news during the summer provided room for pleasing
equity returns.
In contrast to Europe, the Japanese market fell over the year, although the
strength of the Yen in the final quarter resulted in a positive return in U.S.
$. The outlook for the Japanese economy remains gloomy with economic growth
likely to slip further into recession this year. The extreme weakness in
consumer confidence remains a major problem, as does the recent strength of the
Yen.
Country allocation decisions were a negative influence over the period.
Underweighting Japan proved to be a positive decision, but the Portfolio was
hurt by the cautious stance adopted towards Hong Kong and Singapore in the
second half of the year. These markets rallied strongly in the final quarter.
The primary reason for underperformance was in stock selection. While the
Portfolio outperformed in the UK, it encountered a difficult time in Continental
Europe. Within Europe, the markets have been very focused, rewarding "growth"
companies, emphasizing the very largest, but not necessarily fundamentally
better value companies.
After a strong fourth quarter, international equity markets once again appear
overvalued. We maintain overweight positions in Europe, particularly in the UK.
The trend toward corporate restructuring has continued in Europe, providing
support for the equity markets. We continue to underweight Japan, although we
added to our position during the quarter. We have become less pessimistic about
our outlook for the Japanese equity market in the short term. Elsewhere in the
Pacific, we continue to favor Australia and New Zealand over other Southeast
Asian markets.
Nigel Emmett
Portfolio Manager
J.P. Morgan Investment Management Inc.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) Morgan Stanley Capital International Europe, Australia and Far East Index is
an unmanaged index and is an aggregate of 15 individual country indexes that
collectively represent many of the major markets of the world. The Index does
not include fees or expenses and is not available for direct investment.
Top 10 Portfolio Holdings by Market Value
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- ------------------------------------------------------------------
<S> <C>
Telecom Italia 2.7%
- ------------------------------------------------------------------
Roche Holdings 2.2
- ------------------------------------------------------------------
Nestle 2.1
- ------------------------------------------------------------------
Vivendi 2.0
- ------------------------------------------------------------------
Zurich Allied 1.7
- ------------------------------------------------------------------
Lloyds TSB Group 1.6
- ------------------------------------------------------------------
Glaxo Wellcome 1.5
- ------------------------------------------------------------------
Paribas 1.4
- ------------------------------------------------------------------
Novartis 1.3
- ------------------------------------------------------------------
Autoliv 1.3
- ------------------------------------------------------------------
</TABLE>
[PIE CHART]
Country Allocation (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
UK Japan France Switzerland Germany Netherlands Italy Australia Sweden Spain Other
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20.5 16.1 12.2 10.2 10.1 6.2 5.8 3.9 3.7 2.7 8.6
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
11
International Equity Portfolio, managed by J.P. Morgan Investment Management
vs. MSCI EAFE Index
Growth Based on $10,000(+)
[LINE CHART]
JPM IE VS MSCI EAFE plot points
<TABLE>
<CAPTION>
JPM Int. Equity MSCI EAFE
<S> <C> <C>
10000 10000
Jun-96 10172 10059
10149 10054
Dec-96 10859 10221
11032 10068
Jun-97 12003 11383
12090 11310
Dec-97 11491 10432
12913 11974
Jun-98 13189 12109
11008 10396
Dec-98 13107 12553
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Average Annual Return1
- ------------------------------------------------------------------------------
1 Year Since inception(+)
- ------------------------------------------------------------------------------
<S> <C> <C>
International Equity Portfolio,
managed by JPMIM 14.07% 10.66%
- ------------------------------------------------------------------------------
MSCI EAFE Index 20.00% 7.85%
- ------------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from date of initial public offering, May 1, 1996.
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the International
Equity Portfolio managed by J.P. Morgan Investment Management (JPMIM) and the
return on the investment will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
12
MONEY MARKET PORTFOLIO For the year ended 12/31/98
MANAGED BY VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
Letter to Policyholders
Throughout 1998, the U.S. economy continued its strong growth. While the Asian
financial crisis seemed to be settling early in the year, the Russian currency
breakdown and forced liquidations by leveraged funds caused all major sectors of
the U.S. stock market to decline. The ongoing Asian contagion brought liquidity
concerns causing investors to seek the relative safety of U.S. Treasuries, which
outperformed almost everything else except money market securities in the third
quarter.
Having a profound impact on yields was the Federal Reserve Board's move
to cut interest rates at the end of the third quarter. The Federal Reserve cut
interest rates three times in the space of 6 weeks in September, October and
November. The impact can be demonstrated in the average taxable seven-day
compound yield, which started off the year at its high of 5.36%, but bottomed
out at 4.64% at year-end in response to the interest-rate cut. During the fourth
quarter, the fund was managed in a defensive manner in anticipation of portfolio
liquidation. Therefore, as positions matured, proceeds were rolled into highly
liquid agency securities. This shifted the composition of the fund from
commercial paper to a high concentration in agency discount notes.
REID HILL
Portfolio Manager
Van Kampen Funds
The Money Market Portfolio in the Cova Series Trust ceased operations as of
January 8, 1999.
TOP 5 HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- ----------------------------------------------------------
<S> <C>
FHLB 46.6%
- ----------------------------------------------------------
FHLMC 12.7
- ----------------------------------------------------------
FNMA 12.7
- ----------------------------------------------------------
Commercial Credit Co. 4.9
- ----------------------------------------------------------
Coca-Cola Corp. 4.9
- ----------------------------------------------------------
</TABLE>
<PAGE>
13
QUALITY INCOME PORTFOLIO For the year ended 12/31/98
MANAGED BY VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
Letter to Policyholders
The Quality Income Portfolio provided a total return of 6.15%(1) for the year
ended December 31, 1998. The Lehman Brothers Government/Corporate Bond Index(2)
returned 9.47% for the same time period.
During 1998, world markets watched,waited and reacted as currency crises shook
Asia, Russian and Brazil. Thisbrought liquidity concerns causing investors to
seek the relative safety of U.S.Treasuries, which outperformed almost
everything else except money marketsecurities in the third quarter.
Indeed, liquidity became the watchword in 1998, as spreads across all sectors
of the domestic fixed income market widened out to levels not seen in over
a decade.
According to the Salomon Brothers Broad Investment-Grade Bond Index(3),
investment grade corporate spreads ended the year 51 basis points wider, and
trailed Treasuries by 206 basis points on a duration adjusted basis. Spreads
peaked in October at the height of hedge fund liquidation and following Russia's
debt restructuring, but recovered nicely once the Federal Reserve started
cutting rates in order to restore financial stability to the system.
The story for mortgages wasn't much different. Overall, 1998 was a painful
year for mortgage investors as they trailed similar duration treasuries by 28
basis points.
KELLY GILBERT
Portfolio Manager
Van Kampen Funds
The Quality Income Portfolio in the Cova Series Trust ceased operations as of
January 8, 1999.
(1) Total return is the percent change in net asset value,
assuming the reinvestment of all distributions.
(2) The Lehman Brothers Government/Corporate Bond Index is comprised of all
publicly issued, non-convertible, domestic debt of the U.S. Government or any
agency thereof, quasi-Federal Corporation, or corporate debt guaranteed by the
U.S. Government and all publicly issued, fixed-rate non-convertible, domestic
debt of the four domestic major corporate classifications; industrial, utility,
financial and Yankee bond. The index does not reflect any expenses.
(3) The Salomon Brothers Broad Investment-Grade Bond Index (BIG) is a
market-capitalized weighted index which includes fixed-rate Treasury, government
sponsored, corporate (Baa3/BBB or better) and mortgage securities. The index
does not reflect any expenses.
CREDIT QUALITY (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- -------------------------------------------------------------------------------
<S> <C>
Treasury 7.93%
- -------------------------------------------------------------------------------
Agency 0.57
- -------------------------------------------------------------------------------
AAA 6.71
- -------------------------------------------------------------------------------
AA 3.15
- -------------------------------------------------------------------------------
A 21.29
- -------------------------------------------------------------------------------
BBB 60.35
- -------------------------------------------------------------------------------
</TABLE>
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- ----------------------------------------------------
<S> <C>
NGC 6.0%
- ----------------------------------------------------
Chase 5.6
- ----------------------------------------------------
PanEnergy 5.5
- ----------------------------------------------------
USA Waste 5.4
- ----------------------------------------------------
Hydro Quebec 5.2
- ----------------------------------------------------
U.S. Treasuries 5.875 (11-01) 5.2
- ----------------------------------------------------
LCI 5.2
- ----------------------------------------------------
Sprint 5.1
- ----------------------------------------------------
Providian 5.1
- ----------------------------------------------------
Petro Geo Services 5.0
- ----------------------------------------------------
</TABLE>
<PAGE>
14
QUALITY INCOME PORTFOLIO MANAGED BY VAN KAMPEN AMERICAN CAPITAL
VS. LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
Growth Based on $10,000(+)
[LINE CHART]
VKM qual inc vs Lehman plot points
VKM Quality Inc Lehman
<TABLE>
<S> <C> <C>
10000 10000
9916 9885
"6/90" 10208 10241
10281 10303
"12/90" 10819 10828
11046 11120
"6/91" 11216 11288
11838 11937
"12/91" 12516 12574
12316 12386
"6/92" 12792 12887
13485 13517
"12/92" 13487 13528
14159 14157
"6/93" 14566 14582
15128 15064
"12/93" 15042 15020
14532 14550
"6/94" 14339 14369
14367 14440
"12/94" 14392 14493
15032 15215
"6/95" 16075 16202
16380 16512
"12/95" 17194 17282
16827 16877
"6/96" 16912 16957
17151 17256
"12/96" 17663 17783
17051 17630
"6/97" 17622 18270
18146 18911
"12/97" 18687 19519
18944 19816
"6/98" 19456 20321
20126 21344
"12/98" 19837 21371
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Average Annual Return(1)
- ------------------------------------------------------------------------------
1 Year 5 Years Since inception(+)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Quality Income Portfolio
managed by VKAC 6.15% 6.09% 7.94%
- ------------------------------------------------------------------------------
Lehman Brothers
Gov't/Corp. Bond Index 9.47% 7.30% 8.80%
- ------------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from first full month since inception (1/1/90).
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the Quality Income
Portfolio managed by Van Kampen American Capital (VKAC) and the return on the
investment will fluctuate, and redemption proceeds may be higher or lower than
an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
15
STOCK INDEX PORTFOLIO For the year ended 12/31/98
MANAGED BY VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
Letter to Policyholders
The Stock Index Portfolio provided a total return of 28.04%(1) for the year
ended December 31, 1998. The U.S. equity market, as measured by the S&P 500
Index(2), advanced 28.58% in 1998 - marking the first time that market returns
exceeded 20% in four consecutive years. Over the past five years, the S&P 500
Index rose more than 150% to generate the highest five-year index return since
measurements began in 1927. This spectacular performance was fueled by a rise in
S&P 500 Index earnings of more than 40% over the past five years and a decline
in U.S. Treasury bond yields from over 7% in mid-1994 to roughly 5% at the end
of 1998.
While the equity rally from 1992 to 1997 saw corporate profit growth average 15%
(significantly higher than the 6% long-term average), the rally in 1998 occurred
despite a modest decline in corporate profit growth. Additionally, the
volatility of the returns on the S&P 500 Index more than doubled from an average
of 10.2% in the 1992 to 1997 period to 21.5% in 1998. In any case, the road to
positive returns was very bumpy in 1998 as world economies experienced
intermittent crises. The results would not have looked nearly as strong in 1998,
but for a late rally that drew support from the view that the economies of the
world were starting to show signs of recovery.
As we enter 1999, the outlook for the U.S. economy appears to be more dependent
upon developments overseas than at home. The slow and protracted recoveries of
the major foreign economies have taken their toll on our economy by slowing our
rate of growth.
We believe this trend will continue and that the 3.5-4.0% GDP growth rates
experienced in the last three years will fall to the 1-2% range in 1999. Even
with this slower rate of growth, the economy would set another record by
completing its ninth consecutive year of expansion.
With a low interest and inflation rate environment as a backdrop, the key to
positive equity returns in the coming year will be our ability to weather the
global economic storm and avoid recession. The level of positive returns,
however, will likely decline to more closely approximate long-term averages.
PETE PAPAGEORGAKIS, CFA
Portfolio Manager
Van Kampen Funds
The Stock Index Portfolio in the Cova Series Trust ceased operations as of
January 8, 1999.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
TOP 10 LONG-TERM HOLDINGS BY MARKET VALUE (Excluding short-term investments) As
a percentage of equity holdings on 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- -----------------------------------------------------
<S> <C>
Microsoft 3.66%
- -----------------------------------------------------
General Electric 3.60
- -----------------------------------------------------
Intel 2.11
- -----------------------------------------------------
Wal-Mart Stores 1.97
- -----------------------------------------------------
Exxon 1.95
- -----------------------------------------------------
IBM 1.94
- -----------------------------------------------------
Merck & Co. 1.92
- -----------------------------------------------------
Coca-Cola 1.78
- -----------------------------------------------------
Pfizer 1.75
- -----------------------------------------------------
Lucent Technologies 1.56
- -----------------------------------------------------
</TABLE>
<PAGE>
16
STOCK INDEX PORTFOLIO MANAGED BY VAN KAMPEN AMERICAN CAPITAL VS. S&P 500 INDEX
Growth Based on $10,000(+)
[LINE CHART]
VKM Stock Index vs.S&P 500 plot points
VKM Stock Index S&P 500
<TABLE>
<S> <C> <C>
10000 10000
"Dec-91" 10570 11144
10279 10862
"Jun-92" 10470 11069
10764 11418
"Dec-92" 11219 11993
11627 12516
"Jun-93" 11686 12577
11948 12902
"Dec-93" 12231 13201
11711 12701
"Jun-94" 11716 12754
12222 13378
"Dec-94" 12156 13376
13364 14678
"Jun-95" 14761 16079
16189 17357
"Dec-95" 17451 18403
18411 19390
"Jun-96" 19256 20260
19821 20886
"Dec-96" 21632 22627
21036 23234
"Jun-97" 24652 27290
26436 29334
"Dec-97" 27201 30176
30957 34386
"Jun-98" 31946 35521
28673 31987
"Dec-98" 34828 38799
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Average Annual Return(1)
- -----------------------------------------------------------------------------
1 Year 5 Year Since inception(+)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Stock Index Portfolio
managed by VKAC 28.04% 23.30% 19.99%
- -----------------------------------------------------------------------------
S&P 500 Index 28.58% 24.05% 21.08%
- -----------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from first full month since inception (12/1/91).
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the Stock Index
Portfolio managed by Van Kampen American Capital (VKAC) and the return on the
investment will fluctuate, and redemption proceeds may be higher or lower than
an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
17
VKAC GROWTH AND INCOME PORTFOLIO For the year ended 12/31/98
MANAGED BY VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
Letter to Policyholders
The Growth and Income Portfolio returned 17.96%(1) for the year ended December
31, 1998. The S&P 500 Index(2) returned 28.58% during this period.
The year 1998 will be remembered as the year of volatility. Consider the Dow
Jones Industrial Average (DJIA)(3). In 1998 the DJIA recorded two swings of 15%
or more - an occurrence that has not happened since 1987.
Still, the volatility couldn't deter overall performance. The U.S. equity
market, as measured by the S&P 500 Index, provided investors another
extraordinary year. The S&P 500 Index advanced 28.58% in 1998 - marking the
first time that market returns exceeded 20% in four consecutive years. More
amazing, over the past five years, the S&P 500 Index rose more than 150% to
generate the highest five-year index return since measurements began in 1927.
The catalyst for these unprecedented returns has been a rise in S&P 500 Index
earnings of more than 40% over the past five years and a decline in U.S.
Treasury bond yields from over 7% in mid-1994 to roughly 5% at the end of the
1998.
After the global market turmoil from August to early October wiped out most of
the stock market's gains for 1998, stocks roared back in the fourth quarter to
post one of the best quarters of the decade. Liquidity flooded the financial
markets as the Federal Reserve made three quarter-point reductions in short-term
interest rates in the space of six weeks. This action had a positive impact,
provided a more optimistic outlook for the markets, and restored investors'
confidence.
The S&P 500 Index staged an impressive rise during the fourth quarter, driving
results for the full year. Large-caps again powered the market, mainly due to
technology and Internet stocks that saw their market values multiply several
times over.
James A. Gilligan
Portfolio Manager
Van Kampen Funds
The VKAC Growth and Income Portfolio in the Cova Series Trust ceased operations
as of January 8, 1999.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
(3) The Dow Jones Industrial Average (DJIA) is an unweighted market index
representing 30 large capitalized industrial companies. The index does not
reflect any expenses and is not available for direct investment.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- -----------------------------------------------------------------
<S> <C>
International Business Machines Corp. 3.48%
- -----------------------------------------------------------------
Philip Morris Co., Inc. 2.93
- -----------------------------------------------------------------
American General Corp. 1.95
- -----------------------------------------------------------------
American Home Products Corp. 1.85
- -----------------------------------------------------------------
Waste Management, Inc. 1.80
- -----------------------------------------------------------------
Pharmacia & Upjohn, Inc. 1.78
- -----------------------------------------------------------------
Rhone-Poulenc S.A. 1.75
- -----------------------------------------------------------------
U.S. WEST, Inc. 1.69
- -----------------------------------------------------------------
GTE Corp. 1.56
- -----------------------------------------------------------------
Atlantic Richfield Co. 1.55
- -----------------------------------------------------------------
</TABLE>
[PIE CHART]
TOP 10 PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Pharmaceuticals Oil and Gas Beverages, Food Electric Utilities Banking
and Tobacco
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10.03 8.63 7.82 7.32 7.06
- -----------------------------------------------------------------------------
<CAPTION>
Computers and Telephone Other Insurance Computer Software Electronics
Information Systems and Processing
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5.66 5.37 33.67 5.09 5.06 4.29
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
18
VKAC GROWTH AND INCOME PORTFOLIO MANAGED BY
VAN KAMPEN AMERICAN CAPITAL VS. S&P 500 INDEX
Growth Based on $10,000(+)
[LINE CHART]
VKM G&I Vs.S&P 500 plot points
VKAC Growth & In S&P 500
<TABLE>
<S> <C> <C>
10000 10000
"Jun-92" 9750 9851
9962 10162
"Dec-92" 10569 10673
11226 11139
"Jun-93" 11527 11194
12143 11483
"Dec-93" 12234 11749
11746 11304
"Jun-94" 11342 11351
11858 11906
"Dec-94" 11634 11904
12498 13063
"Jun-95" 13581 14311
14862 15448
"Dec-95" 15948 16378
16737 17257
"Jun-96" 17082 18031
17466 18589
"Dec-96" 18998 20138
18377 20678
"Jun-97" 21114 24288
22343 26107
"Dec-97" 22659 26857
25649 30603
"Jun-98" 26099 31614
23067 28469
"Dec-98" 26729 34531
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Average Annual Return(1)
- ------------------------------------------------------------------------------
1 Year 5 Year Since inception(+)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
VKAC Growth and
Income Portfolio
managed by Van
Kampen American
Capital 17.96% 17.07% 15.82%
- ------------------------------------------------------------------------------
S&P 500 Index 28.58% 21.60% 20.70%
- ------------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from first full month since inception (6/1/92).
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the VKAC Growth
and Income Portfolio managed by Van Kampen American Capital and the return on
the investment will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
Cova from CDA Wiesenberger HySales software. Comparison line graphs chart the
hypothetical growth of $10,000 over a given historical period of time. Although
data are gathered from reliable sources, accuracy and completeness cannot be
guaranteed.
<PAGE>
19
HIGH YIELD PORTFOLIO For the year ended 12/31/98
MANAGED BY VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
Letter to Policyholders
The High Yield Portfolio provided a total return of 2.76%(1) for the year ending
December 31, 1998, while the Salomon Brothers High Yield Index-Composite(2)
returned 4.04%.
The year 1998 proved to be turbulent for the high yield sector. The month of May
marked the first time in 1998 that U.S. Treasury bonds outperformed their
corporate high-yield counterparts on a monthly basis. During both May and June,
investors worldwide fled to the safety of U.S. Treasuries, leaving corporate and
high-yield bonds behind. Furthermore, for the first time in eight years, safer
quality issues overall outperformed their riskier high-yield counterparts.
Investors started off the year with a strong appetite for the higher yield of
riskier bonds. However, a flight to quality was set off by a series of events,
namely economic crises in Asia, Russia, and Brazil, unresolved worry over a
meltdown of the Japanese economy and on the domestic front, concern over
President Clinton's legal proceedings. Investors began to run for the shelter of
the rallying Treasury market and eschewing substantially higher yields of
below-investment-grade assets, such as high-yield corporate bonds and emerging
market debt securities. Although interest rates reached historic lows, many
sectors of the bond market failed to keep pace with the price appreciation
provided by long-term U.S. Treasuries and, as a result, high-yield and
convertible securities performed poorly.
During the fourth quarter of 1998, the high yield sector was impressively strong
given the turmoil that sent it reeling over the summer. Of course, this was
prompted by three decisive rate cuts by the Federal Reserve Board in an attempt
to lower short-term interest rates. This action had a positive impact on
liquidity and proved effective in restoring investor confidence. As a result,
high-yield and convertible debt securities substantially outperformed Treasury
instruments of comparable maturities during the quarter.
BOB HICKEY
Portfolio Manager
Van Kampen Funds
The High Yield Portfolio in the Cova Series Trust ceased operations as of
January 8, 1999.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The Salomon Brothers High Yield Index-Composite tracks the composite high
yield market excluding issues with less than 7 years maturity. The index does
not reflect any expenses.
CREDIT QUALITY (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- ------------------------------------------------------------------------
<S> <C>
Treasury 0.00%
- ------------------------------------------------------------------------
Agency 0.00
- ------------------------------------------------------------------------
AAA 2.32
- ------------------------------------------------------------------------
AA 0.00
- ------------------------------------------------------------------------
A 0.00
- ------------------------------------------------------------------------
BBB 0.00
- ------------------------------------------------------------------------
BB 18.24
- ------------------------------------------------------------------------
</TABLE>
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- --------------------------------------------------------------------
<S> <C>
Sprint Spectrum L.P. 3.99%
- --------------------------------------------------------------------
Intermedia Communications, Inc. 3.37
- --------------------------------------------------------------------
Millicom International Cellular S.A. 2.51
- --------------------------------------------------------------------
MetroNet Communications Corp. 2.18
- --------------------------------------------------------------------
American Standard Co., Inc. 2.04
- --------------------------------------------------------------------
Communications & Power Corp. 2.03
- --------------------------------------------------------------------
ISP Holdings, Inc. 2.01
- --------------------------------------------------------------------
Pantry, Inc. (The) 2.00
- --------------------------------------------------------------------
Argosy Gaming Co. 1.98
- --------------------------------------------------------------------
AES Corp. 1.91
- --------------------------------------------------------------------
</TABLE>
<PAGE>
20
HIGH YIELD PORTFOLIO MANAGED BY VAN KAMPEN AMERICAN CAPITAL
VS. SALOMON BROTHERS HIGH YIELD INDEX-COMPOSITE
Growth Based on $10,000(+)
[LINE CHART]
VKM High Yeld vs.Salomon plot points
VKM HiYield Salomon
<TABLE>
<S> <C> <C>
10000 10000
10073 9706
"6/90" 10458 10090
10173 9200
"12/90" 10186 9252
11358 11065
"6/91" 11908 11786
12577 12546
"12/91" 13064 13251
14313 14244
"6/92" 14606 14808
15473 15473
"12/92" 15554 15674
15859 16690
"6/93" 17653 17471
17988 17873
"12/93" 18972 18548
18691 18068
"6/94" 18498 17910
18254 18218
"12/94" 18114 17887
18907 19235
"6/95" 19804 20559
20486 21211
"12/95" 21137 22131
21610 22376
"6/96" 21936 22562
22738 23528
"12/96" 23588 24619
23892 24599
"6/97" 24733 25816
25680 27044
"12/97" 26328 27837
27197 28971
"6/98" 27635 29247
26476 27906
"12/98" 27056 29057
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Average Annual Return(1)
- -----------------------------------------------------------------------------
1 Year 5 Years Since inception(+)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
High Yield Portfolio
managed by VKAC 2.76% 7.28% 11.69%
- -----------------------------------------------------------------------------
Salomon Brothers
High Yield Index 4.04% 9.55% 10.68%
- -----------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from first full month since inception (1/1/90).
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the High Yield
Portfolio managed by Van Kampen American Capital (VKAC) and the return on the
investment will fluctuate, and redemption proceeds may be higher or lower than
an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
21
BOND DEBENTURE PORTFOLIO For the year ended 12/31/98
MANAGED BY LORD, ABBETT &CO.
Letter to Policyholders
The Bond Debenture Portfolio completed its fiscal year on December 31, 1998 and
provided a total return of 6.26%(1) during that period. A key underlying reason
for this success is the Portfolio's ability to fine tune its allocation in
accordance with our projections regarding future debt market conditions.
WHAT HAPPENED IN THE MARKETS
U.S. financial markets became unnerved late in the first half of 1998 due to
mounting concerns about the impact of the Asian crisis and the fallout on
corporate earnings. The month of May marked the first time in 1998 that U.S.
Treasury bonds outperformed their corporate high-yield counterparts on a monthly
basis. During both May and June, investors worldwide fled to the safety of U.S.
Treasuries, leaving corporate and high-yield bonds behind.
Economic and political uncertainties extended the previous global "flight to
quality" into the third quarter of 1998. Despite the attraction of substantially
higher yields, investors limited their appetite for below-investment-grade
assets, such as high-yield corporate bonds and emerging market debt securities.
Although interest rates reached historic lows, many sectors of the bond market
failed to keep pace with the price appreciation provided by long-term U.S.
Treasuries and, as a result, high-yield and convertible securities performed
poorly.
The fourth quarter of 1998 was notable for its strong follow-through on the
improved U.S. market conditions that first became apparent in late October. The
turmoil in the capital markets that had held sway throughout the late summer and
early fall has now subsided and given rise to a more optimistic outlook. In the
U.S., the Federal Reserve Board moved decisively to lower short-term interest
rates. Such action had a positive impact on liquidity and has gone a long way
toward restoring investor confidence. Given this backdrop, high-yield and
convertible debt securities substantially outperformed Treasury instruments of
comparable maturities during the quarter.
HOW YOUR PORTFOLIO MET THE CHALLENGE
The Bond Debenture Portfolio's focus on high-yield bonds provided substantial
rewards for shareholders throughout 1998 as that sector of the fixed-income
market substantially outperformed Treasuries.
The overall strategy of the Bond Debenture Portfolio is to identify good bond
values while being careful about credit selection. Throughout the year, we
underweighted the Portfolio's corporate bond holdings in basic industries such
as steel, paper and chemicals because we considered that there was little
pricing power within these industries. We emphasized industries where cash flows
are steady, such as telecommunications, media and cable television providers.
Long term, we expect attractive returns from the well-managed high-yield
companies that we have selected. Because such bonds are currently yielding more
than 6% over Treasuries, we believe they represent particularly good value.
WHAT MAY LIE AHEAD
We believe that the current environment of low inflation, global overcapacity
and moderating U.S. economic growth makes a reversal of the Fed's interest-rate
policy extremely unlikely. Consequently, we expect that high-yield corporate
bonds - which provided a yield advantage of more than 6% over Treasuries at
year-end - will continue to offer outstanding value in relative terms going
forward. Given this forecast, we plan to maintain the Portfolio's current
overweighting of high-yield bonds.
As always, we will monitor the domestic economy closely and fine-tune the
Portfolio's allocation in accordance with our views among high-yield bonds,
convertible securities and high-grade securities that may include U.S. Treasury
notes and short-term U.S. Government obligations. We will also use our
proprietary in-depth research capabilities as a foundation for opportunistic
securities purchases within these market sectors regardless of changes in the
Portfolio's allocation.
Thank you for your continued confidence in the Bond Debenture Portfolio. We look
forward to helping you achieve your financial goals in the years ahead.
CHRISTOPHER J. TOWLE
Portfolio Manager
Lord, Abbett & Co.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- -----------------------------------------------------------------
<S> <C>
U.S. Treasury Notes (5.5%, 5/31/03) 8.7%
- -----------------------------------------------------------------
U.S. Treasury Notes (7.5%, 5/15/02) 4.6
- -----------------------------------------------------------------
FNMA 1.3
- -----------------------------------------------------------------
Elan Intl. Fin. 1.2
- -----------------------------------------------------------------
R.H. Donnelly 1.0
- -----------------------------------------------------------------
Harrahs Operating Co., Inc. 1.0
- -----------------------------------------------------------------
Purina Mills Inc. 1.0
- -----------------------------------------------------------------
AEI Holding Co. 1.0
- -----------------------------------------------------------------
Sinclair Broadcasting Group 1.0
- -----------------------------------------------------------------
Pierce Leahy Corp. 1.0
- -----------------------------------------------------------------
</TABLE>
[PIE CHART]
TOP 10 PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Consumer Transportation Technology Foreign U.S. Finance
Cyclicals Government Government
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
26.76 1.83 20.81 1.24 14.94 2.04
- -------------------------------------------------------------------------------
Consumer Non Basic Consumer Energy Other
Cyclicals Industry Services
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
11.7 2.99 7.82 6.36 3.51
- -----------------------------------------------------------------
</TABLE>
<PAGE>
22
BOND DEBENTURE PORTFOLIO MANAGED BY LORD ABBETT VS. INDICES(2)
Growth Based on $10,000(+)
[LINE CHART]
LA bond deb vs indices plot points
<TABLE>
<CAPTION>
LA Bond Deb ML Conv Ind FB Hi Yield Ind Salomon BIHGI
<S> <C> <C> <C> <C>
10000 10000 10000 10000
"6/96" 10202 10069 10068 10129
10718 10288 10303 10318
"12/96" 11359 10685 10601 10629
11433 10720 10682 10574
"6/97" 12148 11722 11532 10955
12779 12895 12540 11319
"12/97" 13053 12776 12387 11652
13711 13874 12697 11840
"6/98" 13792 13768 12858 12114
13198 12232 12067 12617
"12/98" 13870 13917 12398 12668
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Average Annual Return(1)
- ---------------------------------------------------------------------------
1 Year Since inception(+)
- ---------------------------------------------------------------------------
<S> <C> <C>
Bond Debenture Portfolio
managed by Lord Abbett 6.26% 13.03%
- ---------------------------------------------------------------------------
First Boston High Yield Index(2) 0.58% 8.40%
- ---------------------------------------------------------------------------
Salomon Brothers Broad
Investment High Grade Index(2) 8.72% 9.27%
- ---------------------------------------------------------------------------
Merrill Lynch Convertible Index(2) 8.93% 13.17%
- ---------------------------------------------------------------------------
</TABLE>
(+)Performance is shown from date of initial public offering, May 1, 1996.
(1) "Average Annual Return" is calculated including reinvestment of all income
dividends and capital gain distributions. Results represent past performance and
do not indicate future results. The value of an investment in the Bond Debenture
Portfolio managed by Lord Abbett and the return on the investment will
fluctuate, and redemption proceeds may be higher or lower than an investor's
original cost.
(2) The First Boston High Yield Index is representative of the lower rated debt
(including straight-preferred stocks) investments in the portfolio; the Merrill
Lynch Convertible Index is representative of the equity-related securities in
the portfolio; and Salomon Brothers Broad Investment High Grade Index is
representative of the high-grade debt in the portfolio. The three indices chosen
have elements of these three categories, but since there is no one index
combining all three categories, these three separate indices may not be a valid
comparison for the Portfolio. You may not directly invest in any of these
indices. The indices do not reflect any expenses.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software and Bloomberg. Comparison line graphs chart
the hypothetical growth of $10,000 over a given historical period of time.
Although data are gathered from reliable sources, accuracy and completeness
cannot be guaranteed.
<PAGE>
23
MID-CAP VALUE PORTFOLIO For the period ended 12/31/98
MANAGED BY LORD, ABBETT & CO.
Letter to Policyholders
The Mid-Cap Value Portfolio completed its fiscal year on December 31, 1998 and
provided a total return of 1.11%(1) for its shareholders during that period.
Our investment strategy focuses on companies that we believe offer the best
value in the mid-capitalization sector. That sector includes companies with
market capitalizations ranging from $500 million to $5 billion. The Portfolio
produced attractive returns during the first half of 1998 in a market climate
that generally favored large-capitalization stocks. Our bottom-up,
value-oriented style of stock selection, which emphasizes solid fundamental
research, led us to timely investments, early in the year, in a number of
electric utilities and HMOs. Our participation in these two sectors contributed
positively to the Portfolio's strong first-half performance.
All major areas within the U.S. equity market experienced declines during the
third quarter of the year, with mid-cap stocks having returns below large-cap
and above small-cap equities. Mid-cap stocks snapped back sharply during the
fourth quarter recapturing virtually all of the third quarter decline. While few
companies or sectors were spared during the downdraft third quarter, the fourth
quarter rally was dominated by strong performance among technology stocks and
consumer cyclicals. The Portfolio's selection of technology and consumer stocks
possessing high growth expectations served to add value during the rebound.
Energy stocks continued to perform poorly as excess supply and a warm start to
winter negatively impacted the price of oil and gas. Stock price declines in
this sector have created a number of excellent values. It is a sector we expect
to explore thoroughly in the coming months.
The economy continues to slow, and the financial markets have shown increased
volatility over concerns regarding earnings shortfalls and evidence of a global
credit crunch. However, our expectation for the U.S. economy at this time is not
recession, but rather that we have reached an inflection point of slower growth.
Given this backdrop, we remain extremely optimistic regarding the Portfolio's
future prospects. We believe we have a well-positioned collection of
attractively valued companies with excellent outlooks. We believe the mid-cap
sector will benefit in 1999 as investors shift away from the higher valuation
levels that currently exist among large-cap stocks. As always, we will continue
to invest with the goal of minimizing downside risk while maintaining maximum
upside potential.
Thank you for your continued confidence in the Mid-Cap Value Portfolio. We look
forward to helping you achieve your financial goals in the years ahead.
EDWARD VON DER LINDE
Portfolio Manager
Lord, Abbett & Co.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- ---------------------------------------------------------
<S> <C>
Tricon Global Restaurant 3.56%
- ---------------------------------------------------------
Ball Corp. 2.75
- ---------------------------------------------------------
Niagara Mohawk Power Corp. 2.55
- ---------------------------------------------------------
Universal Foods Corp. 2.32
- ---------------------------------------------------------
Adobe Systems 2.27
- ---------------------------------------------------------
Northeast Utilities 2.27
- ---------------------------------------------------------
Safety-Kleen Corp. 2.24
- ---------------------------------------------------------
Med Partners, Inc. 2.23
- ---------------------------------------------------------
Unisource Worldwide, Inc. 2.18
- ---------------------------------------------------------
Humana, Inc. 2.04
- ---------------------------------------------------------
</TABLE>
[PIE CHART]
TOP 10 PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Consumer Non Consumer Utilities Finance Energy Basic Technology Multi-Industry Cash Capital
Cyclicals Cyclicals Industry Goods
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
24.30 12.62 12.62 12.53 10.51 9.10 7.22 7.15 2.10 1.85
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
24
MID-CAP VALUE PORTFOLIO MANAGED BY LORD ABBETT VS. RUSSELL MIDCAP INDEX(2)
Growth Based on $10,000(+)
[LINE CHART]
LA mid cap vs Rus mid cap plot points
LAmid cap Russ mid cap
<TABLE>
<S> <C> <C>
10000 10000
10440 10571
"12/97" 10490 10689
11361 11844
"6/98" 11308 11665
9383 9935
"12/98" 10606 11767
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Total Return(1)
- -----------------------------------------------------------------------------
1 Year Since inception(+)
- -----------------------------------------------------------------------------
<S> <C> <C>
Mid-Cap Value Portfolio
managed by Lord Abbett 1.11% 4.40%*
- -----------------------------------------------------------------------------
Russell Midcap Index(2) 10.09% 12.65%
- -----------------------------------------------------------------------------
</TABLE>
*Portfolio commenced operations on 8/20/97.
(+)Index is shown from the first full month since Portfolio's inception.
(1) "Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Mid-Cap Value
Portfolio managed by Lord Abbett and the return on the investment will
fluctuate, and redemption proceeds may be higher or lower than an investor's
original cost.
(2) The Russell Midcap Index measures the performance of the 800 smallest
securities in the Russell 1000 Index, which represent approximately 35% of the
total market capitalization. The index does not reflect any expenses.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software and Bloomberg. Comparison line graphs chart
the hypothetical growth of $10,000 over a given historical period of time.
Although data are gathered from reliable sources, accuracy and completeness
cannot be guaranteed.
<PAGE>
25
LARGE-CAP RESEARCH PORTFOLIO For the period ended 12/31/98
MANAGED BY LORD, ABBETT & CO.
Letter to Policyholders
The Cova Large-Cap Research Portfolio completed its fiscal year on December 31,
1998 and provided a total return of 21.04%(1) for its shareholders during that
period.
WHAT HAPPENED IN THE MARKETS
The market momentum seen in the early months of 1998 was overcome in the third
quarter as concerns regarding economic and political crises in Asia and Russia
hit home. During the year's fourth quarter, however, many of the world's
financial markets experienced healthy recoveries that were triggered by
interest-rate declines in the U.S. and Europe. The third quarter declines that
affected stock prices provided tremendous buying opportunities for value
investors, like the Portfolio's management team, who focus on undervalued stocks
of companies with prospects that exceed the earnings expectations reflected in
their stock prices.
ABOUT THE PORTFOLIO
The Portfolio's strong 1998 returns were due, in part, to our decision to
maintain an overweighting of financial company holdings. After a weak start, the
companies benefited from attractive valuations relative to their expected
earnings and ongoing consolidations within their industry. Because of favorable
earnings developments and merger activity, pharmaceutical and health care
holdings also provided a positive influence on the Portfolio's performance, as
did our selections in the energy sector.
Price weakness among technology companies during the third quarter provided us
with the opportunity to purchase additional technology stocks for the Portfolio,
as we anticipated that companies in this industry would continue to perform well
into the New Year. Several companies in the consumer cyclicals and consumer
non-cyclicals sectors also added value to the Portfolio, while companies in the
electric utilities and energy sectors detracted.
LOOKING AHEAD
We believe that continued low inflation, slowing economic growth and benign
interest rates, combined with flat projected earnings growth of the S&P 500
Index(2) companies in 1999, will favor the Portfolio's research-driven value
investment strategy in the years ahead. We remain confident that we can uncover
solid investment values across all industries by focusing on company
fundamentals and long-term earnings potential. These opportunities should prove
beneficial as the "flight to liquidity" phenomenon subsides and investors are
willing to assume more risk in their diversified strategies.
ROBERT MORRIS
Portfolio Manager
Lord, Abbett & Co.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- ------------------------------------------------------------------
<S> <C>
AT&T Corp. 3.11%
- ------------------------------------------------------------------
International Business Machines 2.81
- ------------------------------------------------------------------
Heinz, H.J. Co. 2.75
- ------------------------------------------------------------------
First Data Corp. 2.48
- ------------------------------------------------------------------
Exxon Corp. 2.44
- ------------------------------------------------------------------
American General Corporation 2.35
- ------------------------------------------------------------------
EMC Corp. 2.25
- ------------------------------------------------------------------
Waste Management, Inc. 2.11
- ------------------------------------------------------------------
CIGNA Corp. 2.02
- ------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 2.01
- ------------------------------------------------------------------
</TABLE>
[PIE CHART]
TOP 10 PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Technology U.S. Consumer Non Multi-Industry Finance Cash
Government Cyclicals
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
20.72 1.67 17.20 2.42 15.67 3.94
- ----------------------------------------------------------------------------
Consumer Basic Energy Capital Utilities
Cyclicals Industry Goods
- -----------------------------------------------------------------
<C> <C> <C> <C> <C>
10.63 4.78 10.53 5.68 6.76
- -----------------------------------------------------------------
</TABLE>
<PAGE>
26
LARGE CAP RESEARCH PORTFOLIO MANAGED BY LORD ABBETT VS. S&P 500 INDEX
Growth Based on $10,000(+)
[LINE CHART]
LA lg cap vs S&P500 plot points
LA Large Cap S&P500
<TABLE>
<S> <C> <C>
10000 10000
10040 10548
"12/97" 9926 10851
11298 12364
"6/98" 11452 12772
10035 11502
"12/98" 12014 13951
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Total Return(1)
- ---------------------------------------------------------------------------
1 Year Since inception(+)
- ---------------------------------------------------------------------------
<S> <C> <C>
Large Cap Research Portfolio
managed by Lord Abbett 21.04% 14.37%*
- ---------------------------------------------------------------------------
S&P 500 Index 28.58% 26.44%
- ---------------------------------------------------------------------------
</TABLE>
(+)Index is shown from first full month since Portfolio's inception.
(1) "Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Large Cap Research
Portfolio managed by Lord Abbett and the return on the investment will
fluctuate, and redemption proceeds may be higher or lower than an investor's
original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns for the graph above were generated by
Cova from CDA Wiesenberger HySales software. Comparison line graphs chart the
hypothetical growth of $10,000 over a given historical period of time. Although
data are gathered from reliable sources, accuracy and completeness cannot be
guaranteed.
<PAGE>
27
DEVELOPING GROWTH PORTFOLIO For the period ended 12/31/98
MANAGED BY LORD, ABBETT & CO.
Letter to Policyholders
The Developing Growth Portfolio completed its fiscal year on December 31, 1998
and provided a total return of 6.60%(1) for its shareholders during that period.
Small-cap investors saw positive early first half returns erased by a sharp
downturn. This downturn was caused in part by a "flight to quality" stemming
from international monetary and economic crises as well as political problems
that led investors to seek more liquid investments, such as larger-company
stocks and higher-quality bonds. While all major asset classes of the U.S.
equity market experienced weakness during the year's third quarter, small-cap
equities had the lowest returns.
The month of October, however, saw some price recovery for small-cap stocks
after August's severe declines. The October upswing turned out to be a harbinger
of extremely strong performance during the fourth quarter as economic and
political uncertainties that had previously affected investor confidence
subsided and a more optimistic outlook emerged. Key to this turnaround was the
Federal Reserve Board's decisive move to lower U.S. interest rates through a
series of autumn rate cuts.
Most sectors of the U.S. equity market participated in the fourth quarter
upswing. However, as the market reached its previous highs, certain sectors,
such as technology and consumer non-cyclicals, that had provided price
leadership earlier in the year, once again moved ahead of the broad market.
Large-cap stocks continued to outperform mid- and small-cap investments.
Our focus on bottom-up stock selection allowed the Portfolio to overcome
industry-specific difficulties throughout most of the period under review. Our
strategy and philosophy remain constant. We concentrate on selecting those
companies that we believe will offer our investors superior long-term stock
price appreciation regardless of industry-specific problems or large-scale
economic trends.
In our view, the current backdrop of growth in the economy, low levels of
inflation and interest rates, paired with adequate liquidity supported by
Federal Reserve policy, should enable the U.S. equity market to show progress in
the next year. However, a slowing U.S. economy could spur small-cap price
volatility due to lower corporate earnings and employment growth. We believe our
focus on identifying financially strong companies that can be purchased at
attractive prices will enable the Portfolio to uncover exciting investment
opportunities even during a slowing economy. Since small-cap stocks remain
significantly undervalued with respect to relative earnings versus large-caps,
we also expect that a period of strong performance by small-caps is likely
during 1999.
STEPHEN J. MCGRUDER
Portfolio Manager
Lord, Abbett & Co.
(1)Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
% of portfolio
- -------------------------------------------------
<S> <C>
Plantronics, Inc. 4.87%
- -------------------------------------------------
Orbital Sciences Corp. 4.54
- -------------------------------------------------
Kross-O'Gara Company 3.28
- -------------------------------------------------
Tarrant Apparel 1.90
- -------------------------------------------------
CMGI, Inc. 1.88
- -------------------------------------------------
IMR Global Corp. 1.57
- -------------------------------------------------
Championship Auto Racing 1.49
- -------------------------------------------------
Micros Systems, Inc. 1.37
- -------------------------------------------------
Ames Department Stores 1.36
- -------------------------------------------------
Radisys Corp. 1.35
- -------------------------------------------------
</TABLE>
[PIE CHART]
TOP 10 PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Technology Finance Multi- Cash Consumer Non Capital Consumer Basic Energy Consumer
Industry Cyclicals Goods Cyclicals Industry Services
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
32.74 2.68 21.07 2.45 21.02 1.83 10.28 1.29 5.59 1.05
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
28
DEVELOPING GROWTH PORTFOLIO MANAGED BY LORD ABBETT VS. RUSSELL 2000 INDEX(2)
Growth Based on $10,000(+)
[LINE CHART]
LA dev grow vs Rus 2000 plot points
LA Dev Growth Russell 2000
<TABLE>
<S> <C> <C>
10000 10000
11190 10732
"12/97" 10552 10372
11732 11416
"6/98" 11419 10883
8927 8691
"12/98" 11248 10108
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Average Annual Return(1)
- --------------------------------------------------------------------------
1 Year Since inception(+)
- --------------------------------------------------------------------------
<S> <C> <C>
Developing Growth Portfolio
managed by Lord Abbett 6.60% 8.99%*
- --------------------------------------------------------------------------
Russell 2000 Index(2) 9.19% 5.38%
- --------------------------------------------------------------------------
</TABLE>
*Portfolio commenced operations on 8/20/97.
(+)Index is shown from the first full month since Portfolio's inception.
(1) "Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Developing Growth
Portfolio managed by Lord Abbett and the return on the investment will
fluctuate, and redemption proceeds may be higher or lower than an investor's
original cost.
(2) The Russell 2000 Index is an unmanaged index consisting of the stocks of
2000 U.S.-based companies. The Index does not include fees or expenses and is
not available for direct investment.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software and Bloomberg. Comparison line graphs chart
the hypothetical growth of $10,000 over a given historical period of time.
Although data are gathered from reliable sources, accuracy and completeness
cannot be guaranteed.
<PAGE>
29
BALANCED PORTFOLIO For the period ended 12/31/98
MANAGED BY MISSISSIPPI VALLEY ADVISORS
Letter to Policyholders
Our economic outlook for 1999 calls for slower economic growth due in part to
turbulent currency markets, stock markets and economic conditions in Southeast
Asia, Latin America and Russia. The U.S. economy is already slowing and along
with cheap imports, weak exports, and upward wage pressures will present a
significant challenge to earnings growth. These implied risks are particularly
worrisome with stocks at or near all-time record valuation levels.
STOCKS
The S&P 500 Index(1) reverted to its seven-year reputation of continued
increased levels while closing at a new high of 1241.81 on December 29, 1998.
Slower economic growth due to problems in Southeast Asia, Russia and Latin
America justifies our cautious outlook.
BONDS
Following a profitable third quarter, the bond market faltered in the last
quarter of the year, notwithstanding the bell-weather 30-year bond, which ended
the year up 17.6%. In addition, the "flight to quality" theme enhanced returns
along the entire yield curve. The bond market could show continued strength
pending more information regarding the global macroeconomic environment.
The prospect of declining economic growth and corporate profits suggests a
defensive portfolio asset mix.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Normal Range of Portfolio Assets
- --------------------------------------------------------------------------
Current Minimum Maximum
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Stocks 55% 45% 70%
- --------------------------------------------------------------------------
Bonds 40% 25% 50%
- --------------------------------------------------------------------------
Short-Term Investments 5% 5% 10%
- --------------------------------------------------------------------------
</TABLE>
(1) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
PETER MERZIAN
Portfolio Manager
Mississippi Valley Advisors
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
% of portfolio
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
<S> <C>
Du Pont (8.25%, 9/06) 4.30%
- ---------------------------------------------------------------
U.S. Treasury (6.625%, 5/07) 4.07
- ---------------------------------------------------------------
U.S. Treasury (7.25%, 5/04) 4.05
- ---------------------------------------------------------------
JC Penney (7.60%, 4/07) 3.96
- ---------------------------------------------------------------
U.S. Treasury (6.125%, 8/07) 3.95
- ---------------------------------------------------------------
U.S. Treasury (5.625%, 5/08) 3.86
- ---------------------------------------------------------------
U.S. Treasury (6.375%, 8/02) 3.81
- ---------------------------------------------------------------
U.S. Treasury (6.375%, 5/00) 3.70
- ---------------------------------------------------------------
Walt Disney (5.250%, 11/03) 3.64
- ---------------------------------------------------------------
FNMA (7.00%, 2/16) 2.46
- ---------------------------------------------------------------
</TABLE>
<PAGE>
30
BALANCED PORTFOLIO, MANAGED BY
MISSISSIPPI VALLEY ADVISORS VS. S&P 500 INDEX
Growth Based on $10,000(+)
[LINE CHART]
MVA Balanced vs S&P 500 plot points
MVA Bal. S&P 500
<TABLE>
<S> <C> <C>
10000 10000
10510 10749
"Dec-97" 10601 11058
11346 12600
"Jun-98" 11327 13016
10760 11721
"Dec-98" 12013 14217
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Total Return(1)
- -----------------------------------------------------------------------------
1 Year Since inception(+)
- -----------------------------------------------------------------------------
<S> <C> <C>
Balanced Portfolio,
managed by MVA 13.31% 12.97%*
- -----------------------------------------------------------------------------
S&P 500 Index 28.58% 26.44%
- -----------------------------------------------------------------------------
</TABLE>
*Portfolio commenced operations on 7/1/97.
(+)Index is shown from the first full month since Portfolio's inception.
(1) "Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Balanced Portfolio
managed by Mississippi Valley Advisors (MVA) and the return on the investment
will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
31
SMALL CAP EQUITY PORTFOLIO For the period ended 12/31/98
MANAGED BY MISSISSIPPI VALLEY ADVISORS
Letter to Policyholders
The Small Cap Equity Portfolio is designed to take advantage of the
opportunities in smaller capitalized companies. The objective is one of buying
relative value in specialized segments of more mature industries. Also
considered for purchase are small companies with unique features including
turnarounds, asset values, high cash flows, or other factors which offer the
potential for above average capital appreciation. Since we believe our strength
is in stock selection and not in market timing, our objective is to stay fully
invested and broadly diversified among economic sectors.
Since the market bottomed on October 8, 1998, the big winner in the market is -
small company stocks. Since October 8th, small caps (price appreciation only as
measured by the Russell 2000 Index(1)) rose 36.0% versus a 28.1% gain for the
S&P 500 Index(2). Unfortunately, the bad news was that in the first six trading
days of the quarter, the Russell 2000 Index declined 14.7% while the S&P 500
Index declined only 5.7%. As a result, for the quarter overall, the Russell 2000
Index lagged again, rising 16.3% versus the S&P 500 Index's gain of 20.9%. A
further sour note is that the Russell 2000 Index underperformed in all four
quarters of the year, showing a decline of -3.4% versus the S&P 500 Index
full-year gain of 28.58%. This absolute underperformance of 30% stands out as
the worst year ever for small company stocks relative to large company stocks in
the 20 year history of the Russell 2000 Index. For comparison, the second worst
year was 1990 when the Russell 2000 Index underperformed by 15%. On an absolute
basis, performance last year was influenced by market capitalization --
essentially, the smaller the capitalization, the worse the performance.
Unfortunately our $750 + million market cap remained well below the average
small- to mid-cap manager.
Common Equity Unweighted Price Performance
(YTD as of 12/31/98)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
By Capitalization Unweighted Performance
- ---------------------------------------------------------------------------
<S> <C>
<250 Million -24.14%
- ---------------------------------------------------------------------------
250 Million - 2 Billion -16.63%
- ---------------------------------------------------------------------------
2 Billion - 5 Billion -6.11%
- ---------------------------------------------------------------------------
5 Billion - 20 Billion 6.19%
- ---------------------------------------------------------------------------
>20 Billion 25.94%
- ---------------------------------------------------------------------------
</TABLE>
Reasons for performance have been widely discussed but bear repeating. Problems
in Asia, Russia and Latin America compounded by political problems in the U.S.
and growing fears of a global recession have resulted in markets being extremely
volatile and investors seeking the safe haven of treasury market securities and
the lower risk of large company equity investments. Concerns over liquidity and
the direction of corporate profits kept investors away from small company
stocks. This extended period of underperformance has created an environment
where small company stocks seem extraordinarily attractive vis-a-vis their
larger counterparts. Growth rates are higher (15% plus vs. 8-10% for the S&P 500
Index) and valuations are significantly lower with P/E's on forward looking
earnings of 16-17x versus 28-30x for large companies. These valuations at some
point should lead to a period of extended outperformance. It is worth noting
that, following the large underperformance in 1990, the Russell 2000 Index in
the following three years increased 46%, 18% and 19% as compared to gains for
the S&P 500 Index of 30%, 8% and 10%.
In direct contrast to the third quarter when virtually all industry groups
suffered losses, the fourth quarter saw strength across the board in the various
industry sectors within the Russell 2000 Index. The exceptions were energy and
REITs, which declined. Particular strength was recorded in technology, where we
have a significant overweighting, health care (excluding service companies such
as nursing homes, which declined sharply), transportation and consumer growth.
In this environment of inexpensive small company stocks, we are continuing to
seek out the best relative values using our team of experienced analysts and our
valuation tools. Our focus remains on those companies with secure industry
positions, strong balance sheets and managements that can survive the turmoil.
We continue to find excellent value in technology, selected financial stocks,
health care and various cyclicals including broadcasters. Possible additions to
the Portfolio in early 1999 may include energy, where valuations seem
compelling. For the year 1999, the outlook is cloudy given liquidity concerns,
the ongoing flight to safety and the general fear of the U.S. economy sliding
into a global recession. However for those with a long-term horizon, the
valuations in small company stocks remain compelling and should pay off for
patient investors.
ROBERT J. ANTHONY
Portfolio Manager
Mississippi Valley Advisors
(1) The Russell 2000 Index is an unmanaged index consisting of the stocks of
2000 U.S.-based companies. The Index does not include fees or expenses and is
not available for direct investment.
(2) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE As of 12/31/98
% of portfolio
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
<S> <C>
PRI Automation 3.04%
- ---------------------------------------------------------------
Superior Industries International 2.69
- ---------------------------------------------------------------
Smart Modular Tech 2.63
- ---------------------------------------------------------------
Kulicke & Soffa Industries 2.56
- ---------------------------------------------------------------
Phototronics 2.37
- ---------------------------------------------------------------
Amkor Technology 2.29
- ---------------------------------------------------------------
National Data 2.28
- ---------------------------------------------------------------
Metris 2.24
- ---------------------------------------------------------------
Dentsply 2.14
- ---------------------------------------------------------------
Curative Health Services 1.91
- ---------------------------------------------------------------
</TABLE>
[PIE CHART]
TOP 10 PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Technology Consumer Interest Industrial Consumer Energy Consumer Capital
Growth Sensitive Cyclical Staples Cyclical Goods
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
29.3 24.4 14.2 12.7 7.2 3.9 4.8 3.5
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
32
SMALL CAP EQUITY PORTFOLIO, MANAGED BY
MISSISSIPPI VALLEY ADVISORS VS. RUSSELL 2000 INDEX
Growth Based on $10,000(+)
[LINE CHART]
MVA sm cap vs rus 2000 plot points
MVA Small Cap Russell 2000
<TABLE>
<S> <C> <C>
10000 10000
11190 11488
"Dec-97" 10486 11103
11724 12220
"Jun-98" 11092 11650
8658 9303
"Dec-98" 10445 10821
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Total Return(1)
- ------------------------------------------------------------------------------
1 Year Since inception(+)
- ------------------------------------------------------------------------------
<S> <C> <C>
Small Cap Equity Portfolio,
managed by MVA -0.39% 2.94%*
- ------------------------------------------------------------------------------
Russell 2000 Index 9.19% 5.38%
- ------------------------------------------------------------------------------
</TABLE>
*Portfolio commenced operations on 7/1/97.
(+)Index is shown from the first full month since Portfolio's inception.
(1) "Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Small Cap Equity
Portfolio managed by Mississippi Valley Advisors (MVA) and the return on the
investment will fluctuate, and redemption proceeds may be higher or lower than
an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
33
EQUITY INCOME PORTFOLIO For the period ended 12/31/98
MANAGED BY MISSISSIPPI
VALLEY ADVISORS
Letter to Policyholders
The Equity Income Portfolio seeks to provide an above-average level of income
consistent with long-term capital appreciation. In pursuing its objective, the
Portfolio utilizes a value discipline that bases stock selection on a number of
fundamental criteria including, but not limited to, the following: forecasted
price earnings ratio, dividend yield, cash flow, asset value, book value and
total return potential. Economic sector diversification is driven from the
Russell 1000 Value Index(1), which is representative of a large-capitalization,
value-oriented investment benchmark. As we believe our strength is in stock
selection, the objective of the Portfolio is to be relatively sector neutral
versus the benchmark and be fully invested.
Our economic outlook for 1999 calls for slower economic growth due in part to
turbulent currency markets, stock markets and economic conditions in Southeast
Asia, Latin America and Russia. The U.S. economy is already slowing and along
with cheap imports, weak exports, and upward wage pressures will present a
significant challenge to earnings growth. These implied risks are particularly
worrisome with stocks at or near all-time record valuation levels. With regard
to the highly visible and well-publicized problems in Southeast Asia, our
approach has been from the outset to minimize investment exposure. Our portfolio
exposure is very limited by design with emphasis on industries that are
predominately domestic and/or directly subject to negative commodity price
fallout. We are specifically avoiding companies in industries with direct export
and competitive exposures such as autos, aerospace and industrial machinery.
The principal risk in the equity markets at the present time would appear to be
valuations, which by nearly all measures are at all time highs and are
superimposed upon slowing profit growth. The recent stock market phenomenon has
all the characteristics of a classic liquidity bubble. Interest rates have
plunged to below 5% on the 30-year Treasury bond versus 8% in early 1995. Cash
is flooding into mutual funds as baby boomers finance their expected
retirements. Foreign investors are avoiding currency and economic risk in most
of the Asian markets as well as selected other trouble spots such as Brazil and
Russia. Fully one-third of the world's economy is facing currency crisis and a
rapid decline in its rate of growth. Fundamentals have become secondary
considerations to money flows. Perhaps most disturbing is the continued
narrowness of the market as the largest of the large companies, otherwise known
as the "nifty-fifty," dominate performance. The largest 50 stocks outperformed
the rest of the market, gaining 40% versus the 17% for the other 450 stocks in
the S&P 500 Index.(2)
(1) The Russell 1000 Index consists of the largest 1000 companies in the Russell
3000 Index. This index represents the universe of large capitalization stocks
from which most active money managers typically select. The index does not
reflect any expenses.
(2) The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
GREGORY A. GLIDDEN
Portfolio Manager
Mississippi Valley Advisors
TOP 10 PORTFOLIO HOLDINGS BY MARKET VALUE
As of 12/31/98
- ------------------------------------------------------------------------
% of portfolio
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
<S> <C>
Applied Materials 2.3%
- ------------------------------------------------------------------------
Dillards 2.3
- ------------------------------------------------------------------------
Comerica 2.2
- ------------------------------------------------------------------------
First Data Corp. 2.2
- ------------------------------------------------------------------------
Heller Financial 2.2
- ------------------------------------------------------------------------
First Union 2.1
- ------------------------------------------------------------------------
USX 2.1
- ------------------------------------------------------------------------
May Dept. Stores 2.1
- ------------------------------------------------------------------------
FMC Corp. 2.1
- ------------------------------------------------------------------------
National City Corp. 2.1
- ------------------------------------------------------------------------
</TABLE>
[PIE CHART]
TOP TEN PORTFOLIO PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Interest Industrial Energy Consumer Consumer Consumer Capital Technology
Sensitive Cyclical Growth Staple Cyclical Goods
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
40.4 18.9 12.2 10.2 2.9 6.2 4.7 4.5
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
34
EQUITY INCOME PORTFOLIO, MANAGED BY
MISSISSIPPI VALLEY ADVISORS VS. RUSSELL 1000
Growth Based on $10,000(+)
[LINE CHART]
MVA Equity Income vs Russell 1000 plot points
MVA Equity Inc. Russell 1000
<TABLE>
<S> <C> <C>
10000 10000
10900 10873
"Dec-97" 11269 11200
12656 12698
"Jun-98" 12427 13015
11266 11673
"Dec-98" 12323 14227
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Total Return(1)
- -----------------------------------------------------------------------------
1 Year Since inception(+)
- -----------------------------------------------------------------------------
<S> <C> <C>
Equity Income Portfolio,
managed by MVA 9.35% 14.90%*
- -----------------------------------------------------------------------------
Russell 1000 Index 27.02% 26.49%
- -----------------------------------------------------------------------------
</TABLE>
*Portfolio commenced operations on 7/1/97.
(+)Index is shown from the first full month since Portfolio's inception.
(1) "Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Equity Income
Portfolio managed by MississippiValley Advisors (MVA) and the return on the
investment will fluctuate, and redemption proceeds may be higher or lower than
an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
35
GROWTH & INCOME EQUITY PORTFOLIO For the period ended 12/31/98
MANAGED BY MISSISSIPPI VALLEY ADVISORS
Letter to Policyholders
For the fourth quarter of 1998, stock prices staged a dramatic recovery on the
heels of a third quarter correction. Most large cap indices posted gains in
excess of 20% for the fourth quarter and the S&P 500 Index(1) finished the year
up 28%, an unprecedented four consecutive gains in excess of 20%. Despite
growing signs of a weakening global economy, currency concerns and disappointing
corporate earnings growth, stock prices bounded sharply higher over the most
recent quarter as central banks around the world began an aggressive and
concerted easing of credit. Investors still not convinced that the Fed easings
came quickly enough, once again favored the nifty few large cap issues still
demonstrating earnings growth. Although markets did begin to broaden somewhat in
the quarter, it was too little too late to change 1998 performance results. Once
again, the "favored few" dominated the returns of the S&P 500 Index. The largest
50 stocks outperformed the rest of the market, gaining 40% versus the 17% for
the other 450 stocks in the S&P 500 Index.
Our economic outlook for 1999 calls for slower economic growth due in part to
the turbulent currency and stock markets in Southeast Asia, Russia and Latin
America. In addition, cheap imports, weak exports and upward wage pressures will
present a significant challenge to earnings growth in 1999. These implied risks
are particularly worrisome with stocks near record valuation levels - as are the
implications of the recent hedge fund debacle. Therefore, we continue to be
cautious and continue to focus upon the best relative values.
With regard to the highly visible and well-publicized problems in Southeast
Asia, our approach has been from the outset to minimize investment exposure. The
magnitude of the situation and the potential impact on worldwide economic growth
is impossible to analyze at this point. Therefore, our portfolio exposure is
very limited by design, with emphasis on industries that are predominately
domestic and/or not directly subject to negative commodity price fallout. We are
specifically avoiding companies in industries with direct export and competitive
exposures such as auto, aerospace and industrial machinery.
Despite our reservations in relation to the overall market, we continue to find
individual stocks and selected industries attractive. We especially like those
companies and industries that have visible and predictable earnings growth
prospects, and/or consolidation potential such as healthcare, retailing,
financial services and energy. Our Portfolio continues in a defensive posture,
well diversified and biased toward noncyclical predictable growth and companies
whose unique earnings and product cycle will be relatively unaffected by the
overall macroeconomic environment.
Timothy S. Engelbrecht
Portfolio Manager
Mississippi Valley Advisors
(1)The S&P 500 Index is an unmanaged index consisting of the stocks of 500 of
the largest U.S.-based companies. The Index does not include fees or expenses
and is not available for direct investment.
TOP 10 HOLDINGS BY MARKET VALUE
As of 12/31/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
% of portfolio
- ------------------------------------------------------------------
<S> <C>
Office Depot 2.73%
- ------------------------------------------------------------------
Sealed Air Corp. 2.42
- ------------------------------------------------------------------
SLM Holding Corp. 2.4
- ------------------------------------------------------------------
MBNA 2.36
- ------------------------------------------------------------------
Adaptec 2.34
- ------------------------------------------------------------------
First Data 2.27
- ------------------------------------------------------------------
Bristol-Myers Squibb 2.23
- ------------------------------------------------------------------
Wal Mart Stores Inc. 2.23
- ------------------------------------------------------------------
Chase Manhattan Corp. 2.2
- ------------------------------------------------------------------
GTE 2.2
- ------------------------------------------------------------------
</TABLE>
[PIE CHART]
TOP 10 PORTFOLIO SECTORS (% of portfolio market value)
As of 12/31/98
<TABLE>
<CAPTION>
Technology Consumer Interest Industrial Consumer Energy Consumer Capital
Growth Sensitive Cyclical Staples Cyclical Goods
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12.2 23.7 27.1 11.7 9.1 10.4 1.7 4.1
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
36
GROWTH & INCOME EQUITY PORTFOLIO, MANAGED BY
MISSISSIPPI VALLEY ADVISORS VS. S&P 500 INDEX
Growth Based on $10,000(+)
[LINE CHART]
MVA G&I vs S&P500 PLOT POINTS
MVA G&I S&P 500
<TABLE>
<S> <C> <C>
10000 10000
10772 10749
Dec-97 10826 11058
12191 12600
Jun-98 11976 13016
10344 11721
Dec-98 12445 14217
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Total Return(1)
- ------------------------------------------------------------------------------
1 Year Since inception+
- ------------------------------------------------------------------------------
<S> <C> <C>
Growth and Income Equity
Portfolio, managed by MVA 14.95% 15.65%*
- ------------------------------------------------------------------------------
S&P 500 Index 28.58% 26.44%
- ------------------------------------------------------------------------------
</TABLE>
*Portfolio commenced operations on 7/1/97.
(+)Index is shown from the first full month since Portfolio's inception.
(1) "Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Growth and Income
Equity Portfolio managed by Mississippi Valley Advisors (MVA) and the return on
the investment will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but they do not include the administrative fee,
the insurance risk charge, the annual contract maintenance charge or the 5%
withdrawal charge imposed by the Cova variable annuity contract. If this
performance information included the effect of the insurance charges,
performance numbers would be lower.
Graph prepared by Cova. The index returns in the graph above were generated by
CDA Wiesenberger HySales software. Comparison line graphs chart the hypothetical
growth of $10,000 over a given historical period of time. Although data are
gathered from reliable sources, accuracy and completeness cannot be guaranteed.
<PAGE>
37
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees
Cova Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Small Cap Stock Portfolio, Quality Bond
Portfolio, Select Equity Portfolio, Large Cap Stock Portfolio, International
Equity Portfolio, Money Market Portfolio, Quality Income Portfolio, Stock Index
Portfolio, VKAC Growth and Income Portfolio, High Yield Portfolio, Bond
Debenture Portfolio, Mid-Cap Value Portfolio, Large Cap Research Portfolio,
Developing Growth Portfolio, Balanced Portfolio, Small Cap Equity Portfolio,
Equity Income Portfolio and Growth & Income Equity Portfolio, portfolios of Cova
Series Trust (the Trust), as of December 31, 1998 and the related statements of
operations for the year then ended and statements of changes in net assets for
each of the years or periods in the two-year period then ended and the financial
highlights for each of the years or periods in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Small
Cap Stock Portfolio, Quality Bond Portfolio, Select Equity Portfolio, Large Cap
Stock Portfolio, International Equity Portfolio, Money Market Portfolio, Quality
Income Portfolio, Stock Index Portfolio, VKAC Growth and Income Portfolio, High
Yield Portfolio, Bond Debenture Portfolio, Mid-Cap Value Portfolio, Large Cap
Research Portfolio, Developing Growth Portfolio, Balanced Portfolio, Small Cap
Equity Portfolio, Equity Income Portfolio and Growth & Income Equity Portfolio,
as of December 31, 1998, the results of their operations for the year then
ended, changes in their net assets for each of the years or periods in the
two-year period then ended and the financial highlights for each of the years or
periods in the five-year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 5, 1999
<PAGE>
38
COVA SERIES TRUST
SMALL CAP STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.2%
ADVERTISING - 0.8%
HA-LO Industries, Inc. * ............................. 17,000 $ 639,625
-----------
AEROSPACE & DEFENSE - 0.9%
Orbital Sciences Corp. * ............................. 15,800 699,150
-----------
AUTOMOTIVE - 2.8%
Intermet Corp. ....................................... 28,300 369,669
Lithia Motors, Inc. * ................................ 24,500 404,250
Modine Manufacturing Co. ............................. 14,400 522,000
Sonic Automotive, Inc. * ............................. 15,800 544,113
Wabash National Corp. ................................ 18,500 375,781
-----------
2,215,813
-----------
BANKING - 8.8%
BancorpSouth, Inc. ................................... 4,400 79,475
Bank North Group, Inc. ............................... 18,200 684,775
Bank of Commerce ..................................... 13,600 227,800
Bank United Corp. .................................... 25,300 993,025
Colonial Bancgroup, Inc. ............................. 56,400 676,800
Commercial Federal Corp. ............................. 13,850 321,147
Community First Bankshares, Inc. ..................... 23,200 488,650
Flagstar Bancorp, Inc. ............................... 21,900 572,138
GBC Bancorp .......................................... 9,900 254,925
Hamilton Bancorp, Inc. * ............................. 5,100 136,106
Investors Financial Services Corp. ................... 2,400 143,100
Irwin Financial Corp. ................................ 4,400 119,625
National Commerce Bancorp ............................ 44,700 840,919
Prime Bancshares, Inc. ............................... 10,000 172,500
Republic Banking Corp. of Florida .................... 13,500 143,438
Southwest Bancorporation of Texas, Inc. * ............ 7,200 128,700
Summit Bancshares, Inc. .............................. 4,000 74,500
Sun Bancorp, Inc. * .................................. 4,200 77,700
TeleBanc Financial Corp. * ........................... 6,600 224,400
Trustco Bank Corp. N.Y ............................... 10,898 326,940
Westamerica Bancorp .................................. 6,000 220,500
-----------
6,907,163
-----------
BEVERAGES, FOOD & TOBACCO - 1.3%
American Italian Pasta Co. * ......................... 10,000 263,750
Beringer Wine Estates Holdings, Inc. * ............... 7,000 312,813
Coors (Adolph), Co. .................................. 3,200 180,600
Kensey Nash Corp. * .................................. 28,800 232,200
-----------
989,363
-----------
BUILDING MATERIALS - 0.1%
Rock of Ages Corp. * ................................. 6,100 86,925
-----------
CHEMICALS - 2.7%
Albemarle Corp. ...................................... 2,100 49,875
Bush Boake Allen, Inc. * ............................. 17,500 616,875
General Chemical Group, Inc. ......................... 10,500 145,688
Geon Co. (The) ....................................... 30,100 692,300
Minerals Technologies, Inc. .......................... 3,000 122,813
Tetra Technologies, Inc. * ........................... 23,000 251,563
USEC, Inc. ........................................... 18,600 258,075
-----------
2,137,189
-----------
COMMERCIAL SERVICES - 2.3%
Century Business Services, Inc. * .................... 5,700 82,116
Comfort Systems USA, Inc. * .......................... 10,600 189,475
On Assignment, Inc. * ................................ 6,000 204,938
Pinkertons, Inc. * ................................... 17,150 365,509
Service Experts, Inc. * .............................. 10,000 292,500
Steiner Leisure Ltd. * ............................... 12,225 391,200
Wackenhut Corrections Corp. * ........................ 9,200 263,350
-----------
1,789,088
-----------
COMMUNICATIONS - 4.5%
ANTEC Corp. * ........................................ 10,400 209,300
Concord Communications, Inc. * ....................... 1,400 80,150
Excel Switching Corp. * .............................. 18,000 684,000
Exodus Communications, Inc. * ........................ 12,800 822,400
L-3 Communications Holdings, Inc. * .................. 7,800 363,188
MetroNet Communications Corp. * ...................... 23,300 780,550
Proxim, Inc. * ....................................... 18,000 480,375
Tekelec * ............................................ 4,200 69,563
-----------
3,489,526
-----------
COMPUTER SOFTWARE & PROCESSING - 9.3%
Aspect Development, Inc. * ........................... 9,400 416,538
Avid Technology, Inc. * .............................. 6,800 158,950
BroadVision, Inc. * .................................. 13,800 441,600
Cognex Corp. * ....................................... 7,600 152,000
Concur Technologies, Inc. * .......................... 1,000 30,219
Condor Technology Solutions, Inc. * .................. 18,500 185,000
CSG Systems International, Inc. * .................... 9,100 718,900
Digital River, Inc. * ................................ 5,100 182,325
Eclipsys Corp. * ..................................... 3,000 86,813
Equant N.V. * ........................................ 3,400 230,563
Exchange Applications, Inc. * ........................ 1,000 19,563
HNC Software, Inc. * ................................. 17,800 719,788
IDX Systems Corp. * .................................. 5,600 246,400
Legato Systems, Inc. * ............................... 6,900 454,969
Macromedia, Inc. * ................................... 14,300 481,731
MAPICS, Inc. * ....................................... 29,200 481,800
Metro Informaton Services, Inc. * .................... 13,000 390,000
New Era of Networks, Inc. * .......................... 5,900 259,600
Pinnacle Systems, Inc. * ............................. 11,500 411,125
Source Information Management Co. (The) * ............ 11,400 131,100
Transaction Systems Architects, Inc. * ............... 8,400 420,000
TSI International Software Ltd. * .................... 3,300 159,638
Visio Corp. * ........................................ 12,700 464,344
-----------
7,242,966
-----------
COMPUTERS & INFORMATION - 2.0%
CNet, Inc. * ......................................... 4,700 257,619
HMT Technology Corp. * ............................... 42,200 540,688
Maxtor Corp. * ....................................... 43,800 613,200
Visual Networks, Inc. * .............................. 3,400 127,394
-----------
1,538,901
-----------
CONSUMER SERVICES - 0.6%
Education Management Corp. * ......................... 20,600 486,675
-----------
CONTAINERS & PACKAGING - 0.6%
AptarGroup, Inc. ..................................... 6,200 173,988
Ivex Packaging Corp. * ............................... 14,000 325,500
-----------
499,488
-----------
ELECTRIC UTILITIES - 1.9%
Central Hudson Gas & Electric ........................ 17,100 765,225
Cleco Corp. .......................................... 21,000 720,563
-----------
1,485,788
-----------
ELECTRICAL EQUIPMENT - 1.8%
Applied Power Inc. ................................... 7,300 275,575
BOLDER Technologies Corp. * .......................... 9,200 113,850
MagneTek, Inc. * ..................................... 21,600 249,750
MicroStratetgy, Inc. * ............................... 12,700 400,050
Veeco Intruments, Inc. * ............................. 6,800 361,250
-----------
1,400,475
-----------
ELECTRONICS - 4.6%
Anixter International, Inc. * ........................ 30,800 625,625
Applied Micro Circuits Corp. * ....................... 9,500 322,704
ATMI, Inc. * ......................................... 21,200 535,300
Exar Corp. * ......................................... 11,100 178,988
Hutchinson Technology, Inc. * ........................ 10,500 374,063
Input/Output, Inc. * ................................. 19,700 144,056
Integrated Device Technology, Inc. * ................. 33,800 207,025
Quickturn Design Systems, Inc. * ..................... 14,600 208,963
SDL, Inc. * .......................................... 14,300 566,638
Sipex Corp. * ........................................ 11,700 410,963
-----------
3,574,325
-----------
ENTERTAINMENT & LEISURE - 1.2%
Cinar Films, Inc. * .................................. 12,400 314,650
Imax Corp. * ......................................... 15,600 493,350
MGM Grand, Inc. * .................................... 5,800 157,325
-----------
965,325
-----------
FINANCIAL SERVICES - 3.0%
Allied Capital Corp. ................................. 8,400 145,425
First Federal Financial Corp. * ...................... 36,400 650,650
Heller Financial, Inc. ............................... 5,900 173,313
ITT Educational Services, Inc. * ..................... 16,200 550,800
Litchfield Financial Corp. ........................... 28,830 547,770
Ocwen Financial Corp. * .............................. 22,100 272,106
-----------
2,340,064
-----------
FOREST PRODUCTS & PAPER - 2.1%
Caraustar Industries, Inc. ........................... 35,300 1,008,256
Universal Forest Products, Inc. ...................... 31,600 633,975
-----------
1,642,231
-----------
HEALTH CARE PROVIDERS - 2.8%
Alternative Living Services, Inc. * .................. 26,360 902,830
Pediatrix Medical Group, Inc. * ...................... 10,000 599,375
Renal Care Group, Inc. * ............................. 16,250 468,203
Sierra Health Services, Inc. * ....................... 400 8,425
Sunrise Assisted Living, Inc. * ...................... 4,300 223,063
-----------
2,201,896
-----------
HEAVY MACHINERY - 1.2%
IDEXX Corp. .......................................... 25,950 635,775
Sauer, Inc. .......................................... 15,300 115,706
Smith International, Inc. * .......................... 6,500 163,719
-----------
915,200
-----------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 2.3%
Bush Industries ...................................... 16,900 210,194
D.R. Horton, Inc. .................................... 49,100 1,129,300
Interface, Inc. ...................................... 12,100 112,304
Select Comfort Corp. * ............................... 1,200 32,025
Stanley Furniture Co., Inc. * ........................ 17,600 321,200
-----------
1,805,023
-----------
INDUSTRIAL - DIVERSIFIED - 0.3%
ABC Rail Products Corp. * ............................ 11,100 135,281
Shaw Group, Inc. * ................................... 16,600 132,800
-----------
268,081
-----------
INSURANCE - 3.9%
Annuity and Life Re (Holdings), Ltd. ................. 15,300 413,100
ARM Financial Group, Inc. ............................ 14,100 312,844
Capital RE Corp. ..................................... 46,800 938,925
MONY Group, Inc. (The) * ............................. 1,700 53,231
RenaissanceRe Holdings Ltd. .......................... 35,400 1,296,503
-----------
3,014,603
-----------
LODGING - 0.2%
Extended Stay America, Inc. * ........................ 12,800 134,400
-----------
MEDIA - BROADCASTING & PUBLISHING - 0.8%
Banta Corp. .......................................... 8,800 240,900
Emmis Broadcasting Corp. * ........................... 7,200 312,300
Journal Register, Co. * .............................. 4,400 66,000
-----------
619,200
-----------
MEDICAL SUPPLIES - 2.6%
Aspen Technologies, Inc. * ........................... 14,500 210,250
CONMED Corp. * ....................................... 10,500 346,500
Endocardial Solutions, Inc. * ........................ 10,000 100,000
Focal, Inc. * ........................................ 12,100 116,463
Lifeline Systems, Inc. * ............................. 2,700 67,500
ResMed, Inc. * ....................................... 4,600 208,725
Sangstat Medical Corp. * ............................. 29,200 621,700
Sola International, Inc. * ........................... 17,900 308,775
Vital Signs, Inc. .................................... 4,700 82,250
-----------
2,062,163
-----------
MEDICAL & BIO-TECHNOLOGY - 0.1%
Affymetrix, Inc. * ................................. 2,800 67,638
-----------
METALS - 3.1%
Amcast Industrial Corp. ............................ 12,000 229,500
Commercial Metals Co. .............................. 32,000 888,000
Mueller Industries * ............................... 52,100 1,058,281
Schnitzer Steel Industries, Inc. ................... 15,300 219,938
Steel Technologies, Inc. ........................... 7,700 51,975
-----------
2,447,694
-----------
OIL & GAS - 4.1%
Atmos Energy Corp. ................................. 23,400 754,650
Devon Energy Corp. ................................. 15,100 463,390
National-Oilwell, Inc. * ........................... 14,600 163,338
Newfield Exploration Co. * ......................... 26,900 561,538
Public Service Co. of North Carolina ............... 9,500 247,000
St. Mary Land & Exploration Co. .................... 11,500 212,750
Tesoro Petroleum Corp. * ........................... 15,000 181,875
Wicor, Inc. ........................................ 30,000 654,375
-----------
3,238,916
-----------
PHARMACEUTICALS - 5.7%
Applied Analytical Industries, Inc. * .............. 31,500 547,313
Hubco, Inc. ........................................ 17,904 539,358
Human Genome Sciences, Inc. * ...................... 24,500 871,006
IDEC Pharmaceuticals Corp. * ....................... 8,500 399,500
Incyte Pharmaceuticals, Inc. * ..................... 9,000 336,375
Kos Pharmaceuticals, Inc. * ........................ 16,500 96,938
Ligand Pharmaceuticals * ........................... 39,600 460,350
Millennium Pharmaceuticals, Inc. * ................. 17,200 445,050
U.S. Bioscience, Inc. * ............................ 13,400 96,313
Ventana Medical Systems, Inc. * .................... 29,300 633,613
-----------
4,425,816
-----------
REAL ESTATE - 6.8%
Amresco, Inc. * .................................... 15,800 138,250
Arden Realty Group, Inc. (REIT) .................... 18,600 431,288
Burnham Pacific Properties, Inc. (REIT) ............ 33,400 402,888
CBL & Associates Properties, Inc. (REIT) ........... 10,500 271,031
Charles E. Smith Residential Realty, Inc. (REIT) ... 4,900 157,413
Cousins Properties, Inc. (REIT) .................... 19,500 628,875
ElderTrust (REIT) .................................. 5,700 65,550
Federal Realty Investment Trust (REIT) ............. 1,200 28,350
LaSalle Hotel Properties (REIT) .................... 10,200 105,825
Macerich Co. (The) (REIT) .......................... 9,800 251,125
Manufactured Home Communities, Inc. (REIT) ......... 16,600 416,038
MeriStar Hospitality Corp. (REIT) .................. 20,512 380,754
Mills Corp. (REIT) ................................. 10,900 216,638
National Golf Properties, Inc. (REIT) .............. 12,300 355,931
Post Properties, Inc. (REIT) ....................... 19,267 740,575
Weeks Corp. (REIT) ................................. 24,400 687,775
-----------
5,278,306
-----------
RESTAURANTS - 0.7%
CEC Entertainment, Inc. * .......................... 8,100 224,775
Papa John's International, Inc. * .................. 5,300 233,863
P.F. Chang's China Bistro, Inc. * .................. 2,400 53,850
-----------
512,488
-----------
RETAILERS - 2.8%
Fingerhut Co., Inc. ................................ 19,400 299,488
Garden Ridge Corp. * ............................... 39,600 358,875
O'Reilly Automotive, Inc. * ........................ 2,300 108,675
PETsMART, Inc. * ................................... 26,900 295,900
School Specialty, Inc. * ........................... 8,900 190,238
ShopKo Stores, Inc. * .............................. 15,600 518,700
Ticketmaster Online-CitySearch, Inc. * ............. 1,100 62,700
Urban Outfitters, Inc. * ........................... 21,600 364,500
-----------
2,199,076
-----------
TELEPHONE SYSTEMS - 2.6%
Concentric Network Corp. * ......................... 30,400 1,010,800
Global Crossing Ltd. * ............................. 9,700 437,713
Intermedia Communications of Florida, Inc. * ....... 6,500 112,125
ITC DeltaCom, Inc. * ............................... 4,500 68,625
NEXTLINK Communications, Inc. * .................... 4,700 133,363
Teligent, Inc. * ................................... 10,300 296,769
-----------
2,059,395
-----------
TEXTILES, CLOTHING & FABRICS - 0.2%
Columbia Sportswear Co. * .......................... 7,100 119,813
-----------
TRANSPORTATION - 3.0%
Allied Holdings, Inc. * ............................ 24,400 350,750
American Freightways Corp. * ....................... 8,200 94,557
C.H. Robinson Worldwide, Inc. ...................... 14,900 386,469
Genesee & Wyoming, Inc. * .......................... 9,400 119,850
Jevic Transportation, Inc. * ....................... 3,000 23,625
Pegasus Systems, Inc. * ............................ 7,400 266,400
Werner Enterprises, Inc. ........................... 37,875 669,914
Willis Lease Finance Corp. * ....................... 26,900 423,675
-----------
2,335,240
-----------
WATER COMPANIES - 0.7%
American States Water Co. .......................... 8,100 $ 220,725
E-Town Corp. ....................................... 7,400 350,575
-----------
571,300
-----------
TOTAL INVESTMENTS - 95.2%
(Cost $70,317,093) 74,406,328
Other Assets and Liabilities (net) - 4.8% 3,754,980
-----------
TOTAL NET ASSETS - 100.0% $ 78,161,308
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the last 12 month period.
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR/Share SECURITY VALUE
AMOUNT DESCRIPTION COUPON MATURITY (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
DOMESTIC BONDS AND DEBT SECURITIES - 90.5%
ASSET BACKED SECURITIES - 1.8%
<S> <C> <C> <C> <C>
$395,000 Discover Card Master Trust ...................................... 5.600% 05/15/06 $ 390,618
100,000 First Omni Credit Card Master Trust ............................. 6.650% 09/15/03 103,005
53,963 Premier Auto Trust .............................................. 6.150% 03/06/00 54,084
156,423 Premier Auto Trust .............................................. 6.050% 04/06/00 156,884
91,667 Sears Credit Account Master Trust ............................... 6.500% 10/15/03 92,272
15,091 World Omni Automobile Securitization Trust ...................... 6.300% 06/25/02 15,093
14,323 World Omni Lease Trust .......................................... 5.950% 11/15/02 14,328
-----------
826,284
-----------
CORPORATE BONDS - 22.2%
735,000 Aerial Communications, Inc. (144A)^ ............................. + 02/01/08 339,216
200,000 Amsouth Bank of Alabama ......................................... 6.450% 02/01/18 208,200
500,000 Armstrong World Industries, Inc. ................................ 6.350% 08/15/03 507,868
250,000 Associates Corp. of North America ............................... 6.250% 11/01/08 258,425
60,000 Banc One Corp. .................................................. 7.625% 10/15/26 68,996
50,000 CalEnergy Co., Inc. ............................................. 7.520% 09/15/08 53,462
200,000 Canadian Imperial Bank .......................................... 6.200% 08/01/00 202,667
125,000 Clear Channel Communications, Inc. .............................. 7.250% 10/15/27 126,338
100,000 Columbia Energy Group ........................................... 7.620% 11/28/25 104,772
250,000 Columbus Southern Power ......................................... 6.850% 10/03/05 263,752
750,000 Comcast Cable Communications .................................... 6.200% 11/15/08 765,225
600,000 Cox Communications, Inc. ........................................ 6.150% 08/01/03 612,387
650,000 Crestar Capital Trust (144A)^ ................................... 8.160% 12/15/26 718,705
300,000 EOP Operating L.P. (144A)^ ...................................... 6.376% 02/15/02 299,358
225,000 Fleet Capital Ltd. .............................................. 7.920% 12/11/26 248,738
200,000 Ford Motor Credit Co. ........................................... 7.470% 07/29/99 202,361
500,000 Ford Motor Credit Co. (b) ....................................... 6.625% 06/30/03 518,989
500,000 General Motors Acceptance Corp. (b) ............................. 6.750% 11/04/04 528,254
60,000 Glenborough Realty Trust, Inc. (REIT) (144A)^ ................... 7.625% 03/15/08 57,579
200,000 Household Finance Corp. ......................................... 6.125% 02/27/03 200,500
225,000 Ingersoll-Rand Co. .............................................. 6.391% 11/15/27 231,392
125,000 Kincaid Generation LLC (144A)^ .................................. 7.330% 06/15/20 124,822
225,000 Laidlaw, Inc. ................................................... 6.500% 05/01/05 221,099
200,000 LASMO (USA), Inc. ............................................... 7.500% 06/30/06 204,928
75,000 Lenfest Communications, Inc. (144A)^ ............................ 7.625% 02/15/08 77,625
300,000 National Fuel Gas Co. (b) ....................................... 6.214% 08/12/27 316,212
10,000 NationsBank Corp. ............................................... 7.250% 10/15/25 10,899
30,000 News America Holdings, Inc. ..................................... 7.700% 10/30/25 32,325
100,000 NGC Corp. ....................................................... 7.625% 10/15/26 101,994
216,075 Oil Purchase Co. (144A)^ ........................................ 7.100% 10/31/02 207,408
150,000 PacifiCorp ...................................................... 6.750% 07/15/04 158,832
50,000 Rural/Metro Corp. ............................................... 7.875% 03/15/08 45,750
500,000 Statoil ......................................................... 6.500% 12/01/28 490,275
60,000 Stena AB ........................................................ 8.750% 06/15/07 57,450
400,000 Tele-Communications TCI Group ................................... 7.875% 08/01/13 468,099
70,000 Tele-Communications TCI Group ................................... 7.875% 02/15/26 83,109
60,000 Tricon Global Restaurants, Inc. ................................. 7.450% 05/15/05 61,920
100,000 U.S. Cellular Corp. ............................................. 7.250% 08/15/07 106,337
65,000 Weeks Realty L.P. ............................................... 6.875% 03/15/05 61,882
500,000 Western Resources, Inc. ......................................... 6.250% 08/15/03 514,229
200,000 Williams Companies, Inc. ........................................ 6.125% 02/01/01 200,841
100,000 WorldCom, Inc. .................................................. 7.750% 04/01/27 114,631
-----------
10,177,851
-----------
CORPORATE MORTGAGE BACKED SECURITIES - 7.4%
336,058 Deutsche Mortgage and Asset Receiving Corp. ..................... 6.220% 06/15/31 341,824
401,459 LB Commercial Conduit Mortgage Trust ............................ 6.330% 11/18/04 410,514
331,125 Merrill Lynch Mortgage Investors, Inc. .......................... 6.220% 02/15/30 337,511
200,000 Money Store Home Equity Trust (The) ............................. 7.000% 04/15/28 206,214
235,000 Money Store Home Equity Trust (The) ............................. 6.485% 12/15/38 238,822
313,367 Morgan Stanley Capital, Inc. .................................... 6.190% 01/15/07 319,699
227,181 Morgan Stanley Capital, Inc. .................................... 6.250% 07/15/07 232,373
125,732 Morgan Stanley Capital, Inc. .................................... 6.590% 10/03/30 130,313
$121,407 Mortgage Capital Funding, Inc. .................................. 6.525% 01/20/07 125,234
383,909 Mortgage Capital Funding, Inc. .................................. 6.417% 06/18/07 395,017
284,872 Nomura Asset Securities Corp. ................................... 6.280% 03/17/28 292,500
376,782 Ocwen Residential Corp. (144A)^ ................................. 4.000% 10/25/30 377,194
-----------
3,407,215
-----------
MUNICIPAL OBLIGATIONS - 2.0%
925,000 Illinois Power Special Purpose Trust ............................ 5.340% 06/25/05 918,496
-----------
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES - 34.2%
325,000 Federal Home Loan Mortgage Corp. ................................ 6.500% 07/15/16 327,101
150,000 Federal Home Loan Mortgage Corp. ................................ 6.500% 09/15/23 154,941
50,658 Federal Home Loan Mortgage Corp. ................................ 8.500% 08/01/26 53,081
150,000 Federal National Mortgage Association ........................... 6.500% 11/25/07 153,270
329,971 Federal National Mortgage Association ........................... 7.000% 05/01/11 337,395
135,934 Federal National Mortgage Association ........................... 7.000% 05/01/12 138,992
538,244 Federal National Mortgage Association ........................... 7.000% 05/01/12 550,355
25,238 Federal National Mortgage Association ........................... 7.000% 09/01/12 25,806
299,207 Federal National Mortgage Association ........................... 6.500% 02/01/13 303,601
1,155,000 Federal National Mortgage Association (a) ....................... 6.000% 01/01/28 1,139,841
200,000 Federal National Mortgage Association (a) ....................... 6.500% 01/14/28 201,313
1,535,000 Federal National Mortgage Association ........................... 6.000% 01/14/28 1,502,381
2,250,000 Federal National Mortgage Association (a) ....................... 6.500% 01/14/28 2,264,766
2,000,000 Federal National Mortgage Association (a) ....................... 6.000% 01/14/28 1,973,750
994,628 Federal National Mortgage Association ........................... 7.000% 06/01/28 1,015,143
463,988 Federal National Mortgage Association ........................... 7.000% 08/01/28 473,558
976,155 Federal National Mortgage Association ........................... 7.000% 09/01/28 997,259
82,264 Government National Mortgage Association ........................ 7.500% 02/15/27 84,912
609,421 Government National Mortgage Association ........................ 7.000% 04/15/28 624,279
298,226 Government National Mortgage Association ........................ 7.000% 05/15/28 305,401
62,400 Government National Mortgage Association ........................ 7.000% 05/15/28 66,222
307,732 Government National Mortgage Association ........................ 7.000% 05/15/28 315,235
246,382 Government National Mortgage Association ........................ 7.000% 07/15/28 252,310
355,196 Government National Mortgage Association ........................ 7.000% 07/15/28 363,742
460,618 Government National Mortgage Association ........................ 7.000% 07/15/28 471,701
1,009,177 Government National Mortgage Association ........................ 7.000% 11/15/28 1,033,458
242,217 Government National Mortgage Association ........................ 7.000% 11/15/28 248,045
270,000 Government National Mortgage Association Commitment (a) ......... 7.000% 01/01/28 276,328
-----------
15,654,186
-----------
U.S. TREASURY SECURITIES - 22.9%
440,000 U.S. Treasury Bond (b) .......................................... 7.875% 11/15/04 509,850
184,000 U.S. Treasury Bond .............................................. 6.750% 08/15/26 220,570
925,000 U.S. Treasury Note (b) .......................................... 5.750% 08/15/03 965,758
3,255,000 U.S. Treasury Note (b) .......................................... 6.875% 05/15/06 3,680,182
120,000 U.S. Treasury Note .............................................. 5.625% 05/15/08 128,063
265,000 U.S. Treasury Note .............................................. 4.750% 11/15/08 267,153
2,170,000 U.S. Treasury Note (b) .......................................... 5.250% 11/15/28 2,224,929
2,780,000 U.S. Treasury Strip ............................................. + 08/15/12 1,347,638
955,000 U.S. Treasury Strip ............................................. + 08/15/13 435,238
1,580,000 U.S. Treasury Strip ............................................. + 11/15/13 707,472
-----------
10,486,853
-----------
Total Domestic Bonds and Debt Securities (Cost $41,071,089) 41,470,885
-----------
FOREIGN BONDS AND DEBT SECURITIES - 3.8%
CANADA - 1.7%
149,900 Express Pipeline L.P. (144A)^ (U.S.$) ........................... 6.470% 12/31/11 146,222
80,000 Gulf Canada Resources Ltd. (Yankee) ............................. 8.250% 03/15/17 75,131
100,000 Hydro-Quebec (Yankee) ........................................... 9.500% 11/15/30 141,463
200,000 Laidlaw, Inc. (Yankee) .......................................... 6.720% 10/01/27 202,075
200,000 Quebec Province (Yankee) ........................................ 7.500% 07/15/23 229,200
-----------
794,091
-----------
SUPRA NATIONAL - 2.1%
$200,000 Corp Andina De Fomento (Yankee) ................................. 6.750% 03/15/05 193,414
655,000 Inter-American Development Bank (Yankee) ........................ 7.000% 06/15/25 762,462
-----------
955,876
-----------
Total Foreign Bonds and Debt Securities (Cost $1,692,259) 1,749,967
-----------
TOTAL INVESTMENTS - 94.3%
(Cost $42,763,348) 43,220,852
Other Assets and Liabilities (net) - 5.7% 2,591,199
-----------
TOTAL NET ASSETS - 100.0% $ 45,812,051
===========
</TABLE>
PORTFOLIO FOOTNOTES:
(a) Security purchased on a delayed delivery or when-issued basis.
(See note 1 to financial statements)
(b) Assets segregated for purchase price of delayed delivery or
when-issued security.
^ Securities that may be resold to "qualified institutional
buyers" under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+ Zero coupon bond
Yankee - U.S. Dollar denominated bonds issued by non-U.S.
companies in the U.S.
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
SELECT EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.5%
AEROSPACE & DEFENSE - 2.7%
AlliedSignal, Inc. ............................. 53,200 $ 2,357,425
Coltec Industries, Inc. * ...................... 150,300 2,930,850
------------
5,288,275
------------
BANKING - 8.1%
Astoria Financial Corp. ........................ 28,850 1,319,888
BankAmerica Corp. .............................. 103,757 6,238,390
Bankers Trust New York Corp. ................... 22,400 1,913,800
KeyCorp ........................................ 57,000 1,824,000
Newcourt Credit Group, Inc. .................... 42,000 1,467,375
Washington Mutual, Inc. ........................ 84,460 3,225,316
------------
15,988,769
------------
BEVERAGES, FOOD & TOBACCO - 6.9%
Anheuser-Busch Companies, Inc. ................. 24,300 1,594,688
Campbell Soup Co. .............................. 27,100 1,490,500
Pepsico, Inc. .................................. 65,000 2,660,938
Philip Morris Co., Inc. ........................ 107,400 5,745,900
Ralston-Ralston Purina Group ................... 30,800 997,150
Seagrams Co., Ltd. ............................. 30,800 1,170,400
------------
13,659,576
------------
CHEMICALS - 4.7%
Albemarle Corp. ................................ 9,000 213,750
Monsanto Co. ................................... 134,400 6,383,990
Rohm & Haas Co. ................................ 86,800 2,614,850
------------
9,212,590
------------
COMMERCIAL SERVICES - 2.2%
Cendant Corp. * ................................ 87,800 1,673,688
Service Corp. International .................... 71,000 2,702,438
------------
4,376,126
------------
COMMUNICATIONS - 3.2%
Lucent Technologies, Inc. ...................... 23,300 2,563,000
Tele-Communications TCI Ventures Group * ....... 68,700 3,799,969
------------
6,362,969
------------
COMPUTER SOFTWARE & PROCESSING - 5.8%
Autodesk, Inc. ................................. 30,800 1,314,775
Cisco Systems, Inc. * .......................... 50,400 4,677,750
Microsoft Corp. * .............................. 33,600 4,659,900
Oracle Corp. * ................................. 18,700 806,438
------------
11,458,863
------------
COMPUTERS & INFORMATION - 6.7%
Compaq Computer Corp. .......................... 55,100 2,310,756
EMC Corp. * .................................... 31,700 2,694,500
International Business Machines Corp. .......... 29,900 5,524,025
Sun Microsystems, Inc. * ....................... 32,700 2,799,938
------------
13,329,219
------------
ELECTRIC UTILITIES - 2.4%
Northern States Power Co. ...................... 9,700 269,175
PP&L Resources, Inc. ........................... 99,000 2,759,625
Wisconsin Energy Corp. ......................... 53,300 1,675,619
------------
4,704,419
------------
ELECTRICAL EQUIPMENT - 0.7%
General Electric Co. ........................... 13,100 1,337,019
------------
ELECTRONICS - 3.7%
Input/Output, Inc. * ........................... 237,100 1,733,794
Intel Corp. .................................... 33,600 3,983,700
Texas Instruments, Inc. ........................ 18,700 1,600,019
------------
7,317,513
------------
ENTERTAINMENT & LEISURE - 2.9%
International Game Technology .................. 83,900 2,039,819
Mattel, Inc. ................................... 95,400 2,176,313
Mirage Resorts, Inc. * ......................... 97,600 1,457,900
------------
5,674,032
------------
ENVIRONMENTAL CONTROLS - 2.9%
Republic Services, Inc. * ...................... 39,800 733,813
Waste Management, Inc. ......................... 106,375 4,959,734
------------
5,693,547
------------
FINANCIAL SERVICES - 1.5%
Citigroup, Inc. ................................ 60,200 2,979,900
------------
FOREST PRODUCTS & PAPER - 1.4%
Smurfit-Stone Container Corp. * ............. 174,383 2,757,431
------------
HEALTH CARE PROVIDERS - 0.9%
HEALTHSOUTH Corp. * ......................... 106,300 1,641,006
Humana, Inc. * .............................. 7,800 138,938
------------
1,779,944
------------
HEAVY MACHINERY - 1.0%
Cooper Industries, Inc. ..................... 42,000 2,002,875
------------
HOUSEHOLD PRODUCTS - 2.6%
Procter & Gamble Co. ........................ 56,000 5,113,500
------------
INDUSTRIAL - DIVERSIFIED - 1.5%
Tyco International Ltd. ..................... 40,010 3,018,254
------------
INSURANCE - 3.4%
Marsh & McLennan Co., Inc. .................. 28,500 1,665,469
MBIA, Inc. .................................. 32,700 2,143,894
Unum Corp. .................................. 51,300 2,994,638
------------
6,804,001
------------
MEDIA - BROADCASTING & PUBLISHING - 1.6%
Comcast Corp. ............................... 20,500 1,203,094
News Corp., Ltd. (The) (ADR) ................ 72,800 1,924,650
------------
3,127,744
------------
MEDICAL SUPPLIES - 0.6%
Forest Laboratories, Inc. * ................. 21,500 1,143,531
------------
METALS - 0.5%
Allegheny Teledyne, Inc. .................... 44,800 915,600
------------
OIL & GAS - 6.3%
British Petroleum Co. Plc (ADR) ............. 1 87
K N Energy, Inc. ............................ 7,500 272,813
Mobil Corp. ................................. 58,800 5,122,950
Shell Transport & Trading Co. (ADR) ......... 124,200 4,618,688
Tosco Corp. ................................. 96,200 2,489,175
------------
12,503,713
------------
PHARMACEUTICALS - 7.7%
Alza Corp. * ................................ 14,900 778,525
American Home Products Corp. ................ 102,700 5,783,294
Bristol-Myers Squibb Co. .................... 39,100 5,232,069
Genzyme Corp. * ............................. 45,700 2,273,575
Genzyme Molecular Oncology * ................ 4,902 15,932
Warner Lambert Co. .......................... 14,900 1,120,294
------------
15,203,689
------------
REAL ESTATE - 1.3%
Starwood Hotels & Resorts Trust (REIT) ...... 114,316 2,593,544
------------
RETAILERS - 6.7%
AutoZone, Inc. * ............................ 26,100 859,669
Circuit City Stores, Inc. ................... 19,600 978,775
Dayton Hudson Corp. ......................... 39,200 2,126,600
Fred Meyer, Inc. * .......................... 43,900 2,644,975
Gap, Inc. ................................... 19,600 1,102,500
Kimberly-Clark Corp. ........................ 37,300 2,032,850
TJX Companies, Inc. ......................... 56,000 1,624,000
Wal-Mart Stores, Inc. ....................... 24,300 1,978,931
------------
13,348,300
------------
TELEPHONE SYSTEMS - 6.3%
GTE Corp. ................................... 49,000 3,304,438
MCI WorldCom, Inc. * ........................ 80,114 5,748,180
SBC Communications Corp. .................... 63,500 3,405,188
------------
12,457,806
------------
TRANSPORTATION - 2.3%
Union Pacific Corp. ......................... 102,700 4,627,919
------------
TOTAL INVESTMENTS - 98.5%
(Cost $176,623,364) 194,780,668
Other Assets and Liabilities (net) - 1.5% 2,987,515
------------
TOTAL NET ASSETS - 100.0% $ 197,768,183
============
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the last 12 month period.
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
LARGE CAP STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 96.3%
AEROSPACE & DEFENSE - 1.4%
AlliedSignal, Inc. ................................... 20,200 $ 895,113
Boeing Co. ........................................... 500 16,313
Coltec Industries, Inc. * ............................ 1,500 29,250
Raytheon Co. ......................................... 9,500 491,031
------------
1,431,707
------------
AUTOMOTIVE - 1.5%
Cooper Tire & Rubber Co. ............................. 1,600 32,700
Dana Corp. ........................................... 6,600 269,775
Ford Motor Co. ....................................... 6,600 387,338
General Motors Corp. (Class H) * ..................... 4,500 178,594
General Motors Corp. ................................. 1,800 128,813
Genuine Parts Co. .................................... 5,100 170,531
Goodyear Tire & Rubber Co. ........................... 6,100 307,669
Lear Corp. * ......................................... 2,600 100,100
------------
1,575,520
------------
BANKING - 7.4%
Associated Banc-Corp ................................. 800 27,350
Associates First Capital Corp. ....................... 9,000 381,375
Astoria Financial Corp. .............................. 1,500 68,625
BancWest Corp. ....................................... 100 4,800
Bank One Corp. ....................................... 5,300 270,631
BankAmerica Corp. .................................... 26,001 1,563,310
BankBoston Corp. ..................................... 4,000 155,750
Bankers Trust New York Corp. ......................... 1,400 119,613
Chase Manhattan Corp. ................................ 10,900 741,881
Colonial Bancgroup, Inc. ............................. 600 7,200
Commercial Federal Corp. ............................. 600 13,913
Compass Bancshares, Inc. ............................. 900 34,256
Crestar Financial Corp. .............................. 3,800 273,600
Dime Bancorp, Inc. ................................... 2,600 68,738
First American Corp. ................................. 1,300 57,688
First Union Corp. .................................... 12,900 784,481
First Virginia Banks, Inc. ........................... 400 18,800
Golden West Financial Corp. .......................... 800 73,350
Greenpoint Financial Corp. ........................... 1,400 49,175
Hibernia Corp. ....................................... 2,000 34,750
Huntington Bancshares, Inc. .......................... 500 15,031
KeyCorp .............................................. 6,400 204,800
Marshall & Ilsley Corp. .............................. 1,400 81,813
Mellon Bank Corp. .................................... 3,300 226,875
Mercantile Bancorporation, Inc. ...................... 2,200 101,475
National Commerce Bancorp ............................ 1,200 22,575
North Fork Bancorp., Inc. ............................ 1,800 43,088
Pacific Century Financial Corp. ...................... 1,000 24,375
Peoples Heritage Financial Group, Inc. ............... 1,000 20,000
PNC Bank Corp. ....................................... 4,200 227,325
Republic New York Corp. .............................. 1,400 63,788
Southtrust Corp. ..................................... 3,000 110,813
Sovereign Bancorp, Inc. .............................. 3,400 48,450
Summit Bancorp ....................................... 200 8,738
TCF Financial Corp. .................................. 1,200 29,025
Union Planters Corp. ................................. 1,700 77,031
U.S. Bancorp ......................................... 9,300 330,150
Washington Federal, Inc. ............................. 200 5,338
Washington Mutual, Inc. .............................. 9,000 343,688
Wells Fargo Co. ...................................... 23,300 930,544
------------
7,664,208
------------
BEVERAGES, FOOD & TOBACCO - 6.8%
Anheuser-Busch Companies, Inc. ....................... 2,200 144,375
Bestfoods ............................................ 2,700 143,775
Campbell Soup Co. .................................... 5,600 308,000
Coca-Cola Co. (The) .................................. 18,300 1,223,813
Corn Products International, Inc. .................... 200 6,075
General Mills Co. .................................... 1,900 147,725
Hershey Foods Corp. .................................. 2,100 130,594
Nabisco Holdings Corp. ............................... 600 24,900
Pepsico, Inc. ........................................ 20,600 843,313
Philip Morris Co., Inc. .............................. 41,000 2,193,500
Pioneer Hi-Bred International, Inc. .................. 2,800 75,600
Ralston-Ralston Purina Group ......................... 4,600 148,925
Sara Lee Corp. ....................................... 13,300 374,894
Seagrams Co., Ltd. ................................... 16,500 627,000
Unilever N.V ......................................... 7,700 638,619
------------
7,031,108
------------
BUILDING MATERIALS - 0.2%
Owens Corning ........................................ 1,900 67,331
Sherwin Williams Co. ................................. 6,400 188,000
------------
255,331
------------
CHEMICALS - 2.8%
Crompton & Knowles Corp. ............................. 700 14,481
Cytec Industries, Inc. * ............................. 400 8,500
Dow Chemical Co. ..................................... 6,500 591,094
Du Pont (E.I.) de Nemours and Co. .................... 6,700 355,519
Georgia Gulf Corp. ................................... 200 3,213
IMC Global, Inc. ..................................... 700 14,963
Lyondell Petro Chemical Co. .......................... 2,300 41,400
Monsanto Co. ......................................... 28,600 1,358,500
Praxair, Inc. ........................................ 4,100 144,525
Rohm & Haas Co. ...................................... 5,200 156,650
Solutia, Inc. ........................................ 3,500 78,313
Union Carbide Corp. .................................. 2,100 89,250
USEC, Inc. ........................................... 1,800 24,975
------------
2,881,383
------------
COMMERCIAL SERVICES - 1.4%
Cendant Corp. * ...................................... 39,900 760,594
Equifax, Inc. ........................................ 6,900 235,894
Service Corp. International .......................... 12,300 468,169
------------
1,464,657
------------
COMMUNICATIONS - 2.7%
3 Com Corp. * ........................................ 4,600 206,138
Lucent Technologies, Inc. ............................ 17,900 1,969,000
Tele-Communications TCI Ventures Group * ............. 18,000 424,125
Tele-Communications, Inc. * .......................... 4,500 248,906
------------
2,848,169
------------
COMPUTER SOFTWARE & PROCESSING - 6.9%
America Online, Inc. * ............................... 4,400 704,000
Autodesk, Inc. ....................................... 700 29,881
BMC Software, Inc. * ................................. 2,600 115,863
Cisco Systems, Inc. * ................................ 24,100 2,236,781
Computer Associates International, Inc. .............. 9,400 400,675
Electronic Arts, Inc. * .............................. 700 39,288
First Data Corp. ..................................... 5,900 186,956
Microsoft Corp. * .................................... 19,300 2,676,669
Networks Associates, Inc. * .......................... 1,900 125,875
Oracle Corp. * ....................................... 10,400 448,500
Parametric Technology Co. * .......................... 2,300 37,663
PeopleSoft, Inc. * ................................... 3,300 62,494
Symantec Corp. * ..................................... 500 10,875
------------
7,075,520
------------
COMPUTERS & INFORMATION - 4.5%
Apple Computer, Inc. * ............................... 1,700 69,594
Compaq Computer Corp. ................................ 25,900 1,086,181
EMC Corp. * .......................................... 7,700 654,500
International Business Machines Corp. ................ 12,300 2,272,425
Seagate Technology, Inc. * ........................... 3,000 90,750
Sun Microsystems, Inc. * ............................. 5,800 496,625
------------
4,670,075
------------
COSMETICS & PERSONAL CARE - 0.6%
Colgate-Palmolive Co. ................................ 3,400 315,775
Gillette Co. ......................................... 6,300 304,369
------------
620,144
------------
ELECTRIC UTILITIES - 2.1%
Allegheny Energy, Inc. ............................... 2,300 79,350
Ameren Corp. ......................................... 2,600 110,988
Baltimore Gas and Electric Co. ....................... 2,800 86,450
Central & South West Corp. ........................... 10,800 296,325
Cinergy Corp. ........................................ 3,100 106,563
CMS Energy Corp. ..................................... 2,000 96,875
Edison International ................................. 6,800 189,550
Entergy Corp. ........................................ 4,700 146,288
GPU, Inc. ............................................ 1,700 75,119
Illinova Corp. ....................................... 1,300 32,500
New England Electric System .......................... 1,200 57,750
Niagara Mohawk Power Corp. * ......................... 3,400 54,825
Northeast Utilities * ................................ 2,400 38,400
Northern States Power Co. ............................ 3,000 83,250
Pinnacle West Capital Corp. .......................... 1,600 67,800
PP&L Resources, Inc. ................................. 3,300 91,988
P.G.&E. Corp. ........................................ 4,600 144,900
TECO Energy, Inc. .................................... 2,400 67,650
Texas Utilities Co. .................................. 5,400 252,113
Western Resources, Inc. .............................. 1,200 39,900
Wisconsin Energy Corp. ............................... 2,400 75,450
------------
2,194,034
------------
ELECTRICAL EQUIPMENT - 2.6%
Emerson Electric Co. ................................. 800 50,050
General Electric Co. ................................. 22,300 2,275,994
Grainger (W.W.), Inc. ................................ 2,500 104,063
National Service Industries, Inc. .................... 500 19,000
Northern Telecom Ltd. ................................ 5,600 280,700
------------
2,729,807
------------
ELECTRONICS - 4.1%
Anixter International, Inc. * ........................ 300 6,094
Input/Output, Inc. * ................................. 200 1,463
Intel Corp. .......................................... 24,100 2,857,316
Motorola, Inc. ....................................... 7,800 476,288
Perkin-Elmer Corp. ................................... 1,100 107,319
Rockwell International Corp. ......................... 4,700 228,244
Sensormatic Electronics Corp. * ...................... 400 2,775
Texas Instruments, Inc. .............................. 5,900 504,819
Xilinx, Inc. * ....................................... 900 58,613
------------
4,242,931
------------
ENTERTAINMENT & LEISURE - 0.7%
Hasbro, Inc. ......................................... 5,200 187,850
International Game Technology ........................ 5,400 131,288
Mattel, Inc. ......................................... 11,600 264,625
MGM Grand, Inc. * .................................... 1,100 29,838
Mirage Resorts, Inc. * ............................... 8,600 128,463
------------
742,064
------------
ENVIRONMENTAL CONTROLS - 1.1%
Browning-Ferris Industries, Inc. ..................... 7,800 221,813
Waste Management, Inc. ............................... 20,400 951,150
------------
1,172,963
------------
FINANCIAL SERVICES - 4.1%
American Express Credit Corp. ........................ 6,000 613,500
Bear Stearns Companies, Inc. ......................... 1,500 56,063
Berkshire Hathaway, Inc. * ........................... 18 122,500
Capital One Financial Corp. .......................... 900 103,500
Charter One Financial, Inc. .......................... 2,100 58,275
CIT Group, Inc. (The) ................................ 1,300 41,356
Citigroup, Inc. ...................................... 31,200 1,544,400
Federal National Mortgage Association ................ 8,800 651,200
Financial Security Assurance Holdings Ltd. ........... 500 27,125
Finova Group, Inc. ................................... 700 37,756
Household International, Inc. ........................ 6,600 261,525
Lehman Brothers Holdings, Inc. ....................... 1,500 66,094
Morgan Stanley, Dean Witter & Co. .................... 7,600 539,600
Ocwen Financial Corp. * .............................. 400 4,925
Paine Webber Group, Inc. ............................. 1,800 69,525
Provident Financial Group, Inc. ...................... 500 18,875
Waddell & Reed Financial, Inc. (Class A) ............. 200 4,738
Waddell & Reed Financial, Inc. (Class B) ............. 700 16,275
------------
4,237,232
------------
FOREST PRODUCTS & PAPER - 0.6%
Boise Cascade Corp. .................................. 900 27,900
Bowater, Inc. ........................................ 1,000 41,438
Corporate Express, Inc. * ............................ 1,600 8,300
Fort James Corp. ..................................... 4,200 168,000
Georgia-Pacific Corp. ................................ 2,300 134,694
Louisiana Pacific Corp. .............................. 2,100 38,456
Smurfit-Stone Container Corp. * ...................... 8,400 132,825
Union Camp Corp. ..................................... 1,400 94,500
------------
646,113
------------
HEALTH CARE PROVIDERS - 1.0%
Columbia/HCA Healthcare Corp. ........................ 15,500 383,625
HCR Manor Care, Inc. * ............................... 2,600 76,375
HEALTHSOUTH Corp. * .................................. 2,600 40,138
Humana, Inc. * ....................................... 4,600 81,938
Medtronic, Inc. ...................................... 1,000 74,250
Tenet Healthcare Corp. * ............................. 8,300 217,875
United Healthcare Corp. .............................. 4,300 185,169
------------
1,059,370
------------
HEAVY CONSTRUCTION - 0.0%
Foster Wheeler Corp. ................................. 300 3,956
------------
HEAVY MACHINERY - 0.7%
Caterpiller Tractor, Inc. ............................ 4,000 184,000
Cooper Industries, Inc. .............................. 3,000 143,063
Deere & Co. .......................................... 5,800 192,125
Eaton Corp. .......................................... 2,000 141,375
Parker-Hannifin Corp. ................................ 2,800 91,700
Smith International, Inc. * .......................... 1,000 25,188
------------
777,451
------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 0.3%
Furniture Brands International, Inc. * ............... 900 24,525
Leggett & Platt, Inc. ................................ 7,800 171,600
Whirlpool Corp. ...................................... 3,000 166,125
------------
362,250
------------
HOUSEHOLD PRODUCTS - 1.4%
Procter & Gamble Co. ................................. 15,800 1,442,738
------------
INDUSTRIAL - DIVERSIFIED - 2.5%
Eastman Kodak Co. .................................... 10,000 720,000
Illinois Tool Works, Inc. ............................ 1,200 69,600
ITT Industries, Inc. ................................. 4,200 166,950
Johnson Controls, Inc. ............................... 3,000 177,000
Temple Inland, Inc. .................................. 1,200 71,175
Tenneco, Inc. ........................................ 6,000 204,375
Tyco International Ltd. .............................. 15,800 1,191,913
------------
2,601,013
------------
INSURANCE - 3.4%
Aetna, Inc. .......................................... 3,100 243,738
Allstate Corp. ....................................... 23,800 919,275
Ambac Financial Group, Inc. .......................... 1,700 102,319
American International Group ......................... 3,100 299,538
Aon Corp. ............................................ 3,200 177,200
Chubb Corp. .......................................... 2,400 155,700
Equitable Companies, Inc. (The) ...................... 2,500 144,688
Fremont General Corp. ................................ 1,600 39,600
Lincoln National Corp. ............................... 200 16,363
Marsh & McLennan Co., Inc. ........................... 6,000 350,625
MBIA, Inc. ........................................... 2,600 170,463
Mercury General Corp. ................................ 1,300 56,956
Ohio Casualty Corp. .................................. 300 12,338
PMI Group, Inc. (The) ................................ 400 19,750
Safeco Corp. ......................................... 3,500 150,281
St. Paul Co. ......................................... 5,500 191,125
Torchmark Corp. ...................................... 1,600 56,500
Transamerica Corp. ................................... 1,400 161,700
Travelers Property Casualty Corp. .................... 3,000 93,000
Unum Corp. ........................................... 3,300 192,638
------------
3,553,797
------------
LODGING - 0.3%
Circus Circus Enterprises, Inc. * .................. 1,800 20,588
Extended Stay America, Inc. * ...................... 700 7,350
Hilton Hotels Corp. ................................ 12,200 233,325
------------
261,263
------------
MEDIA - BROADCASTING & PUBLISHING - 2.0%
Comcast Corp. ...................................... 13,000 762,938
Gannett Co., Inc. .................................. 4,500 297,844
Knight-Ridder, Inc. ................................ 2,700 138,038
New York Times Co. ................................. 7,000 242,813
R.R. Donnelley & Sons Co. .......................... 5,700 249,731
Times Mirror Co. ................................... 1,300 72,800
Tribune Co. ........................................ 2,400 158,400
Washington Post Co. (The) .......................... 300 173,381
------------
2,095,945
------------
MEDICAL SUPPLIES - 1.0%
Bausch & Lomb, Inc. ................................ 1,200 72,000
Boston Scientific Corp. * .......................... 10,500 281,531
Forest Laboratories, Inc. * ........................ 10,200 542,513
Stryker Corp. ...................................... 1,700 93,606
------------
989,650
------------
METALS - 0.6%
Alcan Aluminum Ltd. ................................ 8,400 227,325
Allegheny Teledyne, Inc. ........................... 7,000 143,063
Aluminum Company of America ........................ 1,100 82,019
Freeport-McMoran Copper & Gold, Inc. (Class A) ..... 2,000 19,375
Reynolds Metals Co. ................................ 2,700 142,256
------------
614,038
------------
OFFICE EQUIPMENT - 0.1%
Harris Corp., Inc. ................................. 2,800 102,550
Ryder System, Inc. ................................. 1,200 31,200
------------
133,750
------------
OIL & GAS - 6.6%
Atlantic Richfield Co. ............................. 8,300 541,575
Columbia Energy Group .............................. 1,700 98,175
Consolidated Natural Gas Co. ....................... 1,800 97,200
Diamond Offshore Drilling, Inc. .................... 1,500 35,531
El Paso Energy Corp. ............................... 2,500 87,031
Enron Corp. ........................................ 6,600 376,613
ENSCO International, Inc. .......................... 2,800 29,925
Exxon Corp. ........................................ 23,600 1,725,750
Global Marine, Inc. * .............................. 6,300 57,881
K N Energy, Inc. ................................... 800 29,100
Mobil Corp. ........................................ 17,500 1,524,688
Occidental Petroleum Corp. ......................... 1,400 23,625
Phillips Petroleum Co. ............................. 8,300 353,788
Royal Dutch Petroleum Co. .......................... 25,500 1,220,813
R&B Falcon Corp. * ................................. 8,400 64,050
Texaco, Inc. ....................................... 3,100 163,913
Tosco Corp. ........................................ 6,700 173,363
Union Pacific Resources Group, Inc. ................ 9,800 88,813
Unocal Corp. ....................................... 5,300 154,694
Valero Energy Corp. ................................ 800 17,000
------------
6,863,528
------------
PHARMACEUTICALS - 9.0%
Alza Corp. * ......................................... 18,100 945,725
American Home Products Corp. ......................... 31,600 1,779,475
Amgen, Inc. * ........................................ 5,200 543,725
Biogen, Inc. * ....................................... 1,100 91,300
Bristol-Myers Squibb Co. ............................. 17,300 2,314,956
Chiron Corporation * ................................. 8,400 219,975
Genzyme Corp. * ...................................... 8,100 402,975
Genzyme Molecular Oncology * ......................... 691 2,246
Immunex Corp. * ...................................... 2,800 352,275
Johnson & Johnson .................................... 2,500 209,688
MedImmune, Inc. * .................................... 3,100 308,256
Merck & Co., Inc. .................................... 5,200 767,975
Pfizer, Inc. ......................................... 4,500 564,469
Warner Lambert Co. ................................... 6,500 488,719
Watson Pharmaceutical, Inc. * ........................ 4,300 270,363
------------
9,262,122
------------
REAL ESTATE - 0.0%
Amresco, Inc. * ...................................... 300 2,625
------------
RESTAURANTS - 0.0%
McDonald's Corp. ..................................... 500 38,313
------------
RETAILERS - 7.0%
Albertson's, Inc. .................................... 100 6,369
American Stores Co. .................................. 10,100 373,069
AutoZone, Inc. * ..................................... 4,000 131,750
Circuit City Stores, Inc. ............................ 2,900 144,819
CompUSA, Inc. * ...................................... 2,100 27,431
Costco Companies, Inc. * ............................. 5,800 418,688
Dayton-Hudson Corp. .................................. 11,500 623,875
Dillard's, Inc. ...................................... 3,000 85,125
Federated Department Stores, Inc. * .................. 5,800 252,663
Gap, Inc. ............................................ 6,900 388,125
General Nutrition Co., Inc. * ........................ 1,900 30,875
Hannaford Brothers Co. ............................... 1,100 58,300
Home Depot, Inc. ..................................... 8,400 513,975
J.C. Penney Co., Inc. ................................ 6,700 314,063
Kimberly-Clark Corp. ................................. 9,100 495,950
K-Mart Corp. * ....................................... 14,200 217,438
Kroger Co. * ......................................... 1,900 114,950
Lowes Companies, Inc. ................................ 6,100 312,244
May Department Stores Co. (The) ...................... 4,700 283,763
Nine West Group, Inc. * .............................. 200 3,113
Safeway, Inc. * ...................................... 1,600 97,500
Sears, Roebuck and Co. ............................... 11,100 471,750
TJX Companies, Inc. .................................. 8,300 240,700
Toys "R" Us, Inc. * .................................. 7,500 126,563
Wal-Mart Stores, Inc. ................................ 17,300 1,408,869
------------
7,141,967
------------
TELEPHONE SYSTEMS - 8.0%
Airtouch Communications, Inc. * ...................... 5,300 382,263
Ameritech Corp. ...................................... 7,400 468,975
AT&T Corp. ........................................... 29,300 2,204,825
Bell Atlantic Corp. .................................. 15,600 886,275
Cincinnati Bell, Inc. ................................ 2,700 102,094
Frontier Corp. ....................................... 4,000 136,000
GTE Corp. ............................................ 23,100 1,557,806
MCI WorldCom, Inc. * ................................. 30,600 2,195,550
SBC Communications Corp. ............................. 5,400 289,575
------------
8,223,363
------------
TEXTILES, CLOTHING & FABRICS - 0.1%
Fruit of the Loom, Inc. * ............................ 1,500 20,719
Nike, Inc. ........................................... 1,600 64,900
Reebok International Ltd. * .......................... 1,100 16,363
Unifi, Inc. .......................................... 1,100 21,519
------------
123,501
------------
TRANSPORTATION - 0.8%
AMR Corp. * .......................................... 1,900 112,813
Burlington Northern Santa Fe Corp. ................... 6,600 222,750
CNF Transportation, Inc. ............................. 600 22,538
Consolidated Freightways Corp. * ..................... 100 1,588
CSX Corp. ............................................ 3,600 149,400
FDX Corp. * .......................................... 200 17,800
Norfolk Southern Corp. ............................... 5,100 161,606
Union Pacific Corp. .................................. 4,100 184,756
Wisconsin Central Transport Corp. * .................. 300 5,156
------------
878,407
------------
Total Common Stocks (Cost $83,737,692) 99,912,013
------------
U.S. GOVERNMENT AGENCIES - 0.2%
U.S. Treasury Note at 6.000%, due 06/30/99 (a) ... $150,000 151,078
U.S. Treasury Note at 5.875%, due 11/15/99 (a) ... 50,000 50,531
------------
(Cost $202,179) 201,609
------------
TOTAL INVESTMENTS - 96.5%
(Cost $83,939,871) 100,113,622
Other Assets and Liabilities (net) - 3.5% 3,647,621
------------
TOTAL NET ASSETS - 100.0% $ 103,761,243
============
</TABLE>
PORTFOLIO FOOTNOTES:
(a) Held as collateral for open futures contracts.
* Non-income producing security as this stock did not declare
or pay dividends in the 12 month period.
See notes to financial statements
<PAGE>
COVA SERIES TRUST
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
PAR AMOUNT DESCRIPTION SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 97.5%
AUSTRALIA - 3.9%
AMP Ltd. * ........................................................... 26,329 $ 333,416
Australia & New Zealand Banking Group Ltd. ........................... 72,600 474,913
Brambles Industries Ltd. ............................................. 9,423 229,421
Broken Hill Proprietary Co., Ltd. .................................... 36,100 261,797
CSR Ltd. ............................................................. 86,100 210,418
Foster's Brewing Group Ltd. .......................................... 82,600 223,619
Goodman Fielder Ltd. ................................................. 139,000 140,477
Lend Lease Corp., Ltd. * ............................................. 14,500 197,785
Lend Lease Corp., Ltd. (Bonus Shares) ................................ 14,500 195,388
National Australia Bank Ltd. ......................................... 39,900 601,193
News Corp., Ltd. (The) Preferred ..................................... 34,400 209,225
Pioneer International Ltd. ........................................... 93,512 199,321
Telstra Corp., Ltd. .................................................. 50,900 237,875
Western Mining Corp. Holdings Ltd. ................................... 60,500 182,317
Westpac Banking Corp. ................................................ 36,120 236,921
Woolworths Ltd. ...................................................... 54,200 184,445
-----------
4,118,531
-----------
AUSTRIA - 1.0%
Bank Austria AG ...................................................... 21,296 1,083,889
-----------
BELGIUM - 0.3%
Delhaize-Le Lion S.A ................................................. 3,900 343,155
-----------
DENMARK - 1.0%
Danisco A/S .......................................................... 11,300 612,779
Great Nordic Store Nord A/S .......................................... 12,200 431,468
-----------
1,044,247
-----------
FINLAND - 1.0%
Merita Plc ........................................................... 103,100 651,392
Nokia Oyj ............................................................ 3,000 364,956
-----------
1,016,348
-----------
FRANCE - 12.2%
AXA Co. .............................................................. 4,500 652,466
Canal Plus ........................................................... 1,270 346,684
Carrefour Supermarche ................................................ 713 538,467
Compagnie de Saint Goban ............................................. 3,073 434,010
Elf Sanofi ........................................................... 5,100 839,882
Groupe Danone ........................................................ 1,900 544,169
Lagardere Groupe ..................................................... 15,569 661,888
Paribas .............................................................. 16,863 1,466,098
Rhodia, S.A. * ....................................................... 30,268 460,535
Rhone-Poulenc S.A .................................................... 16,100 828,848
Societe Generale ..................................................... 1,943 314,761
Societe National Elf-Aquitaine ....................................... 9,486 1,096,922
STMicroelectronics N.V. * ............................................ 12,875 1,014,052
Thomson CSF .......................................................... 11,700 502,640
Total Cie Francaise Petroles ......................................... 9,758 988,638
Vivendi .............................................................. 8,059 2,091,748
-----------
12,781,808
-----------
GERMANY - 10.1%
Allianz AG Holdings .................................................. 1,060 388,938
BASF AG .............................................................. 19,400 740,956
Bayerische Hypo-Und Vereinsbank ...................................... 15,180 1,189,641
Bilfinger and Berger Bau AG .......................................... 12,540 320,052
Deutsche Bank AG ..................................................... 4,266 251,190
Hochtief AG .......................................................... 4,400 171,751
Karstadt AG .......................................................... 1,100 574,706
Muenchener Rueckversicherungs - Gesellschaft AG ...................... 4,988 2,417,317
RWE AG ............................................................... 16,720 916,226
SAP AG ............................................................... 950 410,761
SGL Carbon AG ........................................................ 4,201 252,282
Siemens AG ........................................................... 12,990 838,593
SKW Trostberg AG ..................................................... 11,770 296,865
Veba AG .............................................................. 14,930 893,899
Volkswagen AG ........................................................ 10,979 876,896
-----------
10,540,073
-----------
HONG KONG - 0.6%
CLP Holdings Ltd. .................................................... 34,500 171,901
Hutchison Whampoa .................................................... 31,000 219,088
Sun Hung Kai Properties Ltd. ......................................... 38,000 277,143
-----------
668,132
-----------
IRELAND - 0.9%
Bank of Ireland ...................................................... 12,000 266,644
CRH Plc .............................................................. 10,475 179,345
Greencore Group Plc .................................................. 25,000 115,382
Irish Life Plc ....................................................... 17,700 166,016
Jefferson Smurfit Corp. .............................................. 97,800 176,182
-----------
903,569
-----------
ITALY - 5.8%
Assicurazioni Generali ............................................... 15,600 651,199
Banca Fideuram SPA ................................................... 147,080 1,051,893
Credito Italiano SPA ................................................. 117,338 692,883
ENI SPA .............................................................. 140,200 920,078
Telecom Italia SPA-RNC ............................................... 437,392 2,742,106
-----------
6,058,159
-----------
JAPAN - 15.8%
Asahi Bank Ltd. ...................................................... 109,000 400,124
Bridgestone Corp. .................................................... 12,000 272,921
Canon, Inc. .......................................................... 9,000 192,720
Dainippon Ink & Chemicals, Inc. ...................................... 43,000 117,813
DDI Corp. ............................................................ 113 420,819
Ebaba Corp. .......................................................... 37,000 319,214
Fanuc Co. ............................................................ 9,100 312,263
Fujitsu Ltd. ......................................................... 45,000 600,505
Honda Motor Co., Ltd. ................................................ 18,000 592,126
Ito-Yokado Co., Ltd. ................................................. 8,000 560,383
Japan Tobacco, Inc. .................................................. 48 472,886
Kawasaki Steel Corp. ................................................. 201,000 301,197
Kyocera Corp. ........................................................ 5,600 296,436
Minebea Co., Ltd. .................................................... 29,000 332,736
Mitsubishi Chemical Corp. ............................................ 189,000 398,847
Mitsubishi Corp. ..................................................... 50,000 288,172
Mitsubishi Estate Co., Ltd. .......................................... 23,000 206,588
Mitsubishi Trust & Banking Corp. (The) ............................... 21,000 135,370
Mitsui Trust & Banking Co., Ltd (The) ................................ 90,000 102,944
Nichiei Co., Ltd. (Kyoto) ............................................ 4,900 391,027
Nippon Telegraph and Telephone Corp. ................................. 141 1,090,193
Nippon Yusen Kabushiki Kaisha ........................................ 99,000 313,380
Nishimatsu Construction Co. .......................................... 59,000 345,274
Nomura Securities Co., Ltd. .......................................... 18,000 157,209
Ono Pharmaceutical ................................................... 500 15,340
Osaka Gas Co., Ltd. .................................................. 45,000 155,214
Pioneer Electronic Corp. ............................................. 10,000 168,026
Ricoh Corp., Ltd. .................................................... 28,000 258,698
Rohm Co. ............................................................. 6,000 550,098
Sanki Engineering .................................................... 2,000 12,768
Sekisui Chemical Co., Ltd. ........................................... 38,000 256,074
Sony Corp. ........................................................... 8,200 598,386
Sony Music Entertainment, Inc. ....................................... 12,600 580,954
Suzuki Motor Corp. ................................................... 23,000 273,275
Taiheiyo Cement Corp. ................................................ 51,000 127,975
Takashimaya Co., Ltd. ................................................ 28,000 236,106
Takeda Chemical Industries ........................................... 23,000 887,125
Takefuji Corp. ....................................................... 9,900 724,198
Toda Construction Co. ................................................ 12,000 58,202
Tokyo Electric Power Co., Inc. ....................................... 14,500 358,707
Tokyo Steel Manufacturing Co., Ltd. .................................. 25,200 126,469
Tostem Corp. ......................................................... 26,000 516,404
Toyota Motor Co. ..................................................... 31,000 843,855
West Japan Railway Co. ............................................... 122 540,876
Yamanouchi Pharmaceutical ............................................ 17,000 548,679
-----------
16,458,576
-----------
NETHERLANDS - 6.2%
Heineken N.V ......................................................... 11,560 696,014
ING Groep N.V ........................................................ 8,548 521,497
Koninklijke KPN N.V .................................................. 10,526 527,197
Laurus N.V ........................................................... 36,852 930,725
Philips Electronics N.V .............................................. 17,546 1,177,960
Royal Dutch Petroleum Co. ............................................ 15,880 791,123
TNT Post Group N.V ................................................... 14,993 483,310
Vedior N.V ........................................................... 12,109 238,722
Vendex N.V ........................................................... 21,551 523,618
Wolters Kluwer N.V ................................................... 2,626 562,195
-----------
6,452,361
-----------
NEW ZEALAND - 0.5%
Fletcher Challenge Paper Shares ...................................... 209,900 140,751
Lion Nathan .......................................................... 45,000 114,761
Telecom New Zealand .................................................. 60,400 263,102
-----------
518,614
-----------
NORWAY - 0.1%
Nycomed Amersham Plc ................................................. 21,075 146,652
-----------
PORTUGAL - 0.6%
Banco Pinto & Sotto Mayor S.A ........................................ 32,200 610,397
-----------
SPAIN - 2.7%
Acerinox, S.A ........................................................ 10,500 244,263
Actividades de Construccion y Servicios S.A .......................... 15,558 613,253
Iberdrola S.A ........................................................ 52,900 988,594
Telefonica S.A ....................................................... 22,100 981,565
-----------
2,827,675
-----------
SWEDEN - 4.4%
ABB AB ............................................................... 36,300 388,689
Astra AB - A Shares .................................................. 14,285 292,657
Autoliv, Inc. * ...................................................... 36,400 1,311,216
Gambro AB ............................................................ 19,275 209,970
Skandia Forsakrings AB * ............................................. 23,550 361,487
Stora Kopparbergs Bergslags Aktiebolag ............................... 63,100 695,183
Telefonaktiebolaget LM Ericsson ...................................... 42,200 1,008,207
Volvo AB ............................................................. 13,700 315,438
-----------
4,582,847
-----------
SWITZERLAND - 10.1%
Nestle S.A ........................................................... 970 2,113,613
Novartis AG .......................................................... 691 1,372,065
Roche Holding AG ..................................................... 185 2,259,583
Schw Rueckversicherungs .............................................. 300 782,903
Swisscom AG * ........................................................ 2,700 1,131,395
UBS AG * ............................................................. 3,785 1,164,021
Zurich Allied AG * ................................................... 2,400 1,778,749
-----------
10,602,329
-----------
UNITED KINGDOM - 20.3%
Allied Zurich Plc * .................................................. 20,050 299,011
Barclays Plc ......................................................... 15,000 323,384
Bass Plc ............................................................. 24,139 351,358
Billiton Plc ......................................................... 199,000 394,761
British Airways Plc .................................................. 36,300 244,710
British American Tobacco Plc ......................................... 16,050 141,105
British Petroleum Co. Plc ............................................ 75,317 1,124,476
British Sky Broadcasting Group Plc ................................... 24,700 187,569
British Telecommunications Plc ....................................... 74,200 1,117,674
Burmah Castrol Plc ................................................... 11,700 167,381
Cable & Wireless Plc ................................................. 74,500 915,848
Cadbury Schweppes Plc ................................................ 29,900 509,821
Compass Group Plc .................................................... 43,600 499,359
Diageo Plc ........................................................... 45,584 518,670
Glaxo Wellcome Plc ................................................... 45,800 1,575,574
Glynwed International Plc ............................................ 70,100 193,575
Great Universal Stores Plc ........................................... 37,700 397,293
Hays Plc ............................................................. 26,000 228,149
HSBC Holdings Plc (Frankfurt) ........................................ 27,150 736,174
Kingfisher Plc ....................................................... 48,200 521,575
Lloyds TSB Group Plc ................................................. 118,900 1,691,106
LucasVarity Plc ...................................................... 102,600 342,204
MEPC Plc ............................................................. 33,374 222,071
MFI Furniture Group Plc .............................................. 153,232 87,941
National Power Plc ................................................... 40,340 347,607
Northern Rock Plc .................................................... 32,400 302,903
Ocean Group Plc ...................................................... 9,900 124,750
Pearson Plc .......................................................... 19,800 392,942
Pilkington Plc ....................................................... 152,500 150,942
PowerGen Plc ......................................................... 28,000 367,966
Prudential Corp. ..................................................... 44,700 674,803
Racal Electronics .................................................... 44,900 259,178
Reed International Ltd. .............................................. 16,700 130,568
RMC Group Plc ........................................................ 12,350 169,079
Royal Bank of Scotland ............................................... 37,300 595,666
Royal & Sun Alliance Insurance Group Plc ............................. 66,000 538,799
Sainsbury (J.) Plc ................................................... 46,444 372,198
Shell Transport & Trading Co. ........................................ 27,000 165,847
Siebe Plc ............................................................ 46,000 181,355
Smith & Nephew Plc ................................................... 33,000 102,655
SmithKline Beecham Plc ............................................... 64,402 899,915
Tomkins Plc .......................................................... 79,100 373,037
Unilever Plc ......................................................... 41,000 459,692
Vickers Plc .......................................................... 42,000 126,459
Vodafone Group Plc ................................................... 48,200 782,564
Zeneca Group Plc ..................................................... 19,350 842,379
------------
21,152,093
------------
Total Common and Preferred Stocks (Cost $92,821,591) 101,909,455
------------
FOREIGN BONDS AND DEBT SECURITIES - 0.6%
BERMUDA - 0.2%
(pound)10,000,000 AB International Cayman Trust .............................. 5.000% 08/01/07 72,043
(pound)24,000,000 Sanwa International Finance Convertible .................... + 08/01/05 169,711
------------
241,754
------------
CAYMAN ISLANDS - 0.2%
(pound)40,000,000 STB Cayman Capital Ltd. (144A)^ ............................ 5.000% 10/01/07 211,491
------------
JAPAN - 0.2%
(Y)10,000,000 Yamanouchi Pharmaceutical .................................. 12.500% 03/31/14 162,387
------------
Total Foreign Bonds and Debt Securities (Cost $559,661) 615,632
------------
TOTAL INVESTMENTS - 98.1%
(Cost $93,381,252) 102,525,087
Other Assets and Liabilities (net) - 1.9% 1,950,209
------------
TOTAL NET ASSETS - 100.0% $ 104,475,296
============
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did
not declare or pay dividends in the 12 month
period.
^ Securities that may be resold to "qualified
institutional buyers" under Rule 144A or
securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These
securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+ Zero coupon bond
(Y) - Japanese Yen
(pound) - British Pound
See notes to financial statements
<PAGE>
COVA SERIES TRUST
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR SECURITY VALUE
AMOUNT DESCRIPTION RATE MATURITY (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS - 100.3%
COMMERCIAL PAPER - 29.2%
$400,000 Associates Corp. of North America ................... 5.060% 03/08/99 $ 396,233
400,000 Coca-Cola Co. (The) ................................. 5.100% 02/08/99 397,790
400,000 Commercial Credit Co. ............................... 5.190% 01/19/99 398,905
400,000 Ford Motor Credit Co. ............................... 5.130% 02/18/99 397,207
400,000 General Electric Capital Corp. ...................... 5.230% 02/12/99 397,501
400,000 Prudential Corp. .................................... 5.180% 02/19/99 397,122
----------
2,384,758
----------
U.S. GOVERNMENT AGENCIES - 71.1%
3,814,000 Federal Home Loan Bank .............................. 4.300% 01/04/99 3,812,633
1,000,000 Federal Home Loan Mortgage Corp. .................... 4.990% 03/05/99 991,129
1,000,000 Federal National Mortgage Association ............... 4.800% 02/02/99 995,600
----------
5,799,362
----------
TOTAL INVESTMENTS - 100.3%
(Cost $8,184,120) 8,184,120
Other Assets and Liabilities (net) - (0.3%) (28,520)
----------
TOTAL NET ASSETS - 100.0% $ 8,155,600
==========
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
QUALITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR SECURITY VALUE
AMOUNT DESCRIPTION COUPON MATURITY (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC BONDS AND DEBT SECURITIES - 85.5%
AIRLINES - 6.2%
$1,000,000 Delta Air Lines, Inc. .............................................. 10.500% 04/30/16 $ 1,300,925
1,000,000 United Air Lines, Inc. ............................................. 9.125% 01/15/12 1,156,038
-----------
2,456,963
-----------
BANKING - 10.7%
2,000,000 Chase Manhattan Corp. .............................................. 9.750% 11/01/01 2,220,298
2,000,000 Providian National Bank ............................................ 6.250% 05/06/01 2,016,512
-----------
4,236,810
-----------
BEVERAGES, FOOD & TOBACCO - 3.1%
1,000,000 Archer-Daniels-Midland Co. ......................................... 8.125% 06/01/12 1,230,779
-----------
BUILDING MATERIALS - 2.5%
1,000,000 Owens Corning ...................................................... 7.500% 08/01/18 979,627
-----------
CHEMICALS - 2.4%
1,000,000 Solutia, Inc. ...................................................... 7.375% 10/15/27 962,188
-----------
CONGLOMERATES - 3.0%
1,000,000 General Electric Capital Corp. ..................................... 8.125% 04/01/08 1,207,354
-----------
CONSUMER SERVICES - 3.6%
1,200,000 Yale University .................................................... 7.375% 04/15/26 1,413,037
-----------
ELECTRIC UTILITIES - 2.4%
1,000,000 Nipsco Capital Markets, Inc. ....................................... 6.780% 12/01/27 1,042,570
-----------
ELECTRICAL EQUIPMENT - 2.4%
1,000,000 Polaroid Corp. ..................................................... 6.750% 01/15/02 972,668
-----------
ENVIRONMENTAL CONTROLS - 5.3%
2,000,000 USA Waste Services, Inc. ........................................... 7.000% 10/01/04 2,093,766
-----------
HOUSEHOLD PRODUCTS - 2.5%
1,000,000 Black & Decker Corp. ............................................... 7.050% 07/01/28 987,312
-----------
MEDIA - BROADCASTING & PUBLISHING - 2.7%
1,000,000 Turner Broadcasting Systems, Inc. .................................. 7.400% 02/01/04 1,070,690
-----------
OIL & GAS - 11.6%
2,000,000 NGC Corp. Capital Trust ............................................ 8.316% 06/01/27 2,047,484
399,000 Noble Drilling Corp. ............................................... 9.125% 07/01/06 445,110
2,000,000 Panenergy Corp. .................................................... 7.000% 10/15/06 2,138,134
-----------
4,630,728
-----------
RETAILERS - 5.6%
1,000,000 Federated Department Stores, Inc. .................................. 8.125% 10/15/02 1,080,793
1,125,000 Kroger Co. ......................................................... 7.000% 05/01/18 1,154,032
-----------
2,234,825
-----------
TELEPHONE SYSTEMS - 13.1%
2,000,000 LCI International, Inc. ............................................ 7.250% 06/15/07 2,056,866
2,000,000 Sprint Capital Corp. ............................................... 6.125% 11/15/08 2,044,464
1,000,000 WorldCom, Inc. ..................................................... 7.750% 04/01/27 1,146,312
-----------
5,247,642
-----------
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES - 0.6%
$32,302 Federal Home Loan Mortgage Corp. ................................... 8.000% 09/01/08 33,433
29,841 Federal National Mortgage Association .............................. 8.000% 09/01/03 30,792
36,006 Federal National Mortgage Association .............................. 8.500% 07/01/19 37,761
64,586 Federal National Mortgage Association .............................. 7.500% 12/25/19 66,012
50,946 Government National Mortgage Association ........................... 9.000% 01/15/20 54,417
-----------
222,415
-----------
U.S. TREASURY SECURITIES - 7.8%
2,000,000 U.S. Treasury Note ................................................. 5.875% 11/30/01 2,066,876
1,000,000 U.S. Treasury Note ................................................. 5.625% 12/31/02 1,033,125
-----------
3,100,001
-----------
Total Domestic Bonds and Debt Securities (Cost $32,860,175) 34,089,375
-----------
FOREIGN BONDS AND DEBT SECURITIES - 12.8%
CANADA - 5.3%
1,390,000 Hydro-Quebec (Yankee) .............................................. 11.750% 02/01/12 2,099,331
-----------
LUXEMBOURG - 2.5%
1,000,000 Tyco International Group SA (Yankee) ............................... 6.250% 06/15/03 1,011,513
-----------
NORWAY - 5.0%
2,000,000 Petro Geo-Services (Yankee) ........................................ 7.125% 03/30/28 1,969,502
-----------
Total Foreign Bonds and Debt Securities (Cost $4,945,936) .......... 5,080,346
-----------
TOTAL INVESTMENTS - 98.3%
(Cost $37,806,111) 39,169,721
Other Assets and Liabilities (net) - 1.7% 691,495
-----------
TOTAL NET ASSETS - 100.0% $ 39,861,216
===========
</TABLE>
PORTFOLIO FOOTNOTES:
Yankee - U.S. Dollar denominated bonds issued by non-U.S.
companies in the U.S.
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STOCK INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 93.4%
ADVERTISING - 0.1%
Omnicom Group, Inc. .................................. 1,700 $ 98,600
R.H. Donnelly Corp. .................................. 400 5,825
-----------
104,425
-----------
AEROSPACE & DEFENSE - 1.4%
AlliedSignal, Inc. ................................... 5,500 243,719
Boeing Co. ........................................... 9,600 313,200
General Dynamics Corp. ............................... 1,500 87,938
Lockheed Martin Corp. ................................ 1,900 161,025
Northrop Grumman Corp. ............................... 700 51,188
Raytheon Co. ......................................... 3,400 181,050
Textron, Inc. ........................................ 1,700 129,094
United Technologies Corp. ............................ 2,300 250,125
-----------
1,417,339
-----------
AIRLINES - 0.4%
AMR Corp. * .......................................... 1,800 106,875
Delta Air Lines, Inc. ................................ 1,600 83,200
FDX Corp. * .......................................... 1,500 133,500
Southwest Airlines, Inc. ............................. 3,450 77,409
US Airways Group, Inc. * ............................. 900 46,800
-----------
447,784
-----------
AUTOMOTIVE - 2.0%
DaimlerChrysler AG ................................... 3,928 377,334
Dana Corp. ........................................... 1,850 75,619
Eaton Corp. .......................................... 800 56,550
Ford Motor Co. ....................................... 11,700 686,644
General Motors Corp. ................................. 6,900 493,781
Genuine Parts Co. .................................... 2,200 73,563
Goodyear Tire & Rubber Co. ........................... 1,700 85,744
Paccar, Inc. ......................................... 900 37,013
TRW, Inc. ............................................ 1,400 78,663
-----------
1,964,911
-----------
BANKING - 7.0%
Associates First Capital Corp. ....................... 6,800 288,150
Bank of New York ..................................... 7,200 289,800
Bank One Corp. ....................................... 10,636 543,101
BankAmerica Corp. .................................... 16,255 977,332
BankBoston Corp. ..................................... 2,800 109,025
Bankers Trust New York Corp. ......................... 1,000 85,438
BB&T Corp. ........................................... 3,200 129,000
Chase Manhattan Corp. ................................ 8,000 544,500
Comerica, Inc. ....................................... 1,600 109,100
Fifth Third Bancorp .................................. 2,300 164,019
First Union Corp. .................................... 9,122 554,732
Fleet Financial Group, Inc. .......................... 5,200 232,375
Golden West Financial Corp. .......................... 600 55,013
Huntington Bancshares, Inc. .......................... 2,530 76,058
KeyCorp .............................................. 4,400 140,800
MBNA Corp. ........................................... 7,500 187,031
Mellon Bank Corp. .................................... 2,400 165,000
Mercantile Bancorporation, Inc. ...................... 1,500 69,188
National City Corp. .................................. 3,200 232,000
Northern Trust Corp. ................................. 1,200 104,775
PNC Bank Corp. ....................................... 3,100 167,788
Republic New York Corp. .............................. 1,300 59,231
State Street Corp. ................................... 1,600 111,300
Summit Bancorp ....................................... 1,900 83,006
Suntrust Banks, Inc. ................................. 2,100 160,650
Synovus Financial Corp. .............................. 2,800 68,250
U.S. Bancorp ......................................... 7,000 248,500
Wachovia Corp. ....................................... 2,100 183,619
Washington Mutual, Inc. .............................. 5,380 205,449
Wells Fargo Co. ...................................... 15,200 607,050
-----------
6,951,280
-----------
BEVERAGES, FOOD & TOBACCO - 6.4%
Anheuser-Busch Companies, Inc. ....................... 4,700 308,438
Archer-Daniels-Midland Co. ........................... 6,195 106,477
Bestfoods ............................................ 2,800 149,100
Campbell Soup Co. .................................... 4,400 242,000
Coca-Cola Co. (The) .................................. 23,500 1,571,563
ConAgra, Inc. ........................................ 4,700 148,050
Fortune Brands, Inc. ................................. 2,100 66,413
General Mills Co. .................................... 1,500 116,625
Heinz (H.J.), Co. .................................... 3,500 198,188
Hershey Foods Corp. .................................. 1,500 93,281
Kellogg Co. .......................................... 4,000 136,500
Pepsico, Inc. ........................................ 14,400 589,500
Philip Morris Co., Inc. .............................. 23,300 1,246,550
Pioneer Hi-Bred International, Inc. .................. 2,400 64,800
Quaker Oats Co. ...................................... 1,500 89,250
Ralston-Ralston Purina Group ......................... 3,300 106,838
Sara Lee Corp. ....................................... 9,200 259,325
Seagrams Co., Ltd. ................................... 3,600 136,800
Sysco Corp. .......................................... 3,600 98,775
Unilever N.V ......................................... 6,100 505,919
UST, Inc. ............................................ 2,300 80,213
Wrigley William Jr. Co. .............................. 1,200 107,475
-----------
6,422,080
-----------
BUILDING MATERIALS - 0.2%
Masco Corp. .......................................... 3,800 109,250
Sherwin Williams Co. ................................. 2,000 58,750
-----------
168,000
-----------
CHEMICALS - 1.6%
Air Products & Chemicals, Inc. ....................... 2,600 104,000
Dow Chemical Co. ..................................... 2,200 200,063
Du Pont (E.I.) de Nemours and Co. .................... 10,700 567,769
Eastman Chemical Co. ................................. 1,100 49,225
Hercules, Inc. ....................................... 1,200 32,850
International Flavors & Fragrances, Inc. ............. 1,300 57,444
Monsanto Co. ......................................... 5,700 270,750
PPG Industries, Inc. ................................. 1,800 104,850
Praxair, Inc. ........................................ 1,700 59,925
Rohm & Haas Co. ...................................... 2,100 63,263
Sigma Aldrich Corp. .................................. 1,200 35,250
Union Carbide Corp. .................................. 1,400 59,500
-----------
1,604,889
-----------
COMMERCIAL SERVICES - 0.5%
Cendant Corp. * ...................................... 7,900 150,594
Dun & Bradstreet Corp. (The) ......................... 2,000 63,125
Equifax, Inc. ........................................ 1,600 54,700
Interpublic Group of Companies, Inc. (The) ........... 1,300 103,675
Nielsen Media Research * ............................. 567 10,200
Service Corp. International .......................... 2,600 98,963
-----------
481,257
-----------
COMMUNICATIONS - 2.2%
3 Com Corp. * ........................................ 3,500 156,844
Alcatel Alsthom (ADR) ................................ 1,059 25,879
Alltel Corp. ......................................... 2,000 119,625
General Instrument Corp. * ........................... 1,500 50,906
Lucent Technologies, Inc. ............................ 12,500 1,375,000
Scientific-Atlanta, Inc. ............................. 900 20,531
Tele-Communications TCI Ventures Group * ............. 5,000 276,563
Tellabs, Inc. * ...................................... 1,800 123,413
-----------
2,148,761
-----------
COMPUTER SOFTWARE & PROCESSING - 6.2%
Adobe Systems, Inc. .................................. 700 32,725
Automatic Data Processing, Inc. ...................... 2,900 232,544
Cabletron Systems, Inc. * ............................ 1,800 15,075
Ceridian Corp. * ..................................... 800 55,850
Cisco Systems, Inc. * ................................ 14,550 1,350,422
Computer Associates International, Inc. .............. 5,300 225,913
Computer Sciences Corp. .............................. 1,600 103,100
First Data Corp. ..................................... 4,200 133,088
HBO & Co. ............................................ 4,200 120,488
IMS Health, Inc. ..................................... 1,700 128,244
Microsoft Corp. * .................................... 23,300 3,231,372
Novell Inc. * ........................................ 3,700 67,063
Oracle Corp. * ....................................... 9,500 409,688
Parametric Technology Co. ............................ 2,600 42,250
-----------
6,147,822
-----------
COMPUTERS & INFORMATION - 5.0%
Apple Computer, Inc. * ............................... 1,400 57,313
Compaq Computer Corp. ................................ 15,917 667,519
Dell Computer Corp. * ................................ 12,600 922,163
EMC Corp. * .......................................... 4,800 408,000
Gateway 2000, Inc. * ................................. 1,500 76,781
Hewlett-Packard Co. .................................. 10,000 683,125
International Business Machines Corp. ................ 9,300 1,718,175
Seagate Technology, Inc. * ........................... 2,400 72,600
Silicon Graphics, Inc. * ............................. 2,100 27,038
Sun Microsystems, Inc. * ............................. 3,600 308,250
Unisys Corp. * ....................................... 2,500 86,094
-----------
5,027,058
-----------
CONGLOMERATES - 0.5%
American Express Credit Corp. ........................ 4,700 480,575
-----------
CONTAINERS & PACKAGING - 0.1%
Avery-Dennison Corp. ................................. 1,200 54,075
Crown Cork & Seal, Inc. .............................. 1,500 46,219
Sealed Air Corp. * ................................... 900 45,956
-----------
146,250
-----------
COSMETICS & PERSONAL CARE - 0.9%
Avon Products, Inc. .................................. 2,600 115,050
Colgate-Palmolive Co. ................................ 2,900 269,338
Gillette Co. ......................................... 10,600 512,113
-----------
896,501
-----------
ELECTRIC UTILITIES - 2.2%
American Electric Power Co. .......................... 2,100 98,831
Carolina Power & Light Co. ........................... 1,900 89,419
Central & South West Corp. ........................... 2,800 76,825
Consolidated Edison, Inc. ............................ 2,600 137,475
Dominion Resources, Inc. ............................. 2,300 107,525
DTE Energy Co. ....................................... 1,900 81,463
Duke Energy Corp. .................................... 3,500 224,219
Edison International ................................. 4,200 117,075
Entergy Corp. ........................................ 3,300 102,713
FirstEnergy Corp. .................................... 2,800 91,175
FPL Group, Inc. ...................................... 1,900 117,088
Houston Industries, Inc. ............................. 3,300 106,013
PacifiCorp ........................................... 3,900 82,144
Peco Energy Co. ...................................... 2,600 108,225
Public Service Enterprise Group, Inc. ................ 2,800 112,000
P.G.&E. Corp. ........................................ 4,200 132,300
Southern Co. ......................................... 6,900 200,531
Texas Utilities Co. .................................. 2,700 126,056
Unicom Corp. ......................................... 2,700 104,119
-----------
2,215,196
-----------
ELECTRICAL EQUIPMENT - 4.0%
AMP, Inc. ............................................ 2,006 104,437
Emerson Electric Co. ................................. 4,300 269,019
General Electric Co. ................................. 31,200 3,184,350
Grainger (W.W.), Inc. ................................ 1,200 49,950
Northern Telecom Ltd. ................................ 6,320 316,790
Raychem Corp. ........................................ 1,000 32,313
Thermo Electron Corp. * .............................. 1,700 28,794
-----------
3,985,653
-----------
ELECTRONICS - 3.2%
Advanced Micro Devices, Inc. * ....................... 1,500 43,406
Applied Materials, Inc. * ............................ 3,600 153,675
Honeywell, Inc. ...................................... 1,300 97,906
Intel Corp. .......................................... 15,700 1,861,431
KLA-Tencor Corp. * ................................... 900 39,038
LSI Logic Corp. * .................................... 1,500 24,188
Micron Technology, Inc. * ............................ 2,100 106,181
Motorola, Inc. ....................................... 5,800 354,163
National Semiconductor Corp. * ....................... 1,800 24,300
Perkin-Elmer Corp. ................................... 500 48,781
Rockwell International Corp. ......................... 2,100 101,981
Texas Instruments, Inc. .............................. 3,800 325,138
-----------
3,180,188
-----------
ENTERTAINMENT & LEISURE - 1.0%
Brunswick Corp., Inc. ................................ 1,300 32,175
Hasbro, Inc. ......................................... 1,400 50,575
Mattel, Inc. ......................................... 2,900 66,156
Mirage Resorts, Inc. * ............................... 2,200 $ 32,863
Viacom International * ............................... 3,500 259,000
Walt Disney Co. (The) ................................ 19,500 585,000
-----------
1,025,769
-----------
ENVIRONMENTAL CONTROLS - 0.2%
Browning-Ferris Industries, Inc. ..................... 2,100 59,719
Waste Management, Inc. ............................... 3,262 152,091
-----------
211,810
-----------
FINANCIAL SERVICES - 4.1%
American General Corp. ............................... 2,500 195,000
Berkshire Hathaway, Inc. * ........................... 84 197,400
Block (H&R), Inc. .................................... 1,200 54,000
Charles Schwab Corp. ................................. 5,400 303,413
Citigroup, Inc. ...................................... 22,050 1,091,475
Countrywide Credit Industries, Inc. .................. 1,300 65,244
Federal Home Loan Mortgage Corp. ..................... 6,800 438,175
Federal National Mortgage Association ................ 10,200 754,800
Franklin Resources, Inc. ............................. 3,400 108,800
Household International, Inc. ........................ 4,833 191,508
J.P. Morgan & Co., Inc. .............................. 1,700 178,606
Lehman Brothers Holdings, Inc. ....................... 1,600 70,500
Merrill Lynch & Co., Inc. ............................ 3,900 260,325
MGIC Investment Corp. ................................ 1,100 43,794
Providian Financial Corp. ............................ 1,350 101,250
Waddell & Reed Financial, Inc. (Class A) ............. 91 2,156
Waddell & Reed Financial, Inc. (Class B) ............. 391 9,091
-----------
4,065,537
-----------
FOREST PRODUCTS & PAPER - 0.7%
Champion International Corp. ......................... 1,200 48,600
Fort James Corp. ..................................... 2,200 88,000
Georgia-Pacific Corp. ................................ 1,000 58,563
International Paper Co. .............................. 3,100 138,919
Mead Corp. ........................................... 1,400 41,038
Union Camp Corp. ..................................... 1,000 67,500
Westvaco Corp. ....................................... 1,700 45,581
Weyerhauser Co. ...................................... 2,200 111,788
Willamette Industries, Inc. .......................... 1,500 50,250
-----------
650,239
-----------
HEALTH CARE PROVIDERS - 0.8%
Columbia/HCA Healthcare Corp. ........................ 6,400 158,400
HEALTHSOUTH Corp. * .................................. 4,000 61,750
Humana, Inc. * ....................................... 1,800 32,063
Medtronic, Inc. ...................................... 4,600 341,550
Tenet Healthcare Corp. * ............................. 3,200 84,000
United Healthcare Corp. .............................. 1,900 81,819
-----------
759,582
-----------
HEAVY MACHINERY - 0.5%
Case Corp. ........................................... 1,000 21,813
Caterpiller Tractor, Inc. ............................ 3,800 174,800
Cooper Industries, Inc. .............................. 1,300 61,994
Deere & Co. .......................................... 2,500 82,813
Ingersoll-Rand Co. ................................... 1,900 89,181
McDermott International, Inc. ........................ 700 17,281
Parker-Hannifin Corp. ................................ 1,300 42,575
-----------
490,457
-----------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 0.2%
Black & Decker Corp. ................................. 1,000 56,063
Maytag Corp. ......................................... 1,000 62,250
Whirlpool Corp. ...................................... 800 44,300
-----------
162,613
-----------
HOUSEHOLD PRODUCTS - 1.5%
Clorox Co. ........................................... 1,100 128,494
Newell Co. ........................................... 1,800 74,250
Owens-Illinois, Inc. * ............................... 1,600 49,000
Procter & Gamble Co. ................................. 12,800 1,168,800
Rubbermaid, Inc. ..................................... 1,700 53,444
Stanley Works, (The) ................................. 1,100 30,525
-----------
1,504,513
-----------
INDUSTRIAL - DIVERSIFIED - 1.6%
Armstrong World Industries, Inc. ..................... 700 42,219
Corning, Inc. ........................................ 2,300 103,500
Dover Corp. .......................................... 2,400 87,900
Eastman Kodak Co. .................................... 3,100 223,200
Fluor Corp. .......................................... 1,000 42,563
Illinois Tool Works, Inc. ............................ 2,500 145,000
ITT Industries, Inc. ................................. 1,500 59,625
Johnson Controls, Inc. ............................... 1,000 59,000
Minnesota Mining & Manufacturing Co. ................. 3,900 277,388
Tenneco, Inc. ........................................ 2,100 71,531
Tyco International Ltd. .............................. 6,284 474,049
-----------
1,585,975
-----------
INSURANCE - 3.2%
Aetna, Inc. .......................................... 1,500 117,938
Allstate Corp. ....................................... 8,000 309,000
American International Group ......................... 9,900 956,588
Aon Corp. ............................................ 1,700 94,138
Chubb Corp. .......................................... 1,600 103,800
Cigna Corp. .......................................... 2,400 185,550
Cincinnati Financial Corp. ........................... 1,700 62,263
Conseco, Inc. ........................................ 3,082 94,194
Hartford Financial Services Group, Inc. .............. 2,200 120,725
Jefferson Pilot Corp. ................................ 1,100 82,500
Lincoln National Corp. ............................... 1,000 81,813
Loews Corp. .......................................... 1,300 127,725
Marsh & McLennan Co., Inc. ........................... 2,550 149,016
MBIA, Inc. ........................................... 1,000 65,563
Progressive Corp. .................................... 700 118,563
Safeco Corp. ......................................... 1,600 68,700
St. Paul Co. ......................................... 2,300 79,925
SunAmerica, Inc. ..................................... 1,900 154,138
Torchmark Corp. ...................................... 1,600 56,500
Transamerica Corp. ................................... 800 92,400
Unum Corp. ........................................... 1,300 75,888
-----------
3,196,927
-----------
LODGING - 0.1%
Hilton Hotels Corp. .................................. 2,700 51,638
Marriott International, Inc. ......................... 2,700 78,300
-----------
129,938
-----------
MEDIA - BROADCASTING & PUBLISHING - 2.2%
CBS Corp. ............................................ 6,900 225,975
Clear Channel Communications, Inc. * ................. 2,400 130,800
Comcast Corp. ........................................ 3,500 205,406
Dow Jones & Co., Inc. ................................ 1,200 57,750
Gannett Co., Inc. .................................... 2,800 185,325
Knight-Ridder, Inc. .................................. 1,000 51,125
McGraw-Hill Companies, Inc. .......................... 1,100 112,063
MediaOne Group, Inc. * ............................... 6,000 282,000
New York Times Co. ................................... 2,200 76,313
R.R. Donnelley & Sons Co. ............................ 1,700 74,481
Time Warner, Inc. .................................... 11,000 682,688
Times Mirror Co. ..................................... 1,100 61,600
Tribune Co. .......................................... 1,400 92,400
-----------
2,237,926
-----------
MEDICAL SUPPLIES - 0.8%
Baxter International, Inc. ........................... 2,900 186,506
Becton Dickinson & Co. ............................... 2,600 110,988
Biomet, Inc. ......................................... 1,400 56,350
Boston Scientific Corp. * ............................ 3,800 101,888
Cardinal Health, Inc. ................................ 1,650 125,194
Guidant Corp. ........................................ 1,500 165,375
St. Jude Medical, Inc. * ............................. 1,100 30,456
-----------
776,757
-----------
METALS - 0.6%
Alcan Aluminum Ltd. .................................. 2,700 73,069
Allegheny Teledyne, Inc. ............................. 2,300 47,006
Aluminum Company of America .......................... 1,700 126,756
Barrick Gold Corp. ................................... 4,300 83,850
Freeport-McMoran Copper & Gold, Inc. Class B ......... 2,400 25,050
Nucor Corp. .......................................... 1,000 43,250
Phelps Dodge Corp. ................................... 800 40,700
Placer Dome, Inc. .................................... 3,600 41,400
Reynolds Metals Co. .................................. 900 47,419
USX - U.S. Steel Group, Inc. ......................... 1,300 29,900
-----------
558,400
-----------
MINING - 0.1%
Inco Ltd. ............................................ 2,200 23,238
Newmont Mining Corp. ................................. 1,900 34,319
-----------
57,557
-----------
OFFICE EQUIPMENT - 0.6%
Harris Corp., Inc. ................................... 1,000 36,625
IKON Office Solutions, Inc. .......................... 1,500 12,844
Pitney Bowes, Inc. ................................... 2,700 178,369
Xerox Corp. .......................................... 3,100 365,800
-----------
593,638
-----------
OIL & GAS - 6.5%
Amerada Hess Corp. ................................... 1,300 64,675
Amoco Corp. .......................................... 9,600 566,400
Anadarko Petroleum Corp. ............................. 1,400 43,225
Apache Corp. ......................................... 1,300 32,906
Ashland, Inc. ........................................ 1,000 48,375
Atlantic Richfield Co. ............................... 3,200 208,800
Baker Hughes, Inc. ................................... 3,420 60,491
Burlington Resources, Inc. ........................... 2,000 71,625
Chevron Corp. ........................................ 6,400 530,800
Coastal Corp. ........................................ 2,600 90,838
Columbia Energy Group ................................ 1,200 69,300
Enron Corp. .......................................... 3,300 188,306
Exxon Corp. .......................................... 23,600 1,725,750
Halliburton Co. ...................................... 4,400 130,350
Mobil Corp. .......................................... 7,600 662,150
Occidental Petroleum Corp. ........................... 3,700 62,438
Phillips Petroleum Co. ............................... 2,900 123,613
Royal Dutch Petroleum Co. ............................ 20,500 981,438
Schlumberger Ltd. .................................... 4,800 221,400
Sonat, Inc. .......................................... 1,300 35,181
Texaco, Inc. ......................................... 5,500 290,813
Union Pacific Resources Group, Inc. .................. 3,100 28,094
Unocal Corp. ......................................... 2,700 78,806
USX - Marathon Group ................................. 3,100 93,388
Williams Companies, Inc. ............................. 4,200 130,988
-----------
6,540,150
-----------
PHARMACEUTICALS - 9.9%
Abbott Laboratories .................................. 14,800 725,200
Alza Corp. * ......................................... 1,000 52,250
American Home Products Corp. ......................... 12,500 703,906
Amgen, Inc. * ........................................ 2,600 271,863
Bristol-Myers Squibb Co. ............................. 9,500 1,271,219
Eli Lilly & Co. ...................................... 10,700 950,963
Johnson & Johnson .................................... 12,900 1,081,988
Merck & Co., Inc. .................................... 11,500 1,698,406
Pfizer, Inc. ......................................... 12,400 1,555,425
Pharmacia & Upjohn, Inc. ............................. 5,100 288,788
Schering-Plough Corp. ................................ 14,000 773,500
Warner Lambert Co. ................................... 7,800 586,463
-----------
9,959,971
-----------
RESTAURANTS - 0.6%
McDonald's Corp. ..................................... 6,700 513,388
Tricon Global Restaurants, Inc. * .................... 1,700 85,213
Wendy's International, Inc. .......................... 1,700 37,081
-----------
635,682
-----------
RETAILERS - 6.0%
Abercrombie & Fitch Co. * ............................ 6 425
Albertson's, Inc. .................................... 2,500 159,219
American Stores Co. .................................. 3,000 110,813
AutoZone, Inc. * ..................................... 1,600 52,700
Circuit City Stores, Inc. ............................ 1,100 54,931
Consolidated Stores Corp. * .......................... 1,200 24,225
Costco Companies, Inc. * ............................. 2,100 151,594
CVS Corp. ............................................ 3,800 209,000
Dayton-Hudson Corp. .................................. 4,200 227,850
Dillard's, Inc. ...................................... 1,300 36,888
Federated Department Stores, Inc. * .................. 2,100 91,481
Gap, Inc. ............................................ 5,700 320,625
Home Depot, Inc. ..................................... 14,000 856,625
J.C. Penney Co., Inc. ................................ 2,500 117,188
Kimberly-Clark Corp. ................................. 5,400 294,300
K-Mart Corp. * ....................................... 4,900 75,031
Kroger Co. * ......................................... 2,600 157,300
Limited, Inc. (The) .................................. 2,300 66,988
Lowes Companies, Inc. ................................ 3,400 174,038
May Department Stores Co. (The) ...................... 2,300 138,863
Nordstrom, Inc. ...................................... 1,600 55,600
Rite Aid Corp. ....................................... 2,600 128,863
Sears, Roebuck and Co. ............................... 3,800 161,500
Tandy Corp. .......................................... 1,100 45,306
TJX Companies, Inc. .................................. 3,400 98,600
Toys "R" Us, Inc. * .................................. 3,000 50,625
Venator Group, Inc. * ................................ 1,700 10,944
Walgreen Co. ......................................... 4,900 286,956
Wal-Mart Stores, Inc. ................................ 21,400 1,742,763
Winn Dixie Stores, Inc. .............................. 1,600 71,800
-----------
5,973,041
-----------
TELEPHONE SYSTEMS - 7.6%
Airtouch Communications, Inc. * ...................... 5,400 389,475
Ameritech Corp. ...................................... 10,500 665,438
AT&T Corp. ........................................... 15,500 1,166,375
Bell Atlantic Corp. .................................. 14,800 840,825
Bellsouth Corp. ...................................... 19,000 947,625
Frontier Corp. ....................................... 1,800 61,200
GTE Corp. ............................................ 9,100 613,681
MCI WorldCom, Inc. * ................................. 18,134 1,301,115
Nextel Communications, Inc. * ........................ 2,600 61,425
SBC Communications Corp. ............................. 17,500 938,438
Sprint Corp. ......................................... 4,200 353,325
Sprint PCS * ......................................... 2,100 48,563
U.S. WEST, Inc. ...................................... 4,863 314,271
-----------
7,701,756
-----------
TEXTILES, CLOTHING & FABRICS - 0.2%
Fruit of the Loom, Inc. * ............................ 900 12,431
Liz Claiborne, Inc. .................................. 800 25,250
Nike, Inc. ........................................... 2,900 117,631
VF Corp. ............................................. 1,500 70,313
-----------
225,625
-----------
TRANSPORTATION - 0.5%
Burlington Northern Santa Fe Corp. ................... 4,500 151,875
CSX Corp. ............................................ 2,300 95,450
Laidlaw, Inc. ........................................ 3,300 33,206
Norfolk Southern Corp. ............................... 3,900 123,581
Union Pacific Corp. .................................. 2,500 112,656
-----------
516,768
-----------
Total Common Stocks (Cost $48,814,664) 93,350,600
-----------
SHORT-TERM INVESTMENTS - 6.5%
REPURCHASE AGREEMENT - 5.5%
State Street Corp. U.S. Gov't Repurchase Agreement
at 4.85%, due 01/04/99, collaterized by U.S.
Treasury Note, $4,110,000 par, 8.125% coupon, due
08/15/19, dated 08/15/89, repurchase proceeds
of $5,509,968 (Cost $5,507,000) ...................... $5,507,000 5,507,000
-----------
U.S. GOVERNMENT AGENCY - 1.0%
Federal Home Loan Mortgage Corp. (Discount Note)
at 5.09%, due 01/08/99 (a) (Cost $997,596) ........... 1,000,000 997,596
-----------
Total Short-Term Investments (Cost $6,504,596) 6,504,596
-----------
TOTAL INVESTMENTS - 99.9%
(Cost $55,319,260) 99,855,196
Other Assets and Liabilities (net) - 0.1% 41,837
-----------
TOTAL NET ASSETS - 100.0% $ 99,897,033
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare or pay
dividends in the last 12 month period.
(a) Assets segregated for open futures
ADR - American Depositary Receipt
See notes to financial statements
<PAGE>
COVA SERIES TRUST
VKAC GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR/SHARE SECURITY VALUE
AMOUNT DESCRIPTION COUPON MATURITY (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 88.4%
AEROSPACE & DEFENSE - 0.5%
5,700 AlliedSignal, Inc. ............................................................................... $ 252,581
-----------
BANKING - 7.1%
37,400 Bank of Tokyo - Mitsubishi Ltd. (The) (ADR) ...................................................... 392,700
12,100 Chase Manhattan Corp. ............................................................................ 823,556
11,470 First Union Corp. ................................................................................ 697,519
14,260 Fleet Financial Group, Inc. ...................................................................... 637,244
12,500 PNC Bank Corp. ................................................................................... 676,563
14,250 Washington Mutual, Inc. .......................................................................... 544,172
-----------
3,771,754
-----------
BEVERAGES, FOOD & TOBACCO - 7.8%
7,300 Anheuser-Busch Companies, Inc. ................................................................... 479,063
7,900 Hershey Foods Corp. .............................................................................. 491,281
29,261 Philip Morris Co., Inc. .......................................................................... 1,565,464
16,690 Ralston-Ralston Purina Group ..................................................................... 540,339
8,900 Sysco Corp. ...................................................................................... 244,194
5,420 Unilever N.V ..................................................................................... 449,521
16,000 Whitman Corp. .................................................................................... 406,000
-----------
4,175,862
-----------
CHEMICALS - 3.2%
9,710 Imperial Chemical Industries Plc (ADR) ........................................................... 339,243
4,700 Monsanto Co. ..................................................................................... 223,250
15,900 Rhodia, Inc. (144A)^ * ........................................................................... 238,500
18,600 Rhone-Poulenc S.A. (ADR) ......................................................................... 934,650
-----------
1,735,643
-----------
COMMUNICATIONS - 0.0%
400 Loral Space & Communications Ltd. * .............................................................. 7,125
-----------
COMPUTER SOFTWARE & PROCESSING - 5.1%
14,600 Adobe Systems, Inc. .............................................................................. 682,550
9,700 BMC Software, Inc. ............................................................................... 432,256
8,750 First Data Corp. ................................................................................. 277,266
8,340 IMS Health, Inc. ................................................................................. 629,149
2,000 Microsoft Corp. Convertible Preferred ............................................................ 195,500
11,300 Oracle Corp. * ................................................................................... 487,313
-----------
2,704,034
-----------
COMPUTERS & INFORMATION - 5.7%
6,500 Compaq Computer Corp. ............................................................................ 272,594
9,200 Electronic Data Systems Corp. .................................................................... 462,300
10,050 International Business Machines Corp. ............................................................ 1,856,725
20,430 Quantum Corp. * .................................................................................. 434,138
-----------
3,025,757
-----------
CONTAINERS & PACKAGING - 1.0%
16,510 Crown Cork & Seal, Inc. .......................................................................... 508,714
-----------
COSMETICS & PERSONAL CARE - 1.1%
6,500 Colgate-Palmolive Co. ............................................................................ 603,688
-----------
ELECTRIC UTILITIES - 7.3%
12,210 BEC Energy ....................................................................................... 502,899
13,720 Consolidated Edison, Inc. ........................................................................ 725,445
200 DQE, Inc. ........................................................................................ 8,788
15,450 Edison International ............................................................................. 430,669
11,690 GPU, Inc. ........................................................................................ 516,552
7,500 Illinova Corp. ................................................................................... 187,500
41,900 Niagara Mohawk Power Corp. * ..................................................................... 675,638
40,400 Northeast Utilities * ............................................................................ 646,400
5,200 Peco Energy Co. .................................................................................. 216,450
-----------
3,910,341
-----------
ELECTRICAL EQUIPMENT - 1.2%
19,110 Raychem Corp. .................................................................................... 617,492
-----------
ELECTRONICS - 4.3%
7,800 Micron Technology, Inc. * ........................................................................ 394,388
8,920 Motorola, Inc. ................................................................................... 544,678
4,600 Philips Electronics N.V .......................................................................... 311,363
6,650 Texas Instruments, Inc. .......................................................................... 568,991
7,220 Xilinx, Inc. * ................................................................................... 470,203
-----------
2,289,623
-----------
ENVIRONMENTAL CONTROLS - 1.8%
20,575 Waste Management, Inc. (a) ....................................................................... 959,309
-----------
FINANCIAL SERVICES - 3.9%
13,360 American General Corp. ........................................................................... 1,042,080
11,710 Block (H&R), Inc. ................................................................................ 526,950
10,150 Citigroup, Inc. .................................................................................. 502,425
-----------
2,071,455
-----------
FOREST PRODUCTS & PAPER - 1.0%
10,190 Boise Cascade Corp. .............................................................................. 315,890
5,230 Fort James Corp. ................................................................................. 209,200
-----------
525,090
-----------
HEALTH CARE PROVIDERS - 1.9%
11,910 Columbia/HCA Healthcare Corp. .................................................................... 294,773
400 Fresenius Medical Care AG Preferred * ............................................................ 12
17,000 United Healthcare Corp. .......................................................................... 732,063
-----------
1,026,848
-----------
HEAVY MACHINERY - 1.3%
15,080 Ingersoll-Rand Co. ............................................................................... 707,818
-----------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 0.6%
5,720 Black & Decker Corp. ............................................................................. 320,678
-----------
HOUSEHOLD PRODUCTS - 0.6%
4,870 Benckiser N.V .................................................................................... 311,071
-----------
INSURANCE - 3.1%
5,900 Aetna, Inc. ...................................................................................... 463,888
5,800 Allstate Corp. ................................................................................... 224,025
10,220 Equitable Companies, Inc. (The) .................................................................. 591,483
5,300 EXEL Ltd. ........................................................................................ 397,500
-----------
1,676,896
-----------
MEDICAL SUPPLIES - 1.5%
9,080 Beckman Coulter, Inc. ............................................................................ 492,590
11,700 St. Jude Medical, Inc. * ......................................................................... 323,944
-----------
816,534
-----------
OFFICE EQUIPMENT - 1.3%
5,700 Xerox Corp. ...................................................................................... 672,600
-----------
OIL & GAS - 8.6%
12,700 Atlantic Richfield Co. ........................................................................... 828,675
22,460 Coastal Corp. .................................................................................... 784,696
21,680 El Paso Energy Corp. ............................................................................. 754,735
7,900 Mobil Corp. ...................................................................................... 688,288
14,100 Texaco, Inc. ..................................................................................... 745,538
10,300 Valero Energy Corp. .............................................................................. 218,875
21,090 YPF Sociedad Anonima (ADR) ....................................................................... 589,202
-----------
4,610,009
-----------
PHARMACEUTICALS - 9.0%
11,920 Alza Corp. * ..................................................................................... 622,820
17,560 American Home Products Corp. ..................................................................... 988,848
4,520 Merck & Co., Inc. ................................................................................ 667,548
22,200 Mylan Laboratories, Inc. ......................................................................... 699,300
16,830 Pharmacia & Upjohn, Inc. ......................................................................... 952,999
9,500 Teva Pharmaceutical (ADR) ........................................................................ 386,531
7,800 Watson Pharmaceutical, Inc. * .................................................................... 490,425
-----------
4,808,471
-----------
REAL ESTATE - 0.5%
12,600 Arden Realty Group, Inc. (REIT) .................................................................. 292,163
-----------
RETAILERS - 2.0%
11,450 Federated Department Stores, Inc. * .............................................................. 498,791
10,335 Gap, Inc. ........................................................................................ 581,344
-----------
1,080,135
-----------
TELEPHONE SYSTEMS - 6.0%
11,740 Bellsouth Corp. .................................................................................. 585,533
12,370 GTE Corp. ........................................................................................ 834,202
6,410 SBC Communications Corp. ......................................................................... 343,736
6,500 Sprint Corp. ..................................................................................... 546,813
13,950 U.S. WEST, Inc. .................................................................................. 901,519
-----------
3,211,803
-----------
TEXTILES, CLOTHING & FABRICS - 1.0%
8,810 Tommy Hilfiger Corp. * ........................................................................... 528,600
-----------
Total Common and Preferred Stocks (Cost $38,586,170) ............................................. 47,222,094
-----------
WARRANTS - 0.1%
9,000 Rhone-Poulenc S.A. (expiring 11/15/01) * ......................................................... 33,750
-----------
(Cost $9,000)
CORPORATE BONDS AND DEBT SECURITIES - 2.6% COUPON MATURITY
COMPUTERS & INFORMATION - 0.5%
$500,000 Hewlett-Packard Co. Convertible ................................ + 10/14/07 277,500
-----------
FINANCIAL SERVICES - 1.1%
1,000,000 Deutsche Bank Finance BV Convertible (144A)^ ................... + 02/12/17 572,500
-----------
PHARMACEUTICALS - 1.0%
700,000 Roche Holdings, Inc. Convertible ............................... + 04/20/10 454,566
50,000 Sandoz Capital BVI Ltd. Convertible ............................ 2.000% 10/06/02 95,005
-----------
549,571
-----------
Total Corporate Bonds and Debt Securities (Cost $1,130,084) 1,399,571
-----------
SHORT-TERM INVESTMENT - 8.9%
$4,769,000 Federal Home Loan Bank (Discount Note) ......................... 4.300% 01/04/99 4,766,721
-----------
(Cost $4,766,721)
TOTAL INVESTMENTS - 100.0%
(Cost $44,491,975) 53,422,136
Other Assets and Liabilities (net) - 0.0% 9,484
-----------
TOTAL NET ASSETS - 100.0% $ 53,431,620
===========
</TABLE>
PORTFOLIO FOOTNOTES:
(a) Assets segregated for open futures
Non-income producing security as this stock did not
declare or pay dividends in the last 12 month period.
^ Securities that may be resold to "qualified institutional
buyers" under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+ Zero coupon bond
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR/SHARE SECURITY VALUE
AMOUNT DESCRIPTION COUPON MATURITY (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC BONDS AND DEBT SECURITIES - 83.5%
AEROSPACE & DEFENSE - 2.0%
$300,000 Sequa Corp. .......................................... 9.625% 10/15/99 $ 306,090
250,000 Sequa Corp. .......................................... 9.375% 12/15/03 257,813
-----------
563,903
-----------
AIRLINES - 0.9%
250,000 Atlas Air, Inc. (144A)^ .............................. + 11/15/06 256,250
-----------
AUTOMOTIVE - 4.1%
500,000 Aetna Industries, Inc. ............................... 11.875% 10/01/06 527,500
250,000 Stanadyne Automotive Corp. ........................... 10.250% 12/15/07 251,250
430,000 Talon Automotive Group LLC (144A)^ ................... 9.625% 05/01/08 410,650
-----------
1,189,400
-----------
BEVERAGES, FOOD & TOBACCO - 1.0%
150,000 Fleming Companies, Inc. .............................. 10.500% 12/01/04 142,500
150,000 Fleming Companies, Inc. .............................. 10.625% 07/31/07 140,625
-----------
283,125
-----------
BUILDING MATERIALS - 2.0%
575,000 American Standard Co., Inc. .......................... 10.875% 05/15/99 577,875
-----------
CHEMICALS - 2.7%
534,000 ISP Holdings, Inc. ................................... 9.750% 02/15/02 570,045
250,000 Pioneer Americas Acquisition Corp. ................... 9.250% 06/15/07 201,250
-----------
771,295
-----------
COMMERCIAL SERVICES - 3.0%
150,000 CSC Holdings, Inc. ................................... 8.125% 08/15/09 158,520
300,000 CSC Holdings, Inc. ................................... 10.500% 05/15/16 354,000
350,000 Dyncorp, Inc. ........................................ 9.500% 03/01/07 351,750
-----------
864,270
-----------
COMMUNICATIONS - 6.1%
400,000 Echostar Communications Corp. ........................ 0%, 12.88% ++ 06/01/04 412,000
250,000 Splitrock Services, Inc. (144A)^ ..................... 11.750% 07/15/08 217,500
1,250,000 Sprint Spectrum L.P. ................................. + 08/15/06 1,131,248
-----------
1,760,748
-----------
COMPUTER SOFTWARE & PROCESSING - 0.7%
200,000 PSINet, Inc. (144A)^ ................................. 11.500% 11/01/08 210,500
-----------
CONTAINERS & PACKAGING - 0.8%
250,000 Fonda Group, Inc. .................................... 9.500% 03/01/07 208,750
30,000 Sweetheart Cup Co., Inc. ............................. 9.625% 09/01/00 27,150
-----------
235,900
-----------
ELECTRIC UTILITIES - 3.5%
500,000 AES Corp. ............................................ 10.250% 07/15/06 542,500
50,000 El Paso Electric Co. ................................. 8.250% 02/01/03 53,000
150,000 El Paso Electric Co. ................................. 8.900% 02/01/06 171,375
1,352 El Paso Electric Co. Preferred (PIK) * ............... 11.400% 02/01/08 145,340
99,975 Midland Cogeneration Venture L.P. .................... 10.330% 07/23/02 106,187
-----------
1,018,402
-----------
ELECTRONICS - 2.3%
550,000 Communications & Power Corp. ......................... 12.000% 08/01/05 576,125
50,000 DecisionOne Corp. .................................... 9.750% 08/01/07 23,250
300,000 DecisionOne Holdings Corp. ........................... 0%, 11.50% ++ 08/01/08 70,500
-----------
669,875
-----------
ENTERTAINMENT & LEISURE - 10.4%
250,000 Argosy Gaming Co. .................................... 12.000% 06/01/01 248,750
500,000 Argosy Gaming Co. .................................... 13.250% 06/01/04 562,500
175,000 Booth Creek Ski Holdings, Inc. ....................... 12.500% 03/15/07 174,125
300,000 Coast Hotels & Casino ................................ 13.000% 12/15/02 337,500
400,000 Grand Casinos, Inc. .................................. 10.125% 12/01/03 438,000
250,000 Majestic Star Casino LLC ............................. 12.750% 05/15/03 260,625
400,000 Selmer Co., Inc. ..................................... 11.000% 05/15/05 430,000
500,000 Silver Cinemas, Inc. (144A)^ ......................... 10.500% 04/15/05 342,500
189,000 Waterford Gaming LLC ................................. 12.750% 11/15/03 197,978
-----------
2,991,978
-----------
ENVIRONMENTAL CONTROLS - 0.2%
50,000 Norcal Waste Systems, Inc. ........................... 13.500% 11/15/05 55,250
-----------
FINANCIAL SERVICES - 2.4%
475,000 Americo Life, Inc. ................................... 9.250% 06/01/05 490,438
200,000 Trizec Finance Ltd. .................................. 10.875% 10/15/05 213,500
-----------
703,938
-----------
FOREST PRODUCTS & PAPER - 1.1%
300,000 SD Warren Co. ........................................ 12.000% 12/15/04 328,125
-----------
HEALTH CARE PROVIDERS - 1.6%
500,000 Mariner Post-Acute Network, Inc. (144A)^ ............. + 11/01/07 222,500
150,000 Mariner Post-Acute Network, Inc. (144A)^ ............. 9.500% 11/01/07 116,250
125,000 Oxford Health Plans, Inc. (144A)^ .................... 11.000% 05/15/05 118,125
-----------
456,875
-----------
HEAVY CONSTRUCTION - 1.7%
500,000 Del Webb Corp. ....................................... 9.375% 05/01/09 490,625
-----------
INDUSTRIAL - DIVERSIFIED - 1.7%
150,000 Community Distributors, Inc. ......................... 10.250% 10/15/04 138,750
200,000 Compass Aerospace Corp. (144A)^ ...................... 10.125% 04/15/05 195,000
250,000 Universal Compression, Inc. (144A)^ .................. 0%, 9.88% ++ 02/15/08 151,250
-----------
485,000
-----------
LODGING - 0.9%
250,000 Intrawest Corp. ...................................... 9.750% 08/15/08 257,500
-----------
MEDIA - BROADCASTING & PUBLISHING - 13.2%
350,000 Capstar Broadcasting Corp. ........................... 9.250% 07/01/07 364,000
300,000 Century Communications Corp. ......................... 8.875% 01/15/07 333,000
150,000 Century Communications Corp. ......................... 8.750% 10/01/07 165,750
450,000 EZ Communications, Inc. .............................. 9.750% 12/01/05 495,000
400,000 Gray Communications Systems, Inc. .................... 10.625% 10/01/06 428,000
450,000 International Cabletel, Inc. ......................... 0%, 12.75% ++ 04/15/05 407,250
100,000 International Cabletel, Inc. ......................... 0%, 11.50% ++ 02/01/06 82,500
425,000 K-III Communications Corp. ........................... 10.250% 06/01/04 448,375
400,000 Pegasus Communications Corp. ......................... 9.625% 10/15/05 403,000
500,000 United International Holdings, Inc. .................. 0%, 10.75% ++ 02/15/08 272,500
350,000 Young Broadcasting, Inc. ............................. 11.750% 11/15/04 377,125
-----------
3,776,500
-----------
METALS - 1.5%
250,000 Kevco, Inc. .......................................... 10.375% 12/01/07 228,750
200,000 Oxford Automotive, Inc. (144A)^ ...................... 10.125% 06/15/07 207,000
-----------
435,750
-----------
MINING - 0.6%
200,000 Renco Steel Holdings, Inc. ........................... 10.875% 02/01/05 173,000
-----------
OIL & GAS - 3.5%
150,000 Frontier Oil Corp. ................................... 9.125% 02/15/06 138,750
145,000 Giant Industries, Inc. ............................... 9.750% 11/15/03 144,275
500,000 Giant Industries, Inc. ............................... 9.000% 09/01/07 477,500
150,000 KCS Energy, Inc. ..................................... 11.000% 01/15/03 138,750
100,000 Petroleum Heat & Power Co., Inc. ..................... 12.250% 02/01/05 96,500
-----------
995,775
-----------
RETAILERS - 5.4%
100,000 Big 5 Corp. .......................................... 10.875% 11/15/07 101,500
310,000 Cole National Group .................................. 9.875% 12/31/06 322,400
250,000 Home Interiors & Gifts, Inc. (144A)^ ................. 10.125% 06/01/08 248,750
100,000 Jitney-Jungle Stores of America, Inc. ................ 12.000% 03/01/06 112,000
540,000 Pantry, Inc. (The) ................................... 12.000% 11/15/00 567,000
200,000 Pantry, Inc. (The) ................................... 10.250% 10/15/07 210,500
-----------
1,562,150
-----------
TELEPHONE SYSTEMS - 8.7%
400,000 Centennial Cellular Corp. ............................ 10.125% 05/15/05 502,000
150,000 Intermedia Communications of Florida, Inc. ........... 13.500% 06/01/05 171,375
400,000 Intermedia Communications of Florida, Inc. ........... 0%, 11.25% ++ 07/15/07 278,000
1,000,000 Intermedia Communications of Florida, Inc. (144A)^ ... 8.600% 06/01/08 955,000
500,000 Level 3 Communications, Inc. (144A)^ ................. 9.125% 05/01/08 496,250
250,000 Triton Communications LLC (144A)^ .................... 0%, 11.00% ++ 05/01/08 118,125
-----------
2,520,750
-----------
TEXTILES, CLOTHING & FABRICS - 1.5%
50,000 Pillowtex Corp. ...................................... 10.000% 11/15/06 54,250
150,000 Pillowtex Corp. ...................................... 9.000% 12/15/07 155,250
250,000 Scovill Fasteners, Inc. .............................. 11.250% 11/30/07 216,250
-----------
425,750
-----------
Total Domestic Bonds and Debt Securities (Cost $24,413,384) 24,060,509
-----------
EQUITIES - 1.1%
COMMUNICATIONS - 0.0%
522 NTL, Inc. (Warrants - expiring 10/14/08) * ............................................... 7,895
250 Splitrock Services, Inc. (Warrants - expiring 07/15/08) * ................................ 0
-----------
7,895
-----------
MEDIA - BROADCASTING & PUBLISHING - 0.0%
930 American Telecasting, Inc. (Warrants - expiring 06/15/99) * .............................. 930
-----------
MEDICAL SUPPLIES - 0.0%
250 Urohealth Systems, Inc. (Warrants - expiring 04/10/04) * ................................. 3
-----------
OIL & GAS - 0.9%
10,000 Coastal Finance, Inc. Preferred .......................................................... 246,250
-----------
TELEPHONE SYSTEMS - 0.2%
350 Intermedia Communications of Florida, Inc. (Warrants - expiring 06/01/00) * .............. 14,375
-----------
Total Equities (Cost $255,402) 269,453
-----------
FOREIGN BONDS AND DEBT SECURITIES - 11.6%
CANADA - 4.5%
500,000 Gulf Canada Resources Ltd. (Yankee) ....................... 8.375% 11/15/05 495,000
1,000,000 MetroNet Communications Corp. (Yankee) (144A)^ ............ 0%, 9.95% ++ 06/15/08 617,500
200,000 Repap New Brunswick (Yankee) (144A)^ ...................... 9.000% 06/01/04 183,000
-----------
1,295,500
-----------
LUXEMBOURG - 2.5%
1,000,000 Millicom International Cellular S.A. (Yankee) ............. 0%, 13.50% ++ 06/01/06 712,500
-----------
MEXICO - 1.4%
500,000 Satelites Mexicanos S.A. (Yankee) (144A)^ ................. 10.125% 11/01/04 401,250
-----------
NETHERLANDS - 0.7%
250,000 Netia Holdings B.V. (Yankee) .............................. 10.250% 11/01/07 213,125
-----------
UNITED KINGDOM - 2.5%
250,000 Cenargo International Plc (U.S.$) (144A)^ ................. 9.750% 06/15/08 240,938
550,000 Diamond Cable Communication Plc (Yankee) .................. 0%, 10.75% ++ 02/15/07 390,500
100,000 Esprit Telecom Group Plc (Yankee) ......................... 11.500% 12/15/07 103,500
-----------
734,938
-----------
Total Foreign Bonds and Debt Securities (Cost $3,504,144) 3,357,313
-----------
REPURCHASE AGREEMENT - 2.3%
State Street Corp. U.S. Gov't Repurchase Agreement at 4.85%, due 01/04/99, collaterized by
U.S. Treasury Note, $495,000 par, 8.125% coupon, due 08/15/19, dated 08/15/89, repurchase
657,000 proceeds of $657,354. (Cost $657,000) 657,000
-----------
TOTAL INVESTMENTS - 98.5%
(Cost $28,829,930) 28,344,275
Other Assets and Liabilities (net) - 1.5% 451,429
-----------
TOTAL NET ASSETS - 100.0% $ 28,795,704
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not
declare or pay dividends in the 12 month period.
^ Securities that may be resold to "qualified institutional
buyers" under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+ Zero coupon bond
++ Security is a "step-up" bond where the coupon increases
or steps up at a predetermined date.
PIK - Payment in Kind
Yankee - U.S. Dollar denominated bonds issued by non-U.S.
companies in the U.S.
See notes to financial statements
<PAGE>
COVA SERIES TRUST
HIGH YIELD PORTFOLIO
PORTFOLIO COMPOSITION BY CREDIT QUALITY (UNAUDITED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
The following table summarizes the portfolio composition of long-term debt
holdings at December 31, 1998, based upon quality ratings issued by Standard &
Poor's. For securities not rated by Standard & Poor's, the Moody's rating is
used.
PORTFOLIO COMPOSITION BY CREDIT QUALITY
- ---------------------------------------------------------
<S> <C>
RATINGS % OF PORTFOLIO
BB 19.0%
B 80.2
CCC 0.4
NR 0.4
------
100.0%
======
</TABLE>
Note: NR = Not Rated
See notes to financial statements
<PAGE>
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR/SHARE SECURITY VALUE
AMOUNT DESCRIPTION (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 6.1%
AEROSPACE & DEFENSE - 0.3%
7,000 Coltec Capital Trust Covertible Preferred * ........................................... $ 311,619
------------
BANKING - 0.2%
9,500 Westpac Banking Strypes Trust Convertible Preferred ................................... 299,844
------------
CHEMICALS - 0.5%
13,000 Monsanto Co. Convertible Preferred * .................................................. 637,000
------------
CONTAINERS & PACKAGING - 0.5%
13,300 Owens-Illinois, Inc. Convertible Preferred ............................................ 565,250
------------
ELECTRIC UTILITIES - 0.9%
20,000 Texas Utilities Co. Convertible Preferred ............................................. 1,127,500
------------
HEAVY MACHINERY - 0.2%
10,000 Ingersoll-Rand Co. Convertible Preferred .............................................. 237,500
------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 0.1%
3,200 Fleetwood Capital Trust Convertible Preferred * ....................................... 150,000
------------
INSURANCE - 1.4%
25,000 AmerUs Life Holdings, Inc. Convertible Preferred ...................................... 600,000
10,000 Frontier Financing Trust Convertible Preferred * ...................................... 426,250
25,000 Lincoln National Corp. Convertible Preferred .......................................... 589,063
------------
1,615,313
------------
MEDIA - BROADCASTING & PUBLISHING - 0.9%
10,000 MediaOne Group, Inc. .................................................................. 665,000
8,500 Sinclair Broadcast Group, Inc. Convertible Preferred .................................. 423,938
------------
1,088,938
------------
OIL & GAS - 0.2%
7,000 K N Energy, Inc. Convertible Preferred * .............................................. 262,938
------------
RETAILERS - 0.6%
7,000 CVS Corp. Convertible Preferred ....................................................... 701,313
------------
TELEPHONE SYSTEMS - 0.3%
10,000 IXC Communications, Inc. Convertible Preferred ........................................ 331,250
254 Viatel, Inc. Convertible Preferred * .................................................. 28,067
------------
359,317
------------
Total Common and Preferred Stocks (Cost $7,739,605) 7,356,532
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DOMESTIC BONDS AND DEBT SECURITIES - 80.1% COUPON MATURITY
ADVERTISING - 2.5%
$550,000 Ackerley Group, Inc. (The) (144A)^ ............................... 9.000% 01/15/09 561,000
505,000 Interpublic Group of Companies, Inc. (The) Convertible (144A)^ ... 1.800% 09/16/04 563,075
95,000 Interpublic Group of Companies, Inc. (The) Convertible ........... 1.800% 09/16/04 105,925
500,000 Lamar Advertising ................................................ 9.625% 12/01/06 537,500
1,200,000 R.H. Donnelly Corp. (144A)^ ...................................... 9.125% 06/01/08 1,263,000
------------
3,030,500
------------
AEROSPACE & DEFENSE - 2.4%
1,000,000 BE Aerospace, Inc. ............................................... 9.875% 02/01/06 1,045,000
500,000 Dyncorp, Inc. .................................................... 9.500% 03/01/07 502,500
500,000 Orbital Sciences Corp. ........................................... 5.000% 10/01/02 828,750
500,000 United Defense Industries, Inc. .................................. 8.750% 11/15/07 508,750
------------
2,885,000
------------
AIRLINES - 1.4%
$1,000,000 America West Airlines, Inc. ...................................... 10.750% 09/01/05 1,045,000
650,000 Continental Airlines, Inc. ....................................... 8.000% 12/15/05 658,905
------------
1,703,905
------------
AUTOMOTIVE - 3.7%
1,000,000 Collins & Aikman Corp. ........................................... 11.500% 04/15/06 1,045,000
500,000 Diamond Triumph Autoglass ........................................ 9.250% 04/01/08 497,500
500,000 Navistar Financial Corp. ......................................... 9.000% 06/01/02 521,250
700,000 Navistar International Corp. ..................................... 8.000% 02/01/08 715,750
675,000 Oshkosh Truck Corp. .............................................. 8.750% 03/01/08 678,375
1,000,000 Safelite Glass, Inc. (144A)^ ..................................... 9.875% 12/15/06 927,500
------------
4,385,375
------------
BANKING - 0.4%
500,000 Credit Suisse First Boston Convertible ........................... 2.625% 04/20/03 467,500
------------
BEVERAGES, FOOD & TOBACCO - 1.3%
300,000 Diamond Brands Operating, Inc. (144A)^ ........................... 10.125% 04/15/08 271,500
1,225,000 Purina Mills, Inc. (144A)^ ....................................... 9.000% 03/15/10 1,255,625
------------
1,527,125
------------
CHEMICALS - 1.3%
1,000,000 Huntsman Corp. (144A)^ ........................................... 9.500% 07/01/07 1,000,000
500,000 Sovereign Specialty Chemicals, Inc. .............................. 9.500% 08/01/07 510,000
------------
1,510,000
------------
COMMERCIAL SERVICES - 2.8%
250,000 Interim Services, Inc. Convertible ............................... 4.500% 06/01/05 225,718
850,000 Iron Mountain, Inc. .............................................. 10.125% 10/01/06 918,000
250,000 Loewen Group, Inc. (The) (144A)^ ................................. 7.750% 10/15/01 220,000
400,000 Metamor Worldwide, Inc. Convertible .............................. 2.940% 08/15/04 321,000
1,025,000 Pierce Leahy Corp. (144A)^ ....................................... 11.125% 07/15/06 1,137,750
500,000 Unicco Service Co. ............................................... 9.875% 10/15/07 485,000
------------
3,307,468
------------
COMMUNICATIONS - 6.3%
725,000 Cencall Communications Corp. ..................................... 0%, 10.13% ++ 01/15/04 714,125
500,000 Comcast Cellular Holdings ........................................ 9.500% 05/01/07 532,500
450,000 Dobson Communications Corp. (144A)^ .............................. 11.750% 04/15/07 461,250
400,000 Dobson Wireline Co. (144A)^ ...................................... 12.250% 06/15/08 372,000
1,000,000 Frontiervision (144A)^ ........................................... 11.875% 09/15/07 841,250
1,000,000 GST USA, Inc. .................................................... 0%, 13.88% ++ 12/15/05 722,500
750,000 Mediacom LLC (144A)^ ............................................. 8.500% 04/15/08 771,563
1,000,000 NTL, Inc. ........................................................ 10.000% 02/15/07 1,030,000
600,000 Orbital Imaging Corp. (144A)^ .................................... 11.625% 03/01/05 600,000
800,000 SBA Communications Corp. (144A)^ ................................. + 03/01/08 464,000
300,000 SBC Jersey ....................................................... 2.500% 07/07/02 350,250
200,000 Splitrock Services, Inc. (144A)^ ................................. 11.750% 07/15/08 174,000
500,000 Time Warner Telecom, Inc. ........................................ 9.750% 07/15/08 527,500
------------
7,560,938
------------
COMPUTER SOFTWARE & PROCESSING - 2.3%
600,000 Affiliated Computer Services, Inc. Convertible ................... 4.000% 03/15/05 723,000
600,000 Arbor Software Corp. Convertible ................................. 4.500% 03/15/05 438,000
1,000,000 National Data Corp. Convertible .................................. 5.000% 11/01/03 1,090,000
500,000 Verio, Inc. (144A)^ .............................................. 11.250% 12/01/08 505,000
------------
2,756,000
------------
COMPUTERS & INFORMATION - 0.9%
246,000 Businessland, Inc. ............................................... 5.500% 03/01/07 194,340
200,000 Comverse Technology, Inc. Convertible (144A)^ .................... 4.500% 07/01/05 250,750
50,000 Comverse Technology, Inc. Convertible ............................ 4.500% 07/01/05 62,688
250,000 General Binding Corp. (144A)^ .................................... 9.375% 06/01/08 250,000
300,000 Viasystems, Inc. ................................................. 9.750% 06/01/07 282,000
------------
1,039,778
------------
CONTAINERS & PACKAGING - 0.4%
$500,000 U.S. Can Corp. ................................................... 10.125% 10/15/06 515,000
------------
COSMETICS & PERSONAL CARE - 0.6%
750,000 Chattem, Inc. (144A)^ ............................................ 8.875% 04/01/08 772,500
------------
ELECTRIC UTILITIES - 1.0%
1,225,000 AEI Holding Co., Inc. (144A)^ .................................... 10.500% 12/15/05 1,206,625
------------
ENTERTAINMENT & LEISURE - 5.0%
1,000,000 Empress Entertainment, Inc. (144A)^ .............................. 8.125% 07/01/06 1,000,000
425,000 Grand Casinos, Inc. .............................................. 9.000% 10/15/04 479,188
1,225,000 Harrah's Operating Co., Inc. ..................................... 7.875% 12/15/05 1,240,211
500,000 Loews Cineplex Entertainment Corp. (144A)^ ....................... 8.875% 08/01/08 518,750
750,000 Majestic Star Casino LLC ......................................... 12.750% 05/15/03 781,875
750,000 Riddell Sports, Inc. ............................................. 10.500% 07/15/07 712,500
300,000 Silver Cinemas, Inc. (144A)^ ..................................... 10.500% 04/15/05 217,500
120,000 Six Flags Entertainment Corp. .................................... 8.875% 04/01/06 123,750
500,000 Trump Atlantic City Association .................................. 11.250% 05/01/06 442,500
500,000 Viacom International ............................................. 8.000% 07/07/06 521,250
------------
6,037,524
------------
FINANCIAL SERVICES - 0.7%
500,000 Merrill Lynch & Co. Principal Protected Notes .................... 1.500% 12/15/05 520,000
150,000 Ocwen Financial Corp. ............................................ 11.875% 10/01/03 134,250
200,000 Outsourcing Solutions, Inc. (144A)^ .............................. 11.000% 11/01/06 194,000
------------
848,250
------------
FOOD RETAILERS - 0.8%
1,000,000 Stater Brothers Holdings, Inc. ................................... 9.000% 07/01/04 970,000
------------
FOREST PRODUCTS & PAPER - 0.6%
725,000 Mail-Well, Inc. (144A)^ .......................................... 8.750% 12/15/08 728,625
------------
HEALTH CARE PROVIDERS - 3.6%
500,000 HEALTHSOUTH Corp. Convertible (144A)^ ............................ 3.250% 04/01/03 427,500
250,000 HEALTHSOUTH Corp. Convertible .................................... 3.250% 04/01/03 213,750
500,000 Integrated Health Services, Inc. ................................. 10.250% 04/30/06 492,500
250,000 Integrated Health Services, Inc. (144A)^ ......................... 9.500% 09/15/07 238,750
885,000 Leiner Health Products Group ..................................... 9.625% 07/01/07 924,825
500,000 Prime Medical Services, Inc. ..................................... 8.750% 04/01/08 483,750
1,000,000 Tenet Healthcare Corp. ........................................... 8.625% 01/15/07 1,050,000
500,000 Total Renal Care Holdings, Inc. Convertible (144A)^ .............. 7.000% 05/15/09 540,625
------------
4,371,700
------------
HEAVY CONSTRUCTION - 0.4%
500,000 American Builders & Contractors Supply Co. ....................... 10.625% 05/15/07 467,500
------------
HEAVY MACHINERY - 0.4%
425,000 Scotsman Group, Inc. ............................................. 8.625% 12/15/07 437,750
------------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 1.7%
500,000 D.R. Horton, Inc. ................................................ 10.000% 04/15/06 533,125
1,000,000 MDC Holdings, Inc. ............................................... 8.375% 02/01/08 985,000
500,000 Nortek, Inc. (144A)^ ............................................. 8.875% 08/01/08 516,250
------------
2,034,375
------------
INDUSTRIAL - DIVERSIFIED - 2.0%
2,500,000 Elan Finance Corp. Convertible ................................... + 12/14/18 1,419,150
1,000,000 Fisher Scientific International, Inc. (144A)^ .................... 9.000% 02/01/08 1,005,000
------------
2,424,150
------------
INSURANCE - 0.3%
250,000 American International Group Convertible ......................... 2.250% 07/30/04 326,720
------------
MEDIA - BROADCASTING & PUBLISHING - 8.8%
$780,000 Allbritton Communications Co. .................................... 9.750% 11/30/07 830,700
500,000 Big Flower Press Holdings, Inc. (144A)^ .......................... 8.875% 07/01/07 503,750
975,000 Big Flower Press Holdings, Inc. (144A)^ .......................... 8.625% 12/01/08 989,625
1,000,000 Century Communications Corp. ..................................... 9.500% 03/01/05 1,120,000
750,000 Chancellor Radio ................................................. 9.375% 10/01/04 791,250
550,000 Clear Channel Communications, Inc. Convertible ................... 2.625% 04/01/03 593,373
500,000 Cumulus Media, Inc. .............................................. 10.375% 07/01/08 532,500
1,000,000 Fox Liberty Networks LLC ......................................... 8.875% 08/15/07 1,025,000
600,000 Interep National Radio Sales (144A)^ ............................. 10.000% 07/01/08 621,000
500,000 Jacor Communications, Inc. ....................................... 9.750% 12/15/06 555,000
1,500,000 Jacor Communications, Inc. Convertible ........................... + 02/09/18 725,625
500,000 L-3 Communications Corp. ......................................... 10.375% 05/01/07 551,250
750,000 Renaissance Media Group (144A)^ .................................. 0%, 10.00% ++ 04/15/08 515,625
1,121,000 Sinclair Broadcast Group, Inc. (144A)^ ........................... 10.000% 09/30/05 1,182,655
------------
10,537,353
------------
METALS - 0.6%
500,000 Kevco, Inc. ...................................................... 10.375% 12/01/07 467,500
250,000 WCI Steel, Inc. .................................................. 10.000% 12/01/04 249,375
------------
716,875
------------
OIL & GAS - 3.5%
500,000 Chesapeake Energy Corp. (144A)^ .................................. 9.625% 05/01/05 377,500
500,000 Flores & Rucks, Inc. ............................................. 9.750% 10/01/06 512,500
1,000,000 HS Resources, Inc. ............................................... 9.875% 12/01/03 990,000
500,000 KCS Energy, Inc. ................................................. 8.875% 01/15/08 352,500
300,000 Parker Drilling Corp. Convertible ................................ 5.500% 08/01/04 192,000
500,000 Pogo Producing Co. ............................................... 8.750% 05/15/07 465,000
400,000 Swift Energy Co. Convertible ..................................... 6.250% 11/15/06 283,000
500,000 Texaco Capital, Inc. Convertible ................................. 3.500% 08/05/04 502,500
500,000 Vintage Petroleum, Inc. .......................................... 8.625% 02/01/09 480,000
------------
4,155,000
------------
REAL ESTATE - 0.4%
500,000 BF Saul (REIT) ................................................... 9.750% 04/01/08 467,500
------------
RETAILERS - 1.3%
750,000 Costco Companies, Inc. ........................................... + 08/19/17 624,375
500,000 Saks, Inc. ....................................................... 8.250% 11/15/08 532,500
350,000 Specialty Retailers, Inc. (144A)^ ................................ 8.500% 07/15/05 304,500
150,000 Specialty Retailers, Inc. ........................................ 9.000% 07/15/07 122,250
------------
1,583,625
------------
TELEPHONE SYSTEMS - 6.5%
550,000 AMSC Acquisition Co., Inc. ....................................... 12.250% 04/01/08 343,750
450,000 Bell Atlantic Financial Services, Inc. Convertible ............... 5.750% 04/01/03 467,073
750,000 Global Crossing Holdings Ltd. (144A)^ ............................ 9.625% 05/15/08 798,750
500,000 Hyperion Telecommunications, Inc. ................................ 12.250% 09/01/04 510,000
1,000,000 Intermedia Communications of Florida, Inc. ....................... 0%, 11.25% ++ 07/15/07 685,000
700,000 IXC Communications, Inc. (144A)^ ................................. 9.000% 04/15/08 705,250
500,000 Level 3 Communications, Inc. (144A)^ ............................. 9.125% 05/01/08 496,250
600,000 MasTec, Inc. ..................................................... 7.750% 02/01/08 582,000
1,000,000 Nextel Communications, Inc. ...................................... + 02/15/08 605,000
1,000,000 NEXTLINK Communications, Inc. (144A)^ ............................ 10.750% 11/15/08 1,022,500
250,000 Price Communications Wireless, Inc. .............................. 9.125% 12/15/06 253,750
1,000,000 Qwest Communications International, Inc. ......................... + 02/01/08 760,000
500,000 Viatel, Inc. (144A)^ ............................................. 11.250% 04/15/08 513,750
------------
7,743,073
------------
TEXTILES, CLOTHING & FABRICS - 1.9%
500,000 Delta Mills, Inc. ................................................ 9.625% 09/01/07 486,250
500,000 GFSI, Inc. ....................................................... 9.625% 03/01/07 467,500
500,000 Interface, Inc. .................................................. 9.500% 11/15/05 527,500
750,000 Pillowtex Corp. .................................................. 9.000% 12/15/07 776,250
------------
2,257,500
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 14.3%
1,500,000 Federal National Mortgage Association ............................ 8.500% 02/01/05 1,554,638
5,000,000 U.S. Treasury Note ............................................... 7.500% 05/15/02 5,429,690
10,000,000 U.S. Treasury Note ............................................... 5.500% 05/31/03 10,321,875
------------
17,306,203
------------
Total Domestic Bonds and Debt Securities (Cost $95,529,479) 96,081,437
------------
FOREIGN BONDS AND DEBT SECURITIES - 10.1%
ARGENTINA - 0.8%
700,000 Telefonica de Argentina (U.S.$) (144A)^ .......................... 9.125% 05/07/08 645,750
300,000 Telefonica de Argentina (U.S.$) .................................. 9.125% 05/07/08 275,250
------------
921,000
------------
BRAZIL - 0.3%
500,000 Globo Comunicacoes Participation (U.S.$) (144A)^ ................. 10.625% 12/05/08 323,750
------------
CANADA - 3.1%
1,500,000 Call-Net Enterprises, Inc. (Yankee) .............................. + 08/15/08 892,500
500,000 Canadian Airlines Corp. (Yankee) ................................. 10.000% 05/01/05 430,000
1,000,000 Gulf Canada Resources Ltd. (Yankee) .............................. 8.375% 11/15/05 990,000
750,000 MetroNet Communications Corp. (Yankee) (144A)^ ................... + 06/15/08 463,125
1,000,000 Rogers Cantel, Inc. (Yankee) ..................................... 8.300% 10/01/07 1,010,000
------------
3,785,625
------------
CHINA - 0.1%
250,000 Cathay International Ltd. (U.S.$) (144A)^ ........................ 13.000% 04/15/08 96,250
------------
MEXICO - 2.0%
300,000 Coca-Cola Femsa, S.A. (Yankee) ................................... 8.950% 11/01/06 293,538
250,000 Grupo Televisa S.A. (Yankee) ..................................... 11.875% 05/15/06 250,000
500,000 Grupo Televisa S.A. (Yankee) ..................................... 0%, 13.25% ++ 05/15/08 375,000
500,000 Mexican (U.S.$) .................................................. 9.875% 01/15/07 492,500
400,000 Pepsi-Gemex, S.A. (Yankee) ....................................... 9.750% 03/30/04 387,000
750,000 TV Azteca, S.A. (Yankee) ......................................... 10.500% 02/15/07 618,750
------------
2,416,788
------------
PANAMA - 0.8%
1,000,000 Panama (Republic of) (U.S.$) ..................................... 8.875% 09/30/27 937,500
------------
SWITZERLAND - 0.8%
1,500,000 Roche Holdings, Inc. Convertible (U.S.$) ......................... + 04/20/10 971,250
------------
UNITED KINGDOM - 2.2%
400,000 Esprit Telecom Group Plc (Yankee) ................................ 10.875% 06/15/08 407,000
1,000,000 RSL Communications Ltd. (U.S.$) (144A)^ .......................... 10.500% 11/15/08 977,500
750,000 Swiss Life Finance Ltd. Convertible (U.S.$) (144A)^ .............. 2.000% 05/20/03 853,125
500,000 Telewest Communications Plc (Yankee) ............................. 0%, 11.00% ++ 10/01/07 420,000
------------
2,657,625
------------
Total Foreign Bonds and Debt Securities (Cost $12,650,285) 12,109,788
------------
WARRANTS - 0.0%
COMMUNICATIONS - 0.0%
600 Orbital Imaging Corp. (expiring 03/01/05) (144A)^ * .............................................. 0
200 Splitrock Services, Inc. (expiring 07/15/08) * ................................................... 0
------------
0
------------
TELEPHONE SYSTEMS - 0.0%
550 American Mobile Satellite Corp. (expiring 04/01/08) * ............................................ 0
------------
Total Warrants (Cost $0) 0
------------
TOTAL INVESTMENTS - 96.3%
(Cost $115,919,369) 115,547,757
Other Assets and Liabilities (net) - 3.7% 4,454,748
------------
TOTAL NET ASSETS - 100.0% $ 120,002,505
============
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not
declare or pay dividends in the last 12 month period.
^ Securities that may be resold to "qualified institutional
buyers" under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+ Zero coupon bond
++ Security is a "step-up" bond where the coupon increases
or steps up at a predetermined date.
Yankee - U.S. Dollar denominated bonds issued by non-U.S.
companies in the U.S.
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
BOND DEBENTURE PORTFOLIO
PORTFOLIO COMPOSITION BY CREDIT QUALITY (UNAUDITED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
The following table summarizes the portfolio composition of long-term debt
holdings at December 31, 1998, based upon quality ratings issued by Standard &
Poor's. For securities not rated by Standard & Poor's, the Moody's rating is
used.
PORTFOLIO COMPOSITION BY CREDIT QUALITY
- ------------------------------------------------------------------
<S> <C>
RATINGS % OF PORTFOLIO
U.S. Gov't and Agency Obligations 15.0%
AAA 0.3
AA 2.7
A 0.8
BBB 4.2
BB 14.8
B 53.0
CCC 2.9
NR 6.3
------
100.0%
======
</TABLE>
Note: NR = Not Rated
See notes to financial statements
<PAGE>
COVA SERIES TRUST
MID CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.4%
AEROSPACE & DEFENSE - 2.6%
Coltec Industries, Inc. * ...................... 17,000 $ 331,500
Orbital Sciences Corp. * ....................... 3,300 146,025
-----------
477,525
-----------
AUTOMOTIVE - 1.1%
Snap-On, Inc. .................................. 6,000 208,875
-----------
BANKING - 1.2%
Cullen/Frost Bankers, Inc. ..................... 4,000 219,500
-----------
BEVERAGES, FOOD & TOBACCO - 8.5%
Corn Products International, Inc. .............. 12,000 364,500
Dean Foods Co. ................................. 8,000 326,500
Dreyers Grand Ice Cream, Inc. .................. 6,000 90,750
IBP, Inc. ...................................... 7,100 206,788
Tyson Foods, Inc. .............................. 7,000 148,750
Universal Foods Corp. .......................... 15,500 425,281
-----------
1,562,569
-----------
CHEMICALS - 3.2%
Crompton & Knowles Corp. ....................... 16,000 331,000
Morton International, Inc. ..................... 10,200 249,900
-----------
580,900
-----------
COMMERCIAL SERVICES - 2.2%
Unisource Worldwide, Inc. ...................... 55,000 398,744
-----------
COMMUNICATIONS - 1.6%
Plantronics, Inc. * ............................ 3,500 301,000
-----------
COMPUTER SOFTWARE & PROCESSING - 4.0%
Adobe Systems, Inc. ............................ 8,900 416,075
Cabletron Systems, Inc. * ...................... 38,000 318,250
-----------
734,325
-----------
CONTAINERS & PACKAGING - 2.7%
Ball Corp. ..................................... 11,000 503,250
-----------
ELECTRIC UTILITIES - 11.9%
FirstEnergy Corp. .............................. 9,000 293,063
Illinova Corp. ................................. 14,000 350,000
IPALCO Enterprises, Inc. ....................... 3,100 171,856
LG&E Energy Corp. .............................. 6,000 169,875
Niagara Mohawk Power Corp. * ................... 29,000 467,625
Northeast Utilities * .......................... 26,000 416,000
Scana Corp. .................................... 4,400 141,900
Sierra Pacific Resources ....................... 3,900 148,200
-----------
2,158,519
-----------
ELECTRONICS - 1.4%
Varian Associates, Inc. ........................ 7,000 265,125
-----------
ENTERTAINMENT & LEISURE - 1.2%
Hasbro, Inc. ................................... 5,900 213,138
-----------
ENVIRONMENTAL CONTROLS - 2.2%
Safety-Kleen Corp. * ........................... 29,025 409,978
-----------
FOREST PRODUCTS & PAPER - 1.5%
Buckeye Technologies, Inc. * ................... 19,000 283,813
-----------
HEALTH CARE PROVIDERS - 7.7%
Humana, Inc. * ................................. 22,000 391,875
MedPartners, Inc. * ............................ 77,600 407,400
Sierra Health Services, Inc. * ................. 13,000 273,813
Trigon Healthcare, Inc. * ...................... 9,000 335,813
-----------
1,408,901
-----------
HOUSEHOLD PRODUCTS - 1.4%
Jostens, Inc. .................................. 10,000 261,875
-----------
INSURANCE - 9.6%
Ace, Ltd. ...................................... 9,000 309,938
CMAC Investment Corp. .......................... 4,700 215,906
EXEL Ltd. ...................................... 2,500 187,500
LandAmerica Financial Group, Inc. .............. 3,000 167,438
MONY Group, Inc. (The) * ....................... 10,770 337,236
ReliaStar Financial Corp. ...................... 5,000 230,625
Transatlantic Holdings, Inc. ................... 4,000 302,250
-----------
1,750,893
-----------
MEDICAL SUPPLIES - 4.3%
Acuson Corp. * ................................. 24,000 357,000
Mettler-Toledo International, Inc. * ........... 4,000 112,250
St. Jude Medical, Inc. * ....................... 11,800 326,713
-----------
795,963
-----------
OIL & GAS - 11.0%
Amerada Hess Corp. ............................. 6,500 323,375
Coflexip S.A. (ADR) ............................ 5,000 160,625
Dynegy, Inc. ................................... 30,000 328,125
Eastern Enterprises ............................ 6,000 262,500
Kerr-Mcgee Corp. ............................... 7,000 267,750
Southwest Gas Corp. ............................ 7,100 190,813
Ultramar Diamond Shamrock Corp. ................ 12,000 291,000
Valero Energy Corp. ............................ 9,000 191,250
-----------
2,015,438
-----------
PHARMACEUTICALS - 1.3%
Mylan Laboratories, Inc. ....................... 7,300 229,950
-----------
REAL ESTATE - 1.6%
Healthcare Realty Trust, Inc. (REIT) ........... 12,755 284,596
-----------
RESTAURANTS - 3.6%
Tricon Global Restaurants, Inc. * .............. 13,000 651,625
-----------
Retailers - 7.6%
Consolidated Stores Corp. * .................... 10,000 201,875
Dillard's, Inc. ................................ 8,000 227,000
Nine West Group, Inc. * ........................ 24,000 373,500
OfficeMax, Inc. * .............................. 27,200 329,800
Saks, Inc. * ................................... 7,000 220,938
Stride Rite Corp. .............................. 4,800 42,000
-----------
1,395,113
-----------
Textiles, Clothing & Fabrics - 2.0%
Polymer Group, Inc. * .......................... 37,000 367,688
-----------
TOTAL INVESTMENTS - 95.4%
(Cost $17,094,508) 17,479,303
Other Assets and Liabilities (net) - 4.6% 841,256
-----------
TOTAL NET ASSETS - 100.0% $ 18,320,559
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the 12 month period.
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
LARGE CAP RESEARCH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 92.1%
AEROSPACE & DEFENSE - 1.7%
United Technologies Corp. ...................... 2,200 $ 239,250
------------
AUTOMOTIVE - 2.3%
Ford Motor Co. ................................. 3,800 223,013
General Motors Corp. ........................... 1,400 100,188
------------
323,201
------------
BANKING - 8.3%
Bank One Corp. ................................. 3,953 201,850
BankAmerica Corp. .............................. 2,556 153,680
Chase Manhattan Corp. .......................... 2,950 200,784
Comerica, Inc. ................................. 2,550 173,878
First Union Corp. .............................. 1,750 106,422
Mellon Bank Corp. .............................. 2,500 171,875
Wells Fargo Co. ................................ 3,550 141,778
------------
1,150,267
------------
BEVERAGES, FOOD & TOBACCO - 5.7%
Bestfoods ...................................... 1,600 85,200
Heinz (H.J.), Co. .............................. 6,700 379,388
Philip Morris Co., Inc. ........................ 2,830 151,405
Ralston-Ralston Purina Group ................... 2,800 90,650
Sara Lee Corp. ................................. 2,800 78,925
------------
785,568
------------
CHEMICALS - 2.4%
Air Products & Chemicals, Inc. ................. 3,200 128,000
Du Pont (E.I.) de Nemours and Co. .............. 2,600 137,963
Rohm & Haas Co. ................................ 2,300 69,288
------------
335,251
------------
COMPUTER SOFTWARE & PROCESSING - 2.5%
First Data Corp. ............................... 10,800 342,225
------------
COMPUTERS & INFORMATION - 9.5%
EMC Corp. * .................................... 3,650 310,250
International Business Machines Corp. .......... 2,100 387,975
Seagate Technology, Inc. * ..................... 5,500 166,375
Sun Microsystems, Inc. * ....................... 3,000 256,875
Unisys Corp. * ................................. 6,000 206,625
------------
1,328,100
------------
ELECTRIC UTILITIES - 3.5%
Baltimore Gas and Electric Co. ................. 2,600 80,275
Carolina Power & Light Co. ..................... 1,720 80,948
Duke Energy Corp. .............................. 1,400 89,688
FPL Group, Inc. ................................ 3,750 231,094
------------
482,005
------------
ELECTRICAL EQUIPMENT - 1.7%
Emerson Electric Co. ........................... 3,690 230,856
------------
ELECTRONICS - 2.1%
Intel Corp. .................................... 1,000 118,563
Texas Instruments, Inc. ........................ 1,980 169,414
------------
287,977
------------
ENVIRONMENTAL CONTROLS - 2.1%
Waste Management, Inc. ......................... 6,250 291,406
------------
FINANCIAL SERVICES - 4.9%
American General Corp. ......................... 4,150 323,700
Federal National Mortgage Association .......... 3,000 222,000
Morgan Stanley, Dean Witter & Co. .............. 1,800 127,800
------------
673,500
------------
FOREST PRODUCTS & PAPER - 4.7%
Bowater, Inc. .................................. 3,810 157,877
Champion International Corp. ................... 3,750 151,875
Georgia-Pacific Corp. .......................... 2,400 140,550
Kimberly-Clark Corp. ........................... 3,750 204,375
------------
654,677
------------
HEALTH CARE PROVIDERS - 0.6%
Columbia/HCA Healthcare Corp. .................. 3,100 76,725
------------
HEAVY MACHINERY - 0.9%
Deere & Co. .................................... 3,800 125,875
------------
INDUSTRIAL TECHNOLOGY - 1.2%
Eastman Kodak Co. .............................. 2,220 159,840
------------
INSURANCE - 4.4%
Chubb Corp. .................................... 1,610 104,449
Cigna Corp. .................................... 3,600 278,325
Citigroup, Inc. ................................ 2,000 99,000
Jefferson Pilot Corp. .......................... 1,650 123,750
------------
605,524
------------
MEDIA - BROADCASTING & PUBLISHING - 3.5%
CBS Corp. ...................................... 4,070 133,293
Dow Jones & Co., Inc. .......................... 2,300 110,688
Time Warner, Inc. .............................. 4,000 248,250
------------
492,231
------------
MEDICAL SUPPLIES - 0.9%
Baxter International, Inc. ..................... 1,840 118,335
------------
OFFICE EQUIPMENT - 1.2%
Xerox Corp. .................................... 1,400 165,200
------------
OIL & GAS - 10.8%
British Petroleum Co. Plc (ADR) ................ 2,460 233,700
Chevron Corp. .................................. 2,800 232,225
Coastal Corp. .................................. 3,220 112,499
Columbia Energy Group .......................... 2,500 144,375
Exxon Corp. .................................... 4,600 336,375
Mobil Corp. .................................... 2,200 191,675
NICOR, Inc. .................................... 2,400 101,400
Total S.A. (ADR) ............................... 3,200 159,200
------------
1,511,449
------------
PHARMACEUTICALS - 7.0%
American Home Products Corp. ................... 4,500 253,406
Bristol-Myers Squibb Co. ....................... 1,700 227,481
Merck & Co., Inc. .............................. 725 107,073
Pharmacia & Upjohn, Inc. ....................... 4,900 277,463
SmithKline Beecham Plc (ADR) ................... 1,500 104,250
------------
969,673
------------
RETAILERS - 2.0%
TJX Companies, Inc. ............................ 5,000 145,000
Toys "R" Us, Inc. * ............................ 8,100 136,688
------------
281,688
------------
TELEPHONE SYSTEMS - 7.4%
Alltel Corp. ................................... 2,400 143,550
AT&T Corp. ..................................... 5,700 428,919
Bell Atlantic Corp. ............................ 2,600 147,713
Bellsouth Corp. ................................ 3,400 169,575
MCI WorldCom, Inc. * ........................... 1,900 136,325
------------
1,026,082
------------
TEXTILES, CLOTHING & FABRICS - 0.8%
VF Corp. ....................................... 2,350 110,156
------------
TOTAL INVESTMENTS - 92.1%
(Cost $11,298,361) 12,767,061
Other Assets and Liabilities (net) - 7.9% 1,098,830
------------
TOTAL NET ASSETS - 100.0% $ 13,865,891
============
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the 12 month period.
ADR - American Depositary Receipt
See notes to financial statements
<PAGE>
COVA SERIES TRUST
DEVELOPING GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.2%
AEROSPACE & DEFENSE - 4.5%
Orbital Sciences Corp. * ........................... 16,300 $ 721,275
-----------
APPAREL RETAILERS - 2.4%
Pacific Sunwear of California, Inc. * .............. 10,700 175,213
Shoe Carnival, Inc. * .............................. 6,400 71,200
Stage Stores, Inc. * ............................... 13,800 129,375
-----------
375,788
-----------
BANKING - 1.8%
Net.B@nk, Inc. * ................................... 4,200 115,500
TeleBanc Financial Corp. * ......................... 5,000 170,000
-----------
285,500
-----------
BEVERAGES, FOOD & TOBACCO - 2.4%
Dreyers Grand Ice Cream, Inc. ...................... 3,500 52,938
Horizon Organic Holding Corp. * .................... 6,000 93,000
Northland Cranberries, Inc. ........................ 8,000 72,250
Smithfield Foods, Inc. * ........................... 4,000 135,500
Twinlab Corp. * .................................... 2,500 32,813
-----------
386,501
-----------
CHEMICALS - 1.0%
Eco Soil Systems, Inc. * ........................... 8,600 75,250
OM Group, Inc. ..................................... 2,500 91,250
-----------
166,500
-----------
COMMERCIAL SERVICES - 13.7%
Aegis Communications Group, Inc. * ................. 28,000 22,750
Armor Holdings, Inc. * ............................. 14,000 160,125
Butler International, Inc. * ....................... 5,300 140,119
Caribiner International, Inc. * .................... 10,700 97,638
Cornell Corrections, Inc. * ........................ 5,000 95,000
G & K Services, Inc. ............................... 2,100 111,825
ICOS Corp. * ....................................... 6,200 184,450
Iron Mountain, Inc. * .............................. 4,500 162,281
Kroll-O'Gara Co. (The) * ........................... 13,200 520,575
Labor Ready, Inc. * ................................ 4,900 96,469
M/A/R/C, Inc. ...................................... 5,600 59,500
NFO Worldwide, Inc. * .............................. 4,000 46,000
Norrell Corp. ...................................... 3,300 48,675
Professional Staff Plc (ADR) * ..................... 5,300 41,738
SCB Computer Technology, Inc. * .................... 8,700 85,913
SOS Staffing Services, Inc. * ...................... 2,200 15,950
Steiner Leisure Ltd. * ............................. 2,800 89,600
TAVA Technologies, Inc. * .......................... 9,500 72,438
TeleTech Holdings, Inc. * .......................... 12,800 131,200
-----------
2,182,246
-----------
COMMUNICATIONS - 6.9%
Aspect Telecommunications Corp. * .................. 6,000 103,500
CellStar Corp. * ................................... 18,500 126,031
PairGain Technologies, Inc. * ...................... 12,000 92,250
Plantronics, Inc. * ................................ 9,000 773,986
-----------
1,095,767
-----------
COMPUTER SOFTWARE & PROCESSING - 19.9%
Activision, Inc. * ................................. 8,000 89,000
Best Software, Inc. * .............................. 3,100 73,625
BrightStar Information Technology Group, Inc. * .... 10,000 78,750
CACI International, Inc. * ......................... 1,500 25,313
Caere Corp. * ...................................... 9,300 130,200
Cambridge Technology Partners, Inc. * .............. 4,300 95,138
CheckFree Corp. * .................................. 4,800 112,200
CIBER, Inc. * ...................................... 4,300 120,131
CMG Information Services, Inc. * ................... 2,800 298,200
Cognicase, Inc. * .................................. 6,400 142,300
Computer Horizons Corp. * .......................... 2,000 53,250
Computer Management Sciences, Inc. * ............... 3,800 66,025
Computer Task Group, Inc. .......................... 2,000 54,250
Harbinger Corp. * .................................. 8,000 64,000
IMRglobal Corp. * .................................. 8,500 250,219
Infinium Software, Inc. * .......................... 3,000 18,750
Landmark Systems Corp. * ........................... 11,000 122,375
Learning Co., Inc. (The) * ......................... 7,000 181,563
Mastech Corp. * .................................... 4,000 114,500
Mercury Interactive Corp. * ........................ 2,800 177,100
Phoenix Technologies Ltd. * ........................ 4,500 38,813
RadiSys Corp. * .................................... 7,200 216,000
Security First Technologies Corp. * ................ 6,700 204,350
Sequent Computer Systems, Inc. * ................... 7,200 86,850
Smallworldwide Plc (ADR) * ......................... 4,300 53,750
software.net Corp. * ............................... 4,000 83,000
THQ, Inc. * ........................................ 1,800 50,400
USWeb Corp. * ...................................... 5,300 139,788
-----------
3,139,840
-----------
COMPUTERS & INFORMATION - 3.3%
Analogic Corp. ..................................... 3,300 124,163
General Binding Corp. .............................. 800 29,800
Identix, Inc. * .................................... 8,000 66,500
MICROS Systems, Inc. * ............................. 6,600 216,975
MicroTouch Systems, Inc. * ......................... 6,200 81,375
-----------
518,813
-----------
CONSUMER SERVICES - 0.2%
York Group, Inc. (The) ............................. 3,600 34,200
-----------
ELECTRIC UTILITIES - 0.2%
Independent Energy Holdings Plc (ADR) * ............ 4,000 36,000
-----------
ELECTRICAL EQUIPMENT - 1.1%
Technitrol, Inc. ................................... 5,700 181,688
-----------
ELECTRONICS - 2.5%
American Xtal Technology, Inc. * ................... 4,000 36,500
Artesyn Technologies, Inc. * ....................... 9,100 127,400
Dionex Corp. * ..................................... 1,000 36,625
Lecroy Corp. * ..................................... 5,900 97,350
SLI, Inc. * ........................................ 3,700 102,675
-----------
400,550
-----------
ENTERTAINMENT & LEISURE - 2.4%
Championship Auto Racing Teams, Inc. * ............. 8,000 237,000
Family Golf Centers, Inc. * ........................ 5,000 98,750
Harvey Entertainment Co. (The) * ................... 1,200 9,300
Play By Play Toys & Novelties, Inc. * .............. 2,400 16,800
Toymax International, Inc. * ....................... 4,400 22,275
-----------
384,125
-----------
FINANCIAL SERVICES - 0.4%
Dain Rauscher Corp. ................................ 2,000 59,000
-----------
FOOD RETAILERS - 0.8%
Wild Oats Markets, Inc. * .......................... 3,800 119,700
-----------
HEALTH CARE PROVIDERS - 4.0%
Counsel Corp. * .................................... 7,800 61,425
Express Scripts, Inc. * ............................ 3,200 214,800
Healthcare Services Group, Inc. * .................. 9,750 88,969
Hooper Holmes, Inc. ................................ 6,500 188,500
Horizon Health Corp. * ............................. 4,300 33,863
Matria Healthcare, Inc. * .......................... 16,000 46,000
-----------
633,557
-----------
HEAVY MACHINERY - 0.8%
Flow International Corp. * ......................... 8,500 81,547
JLG Industries, Inc. ............................... 3,200 50,000
-----------
131,547
-----------
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES - 2.0%
Crossmann Communities, Inc. * ...................... 2,900 80,113
McGrath Rentcorp ................................... 7,900 173,800
Meadowcraft, Inc. * ................................ 6,000 67,125
-----------
321,038
-----------
INDUSTRIAL - DIVERSIFIED - 1.7%
Matthews International Corp. ....................... 5,700 179,550
Park-Ohio Holdings Corp. * ......................... 3,500 52,938
Strategic Distribution, Inc. * ..................... 13,400 32,663
-----------
265,151
-----------
MEDICAL SUPPLIES - 3.2%
Arrow International, Inc. .......................... 4,000 125,500
ATS Medical, Inc. * ................................ 8,500 59,500
Maxxim Medical, Inc. * ............................. 6,300 187,425
Orthofix International, N.V. * ..................... 3,500 49,000
Theragenics Corp. * ................................ 5,000 84,063
-----------
505,488
-----------
METALS - 1.2%
Stillwater Mining Co. * ............................ 4,800 196,800
-----------
OFFICE EQUIPMENT - 0.4%
In Focus Systems, Inc. * ........................... 7,900 70,113
-----------
OIL & GAS - 5.9%
Core Laboratories N.V. * ........................... 8,900 170,213
Dawson Geophysical Co. * ........................... 2,200 15,813
Edge Petroleum Corp. * ............................. 9,000 39,375
Evergreen Resources, Inc. * ........................ 4,000 71,000
EXCO Resources, Inc. * ............................. 8,000 58,000
Gulf Island Fabrication, Inc. * .................... 5,200 40,300
Harken Energy Corp. * .............................. 34,500 66,844
Seitel, Inc. * ..................................... 7,800 97,013
Stone Energy Corp. * ............................... 4,600 132,250
Superior Energy Services, Inc. * ................... 11,000 31,282
TransMontaigne Oil Co. * ........................... 8,700 131,588
Vintage Petroleum, Inc. ............................ 10,200 87,975
-----------
941,653
-----------
PHARMACEUTICALS - 1.4%
Columbia Laboratories, Inc. * ...................... 5,000 15,313
Kos Pharmaceuticals, Inc. * ........................ 4,900 28,788
PharMerica, Inc. * ................................. 30,000 180,000
-----------
224,101
-----------
REAL ESTATE - 0.6%
Healthcare Realty Trust, Inc. (REIT) ............... 4,300 95,944
-----------
RETAILERS - 3.1%
Ames Department Stores, Inc. * ..................... 8,000 216,000
Cost Plus, Inc. * .................................. 3,600 112,950
CyberShop International, Inc. * .................... 4,000 45,500
Eagle Hardware & Garden, Inc. * .................... 3,700 120,250
-----------
494,700
-----------
TELEPHONE SYSTEMS - 0.4%
Boston Communications Group, Inc. * ................ 4,300 55,900
-----------
TEXTILES, CLOTHING & FABRICS - 5.8%
Kenneth Cole Productions, Inc. * ................... 4,900 91,875
Quiksilver, Inc. * ................................. 7,000 210,000
St. John Knits, Inc. ............................... 5,300 137,800
Tarrant Apparel Group * ............................ 7,600 302,100
Timberland Co. (The) * ............................. 2,700 123,019
Vans, Inc. * ....................................... 8,500 58,438
-----------
923,232
-----------
TRANSPORTATION - 0.9%
MotivePower Industries, Inc. * ..................... 4,400 141,625
-----------
WHOLESALE - 0.3%
U.S.A. Floral Products, Inc. * ..................... 4,000 46,000
-----------
TOTAL INVESTMENTS - 95.2%
(Cost $13,736,498) 15,134,342
Other Assets and Liabilities (net) - 4.8% 756,123
-----------
TOTAL NET ASSETS - 100.0% $ 15,890,465
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the 12 month period.
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAR SECURITY VALUE
AMOUNT DESCRIPTION (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 53.0%
BANKING - 4.5%
785 Bank One Corp. ....................................................................................... $ 40,084
760 Chase Manhattan Corp. ................................................................................ 51,728
880 First Union Corp. .................................................................................... 53,515
2,500 MBNA Corp. ........................................................................................... 62,344
-----------
207,671
-----------
BEVERAGES, FOOD & TOBACCO - 2.9%
1,155 Pepsico, Inc. ........................................................................................ 47,283
790 Philip Morris Co., Inc. .............................................................................. 42,265
1,650 Sysco Corp. .......................................................................................... 45,272
-----------
134,820
-----------
BUILDING MATERIALS - 2.0%
1,400 Masco Corp. .......................................................................................... 40,250
1,760 Sherwin Williams Co. ................................................................................. 51,700
-----------
91,950
-----------
CHEMICALS - 0.5%
1,040 Solutia, Inc. ........................................................................................ 23,270
-----------
COMPUTER SOFTWARE & PROCESSING - 2.7%
1,685 First Data Corp. ..................................................................................... 53,393
275 Microsoft Corp. * .................................................................................... 38,139
502 Networks Associates, Inc. * .......................................................................... 33,258
-----------
124,790
-----------
CONTAINERS & PACKAGING - 2.6%
895 Avery-Dennison Corp. ................................................................................. 40,331
730 Crown Cork & Seal, Inc. .............................................................................. 22,493
1,065 Sealed Air Corp. * ................................................................................... 54,382
-----------
117,206
-----------
COSMETICS & PERSONAL CARE - 0.6%
325 Estee Lauder Co. ..................................................................................... 27,788
-----------
ELECTRIC UTILITIES - 1.4%
1,220 Cinergy Corp. ........................................................................................ 41,938
470 New Century Energies, Inc. ........................................................................... 22,913
-----------
64,851
-----------
ELECTRICAL EQUIPMENT - 1.9%
450 General Electric Co. ................................................................................. 45,928
975 Grainger (W.W.), Inc. ................................................................................ 40,584
-----------
86,512
-----------
ELECTRONICS - 5.5%
4,520 Adaptec, Inc. * ...................................................................................... 79,383
1,225 Analog Devices, Inc. * ............................................................................... 38,434
1,305 Applied Materials, Inc. * ............................................................................ 55,707
1,675 KLA-Tencor Corp. * ................................................................................... 72,653
-----------
246,177
-----------
FINANCIAL SERVICES - 2.1%
500 Block (H&R), Inc. .................................................................................... 22,500
885 Heller Financial, Inc. ............................................................................... 25,997
1,013 SLM Holding Corp. .................................................................................... 48,624
-----------
97,121
-----------
FOREST PRODUCTS & PAPER - 0.4%
700 Mead Corp. ........................................................................................... 20,519
-----------
HEALTH CARE PROVIDERS - 1.7%
3,075 Columbia/HCA Healthcare Corp. ........................................................................ 76,106
-----------
HOUSEHOLD PRODUCTS - 0.9%
975 Newell Co. ........................................................................................... 40,219
-----------
INDUSTRIAL - DIVERSIFIED - 1.3%
2,140 Millipore Corp. ...................................................................................... 60,856
-----------
MEDIA - BROADCASTING & PUBLISHING - 0.5%
340 Tribune Co. .......................................................................................... 22,440
-----------
MEDICAL SUPPLIES - 0.5%
470 Bard (C.R.), Inc. .................................................................................... 23,265
-----------
OIL & GAS - 6.2%
635 Atlantic Richfield Co. ............................................................................... 41,434
2,120 Baker Hughes, Inc. ................................................................................... 37,498
830 Consolidated Natural Gas Co. ......................................................................... 44,820
1,050 Murphy Oil Corp. ..................................................................................... 43,313
4,345 Ocean Energy, Inc. * ................................................................................. 27,428
1,360 USX - Marathon Group ................................................................................. 40,970
950 Vastar Resources, Inc. ............................................................................... 41,028
-----------
276,491
-----------
PHARMACEUTICALS - 4.7%
350 Allergan, Inc. ....................................................................................... 22,663
395 Bristol-Myers Squibb Co. ............................................................................. 52,856
485 Eli Lilly & Co. ...................................................................................... 43,104
330 Merck & Co., Inc. .................................................................................... 48,737
900 Schering-Plough Corp. ................................................................................ 49,725
-----------
217,085
-----------
RESTAURANTS - 0.6%
550 Tricon Global Restaurants, Inc. * .................................................................... 27,569
-----------
RETAILERS - 5.7%
2,948 Consolidated Stores Corp. * .......................................................................... 59,513
1,255 Dillard's, Inc. ...................................................................................... 35,611
1,650 Office Depot, Inc. * ................................................................................. 60,947
2,890 Pep Boys - Manny, Moe & Jack ......................................................................... 45,337
690 Wal-Mart Stores, Inc. ................................................................................ 56,192
-----------
257,600
-----------
TELEPHONE SYSTEMS - 2.8%
477 AT&T Corp. ........................................................................................... 35,894
680 GTE Corp. ............................................................................................ 45,858
750 U.S. WEST, Inc. ...................................................................................... 48,469
-----------
130,221
-----------
TRANSPORTATION - 1.0%
1,360 Burlington Northern Santa Fe Corp. ................................................................... 45,900
-----------
Total Common Stocks (Cost $2,168,233) 2,420,427
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CORPORATE DEBT - 10.8% COUPON MATURITY
CHEMICALS - 3.9%
$150,000 Du Pont (E.I.) de Nemours and Co. ......................................... 8.250% 09/15/06 $ 178,308
-----------
ENTERTAINMENT & LEISURE - 3.3%
150,000 Walt Disney Co. (The) ..................................................... 5.250% 11/10/03 150,867
-----------
RETAILERS - 3.6%
$150,000 J.C. Penney Co., Inc. ..................................................... 7.600% 04/01/07 164,480
-----------
Total Corporate Debt (Cost $492,708) 493,655
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 27.0%
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES - 5.8%
39,470 Federal Home Loan Mortgage Corp. .......................................... 6.500% 01/01/12 40,086
39,790 Federal National Mortgage Association ..................................... 6.000% 03/01/11 39,889
99,929 Federal National Mortgage Association ..................................... 7.000% 02/01/16 102,254
36,787 Government National Mortgage Association .................................. 6.500% 03/15/24 37,189
43,357 Government National Mortgage Association .................................. 7.000% 07/20/27 44,102
-----------
263,520
-----------
U.S. TREASURY SECURITIES - 21.2%
150,000 U.S. Treasury Note ........................................................ 6.375% 05/15/00 153,422
150,000 U.S. Treasury Note ........................................................ 6.375% 08/15/02 158,250
150,000 U.S. Treasury Note ........................................................ 7.250% 05/15/04 168,141
150,000 U.S. Treasury Note ........................................................ 6.625% 05/15/07 168,750
150,000 U.S. Treasury Note ........................................................ 6.125% 08/15/07 163,969
150,000 U.S. Treasury Note ........................................................ 5.625% 05/15/08 160,078
-----------
972,610
-----------
Total U.S. Government and Agency Obligations (Cost $1,186,434) 1,236,130
-----------
TOTAL INVESTMENTS - 90.8%
(Cost $3,847,375) 4,150,212
Other Assets and Liabilities (net) - 9.2% 422,546
-----------
TOTAL NET ASSETS - 100.0% $ 4,572,758
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the last 12 month period.
See notes to financial statements
<PAGE>
COVA SERIES TRUST
SMALL CAP EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 96.3%
AUTOMOTIVE - 3.1%
Aftermarket Technology Corp. * .................... 1,500 $ 11,813
Superior Industries International, Inc. ........... 2,200 61,188
-----------
73,001
-----------
BANKING - 8.7%
Associated Banc-Corp .............................. 446 15,248
Bank United Corp. ................................. 550 21,588
CCB Financial Corp. ............................... 500 28,500
Commercial Federal Corp. .......................... 750 17,391
Cullen/Frost Bankers, Inc. ........................ 521 28,590
Metris Companies, Inc. ............................ 1,023 51,470
Sovereign Bancorp, Inc. ........................... 1,680 23,940
St. Paul Bancorp, Inc. ............................ 750 20,414
-----------
207,141
-----------
BEVERAGES, FOOD & TOBACCO - 4.5%
Beringer Wine Estates Holdings, Inc. * ............ 750 33,516
Canandaigua Wine Co., Inc. * ...................... 550 31,797
Hormel Foods Corp. ................................ 600 19,650
Performance Food Group Co. * ...................... 746 20,981
-----------
105,944
-----------
CHEMICALS - 5.6%
Cytec Industries, Inc. * .......................... 450 9,563
Hanna (M.A.) Co. .................................. 1,227 15,107
International Specialty Products, Inc. * .......... 950 12,884
Minerals Technologies, Inc. ....................... 700 28,656
OM Group, Inc. .................................... 1,150 41,975
RPM, Inc. ......................................... 1,575 25,200
-----------
133,385
-----------
COMMERCIAL SERVICES - 4.7%
Applied Graphics Technologies, Inc. * ............. 1,936 31,944
Interim Services, Inc. * .......................... 850 19,869
Iron Mountain, Inc. * ............................ 1,150 41,472
Rental Service Corp. * ............................ 1,200 18,825
-----------
112,110
-----------
COMMUNICATIONS - 2.1%
RELTEC Corp. * .................................... 1,000 22,188
Tekelec * ......................................... 1,600 26,500
-----------
48,688
-----------
COMPUTER SOFTWARE & PROCESSING - 9.2%
Cognos, Inc. * .................................... 1,500 37,500
Condor Technology Solutions, Inc. * ............... 1,300 13,000
Cotelligent Group, Inc. * ......................... 1,200 25,575
National Data Corp. ............................... 1,050 51,122
Source Information Management Co. (The) * ......... 3,400 39,100
SPSS, Inc. * ...................................... 1,100 20,763
Sungard Data Systems, Inc. * ...................... 700 27,781
-----------
214,841
-----------
COMPUTERS & INFORMATION - 3.1%
CDW Computer Centers, Inc. * ...................... 350 33,578
Zebra Technologies Corp. * ........................ 1,400 40,250
-----------
73,828
-----------
CONTAINERS & PACKAGING - 1.4%
AptarGroup, Inc. .................................. 1,200 33,675
-----------
ELECTRICAL EQUIPMENT - 1.9%
Barnett, Inc. * ................................... 1,850 25,438
Watsco, Inc. ...................................... 1,186 19,866
-----------
45,304
-----------
ELECTRONICS - 16.2%
Amkor Technology, Inc. * .......................... 5,300 57,306
Burr-Brown Corp. * ................................ 846 19,775
CFM Technologies, Inc. * .......................... 1,506 12,801
Etec Systems, Inc. * .............................. 851 34,040
General Scanning, Inc. * .......................... 3,200 19,400
Kulicke & Soffa Industries, Inc. * ................ 3,300 58,575
Photronics, Inc. * ................................ 2,289 54,865
PRI Automation, Inc. * ............................ 2,692 69,992
SMART Modular Technologies, Inc. * ................ 2,000 55,500
-----------
382,254
-----------
ENTERTAINMENT & LEISURE - 1.1%
Anchor Gaming * ................................... 476 26,835
-----------
FINANCIAL SERVICES - 1.9%
Finova Group, Inc ................................. 500 26,969
UniCapital Corp. * ................................ 2,450 18,069
-----------
45,038
-----------
HEALTH CARE PROVIDERS - 5.1%
American Oncology Resources, Inc. * ............... 1,900 27,669
Curative Health Services, Inc. * .................. 1,300 42,900
Integrated Health Services, Inc. .................. 800 11,300
Laser Vision Centers, Inc. * ...................... 1,400 31,019
Sun Healthcare Group, Inc. * ...................... 1,300 8,531
-----------
121,419
-----------
HEAVY MACHINERY - 0.8%
DT Industries, Inc. ............................... 1,250 19,688
-----------
HOUSEHOLD PRODUCTS - 1.2%
Blyth Industries, Inc. * .......................... 900 28,125
-----------
INSURANCE - 1.0%
HCC Insurance Holdings, Inc. ...................... 1,400 24,675
-----------
MEDIA - BROADCASTING & PUBLISHING - 2.3%
Cumulus Media, Inc. * .......................... 1,500 24,938
Young Broadcasting, Inc. * ..................... 710 29,731
-----------
54,669
-----------
MEDICAL SUPPLIES - 5.9%
DENTSPLY International, Inc. ................... 1,800 46,350
Hanger Orthopedic Group, Inc. * ................ 1,000 22,500
Maxxim Medical, Inc. * ......................... 1,400 41,650
Ocular Sciences, Inc. * ........................ 1,100 29,425
-----------
139,925
-----------
METALS - 1.0%
Texas Industries, Inc. ......................... 900 24,244
-----------
OIL & GAS - 3.8%
BJ Services Co. * .............................. 579 9,047
Cooper Cameron Corp. * ......................... 1,400 34,300
Global Industries Ltd. * ....................... 2,850 17,456
Ocean Energy, Inc. * ........................... 3,503 22,113
Swift Energy Co. * ............................. 1,047 7,722
-----------
90,638
-----------
PHARMACEUTICALS - 3.6%
Allergan, Inc. ................................. 500 32,375
PharMerica, Inc. * ............................. 10 60
Shire Pharmaceuticals Group Plc (ADR) * ........ 1,810 36,653
Zonagen, Inc. * ................................ 900 17,213
-----------
86,301
-----------
RESTAURANTS - 1.2%
Brinker International, Inc. * .................. 1,000 28,875
-----------
RETAILERS - 1.5%
Bombay Co., Inc. (The) * ....................... 2,000 11,125
Marks Brothers Jewelers, Inc. * ................ 1,350 24,300
-----------
35,425
-----------
TELEPHONE SYSTEMS - 1.7%
IXC Communications, Inc. * ..................... 1,200 40,350
-----------
TEXTILES, CLOTHING & FABRICS - 1.1%
Kellwood Co. ................................... 1,000 25,000
-----------
TRANSPORTATION - 2.6%
Hub Group, Inc. * .............................. 1,907 36,939
USFreightways Corp. ............................ 861 25,078
-----------
62,017
-----------
TOTAL INVESTMENTS - 96.3%
(Cost $2,178,563) 2,283,395
Other Assets and Liabilities (net) - 3.7% 88,916
-----------
TOTAL NET ASSETS - 100.0% $ 2,372,311
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the 12 month period.
ADR - American Depositary Receipt
See notes to financial statements
<PAGE>
COVA SERIES TRUST
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.1%
AUTOMOTIVE - 1.0%
Genuine Parts Co. ............................... 1,400 $ 46,813
----------
BANKING - 17.1%
Bank One Corp. .................................. 1,500 76,594
Comerica, Inc. .................................. 1,400 95,463
First Union Corp. ............................... 1,500 91,219
MBNA Corp. ...................................... 3,400 84,788
Mellon Bank Corp. ............................... 1,100 75,625
National City Corp. ............................. 1,200 87,000
PNC Bank Corp. .................................. 1,300 70,363
Union Planters Corp. ............................ 1,500 67,969
U.S. Bancorp .................................... 2,000 71,000
Wachovia Corp. .................................. 900 78,694
----------
798,715
----------
BEVERAGES, FOOD & TOBACCO - 2.6%
Philip Morris Co., Inc. ......................... 1,200 64,200
UST, Inc. ....................................... 1,700 59,288
----------
123,488
----------
BUILDING MATERIALS - 1.4%
Sherwin Williams Co. ............................ 2,200 64,625
----------
CHEMICALS - 3.5%
Du Pont (E.I.) de Nemours and Co. ............... 1,500 79,594
Union Carbide Corp. ............................. 2,000 85,000
----------
164,594
----------
COMPUTER SOFTWARE & PROCESSING - 2.0%
First Data Corp. ................................ 3,000 95,063
----------
CONTAINERS & PACKAGING - 1.6%
Crown Cork & Seal, Inc. ......................... 2,500 77,031
----------
ELECTRIC UTILITIES - 5.3%
Ameren Corp. .................................... 1,300 55,494
Baltimore Gas and Electric Co. .................. 1,400 43,225
Cinergy Corp. ................................... 1,500 51,563
New Century Energies, Inc. ...................... 1,000 48,750
Scana Corp. ..................................... 1,500 48,375
----------
247,407
----------
ELECTRICAL EQUIPMENT - 3.0%
Grainger (W.W.), Inc. ........................... 2,000 83,250
Hubbell, Inc. ................................... 1,500 57,000
----------
140,250
----------
ELECTRONICS - 2.2%
Applied Materials, Inc. * ....................... 2,400 102,441
----------
FINANCIAL SERVICES - 6.3%
Block (H&R), Inc. ............................... 1,200 54,000
Federal National Mortgage Association ........... 1,000 74,000
Heller Financial, Inc. .......................... 3,300 96,938
SLM Holding Corp. ............................... 1,500 72,000
----------
296,938
----------
FOREST PRODUCTS & PAPER - 3.3%
Consolidated Papers, Inc. ....................... 2,500 68,750
Mead Corp. ...................................... 3,000 87,938
----------
156,688
----------
HEALTH CARE PROVIDERS - 1.6%
Columbia/HCA Healthcare Corp. ................... 3,000 74,250
----------
HEAVY MACHINERY - 1.4%
Cooper Industries, Inc. .......................... 1,400 66,763
----------
INDUSTRIAL - DIVERSIFIED - 3.8%
FMC Corp. * ...................................... 1,600 89,600
Temple Inland, Inc. .............................. 1,500 88,969
----------
178,569
----------
MEDICAL SUPPLIES - 1.5%
Bard (C.R.), Inc. ................................ 1,400 69,300
----------
METALS - 3.5%
Aluminum Company of America ...................... 1,000 74,563
USX - U.S. Steel Group, Inc. ..................... 4,000 92,000
----------
166,563
----------
OIL & GAS - 16.2%
Atlantic Richfield Co. ........................... 1,000 65,250
Baker Hughes, Inc. ............................... 5,000 88,438
Consolidated Natural Gas Co. ..................... 1,600 86,400
Murphy Oil Corp. ................................. 1,700 70,125
National Fuel Gas Co. ............................ 1,500 67,781
NICOR, Inc. ...................................... 1,800 76,050
Ocean Energy, Inc. * ............................. 13,000 82,063
Phillips Petroleum Co. ........................... 1,800 76,725
USX - Marathon Group ............................. 2,500 75,313
Vastar Resources, Inc. ........................... 1,700 73,419
----------
761,564
----------
PHARMACEUTICALS - 2.4%
Abbott Laboratories .............................. 1,100 53,900
Pharmacia & Upjohn, Inc. ......................... 1,030 58,324
----------
112,224
----------
REAL ESTATE - 2.3%
Felcor Lodging Trust, Inc. (REIT) ................ 2,300 53,044
Prentiss Properties Trust (REIT) ................. 2,500 55,781
----------
108,825
----------
RETAILERS - 8.8%
Consolidated Stores Corp. * ...................... 4,000 80,750
Dayton-Hudson Corp. .............................. 1,500 81,375
Dillard's, Inc. .................................. 3,500 99,313
May Department Stores Co. (The) .................. 1,500 90,563
Pep Boys - Manny, Moe & Jack ..................... 3,900 61,181
----------
413,182
----------
TELEPHONE SYSTEMS - 2.4%
Frontier Corp. ................................... 1,415 48,110
U.S. WEST, Inc. .................................. 1,000 64,625
----------
112,735
----------
TRANSPORTATION - 1.9%
Burlington Northern Santa Fe Corp. ............... 2,600 87,750
----------
TOTAL INVESTMENTS - 95.1%
(Cost $4,317,990) 4,465,778
Other Assets and Liabilities (net) - 4.9% 229,359
----------
TOTAL NET ASSETS - 100.0% $ 4,695,137
==========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the 12 month period.
REIT - Real Estate Investment Trust
See notes to financial statements
<PAGE>
COVA SERIES TRUST
GROWTH & INCOME EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(PERCENTAGE OF NET ASSETS)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SECURITY VALUE
DESCRIPTION SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.5%
BANKING - 7.6%
Bank One Corp. ................................. 3,140 $ 160,336
Chase Manhattan Corp. .......................... 2,530 172,198
First Union Corp. .............................. 2,650 161,153
MBNA Corp. ..................................... 7,700 192,019
-----------
685,706
-----------
BEVERAGES, FOOD & TOBACCO - 5.6%
Pepsico, Inc. .................................. 4,480 183,400
Philip Morris Co., Inc. ........................ 3,080 164,780
Sysco Corp. .................................... 5,960 163,528
-----------
511,708
-----------
BUILDING MATERIALS - 3.7%
Masco Corp. .................................... 5,500 158,125
Sherwin Williams Co. ........................... 6,175 181,391
-----------
339,516
-----------
CHEMICALS - 1.1%
Solutia, Inc. .................................. 4,650 104,044
-----------
COMPUTER SOFTWARE & PROCESSING - 4.5%
First Data Corp. ............................... 5,955 188,699
Microsoft Corp. ................................ 700 97,081
Networks Associates, Inc. ...................... 1,880 124,550
-----------
410,330
-----------
CONTAINERS & PACKAGING - 4.8%
Avery-Dennison Corp. ........................... 3,600 162,225
Crown Cork & Seal, Inc. ........................ 2,525 77,802
Sealed Air Corp. * ............................. 3,900 199,144
-----------
439,171
-----------
COSMETICS & PERSONAL CARE - 1.0%
Estee Lauder Co. ............................... 1,100 94,050
-----------
ELECTRIC UTILITIES - 1.9%
Cinergy Corp. .................................. 2,378 81,744
New Century Energies, Inc. ..................... 1,850 90,188
-----------
171,932
-----------
ELECTRICAL EQUIPMENT - 3.7%
General Electric Co. ........................... 1,775 181,161
Grainger (W.W.), Inc. .......................... 3,730 155,261
-----------
336,422
-----------
ELECTRONICS - 6.8%
Adaptec, Inc. * ................................ 10,980 192,836
Analog Devices, Inc. * ......................... 3,900 122,363
Applied Materials, Inc. * ...................... 3,550 151,541
KLA-Tencor Corp. * ............................. 3,500 151,813
-----------
618,553
-----------
FINANCIAL SERVICES - 4.0%
Block (H&R), Inc. .............................. 1,650 74,250
Heller Financial, Inc. ......................... 3,200 94,000
SLM Holding Corp. .............................. 4,135 198,480
-----------
366,730
-----------
FOREST PRODUCTS & PAPER - 0.9%
Mead Corp. ..................................... 2,875 84,273
-----------
HEALTH CARE PROVIDERS - 1.7%
Columbia/HCA Healthcare Corp. .................... 6,095 150,851
-----------
HOUSEHOLD PRODUCTS - 1.6%
Newell Co. ....................................... 3,465 142,931
-----------
INDUSTRIAL - DIVERSIFIED - 2.0%
Millipore Corp. .................................. 6,415 182,427
-----------
MEDIA - BROADCASTING & PUBLISHING - 1.0%
Tribune Co. ...................................... 1,350 89,100
-----------
MEDICAL SUPPLIES - 1.0%
Bard (C.R.), Inc. ................................ 1,820 90,090
-----------
OIL & GAS - 11.5%
Atlantic Richfield Co. ........................... 2,575 168,019
Baker Hughes, Inc. ............................... 8,400 148,575
Consolidated Natural Gas Co. ..................... 3,050 164,700
Murphy Oil Corp. ................................. 4,050 167,063
Ocean Energy, Inc. * ............................. 8,400 53,025
USX - Marathon Group ............................. 5,580 168,098
Vastar Resources, Inc. ........................... 3,875 167,352
-----------
1,036,832
-----------
PHARMACEUTICALS - 8.6%
Allergan Specialty Therapeutics, Inc. * .......... 3 23
Allergan, Inc. ................................... 1,255 81,261
Bristol-Myers Squibb Co. ......................... 1,400 187,338
Eli Lilly & Co. .................................. 1,930 171,529
Merck & Co., Inc. ................................ 1,170 172,794
Schering-Plough Corp. ............................ 3,010 166,303
-----------
779,248
-----------
RESTAURANTS - 1.1%
Tricon Global Restaurants, Inc. * ................ 1,923 96,390
-----------
RETAILERS - 10.2%
Consolidated Stores Corp. * ...................... 8,781 177,266
Dillard's, Inc. .................................. 4,950 140,456
Office Depot, Inc. * ............................. 6,300 232,701
Pep Boys - Manny, Moe & Jack ..................... 11,200 175,700
Wal-Mart Stores, Inc. ............................ 2,280 185,678
-----------
911,801
-----------
TELEPHONE SYSTEMS - 5.4%
AT&T Corp. ....................................... 1,827 137,482
GTE Corp. ........................................ 2,660 179,384
U.S. WEST, Inc. .................................. 2,700 174,488
-----------
491,354
-----------
TRANSPORTATION - 1.8%
Burlington Northern Santa Fe Corp. 4,940 166,725
-----------
TOTAL INVESTMENTS - 91.5%
(Cost $7,629,578) 8,300,184
Other Assets and Liabilities (net) - 8.5% 766,311
-----------
TOTAL NET ASSETS - 100.0% $ 9,066,495
===========
</TABLE>
PORTFOLIO FOOTNOTES:
* Non-income producing security as this stock did not declare
or pay dividends in the 12 month period.
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Small Cap Stock Quality Bond Select Equity Large Cap Stock
Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (Note 1)* $ 74,406,328 $ 43,220,852 $ 194,780,668 $ 100,113,622
Cash 5,156,673 8,373,964 3,058,710 3,502,194
Cash denominated in foreign currencies ** -- 4,055 -- --
Receivable for investments sold 212,025 1,178,971 2,544,981 466,944
Receivable for Trust shares sold -- 14,872 -- 43,394
Dividends receivable 44,186 -- 220,295 119,226
Interest receivable 21,362 377,972 6,332 13,099
Net variation margin on financial
futures contracts (Note 4) -- -- -- 10,200
Unrealized appreciation on forward
currency contracts (Note 5) -- 33,782 -- --
Receivable from investment adviser (Note 2) -- 9,080 -- --
------------ ------------ ------------ ------------
Total assets 79,840,574 53,213,548 200,610,986 104,268,679
------------ ------------ ------------ ------------
LIABILITIES
Payables for:
Payable for investments purchased 1,630,064 1,515,093 2,668,150 463,469
Payable for delayed delivery investments -- 5,846,793 -- --
Payable for Trust shares redeemed 16,916 -- 71,438 --
Unrealized depreciation on forward
currency contracts (Note 5) -- 15,465 -- --
Investment advisory fee payable (Note 2) 1,486 -- 65,142 12,549
Accrued expenses 30,800 24,146 38,073 31,418
------------ ------------ ------------ ------------
Total liabilities 1,679,266 7,401,497 2,842,803 507,436
------------ ------------ ------------ ------------
NET ASSETS $ 78,161,308 $ 45,812,051 $ 197,768,183 $ 103,761,243
============ ============ ============ ============
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Paid in surplus $ 77,823,865 $ 43,806,295 $ 160,542,040 $ 80,444,541
Accumulated net realized gain (loss) (4,003,827) 509,037 18,485,194 6,654,698
Unrealized appreciation on investments,
futures contracts and foreign currency 4,089,235 451,018 18,157,304 16,345,829
Undistributed (distributions in excess of)
net investment income 252,035 1,045,701 583,645 316,175
------------ ------------ ------------ ------------
Total $ 78,161,308 $ 45,812,051 $ 197,768,183 $ 103,761,243
============ ============ ============ ============
Capital shares outstanding 6,523,058 4,157,310 12,301,851 5,727,886
============ ============ ============ ============
NET ASSET VALUE AND OFFERING PRICE PER SHARE $ 11.982 $ 11.020 $ 16.076 $ 18.115
============ ============ ============ ============
- ------------------------------------------------------------------------------------------------------------------------------------
* Investments in securities, at cost $ 70,317,093 $ 42,763,348 $ 176,623,364 $ 83,939,871
** Cost of cash denominated in foreign currencies -- 28,857 -- --
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
VKAC
International Equity Money Market Quality Income Stock Index Growth and Income High Yield
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------- -------------- --------------- ------------- ------------------- ---------------
<C> <C> <C> <C> <C> <C>
$ 102,525,087 $ 8,184,120 $ 39,169,721 $ 99,855,196 $ 53,422,136 $ 28,344,275
1,641,567 1,893 90,394 256 2,540 320
1,354,493 -- -- -- -- --
-- -- 880 -- 60 --
-- 3,073 -- -- -- --
178,558 -- -- 100,917 51,249 --
18,077 615 631,229 2,156 806 465,281
-- -- -- 21,250 8,500 --
89,150 -- -- -- -- --
-- -- -- -- 5,122 8,259
- ---------------------- -------------- --------------- ------------- ------------------- ---------------
105,806,932 8,189,701 39,892,224 99,979,775 53,490,413 28,818,135
- ---------------------- -------------- --------------- ------------- ------------------- ---------------
1,059,587 -- -- -- 32,819 --
-- -- -- -- -- --
96,870 -- 2,368 6,875 2,077 1,676
136,157 -- -- -- -- --
979 -- 5,208 39,940 -- --
38,043 34,101 23,432 35,927 23,897 20,755
- ---------------------- -------------- --------------- ------------- ------------------- ---------------
1,331,636 34,101 31,008 82,742 58,793 22,431
- ---------------------- -------------- --------------- ------------- ------------------- ---------------
$ 104,475,296 $ 8,155,600 $ 39,861,216 $ 99,897,033 $ 53,431,620 $ 28,795,704
====================== ============== =============== ============= =================== ===============
- -----------------------------------------------------------------------------------------------------------------------------------
$ 93,853,565 $ 8,233,275 $ 38,938,173 $ 44,715,509 $ 38,941,361 $ 28,113,786
1,345,505 (77,675) (1,856,548) 9,755,933 5,124,846 (155,923)
9,106,756 -- 1,363,610 44,845,310 9,017,442 (485,655)
169,470 -- 1,415,981 580,281 347,971 1,323,496
- ---------------------- -------------- --------------- ------------- ------------------- ---------------
$ 104,475,296 $ 8,155,600 $ 39,861,216 $ 99,897,033 $ 53,431,620 $ 28,795,704
====================== ============== =============== ============= =================== ===============
8,125,765 8,158,091 3,628,582 4,491,420 3,000,550 2,687,415
====================== ============== =============== ============= =================== ===============
$12.857 $1.000 $10.985 $22.242 $17.807 $10.715
====================== ============== =============== ============= =================== ===============
- -----------------------------------------------------------------------------------------------------------------------------------
$ 93,381,252 $ 8,184,120 $ 37,806,111 $ 55,319,260 $ 44,491,975 $ 28,829,930
1,356,915 -- -- -- -- --
- ---------------------- -------------- --------------- ------------- ------------------- ---------------
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Mid-Cap Large Cap Developing
Bond Debenture Value Research Growth
Portfolio Portfolio Portfolio Portfolio
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (Note 1)* $ 115,547,757 $ 17,479,303 $ 12,767,061 $ 15,134,342
Cash 2,433,680 1,650,764 1,669,780 757,554
Cash denominated in foreign currencies ** -- -- -- --
Receivable for investments sold 140,167 97,249 563,463 1,692
Receivable for Trust shares sold 49,361 12,129 36,703 --
Dividends receivable 11,122 3,096 18,795 478
Interest receivable 1,891,178 5,667 3,489 2,761
Net variation margin on financial
futures contracts (Note 4) -- -- -- --
Unrealized appreciation on forward
currency contracts (Note 5) -- -- -- --
Receivable from investment adviser (Note 2) -- 12,834 14,016 14,665
--------------- ----------- ------------ ------------
Total assets 120,073,265 19,261,042 15,073,307 15,911,492
--------------- ----------- ------------ ------------
LIABILITIES
Payables for:
Payable for investments purchased -- 918,724 1,186,776 --
Payable for delayed delivery investments -- -- -- --
Payable for Trust shares redeemed -- -- -- 28
Unrealized depreciation on forward
currency contracts (Note 5) -- -- -- --
Investment advisory fee payable (Note 2) 42,191 -- -- --
Accrued expenses 28,569 21,759 20,640 20,999
--------------- ----------- ------------ ------------
Total liabilities 70,760 940,483 1,207,416 21,027
--------------- ----------- ------------ ------------
NET ASSETS $ 120,002,505 $ 18,320,559 $ 13,865,891 $ 15,890,465
=============== =========== ============ ============
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Paid in surplus $ 116,118,949 $ 18,128,174 $ 12,485,102 $ 14,888,158
Accumulated net realized gain (loss) 1,030,806 (225,973) (131,082) (395,537)
Unrealized appreciation on investments,
futures contracts and foreign currency (371,612) 384,795 1,468,700 1,397,844
Undistributed (distributions in excess of)
net investment income 3,224,362 33,563 43,171 --
--------------- ------------ ----------- ------------
Total $ 120,002,505 $ 18,320,559 $ 13,865,891 $ 15,890,465
=============== =========== =========== ============
Capital shares outstanding 9,692,597 1,731,193 1,158,927 1,413,656
=============== =========== =========== ============
NET ASSET VALUE AND OFFERING PRICE PER SHARE $12.381 $10.583 $11.964 $11.241
=============== =========== =========== ============
- -----------------------------------------------------------------------------------------------------------------------------------
* Investments in securities, at cost $ 115,919,369 $ 17,094,508 $ 11,298,361 $ 13,736,498
** Cost of cash denominated in foreign currencies -- -- -- --
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Small Cap Growth & Income
Balanced Equity Equity Income Equity
Portfolio Portfolio Portfolio Portfolio
- ------------ ------------ ------------- ----------------
<C> <C> <C> <C>
$ 4,150,212 $ 2,283,395 $ 4,465,778 $ 8,300,184
388,661 100,202 294,975 729,993
-- -- -- --
4,489 -- 72,973 27,089
2,792 1,358 564 1,143
2,638 507 10,310 9,609
23,373 549 1,695 1,646
-- -- -- --
-- -- -- --
21,298 22,745 20,242 16,454
- ------------ ------------ ------------- ----------------
4,593,463 2,408,756 4,866,537 9,086,118
- ------------ ------------ ------------- ----------------
-- 16,106 151,338 --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
20,705 20,339 20,062 19,623
- ------------ ------------ ------------- ----------------
20,705 36,445 171,400 19,623
- ------------ ------------ ------------- ----------------
$ 4,572,758 $ 2,372,311 $ 4,695,137 $ 9,066,495
============ ============ ============= ================
- --------------------------------------------------------------------------------------------------------------------------------
$ 4,257,506 $ 2,321,013 $ 4,461,218 $ 8,292,591
12,050 (53,534) 86,131 103,298
302,837 104,832 147,788 670,606
365 -- -- --
- ------------ ------------ ------------- ----------------
$ 4,572,758 $ 2,372,311 $ 4,695,137 $ 9,066,495
============ ============ ============= ================
401,205 233,159 403,852 755,861
============ ============ ============= ================
$11.398 $10.175 $11.626 $11.995
============ ============ ============= ================
- ------------ ---------------- ----------------- -------------------
$ 3,847,375 $ 2,178,563 $ 4,317,990 $ 7,629,578
-- -- -- --
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Small Cap Quality Select Large Cap
Stock Bond Equity Stock
Portfolio Portfolio Portfolio Portfolio
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (1) $ 793,368 $ -- $ 2,044,450 $ 883,443
Interest 190,998 1,875,486 147,786 60,878
---------- ---------- ----------- -----------
Total investment income 984,366 1,875,486 2,192,236 944,321
---------- ---------- ----------- -----------
EXPENSES
Investment advisory fee (Note 2) 596,903 165,294 1,023,054 402,802
Custody, fund accounting, and transfer agent fees 168,350 72,374 239,373 159,403
Audit 14,437 14,437 14,437 14,437
Trustee fees and expenses 3,464 3,464 3,464 3,464
Legal 2,161 2,161 2,161 2,161
Shareholder reporting 109 109 109 109
---------- ---------- ----------- -----------
Total operating expenses 785,424 257,839 1,282,598 582,376
Interest Expense (Note 3) -- -- -- --
---------- ---------- ----------- -----------
Total expenses 785,424 257,839 1,282,598 582,376
Less fees waived and expenses reimbursed by the adviser 118,297 62,492 107,238 117,604
---------- ---------- ----------- -----------
Net expenses 667,127 195,347 1,175,360 464,772
---------- ---------- ----------- -----------
Net investment income 317,239 1,680,139 1,016,876 479,549
---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain (loss) on investments (3,831,239) 633,301 18,543,240 6,340,630
Net realized gain (loss) on futures contracts -- -- -- 325,157
Net realized gain on foreign currency related transactions -- (102,353) -- --
Net realized gain (loss) on investments, futures contracts ---------- ---------- ----------- -----------
and foreign currency related transactions (3,831,239) 530,948 18,543,240 6,665,787
---------- ---------- ----------- -----------
Unrealized appreciation on investments, futures contracts
and foreign currency
Beginning of year 5,055,622 344,990 5,798,007 4,728,305
End of year 4,089,235 451,018 18,157,304 16,345,829
---------- ---------- ----------- -----------
Net change in unrealized appreciation (depreciation)
on investments, futures contracts and foreign currency (966,387) 106,028 12,359,297 11,617,524
---------- ---------- ----------- -----------
Net realized and unrealized gain/(loss) on investments,
futures contracts and foreign currency related transactions (4,797,626) 636,976 30,902,537 18,283,311
---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $(4,480,387) $ 2,317,115 $ 31,919,413 $ 18,762,860
========== ========== =========== ===========
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
(1)Dividend income is net of foreign taxes withheld of: $ -- $ -- $ 3,132 $ 879
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
VKAC
International Money Quality Stock Growth and High
Equity Market Income Index Income Yield
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------- ---------- ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C> <C>
$ 1,515,782 $ -- $ -- $ 1,286,184 $ 718,479 $ 35,540
167,116 814,336 3,191,584 312,924 299,319 2,911,988
------------- --------- ----------- ----------- ----------- -----------
1,682,898 814,336 3,191,584 1,599,108 1,017,798 2,947,528
------------- --------- ----------- ----------- ----------- -----------
717,933 73,632 225,265 463,673 309,774 236,588
237,028 34,502 84,587 140,556 97,465 59,931
14,437 14,089 14,089 12,387 14,089 14,089
3,464 3,332 3,332 3,332 3,332 3,332
2,161 1,645 954 -- 2,161 1,498
109 110 110 110 95 110
------------- --------- ----------- ----------- ----------- -----------
975,132 127,310 328,337 620,058 426,916 315,548
1,007 -- 20,747 2,056 -- 95
------------- --------- ----------- ----------- ----------- -----------
976,139 127,310 349,084 622,114 426,916 315,643
167,271 112,583 58,019 63,652 65,512 47,415
------------- --------- ----------- ----------- ----------- -----------
808,868 14,727 291,065 558,462 361,404 268,228
------------- --------- ----------- ----------- ----------- -----------
874,030 799,609 2,900,519 1,040,646 656,394 2,679,300
------------- --------- ----------- ----------- ----------- -----------
1,568,780 (36) 955,754 9,037,032 4,828,637 (61,431)
-- -- (362,863) 752,868 345,569 --
484,932 -- -- -- -- --
------------- --------- ----------- ----------- ----------- -----------
2,053,712 (36) 592,891 9,789,900 5,174,206 (61,431)
------------- --------- ----------- ----------- ----------- -----------
1,285,706 -- 1,993,312 31,962,906 6,466,491 1,305,260
9,106,756 -- 1,363,610 44,845,310 9,017,442 (485,655)
------------- --------- ----------- ----------- ----------- -----------
7,821,050 -- (629,702) 12,882,404 2,550,951 (1,790,915)
------------- --------- ----------- ----------- ----------- -----------
9,874,762 (36) (36,811) 22,672,304 7,725,157 (1,852,346)
------------- --------- ----------- ----------- ----------- -----------
$ 10,748,792 $ 799,573 $ 2,863,708 $ 23,712,950 $ 8,381,551 $ 826,954
============= ========= =========== =========== =========== ===========
- ----------------------------------------------------------------------------------------
$ 187,320 $ -- $ -- $ -- $ 1,563 $ --
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Bond Mid-Cap Large Cap Developing
Debenture Value Research Growth
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (1) $ 241,923 $ 95,183 $ 95,535 $ 14,354
Interest 6,171,223 46,645 30,578 25,523
---------- --------- ---------- ----------
Total investment income 6,413,146 141,828 126,113 39,877
---------- --------- ---------- ----------
EXPENSES
Investment advisory fee (Note 2) 647,086 92,358 61,036 67,992
Custody, fund accounting, and transfer agent fees 134,253 40,157 34,887 37,562
Audit 14,437 16,384 16,337 16,337
Trustee fees and expenses 3,464 3,472 3,464 3,464
Legal 2,161 2,702 2,702 2,702
Shareholder reporting 109 404 410 404
---------- --------- ---------- ----------
Total operating expenses 801,510 155,477 118,836 128,461
Interest Expense (Note 3) 767 -- -- --
---------- --------- ---------- ----------
Total expenses 802,277 155,477 118,836 128,461
Less fees waived and expenses reimbursed by the adviser 68,145 53,883 51,695 52,914
---------- --------- ---------- ----------
Net expenses 734,132 101,594 67,141 75,547
---------- --------- ---------- ----------
Net investment income 5,679,014 40,234 58,972 (35,670)
---------- --------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain (loss) on investments 1,031,304 (225,973) (130,449) (395,538)
Net realized gain (loss) on futures contracts -- -- -- --
Net realized gain on foreign currency related transactions -- -- -- --
Net realized gain (loss) on investments, futures contracts ---------- --------- ---------- ----------
and foreign currency related transactions 1,031,304 (225,973) (130,449) (395,538)
---------- --------- ---------- ----------
Unrealized appreciation on investments, futures contracts and
foreign currency
Beginning of year 1,213,703 46,986 6,584 8,505
End of year (371,612) 384,795 1,468,700 1,397,844
---------- --------- ---------- ----------
Net change in unrealized appreciation (depreciation) on investments,
futures contracts and foreign currency (1,585,315) 337,809 1,462,116 1,389,339
---------- --------- ---------- ----------
Net realized and unrealized gain/(loss) on investments, futures
contracts and foreign currency related transactions (554,011) 111,836 1,331,667 993,801
---------- --------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 5,125,003 $ 152,070 $ 1,390,639 $ 958,131
========== ========= ========== ==========
FROM OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
(1)Dividend income is net of foreign taxes withheld of: $ -- $ -- $ 319 $ --
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Small Cap Equity Growth &
Balanced Equity Income Income Equity
Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------
<C> <C> <C> <C>
$ 17,026 $ 8,235 $ 70,858 $ 67,274
81,845 7,283 16,369 26,541
--------- --------- ---------- ------------
98,871 15,518 87,227 93,815
--------- --------- ---------- ------------
27,149 17,176 30,163 53,799
33,572 31,737 27,927 30,689
16,336 16,337 16,337 16,337
3,464 3,464 3,464 3,464
2,550 2,550 2,550 2,550
675 671 675 672
--------- --------- ---------- ------------
83,746 71,935 81,116 107,511
-- -- -- --
--------- --------- ---------- ------------
83,746 71,935 81,116 107,511
53,883 53,041 47,936 48,333
--------- --------- ---------- ------------
29,863 18,894 33,180 59,178
--------- --------- ---------- ------------
69,008 (3,376) 54,047 34,637
--------- --------- ---------- ------------
73,015 (52,446) 192,938 299,371
-- -- -- --
-- -- -- --
--------- --------- ---------- ------------
73,015 (52,446) 192,938 299,371
--------- --------- ---------- ------------
44,924 2,599 122,751 98,922
302,837 104,832 147,788 670,606
--------- --------- ---------- ------------
257,913 102,233 25,037 571,684
--------- --------- ---------- ------------
330,928 49,787 217,975 871,055
--------- --------- ---------- ------------
$ 399,936 $ 46,411 $ 272,022 $ 905,692
========= ========= ========== ============
- ----------------------------------------------------------
$ -- $ -- $ -- $ --
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Small Cap Stock Quality Bond
Portfolio Portfolio
--------------------------- ---------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 317,239 $ 192,685 $ 1,680,139 $ 605,946
Net realized gain (loss) on investments, futures
contracts, and foreign currency related transactions (3,831,239) 2,316,556 530,948 98,268
Net change in unrealized appreciation (depreciation)
on investments, futures contracts and foreign currency
related transactions (966,387) 4,557,270 106,028 281,253
------------ ----------- ----------- -----------
Net increase in net assets resulting from operations (4,480,387) 7,066,511 2,317,115 985,467
------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (96,253) (192,883) (643,157) (660,166)
Net realized gains (2,461,868) (99,847) -- (76,278)
------------ ----------- ----------- -----------
Total distributions (2,558,121) (292,730) (643,157) (736,444)
------------ ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from shares sold 26,987,297 38,022,176 26,526,504 15,683,372
Net asset value of shares issued through dividend
reinvestment 2,558,121 914,326 643,157 879,467
Cost of shares repurchased (4,102,670) (603,894) (1,659,034) (3,986,444)
------------ ----------- ----------- -----------
Net increase in net assets from capital share transactions 25,442,748 38,332,608 25,510,627 12,576,395
------------ ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS 18,404,240 45,106,389 27,184,585 12,825,418
NET ASSETS:
Beginning of period 59,757,068 14,650,679 18,627,466 5,802,048
------------ ----------- ----------- -----------
End of period $ 78,161,308 $ 59,757,068 $ 45,812,051 $ 18,627,466
============ =========== =========== ===========
Net Assets at end of period includes undistributed
(distributions in excess of) net investment income 252,035 $ -- $ 1,045,701 $ (480)
============ =========== =========== ===========
CAPITAL SHARE TRANSACTIONS:
Beginning shares 4,559,948 1,341,383 1,790,249 575,476
------------ ----------- ----------- -----------
Shares sold 2,121,662 3,186,388 2,461,040 1,518,698
Shares issued through dividend reinvestment 194,906 82,158 60,846 85,914
Shares repurchased (353,458) (49,981) (154,825) (389,839)
------------ ----------- ----------- -----------
Net increase in shares outstanding 1,963,110 3,218,565 2,367,061 1,214,773
------------ ----------- ----------- -----------
Ending shares 6,523,058 4,559,948 4,157,310 1,790,249
============ =========== =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Select Equity Large Cap Stock International Equity
Portfolio Portfolio Portfolio
------------------------------ ----------------------------- -----------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 1,016,876 $ 500,179 $ 479,549 $ 199,335 $ 874,030 $ 555,071
18,543,240 9,123,149 6,665,787 2,193,907 2,053,712 191,480
12,359,297 4,743,432 11,617,524 3,145,916 7,821,050 402,592
------------ ------------ ------------ ------------ ------------ ------------
31,919,413 14,366,760 18,762,860 5,539,158 10,748,792 1,149,143
------------ ------------ ------------ ------------ ------------ ------------
(455,252) (490,963) (163,389) (202,300) (1,590,564) (557,716)
(9,083,861) (330,961) (537,969) (1,756,862) (20,171) (42,415)
------------ ------------ ------------ ------------ ------------ ------------
(9,539,113) (821,924) (701,358) (1,959,162) (1,610,735) (600,131)
------------ ------------ ------------ ------------ ------------ ------------
61,596,707 68,852,468 54,597,695 17,343,331 30,533,316 52,754,470
9,539,113 1,157,234 701,358 2,369,560 1,610,735 673,824
(2,678,812) (457,582) (1,855,401) (7,808,393) (5,575,851) (827,522)
------------ ------------ ------------ ------------ ------------ ------------
68,457,008 69,552,120 53,443,652 11,904,498 26,568,200 52,600,772
------------ ------------ ------------ ------------ ------------ ------------
90,837,308 83,096,956 71,505,154 15,484,494 35,706,257 53,149,784
106,930,875 23,833,919 32,256,089 16,771,595 68,769,039 15,619,255
------------ ------------ ------------ ------------ ------------ ------------
$ 197,768,183 $ 106,930,875 $ 103,761,243 $ 32,256,089 $ 104,475,296 $ 68,769,039
============ ============ ============ ============ ============ ============
$ 583,645 $ 9,216 $ 316,175 $ -- $ 169,470 $ 349,324
============ ============ ============ ============ ============ ============
7,656,774 2,218,737 2,329,781 1,509,371 5,994,704 1,425,198
------------ ------------ ------------ ------------ ------------ ------------
4,185,304 5,382,252 3,472,771 1,243,518 2,462,998 4,584,724
641,497 93,395 42,928 179,193 125,855 57,454
(181,724) (37,610) (117,594) (602,301) (457,792) (72,672)
------------ ------------ ------------ ------------ ------------ ------------
4,645,077 5,438,037 3,398,105 820,410 2,131,061 4,569,506
------------ ------------ ------------ ------------ ------------ ------------
12,301,851 7,656,774 5,727,886 2,329,781 8,125,765 5,994,704
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Money Market Quality Income
Portfolio Portfolio
----------------------------- ----------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 799,609 $ 2,527,383 $ 2,900,519 $ 3,348,394
Net realized gain (loss) on investments, futures contracts,
and foreign currency related transactions (36) (2,455) 592,891 (436,095)
Net change in unrealized appreciation (depreciation)
on investments, futures contracts and foreign currency
related transactions -- -- (629,702) 1,309,494
------------ ------------ ------------ -----------
Net increase in net assets resulting from operations 799,573 2,524,928 2,863,708 4,221,793
------------ ------------ ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (799,609) (2,527,383) (2,398,139) (3,338,386)
Net realized gains -- -- -- --
------------ ------------ ------------ -----------
Total distributions (799,609) (2,527,383) (2,398,139) (3,338,386)
------------ ------------ ------------ -----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from shares sold 23,586 57,494,205 260,950 27,417,912
Net asset value of shares issued through dividend
reinvestment 799,609 2,527,383 2,398,139 4,139,374
Cost of shares repurchased (14,646,322) (68,995,258) (13,099,102) (33,929,181)
------------ ------------ ------------ -----------
Net decrease in net assets from capital share transactions (13,823,127) (8,973,670) (10,440,013) (2,371,895)
------------ ------------ ------------ -----------
TOTAL DECREASE IN NET ASSETS (13,823,163) (8,976,125) (9,974,444) (1,488,488)
NET ASSETS:
Beginning of period 21,978,763 30,954,888 49,835,660 51,324,148
------------ ------------ ------------ -----------
End of period $ 8,155,600 $ 21,978,763 $ 39,861,216 $ 49,835,660
============ ============ ============ ===========
Net Assets at end of period includes undistributed
(distributions in excess of) net investment income $ -- $ -- $ 1,415,981 $ 894,166
============ ============ ============ ===========
CAPITAL SHARE TRANSACTIONS:
Beginning shares 21,981,219 31,030,072 4,572,261 4,801,097
------------ ------------ ------------ -----------
Shares sold 23,586 57,419,022 23,833 2,544,684
Shares issued through dividend reinvestment 799,609 2,527,383 223,488 392,730
Shares repurchased (14,646,323) (68,995,258) (1,191,000) (3,166,250)
------------ ------------ ------------ -----------
Net decrease in shares outstanding (13,823,128) (9,048,853) (943,679) (228,836)
------------ ------------ ------------ -----------
Ending shares 8,158,091 21,981,219 3,628,582 4,572,261
============ ============ ============ ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Stock Index VKAC Growth and Income High Yield
Portfolio Portfolio Portfolio
- ------------------------------- ----------------------------- -----------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 1,040,646 $ 1,068,561 $ 656,394 $ 567,657 $ 2,679,300 $ 3,153,490
9,789,900 16,291,273 5,174,206 5,894,224 (61,431) 909,331
12,882,404 4,753,502 2,550,951 2,424,361 (1,790,915) 268,083
------------ ------------ ----------- ----------- ----------- ------------
23,712,950 22,113,336 8,381,551 8,886,242 826,954 4,330,904
------------ ------------ ----------- ----------- ----------- ------------
(479,051) (1,058,007) (317,776) (563,938) (1,365,047) (3,144,247)
(16,176,509) (288,033) (5,909,576) (513,391) -- --
------------ ------------ ----------- ----------- ----------- ------------
(16,655,560) (1,346,040) (6,227,352) (1,077,329) (1,365,047) (3,144,247)
------------ ------------ ----------- ----------- ----------- ------------
9,138,213 34,246,387 3,569,328 9,997,804 1,019,994 13,533,122
16,655,560 4,855,058 6,227,352 2,585,409 1,365,047 4,949,889
(23,331,432) (56,051,623) (6,348,623) (4,155,928) (6,313,701) (27,471,849)
------------ ------------ ----------- ----------- ----------- ------------
2,462,341 (16,950,178) 3,448,057 8,427,285 (3,928,660) (8,988,838)
------------ ------------ ----------- ----------- ----------- ------------
9,519,731 3,817,118 5,602,256 16,236,198 (4,466,753) (7,802,181)
90,377,302 86,560,184 47,829,364 31,593,166 33,262,457 41,064,638
------------ ------------ ----------- ----------- ----------- ------------
$ 99,897,033 $ 90,377,302 $ 53,431,620 $ 47,829,364 $ 28,795,704 $ 33,262,457
============ ============ =========== =========== =========== ============
$ 580,281 $ 18,686 $ 347,971 $ 9,283 $ 1,323,496 $ 9,243
============ ============ =========== =========== =========== ============
4,289,352 5,367,589 2,804,973 2,258,899 3,051,753 3,864,501
------------ ------------ ----------- ----------- ----------- ------------
477,900 1,698,260 197,226 626,726 91,353 1,249,817
816,453 286,130 360,343 175,231 124,923 461,088
(1,092,285) (3,062,627) (361,992) (255,883) (580,614) (2,523,653)
------------ ------------ ----------- ----------- ----------- ------------
202,068 (1,078,237) 195,577 546,074 (364,338) (812,748)
------------ ------------ ----------- ----------- ----------- ------------
4,491,420 4,289,352 3,000,550 2,804,973 2,687,415 3,051,753
============ ============ =========== =========== =========== ============
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Bond Debenture Mid-Cap Value
Portfolio Portfolio
----------------------------- -----------------------------
Year ended Year ended Year ended Period ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997*
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 5,679,014 $ 1,745,813 $ 40,234 $ 2,098
Net realized gain (loss) on investments, futures contracts,
and foreign currency related transactions 1,031,304 964,071 (225,973) 150
Net change in unrealized appreciation (depreciation)
on investments, futures contracts and foreign currency
related transactions (1,585,315) 930,642 337,809 46,986
------------ ----------- ----------- -----------
Net increase in net assets resulting from operations 5,125,003 3,640,526 152,070 49,234
------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,455,079) (1,747,981) (14,075) (2,089)
Net realized gains (954,738) (18,188) -- --
------------ ----------- ----------- -----------
Total distributions (3,409,817) (1,766,169) (14,075) (2,089)
------------ ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from shares sold 69,629,076 44,653,139 16,144,764 2,185,306
Net asset value of shares issued through dividend
reinvestment 3,409,817 2,000,414 14,075 2,089
Cost of shares repurchased (10,163,753) (778,993) (205,183) (5,632)
------------ ----------- ----------- -----------
Net increase in net assets from capital share transactions 62,875,140 45,874,560 15,953,656 2,181,763
------------ ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS 64,590,326 47,748,917 16,091,651 2,228,908
NET ASSETS:
Beginning of period 55,412,179 7,663,262 2,228,908 --
------------ ----------- ----------- -----------
End of period $ 120,002,505 $ 55,412,179 $ 18,320,559 $ 2,228,908
============ =========== =========== ===========
Net Assets at end of period includes undistributed
(distributions in excess of) net investment income $ 3,224,362 $ -- $ 33,563 $ 9
============ =========== =========== ===========
CAPITAL SHARE TRANSACTIONS:
Beginning shares 4,574,812 698,547 212,659 --
------------ ----------- ----------- -----------
Shares sold 5,684,070 3,775,808 1,537,405 213,013
Shares issued through dividend reinvestment 277,516 169,197 1,252 200
Shares repurchased (843,801) (68,740) (20,123) (554)
------------ ----------- ----------- -----------
Net increase in shares outstanding 5,117,785 3,876,265 1,518,534 212,659
------------ ----------- ----------- -----------
Ending shares 9,692,597 4,574,812 1,731,193 212,659
============ =========== =========== ===========
* Fund commenced operations on August 20, 1997
** Fund commenced operations on July 1, 1997
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Large Cap Research Developing Growth Balanced
Portfolio Portfolio Portfolio
- ----------------------------- ----------------------------- -----------------------------
Year ended Period ended Year ended Period ended Year ended Period ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997* 1998 1997* 1998 1997**
- -------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 58,972 $ 2,322 $ (35,670) $ 345 $ 69,008 $ 17,015
(130,449) (633) (395,538) 4,555 73,015 7,388
1,462,116 6,584 1,389,339 8,505 257,913 44,924
----------- ----------- ----------- ----------- ----------- -----------
1,390,639 8,273 958,131 13,405 399,936 69,327
----------- ----------- ----------- ----------- ----------- -----------
(15,994) (2,129) -- (326) (68,643) (17,093)
-- -- (4,573) -- (56,389) (11,993)
----------- ----------- ----------- ----------- ----------- -----------
(15,994) (2,129) (4,573) (326) (125,032) (29,086)
----------- ----------- ----------- ----------- ----------- -----------
11,287,023 1,345,530 13,397,485 1,735,826 2,741,532 1,429,858
15,994 2,129 4,573 326 125,032 29,086
(164,781) (793) (199,301) (15,081) (29,760) (38,135)
----------- ----------- ----------- ----------- ----------- -----------
11,138,236 1,346,866 13,202,757 1,721,071 2,836,804 1,420,809
----------- ----------- ----------- ----------- ----------- -----------
12,512,881 1,353,010 14,156,315 1,734,150 3,111,708 1,461,050
1,353,010 -- 1,734,150 -- 1,461,050 --
----------- ----------- ----------- ----------- ----------- -----------
$ 13,865,891 $ 1,353,010 $ 15,890,465 $ 1,734,150 $ 4,572,758 $ 1,461,050
=========== =========== =========== =========== =========== ===========
$ 43,171 $ 193 $ -- $ 19 $ 365 $ --
=========== =========== =========== =========== =========== ===========
136,592 -- 164,390 -- 140,640 --
----------- ----------- ----------- ----------- ----------- -----------
1,036,127 136,458 1,268,600 165,753 252,322 141,462
1,409 215 408 31 11,070 2,804
(15,201) (81) (19,742) (1,394) (2,827) (3,626)
----------- ----------- ----------- ----------- ----------- -----------
1,022,335 136,592 1,249,266 164,390 260,565 140,640
----------- ----------- ----------- ----------- ----------- -----------
1,158,927 136,592 1,413,656 164,390 401,205 140,640
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Small Cap Equity Equity Income
Portfolio Portfolio
----------------------------- ----------------------------
Year ended Period ended Year ended Period ended
December 31, December 31, December 31, December 31,
1998 1997** 1998 1997**
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ (3,376) $ (96) $ 54,047 $ 11,052
Net realized gain (loss) on investments, futures contracts,
and foreign currency related transactions (52,446) 42,782 192,938 24,201
Net change in unrealized appreciation (depreciation)
on investments, futures contracts and foreign currency
related transactions 102,233 2,599 25,037 122,751
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations 46,411 45,285 272,022 158,004
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (54,210) (11,052)
Net realized gains (35,585) (8,189) (109,174) (21,671)
----------- ----------- ----------- -----------
Total distributions (35,585) (8,189) (163,384) (32,723)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (NOTE 3):
Proceeds from shares sold 1,043,728 1,277,390 2,814,364 1,528,693
Net asset value of shares issued through dividend
reinvestment 35,585 8,189 163,384 32,723
Cost of shares repurchased (38,773) (1,730) (74,560) (3,386)
----------- ----------- ----------- -----------
Net increase in net assets from capital share transactions 1,040,540 1,283,849 2,903,188 1,558,030
----------- ----------- ----------- -----------
TOTAL DECREASE IN NET ASSETS 1,051,366 1,320,945 3,011,826 1,683,311
NET ASSETS:
Beginning of period 1,320,945 -- 1,683,311 --
----------- ----------- ----------- -----------
End of period $ 2,372,311 $ 1,320,945 $ 4,695,137 $ 1,683,311
=========== =========== =========== ===========
Net Assets at end of period includes undistributed
(distributions in excess of) net investment income $ -- $ -- $ -- $ --
=========== =========== =========== ===========
CAPITAL SHARE TRANSACTIONS:
Beginning shares 126,779 -- 152,372 --
----------- ----------- ----------- -----------
Shares sold 107,029 126,145 244,072 149,720
Shares issued through dividend reinvestment 3,359 798 14,080 2,966
Shares repurchased (4,008) (164) (6,672) (314)
----------- ----------- ----------- -----------
Net increase in shares outstanding 106,380 126,779 251,480 152,372
----------- ----------- ----------- -----------
Ending shares 233,159 126,779 403,852 152,372
=========== =========== =========== ===========
** Fund commenced operations on July 1, 1997
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Growth & Income Equity
Portfolio
- ----------------------------
Year ended Period ended
December 31, December 31,
1998 1997**
- ----------------------------
<C> <C>
$ 34,637 $ 7,199
299,371 8,581
571,684 98,922
----------- -----------
905,692 114,702
----------- -----------
(35,035) (7,070)
(185,828) (18,557)
----------- -----------
(220,863) (25,627)
----------- -----------
5,979,912 2,310,417
220,863 25,627
(210,468) (33,760)
----------- -----------
5,990,307 2,302,284
----------- -----------
6,675,136 2,391,359
2,391,359 --
----------- -----------
$ 9,066,495 $ 2,391,359
=========== ===========
$ -- $ 129
=========== ===========
223,292 --
----------- -----------
532,806 224,036
18,488 2,398
(18,725) (3,142)
----------- -----------
532,569 223,292
----------- -----------
755,861 223,292
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE HELD THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
Small Cap Stock
Portfolio
-------------------------------------------------------
For the period
from May 1, 1996
Year ended Year ended (date of initial
December 31, December 31, public offering) to
1998 1997 December 31, 1996
-------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.105 $ 10.922 $ 10.512
------------ ------------ ------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.051 0.057 0.057
Net realized and unrealized gains (0.722) 2.217 0.843
------------ ------------ ------------------
Total from investment operations (0.671) 2.274 0.900
------------ ------------ ------------------
Distributions
Dividends from net investment income (0.017) (0.055) (0.055)
Distributions from net realized gains (0.435) (0.036) (0.435)
Distributions in excess of net
investment income -- -- --
Return of capital distributions -- -- --
------------ ------------ ------------------
Total distributions (0.452) (0.091) (0.490)
------------ ------------ ------------------
Net Asset Value, end of period $ 11.982 $ 13.105 $ 10.922
------------ ------------ ------------------
TOTAL RETURN (5.40%) 20.89% 8.65%*
------------ ------------ ------------------
Ratios/Supplemental Data:
Net Assets, end of period (In millions) $ 78.2 $ 59.8 $ 14.7
Ratios to Average Net Assets (1):
Operating Expenses 0.95% 0.95% 0.95%**
Interest Expense -- -- --
Net investment income 0.45% 0.56% 0.87%**
Portfolio turnover rate 62.4% 79.1% 102.4%*
(1) If certain expenses had not been
reimbursed by the Adviser, total return
would have been lower and the ratios would
have been as follows:
Ratio of Operating Expenses to Average
Net Assets: 1.12% 1.39% 2.68%**
Ratio of Net Investment Income to Average
Net Assets: 0.28% 0.12% (0.86%)**
* Non-annualized
** Annualized
+ Amount is less than $.0005
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Quality Bond Select Equity
Portfolio Portfolio
-------------------------------------------------------------- -----------------------------------------------------------
For the period For the period
from May 1, 1996 from May 1, 1996
Year ended Year ended (date of initial Year ended Year ended (date of initial
December 31, December 31, public offering) to December 31, December 31, public offering) to
1998 1997 December 31, 1996 1998 1997 December 31, 1996
-------------------------------------------------------------- -----------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 10.405 $ 10.082 $ 9.897 $ 13.966 $ 10.742 $ 10.084
-------------- ------------- --------------------- -------------- ------------- -------------------
0.490 0.446 0.459 0.091 0.078 0.081
0.365 0.452 0.102 2.983 3.294 0.771
-------------- ------------- --------------------- -------------- ------------- -------------------
0.855 0.898 0.561 3.074 3.372 0.852
-------------- ------------- --------------------- -------------- ------------- -------------------
(0.240) (0.531) (0.376) (0.046) (0.077) (0.081)
-- (0.044) -- (0.918) (0.071) (0.113)
-- -- -- -- -- (0.000) +
-- -- -- -- -- --
-------------- ------------- --------------------- -------------- ------------- -------------------
(0.240) (0.575) (0.376) (0.964) (0.148) (0.194)
-------------- ------------- --------------------- -------------- ------------- -------------------
$ 11.020 $ 10.405 $ 10.082 $ 16.076 $ 13.966 $ 10.742
-------------- ------------- --------------------- -------------- ------------- -------------------
8.37% 9.06% 5.68% * 22.56% 31.55% 8.52% *
-------------- ------------- --------------------- -------------- ------------- -------------------
$ 45.8 $ 18.6 $ 5.8 $ 197.8 $ 106.9 $ 23.8
0.65% 0.65% 0.65% ** 0.78% 0.83% 0.85% **
-- -- -- -- -- --
5.59% 5.92% 5.94% ** 0.68% 0.81% 1.35% **
255.4% 163.7% 181.3% * 182.9% 134.8% 123.9% *
0.86% 1.08% 1.52% ** 0.86% 1.00% 1.70% **
5.38% 5.49% 5.07% ** 0.60% 0.64% 0.50% **
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE HELD THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
Large Cap Stock
Portfolio
-------------------------------------------------------------------
For the period
from May 1, 1996
Year ended Year ended (date of initial
December 31, December 31, public offering) to
1998 1997 December 31, 1996
-------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.845 $ 11.112 $ 10.003
---------------- ---------------- -------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.098 0.113 0.124
Net realized and unrealized gains 4.357 3.560 1.304
---------------- ---------------- -------------------------
Total from investment operations 4.455 3.673 1.428
---------------- ---------------- -------------------------
Distributions
Dividends from net investment income (0.043) (0.118) (0.122)
Distributions from net realized gains (0.142) (0.822) (0.197)
Distributions in excess of net
investment income ---- ---- ----
Return of capital distributions ---- ---- ----
---------------- ---------------- -------------------------
Total distributions (0.185) (0.940) (0.319)
---------------- ---------------- -------------------------
Net Asset Value, end of period $ 18.115 $ 13.845 $ 11.112
---------------- ---------------- -------------------------
TOTAL RETURN 32.31% 33.25% 14.35%*
---------------- ---------------- -------------------------
Ratios/Supplemental Data:
Net Assets, end of period (In millions) $ 103.8 $ 32.3 $ 16.8
Ratios to Average Net Assets (1):
Operating Expenses 0.75% 0.75% 0.75% **
Interest Expense ---- ---- ----
Net investment income 0.77% 0.99% 1.56% **
Portfolio turnover rate 62.4% 59.5% 35.5% *
(1) If certain expenses had not been
reimbursed by the Adviser, total return
would have been lower and the ratios would
have been as follows:
Ratio of Operating Expenses to Average
Net Assets: 0.94% 1.08% 1.23% **
Ratio of Net Investment Income to Average
Net Assets: 0.58% 0.66% 1.08% **
* Non-annualized
** Annualized
*** Amount is less than 0.00%
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
International Equity
Portfolio
------------------------------------------------------------------------
For the period
from May 1, 1996
Year ended Year ended (date of initial
December 31, December 31, public offering) to
1998 1997 December 31, 1996
------------------------------------------------------------------------
<C> <C> <C>
$ 11.472 $ 10.959 $ 10.215
-------------------- --------------- -----------------------
0.117 0.122 0.096
1.491 0.539 0.755
-------------------- --------------- -----------------------
1.608 0.661 0.851
-------------------- --------------- -----------------------
(0.220) (0.137) (0.086)
(0.003) (0.011) (0.021)
-- -- --
-- -- --
-------------------- --------------- -----------------------
(0.223) (0.148) (0.107)
-------------------- --------------- -----------------------
$ 12.857 $ 11.472 $ 10.959
-------------------- --------------- -----------------------
14.07% 5.96% 8.44% *
-------------------- --------------- -----------------------
$ 104.5 $ 68.8 $ 15.6
0.91% 0.95% 0.95% **
-- *** -- --
0.97% 1.35% 1.43% **
74.0% 74.1% 48.2% *
1.09% 1.53% 3.80% **
0.79% 0.77% (1.42%) **
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE HELD THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
Money Market
Portfolio
----------------------------------------------------------------------------
Years Ended December 31,
1998 1997 1996 1995 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.054 0.055 0.053 0.059 0.041
Net realized and unrealized gains -- -- -- -- --
---------------- --------- --------- --------- ---------
Total from investment operations 0.054 0.055 0.053 0.059 0.041
---------------- --------- --------- --------- ---------
Distributions
Dividends from net investment income (0.054) (0.055) (0.053) (0.059) (0.041)
Distributions from net realized gains -- -- -- -- --
Distributions in excess of net
investment income -- -- -- -- --
Return of capital distributions -- -- -- -- --
---------------- --------- --------- --------- ---------
Total distributions (0.054) (0.055) (0.053) (0.059) (0.041)
---------------- --------- --------- --------- ---------
Net Asset Value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------- --------- --------- --------- ---------
TOTAL RETURN 5.46% 5.49% 5.42% 6.01% 4.23%
---------------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net Assets, end of period (In millions) $ 8.2 $ 22.0 $ 31.0 $ 34.4 $ 75.9
Ratios to Average Net Assets (1):
Operating Expenses 0.10% 0.10% 0.11% 0.11% 0.10%
Interest Expense -- -- -- -- --
Net investment income 5.43% 5.49% 5.31% 5.68% 4.37%
Portfolio turnover rate N/A N/A N/A N/A N/A
(1) If certain expenses had not been
reimbursed by the Adviser, total return
would have been lower and the ratios would
have been as follows:
Ratio of Operating Expenses to Average
Net Assets: 0.86% 0.68% 0.74% 0.64% 0.68%
Ratio of Net Investment Income to Average
Net Assets: 4.67% 4.91% 4.68% 5.25% 3.79%
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Quality Income
Portfolio
- -----------------------------------------------------------------------
Years Ended December 31,
1998 1997 1996 1995 1994
----------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 10.900 $ 10.690 $ 10.871 $ 9.815 $ 10.886
--------- --------- --------- --------- ---------
0.787 0.737 0.651 0.667 0.603
(0.104) 0.199 (0.359) 1.056 (1.071)
--------- --------- --------- --------- ---------
0.683 0.936 0.292 1.723 (0.468)
--------- --------- --------- --------- ---------
(0.598) (0.726) (0.471) (0.667) (0.603)
-- -- (0.002) -- --
-- -- -- -- --
-- -- -- -- --
--------- --------- --------- --------- ---------
(0.598) (0.726) (0.473) (0.667) (0.603)
--------- --------- --------- --------- ---------
$ 10.985 $ 10.900 $ 10.690 $ 10.871 $ 9.815
--------- --------- --------- --------- ---------
6.44% 9.08% 2.82% 17.99% (4.33%)
--------- --------- --------- --------- ---------
$ 39.9 $ 49.8 $ 51.3 $ 41.4 $ 33.9
0.60% 0.60% 0.60% 0.60% 0.59%
0.05% 0.06% -- -- --
6.44% 6.41% 6.06% 6.42% 5.69%
108.5% 308.0% 320.3% 219.5% 177.6%
0.73% 0.70% 0.71% 0.75% 0.68%
6.31% 6.31% 5.95% 6.27% 5.60%
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE HELD THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
Stock Index
Portfolio
-------------------------------------------------------------------------
Years Ended December 31,
1998 1997 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.070 $ 16.126 $ 13.844 $ 10.587 $ 11.115
----------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.250 0.273 0.286 0.260 0.311
Net realized and unrealized gains 5.268 5.018 2.797 3.637 (0.337)
----------- ---------- ---------- ---------- ----------
Total from investment operations 5.518 5.291 3.083 3.897 (0.026)
----------- ---------- ---------- ---------- ----------
Distributions
Dividends from net investment income (0.125) (0.268) (0.284) (0.260) (0.311)
Distributions from net realized gains (4.221) (0.079) (0.517) (0.380) (0.185)
Distributions in excess of net
investment income -- -- -- -- --
Return of capital distributions -- -- -- -- (0.006)
----------- ---------- ---------- ---------- ----------
Total distributions (4.346) (0.347) (0.801) (0.640) (0.502)
----------- ---------- ---------- ---------- ----------
Net Asset Value, end of period $ 22.242 $ 21.070 $ 16.126 $ 13.844 $ 10.587
----------- ---------- ---------- ---------- ----------
TOTAL RETURN 28.04% 32.91% 22.48% 36.87% (0.11%)
----------- ---------- ---------- ---------- ----------
Ratios/Supplemental Data:
Net Assets, end of period (In millions) $ 99.9 $ 90.4 $ 86.6 $ 86.0 $ 36.8
Ratios to Average Net Assets (1):
Operating Expenses 0.60% 0.60% 0.60% 0.61% 0.58%
Interest Expense --- *** 0.02% -- -- --
Net investment income 1.12% 1.32% 1.77% 2.41% 2.23%
Portfolio turnover rate 2.9% 27.2% 1.3% 3.9% 47.1%
(1) If certain expenses had not been
reimbursed by the Adviser, total return
would have been lower and the ratios would
have been as follows:
Ratio of Operating Expenses to Average
Net Assets: 0.67% 0.69% 0.67% 0.78% 0.80%
Ratio of Net Investment Income to Average
Net Assets: 1.05% 1.23% 1.70% 2.24% 2.01%
*** Amount is less than 0.00%
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
VKAC Growth and Income
Portfolio
- -----------------------------------------------------------------------
Years Ended December 31,
1998 1997 1996 1995 1994
----------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 17.052 $ 13.986 $ 12.512 $ 10.306 $ 11.170
--------- --------- --------- --------- ---------
0.227 0.212 0.243 0.224 0.331
2.762 3.265 2.007 3.089 (0.864)
--------- --------- --------- --------- ---------
2.989 3.477 2.250 3.313 (0.533)
--------- --------- --------- --------- ---------
(0.114) (0.211) (0.241) (0.232) (0.323)
(2.120) (0.200) (0.535) (0.875) (0.008)
-- -- -- -- --
-- -- -- -- --
--------- --------- --------- --------- ---------
(2.234) (0.411) (0.776) (1.107) (0.331)
--------- --------- --------- --------- ---------
$ 17.807 $ 17.052 $ 13.986 $ 12.512 $ 10.306
--------- --------- --------- --------- ---------
17.96% 24.98% 18.18% 32.24% (4.54%)
--------- --------- --------- --------- ---------
$ 53.4 $ 47.8 $ 31.6 $ 19.7 $ 10.9
0.70% 0.70% 0.70% 0.69% 0.70%
-- -- -- -- --
1.27% 1.36% 1.99% 2.05% 3.47%
69.1% 94.5% 113.0% 180.1% 326.0%
0.83% 0.88% 1.02% 1.19% 1.49%
1.14% 1.18% 1.67% 1.55% 2.68%
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE HELD THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
High Yield
Portfolio
-------------------------------------------------------------------------
Years Ended December 31,
1998 1997 1996 1995 1994
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.899 $ 10.626 $ 10.446 $ 9.823 $ 11.287
----------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.969 0.922 0.952 0.949 0.978
Net realized and unrealized gains (0.673) 0.281 0.187 0.621 (1.464)
----------- --------- --------- --------- ---------
Total from investment operations 0.296 1.203 1.139 1.570 (0.486)
----------- --------- --------- --------- ---------
Distributions
Dividends from net investment income (0.480) (0.930) (0.954) (0.947) (0.978)
Distributions from net realized gains -- -- -- -- --
Distributions in excess of net
investment income -- -- (0.005) -- --
Return of capital distributions -- -- -- -- --
----------- --------- --------- --------- ---------
Total distributions (0.480) (0.930) (0.959) (0.947) (0.978)
----------- --------- --------- --------- ---------
Net Asset Value, end of period $ 10.715 $ 10.899 $ 10.626 $ 10.446 $ 9.823
----------- --------- --------- --------- ---------
TOTAL RETURN 2.67% 11.54% 11.29% 16.69% (4.52%)
----------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net Assets, end of period (In millions) $ 28.8 $ 33.3 $ 41.1 $ 36.5 $ 19.7
Ratios to Average Net Assets (1):
Operating Expenses 0.85% 0.85% 0.85% 0.86% 0.86%
Interest Expense -- *** 0.02% -- -- --
Net investment income 8.49% 8.13% 8.89% 9.50% 9.48%
Portfolio turnover rate 70.3% 109.4% 117.3% 118.9% 200.1%
(1) If certain expenses had not been
reimbursed by the Adviser, total return
would have been lower and the ratios would
have been as follows:
Ratio of Operating Expenses to Average
Net Assets: 1.00% 0.99% 1.04% 1.09% 1.16%
Ratio of Net Investment Income to Average
Net Assets: 8.34% 7.99% 8.70% 9.27% 9.18%
* Non-annualized
** Annualized
*** Amount is less than 0.00%
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Bond Debenture Mid-Cap Value
Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------
For the period For the period
from May 1, 1996 from August 20, 1997
Year ended Year ended (date of initial Year ended (commencement
December 31, December 31, public offering) to December 31, of operations) to
1998 1997 December 31, 1996 1998 December 31, 1997
- ------------------------------------------------------ ---------------------------------------
<C> <C> <C> <C> <C>
$ 12.112 $ 10.970 $ 10.098 $ 10.481 $ 10.000
----------- --------- -------------------- ----------- ---------------------
0.682 0.544 0.345 0.032 0.010
0.072 1.147 0.949 0.087 0.481
----------- --------- -------------------- ----------- ---------------------
0.754 1.691 1.294 0.119 0.491
----------- --------- -------------------- ----------- ---------------------
(0.349) (0.549) (0.342) (0.017) (0.010)
(0.136) -- (0.080) -- --
-- -- -- -- --
-- -- -- -- --
----------- --------- -------------------- ----------- ---------------------
(0.485) (0.549) (0.422) (0.017) (0.010)
----------- --------- -------------------- ----------- ---------------------
$ 12.381 $ 12.112 $ 10.970 $ 10.583 $ 10.481
----------- --------- -------------------- ----------- ---------------------
6.26% 15.63% 12.89% * 1.11% 4.90% *
----------- --------- -------------------- ----------- ---------------------
$ 120.0 $ 55.4 $ 7.7 $ 18.3 $ 2.2
0.85% 0.85% 0.85% ** 1.10% 1.10% **
-- *** -- -- -- --
6.58% 6.68% 7.26% ** 0.44% 0.97% **
84.7% 100.3% 58.1% * 41.0% 1.5% *
0.93% 1.07% 2.05% ** 1.68% 8.41% **
6.50% 6.46% 6.06% ** (0.14%) (6.34%) **
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE HELD THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
Large Cap Research
Portfolio
---------------------------------------------------
For the period
from August 20, 1997
Year ended (commencement
December 31, of operations) to
1998 December 31, 1997
---------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.905 $ 10.000
------------------- ------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.069 0.017
Net realized and unrealized gains 2.023 (0.096)
------------------- ------------------------
Total from investment operations 2.092 (0.079)
------------------- ------------------------
Distributions
Dividends from net investment income (0.033) (0.016)
Distributions from net realized gains -- --
Distributions in excess of net
investment income -- --
Return of capital distributions -- --
------------------- ------------------------
Total distributions (0.033) (0.016)
------------------- ------------------------
Net Asset Value, end of period $ 11.964 $ 9.905
------------------- ------------------------
TOTAL RETURN 21.04% (0.74%) *
------------------- ------------------------
Ratios/Supplemental Data:
Net Assets, end of period (In millions) $ 13.9 $ 1.4
Ratios to Average Net Assets (1):
Operating Expenses 1.10% 1.10% **
Interest Expense -- --
Net investment income 0.97% 1.53% **
Portfolio turnover rate 103.0% 1.3% *
(1) If certain expenses had not been
reimbursed by the Adviser, total return
would have been lower and the ratios would
have been as follows:
Ratio of Operating Expenses to Average
Net Assets: 1.95% 10.04% **
Ratio of Net Investment Income to Average
Net Assets: 0.12% (7.41%) **
* Non-annualized
** Annualized
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Developing Growth Balanced
Portfolio Portfolio
- --------------------------------------------------- ---------------------------------------------------
For the period For the period
from August 20, 1997 from July 1, 1997
Year ended (commencement Year ended (commencement
December 31, of operations) to December 31, of operations) to
1998 December 31, 1997 1998 December 31, 1997
- --------------------------------------------------- ---------------------------------------------------
<C> <C> <C> <C>
$ 10.549 $ 10.000 $ 10.389 $ 10.000
------------------- ----------------------- ------------------- -----------------------
(0.025) 0.002 0.223 0.123
0.723 0.549 1.152 0.477
------------------- ----------------------- ------------------- -----------------------
0.698 0.551 1.375 0.600
------------------- ----------------------- ------------------- -----------------------
-- (0.002) (0.222) (0.124)
(0.006) -- (0.144) (0.087)
-- -- -- --
-- -- -- --
------------------- ----------------------- ------------------- -----------------------
(0.006) (0.002) (0.366) (0.211)
------------------- ----------------------- ------------------- -----------------------
$ 11.241 $ 10.549 $ 11.398 $ 10.389
------------------- ----------------------- ------------------- -----------------------
6.60% 5.52% * 13.31% 6.01% *
------------------- ----------------------- ------------------- -----------------------
$ 15.9 $ 1.7 $ 4.6 $ 1.5
1.00% 1.00% ** 1.10% 1.10% **
-- -- -- --
(0.47%) 0.18% ** 2.54% 2.74% **
18.7% 9.1% * 36.0% 13.6% *
1.70% 9.00% ** 3.08% 3.81% **
(1.17%) (7.82%) ** 0.56% 0.03% **
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE HELD THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
Small Cap Equity
Portfolio
---------------------------------------------------
For the period
from July 1, 1997
Year ended (commencement
December 31, of operations) to
1998 December 31, 1997
---------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.419 $ 10.000
-------------------- ------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.014) (0.001)
Net realized and unrealized gains (0.012) 0.485
-------------------- ------------------------
Total from investment operations (0.026) 0.484
-------------------- ------------------------
Distributions
Dividends from net investment income -- --
Distributions from net realized gains (0.218) (0.065)
Distributions in excess of net
investment income -- --
Return of capital distributions -- --
-------------------- ------------------------
Total distributions (0.218) (0.065)
-------------------- ------------------------
Net Asset Value, end of period $ 10.175 $ 10.419
-------------------- ------------------------
TOTAL RETURN (0.39%) 4.86% *
-------------------- ------------------------
Ratios/Supplemental Data:
Net Assets, end of period (In millions) $ 2.4 $ 1.3
Ratios to Average Net Assets (1):
Operating Expenses 1.10% 1.10% **
Interest Expense -- --
Net investment income (0.19%) (0.02%) **
Portfolio turnover rate 62.0% 36.2% *
(1) If certain expenses had not been reimbursed by the
Adviser, total return would have been lower and the
ratios would have been as follows:
Ratio of Operating Expenses to Average
Net Assets: 4.19% 3.97% **
Ratio of Net Investment Income to Average
Net Assets: (3.28%) (2.89%) **
* Non-annualized
** Annualized
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Equity Income Growth & Income Equity
Portfolio Portfolio
--------------------------------------------------- ---------------------------------------------------
For the period For the period
from July 1, 1997 from July 1, 1997
Year ended (commencement Year ended (commencement
December 31, of operations) to December 31, of operations) to
1998 December 31, 1997 1998 December 31, 1997
--------------------------------------------------- ---------------------------------------------------
<C> <C> <C> <C>
$ 11.047 $ 10.000 $ 10.710 $ 10.000
-------------------- ------------------------ -------------------- ------------------------
0.167 0.074 0.057 0.033
0.862 1.192 1.538 0.793
-------------------- ------------------------ -------------------- ------------------------
1.029 1.266 1.595 0.826
-------------------- ------------------------ -------------------- ------------------------
(0.167) (0.074) (0.058) (0.032)
(0.283) (0.145) (0.252) (0.084)
-- -- -- --
-- -- -- --
-------------------- ------------------------ -------------------- ------------------------
(0.450) (0.219) (0.310) (0.116)
-------------------- ------------------------ -------------------- ------------------------
$ 11.626 $ 11.047 $ 11.995 $ 10.710
-------------------- ------------------------ -------------------- ------------------------
9.35% 12.69% * 14.95% 8.26% *
-------------------- ------------------------ -------------------- ------------------------
$ 4.7 $ 1.7 $ 9.1 $ 2.4
1.10% 1.10% ** 1.10% 1.10% **
-- -- -- --
1.79% 1.65% ** 0.65% 0.87% **
79.4% 17.9% * 57.5% 18.1% *
2.69% 3.58% ** 2.00% 3.51% **
0.20% (0.83%) ** (0.25%) (1.54%) **
</TABLE>
See notes to financial statements
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Cova Series Trust (the Trust) is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
1940 Act). The Trust offers eighteen diversified portfolios (each, a Fund and
collectively, the Funds) to its policyholders for investment, each of which
operates as a distinct investment vehicle of the Trust. J.P. Morgan Investment
Management Inc. manages the Small Cap Stock Portfolio, Quality Bond Portfolio,
Select Equity Portfolio, Large Cap Stock Portfolio, and International Equity
Portfolio. Lord Abbett & Co. manages the Bond Debenture Portfolio, Mid-Cap Value
Portfolio, Large Cap Research Portfolio, and Developing Growth Portfolio. Van
Kampen American Capital Investment Advisory Corporation manages the Money Market
Portfolio, Quality Income Portfolio, Stock Index Portfolio, VKAC Growth and
Income Portfolio and High Yield Portfolio. Mississippi Valley Advisors Inc.
manages the Balanced Portfolio, Small Cap Equity Portfolio, Equity Income
Portfolio and Growth & Income Equity Portfolio. Depending on the policyholder's
contract, not all portfolios are available to all policyholders. The Trust
commenced operations on December 11, 1989 with the Quality Income Portfolio and
High Yield Portfolio. The Money Market Portfolio commenced operations on July 1,
1991. The Stock Index Portfolio commenced operations on November 1, 1991. The
VKAC Growth and Income Portfolio commenced operations on May 1, 1992. The Small
Cap Stock Portfolio, Quality Bond Portfolio, Select Equity Portfolio, Large Cap
Stock Portfolio, International Equity Portfolio and Bond Debenture Portfolio
commenced operations on April 2, 1996. The Balanced Portfolio, Small Cap Equity
Portfolio, Equity Income Portfolio and Growth & Income Equity Portfolio
commenced operations on July 1, 1997. The Mid-Cap Value Portfolio, Large Cap
Research Portfolio and Developing Growth Portfolio commenced operations on
August 20, 1997. The preparation of financial statements in conformity with
generally accepted accounting principles may require 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. Although actual results could
differ from these estimates, any such differences are expected to be immaterial
to the net assets of the Funds. The following is a summary of significant
accounting policies consistently followed by the Trust 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. If there was no sale on such day, the securities are valued at the
mean between the most recently quoted bid and asked prices. 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 in good
faith by the Board of Trustees. Domestic fixed income investments are stated at
values using the mean between the most recently quoted bid and asked prices.
Foreign fixed income securities are valued at their sale price as of the close
of the securities exchange on which the securities are listed. 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 are used.
Short-term securities with remaining maturities of less than 60 days are valued
at amortized cost, which approximates market value. The Money Market Portfolio,
in accordance with Rule 2a-7 of the 1940 Act, values its investments at
amortized cost. Under the amortized cost method, investments are recorded at
cost and any discount or premium is accreted or amortized, respectively, on a
straight line basis to the maturity of the investment. Value on any given date
equals original cost plus or minus accreted discount or amortized premium,
respectively, to that date. Futures contracts and options are valued based upon
their daily settlement prices. Forward currency exchange contracts are valued at
forward rates and are marked-to-market daily.
B. SECURITY TRANSACTIONS - Security transactions are recorded on a trade
date basis. Realized gains and losses are determined on an identified cost
basis. The Funds 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
Funds will maintain, in a segregated account with their 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 - Dividend income is recorded on the
ex-dividend date, or in the case of some foreign securities, on the date
thereafter when the Fund is made aware of the dividend. Interest income and
expenses are recorded when earned or incurred, respectively. Foreign income and
foreign capital gains realized on some foreign securities may be subject to
foreign withholding taxes, which are accrued as applicable.
D. FEDERAL INCOME TAXES - It is the Trust's policy to comply with the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income, including net realized gains, if any, to its shareholders.
Accordingly, the Funds have not recorded a provision for federal income taxes.
In addition, any Funds subject to federal excise tax regulations will distribute
substantially all of their net investment income and net capital gains, if any,
in each calendar year in order to avoid the payment of federal excise taxes.
Distributions from net investment income and capital gains are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles. As a result, distributions from net investment
income and net realized capital gains may differ from their ultimate
characterization for federal income tax purposes due to timing differences. For
the Large Cap Stock, Quality Income, Stock Index and VKAC Growth and Income
Portfolios, net realized gains and losses may differ for financial and tax
reporting purposes primarily as a result of timing differences related to open
futures transactions at year end. The Funds utilize the provisions of the
federal income tax laws that provide for the carryforward of capital losses for
eight years, offsetting such losses against any future net realized capital
gains. At December 31, 1998, the accumulated capital loss carryforwards and
expiration dates by Fund were as follows: Mid-Cap Value $212,506 expiring in
2006, Large Cap Research $115,583 expiring in 2005 and 2006, Developing Growth
$395,537 expiring in 2006, Small Cap Equity $37,381 expiring in 2006, Small Cap
Stock $3,778,997 expiring in 2006, Money Market $77,675 expiring in 2002, 2005
and 2006, Quality Income $1,856,548 expiring in 2002, 2004 and 2005 and High
Yield $148,853 expiring in 2002 and 2006. For tax purposes, the Small Cap Equity
Portfolio elected to defer to its fiscal year ending December 31, 1999, $16,039
of losses recognized during the period November 1, 1998 to December 31, 1998.
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
E. DISTRIBUTION OF INCOME AND GAINS - The Funds, except the Money Market
Portfolio, declare, pay and automatically reinvest dividends semi-annually from
net investment income. The Money Market Portfolio declares dividends from net
investment income daily and automatically reinvests such dividends daily. Net
realized gains, if any, are distributed annually. Distributions are
automatically reinvested in the Funds as additional shares.
F. DERIVATIVES - A derivative financial instrument, in general terms, is a
security whose value is "derived" from the value of an underlying asset,
reference rate or index. The Funds primarily use derivative instruments to
protect against possible changes in the market value of their investments. All
of the Funds' holdings, including derivative instruments, are marked to market
each day with the change in value reflected in unrealized
appreciation/depreciation of investments. Upon disposition, a realized gain or
loss is recognized accordingly. The primary risks associated with the use of
these financial instruments for hedging purposes are the possibility of (a) an
imperfect correlation between the change in market value of the hedged
securities held by the Funds and the change in market value of these financial
instruments, and (b) an illiquid market. As a result, the use of these financial
instruments may involve, to a varying degree, elements of market risk in excess
of the amount recognized in the Statement of Assets and Liabilities. The
following are brief descriptions of derivative instruments the Funds may hold.
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 Funds generally invest 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 temporary substitute for purchasing or
selling specific securities. Upon entering into a futures contract, the Funds
are required to make initial margin deposits with the broker or segregate liquid
investments to satisfy the broker's margin requirements. Initial margin deposits
are recorded as assets and held in a segregated account at the custodian. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking to market" the contract
on a daily basis to reflect the value of the contract's settlement price at the
end of each day's trading. Variation margin payments are made or received and
recognized as assets due from or liabilities to the broker depending upon
whether unrealized gains or losses, respectively, are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
its basis in the contract.
b. OPTIONS CONTRACTS - A purchased 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 Funds 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. Purchases of put and call options are recorded as
investments, the value of which are marked-to-market daily. When a purchased
option expires, the Fund will realize a loss equal to the premium paid. When the
Fund enters into a closing sale transaction, the Fund will realize a gain or
loss depending on whether the sales proceeds from the closing sale transaction
are greater or less the cost of the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
The premium received for a written option is recorded as a liability. The
liability is marked-to-market daily based on the option's quoted market price.
When an option expires or the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or loss if the cost of the closing purchase
transaction exceeds the premium received when the option was sold) without
regard to any unrealized gain or loss on the underlying security and the
liability related to such option is eliminated. When a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received. If a written put option is exercised, the amount of the premium
originally received will reduce the cost of the underlying security purchased.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity for profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is the Fund may
incur a loss if the market price of the underlying security decreases and the
option is exercised because this loss can be greater than premium received. In
addition, the Fund could be exposed to risks if the counterparties to the
transactions are unable to meet the terms of the contracts.
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
c. FORWARD FOREIGN CURRENCY CONTRACTS - The Quality Bond and International
Equity Portfolios may enter into forward foreign currency contracts to hedge its
portfolio holdings against 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 an unrealized gain or loss. When the contract
is closed, the Fund recognizes 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. The use of forward foreign currency contracts does not
eliminate fluctuations in the underlying prices of the securities of the Fund,
but it does establish a rate of exchange that can be achieved in the future.
Although forward foreign currency contracts to sell limit the risk of loss due
to a decline in the value of the currency holdings, they also limit any
potential gain that might result should the value of the currency increase. In
addition, the Fund could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of the contracts.
G. FOREIGN 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 interest is accrued or
dividends are recorded. The Fund does not isolate that portion 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
activity in forward foreign currency contracts, 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, and changes in the contract value of forward
foreign currency contracts.
H. REPURCHASE AGREEMENTS - The Funds may enter into repurchase agreements
with selected commercial banks and broker-dealers, under which the Fund acquires
securities as collateral and agrees to resell the securities at an agreed upon
time and at an agreed upon price. The Fund accrues interest for the difference
between the amount it pays for the securities and the amount it receives upon
resale. At the time the Fund enters into a repurchase agreement, the value of
the collateral securities including accrued interest will be equal to or exceed
the value of the repurchase agreement and, for repurchase agreements that mature
in more than one day, the seller will agree that the value of the collateral
securities including accrued interest will continue to be at least equal to the
value of the repurchase agreement.
I. REVERSE REPURCHASE AGREEMENTS - The Funds may enter into reverse
repurchase agreements with selected commercial banks or broker-dealers. In a
reverse repurchase agreement, the Fund sells securities as collateral and agrees
to repurchase them at a mutually agreed upon date and price. This practice is
the equivalent of borrowing using the securities as collateral and can create
leverage. 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 competitive market rates at the time of issuance.
At the time the Fund enters into a reverse repurchase agreement, it will
establish and maintain a segregated account with the custodian containing liquid
assets having a value not less than the repurchase price (including accrued
interest). If the counterparty to the transaction is rendered insolvent, the
ultimate realization of the collateral securities to be repurchased by the Fund
may be delayed or limited.
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
sub-advisory agreements with J.P. Morgan Investment Management Inc., Lord Abbett
& Co., Van Kampen American Capital Investment Advisory Corporation, and
Mississippi Valley Advisors Inc. ( the "Sub-advisers") for investment advisory
services in connection with the investment or management of the portfolios of
the Funds. The Adviser supervises the Sub-advisers' performance of advisory
services and will make recommendations to the Board of Trustees with respect to
the retention or renewal of the sub-advisory agreements. The Adviser pays the
Sub-advisers and bears the cost of compensating officers of the Trust.
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES - cont.
<TABLE>
<CAPTION>
Under the terms of the Funds' investment advisory agreement, the Funds pay
the Adviser a monthly fee based on the average daily net assets as follows:
Fund Average DailyNet Assets % Per Annum
- --------------------------- ------------------------------ -----------
<S> <C> <C>
Small Cap Stock All .85%
Quality Bond First $75 Million .55%
Over $75 Million .50%
Select Equity First $50 Million .75%
Over $50 Million .65%
Large Cap Stock All .65%
International Equity First $50 Million .85%
Over $50 Million .75%
Money Market First $500 Million .50%
Over $500 Million .40%
Quality Income First $500 Million .50%
Over $500 Million .45%
Stock Index All .50%
VKAC Growth and Income First $500 Million .60%
Over $500 Million .50%
High Yield First $500 Million .75%
Over $500 Million .65%
Bond Debenture All .75%
Mid-Cap Value All 1%
Large Cap Research All 1%
Developing Growth All .90%
Balanced All 1%
Small Cap Equity All 1%
Equity Income All 1%
Growth & Income Equity All 1%
</TABLE>
The Adviser has voluntarily waived its monthly advisory fee for the Money Market
Portfolio. In addition, the Adviser has voluntarily waived or otherwise
reimbursed the Funds for their other 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 an annual rate of 0.10% of the average daily net assets of each Fund. The
Trust has entered into Custodian, Fund Accounting, and Transfer Agency
Agreements with Investors Bank & Trust Company ("Investors Bank"). Cova Variable
Annuity Accounts One and Five, Cova Variable Life Account One and First Cova
Variable Annuity Account One are separate investment accounts offered by Cova
Financial Services Life Insurance Co. and its subsidiaries, Cova Financial Life
Insurance Co. and First Cova Life Insurance Co. (collectively "Cova Life"). At
December 31, 1998, Cova Life owned all shares of beneficial interest of each
Fund except those listed below.
<TABLE>
<CAPTION>
Percentage of Ownership
--------------------------------------------------------------------------------------
Cova Life Lord Abbett & Co. Mississippi Valley Advisors Inc.
------------------- ------------------------------ ----------------------------------
<S> <C> <C> <C>
Mid-Cap Value 99.4% 0.6% --
Large Cap Research 99.0% 1.0% --
Developing Growth 99.3% 0.7% --
Balanced 73.7% -- 26.3%
Small Cap Equity 56.0% -- 44.0%
Equity Income 73.8% -- 26.2%
Growth & Income Equity 86.3% -- 13.7%
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
3. INVESTMENT TRANSACTIONS
Aggregate cost of purchases and proceeds of sales of investment securities,
excluding short-term securities, for the period ended December 31, 1998 were as
follows:
Purchases
------------------------------------------------------------------------
Portfolio: U.S. Government Non-Government Total
--------------------- ------------------------ --------------
<S> <C> <C> <C>
Small Cap Stock $ 0 $63,482,135 $63,482,135
Quality Bond 72,992,248 28,281,182 101,273,430
Select Equity 0 328,977,329 328,977,329
Large Cap Stock 202,179 87,649,807 87,851,986
International Equity 0 89,732,145 89,732,145
Quality Income 18,527,841 29,342,084 47,869,925
Stock Index 0 2,536,865 2,536,865
VKAC Growth and Income 0 32,620,484 32,620,484
High Yield 0 20,681,531 20,681,531
Bond Debenture 21,732,598 109,380,220 131,112,818
Mid-Cap Value 0 18,775,616 18,775,616
Large Cap Research 0 15,867,286 15,867,286
Developing Growth 0 13,880,695 13,880,695
Balanced 567,403 2,826,653 3,394,056
Small Cap Equity 0 1,976,670 1,976,670
Equity Income 0 4,799,085 4,799,085
Growth & Income Equity 0 8,063,170 8,063,170
</TABLE>
<TABLE>
<CAPTION>
Sales
---------------------------------------------------------------------
Portfolio: U.S. Government Non-Government Total
- ----------------------- ------------ -------------------- -----------
<S> <C> <C> <C>
Small Cap Stock $ 0 $41,324,464 $41,324,464
Quality Bond 54,133,161 18,089,214 72,222,375
Select Equity 0 267,790,641 267,790,641
Large Cap Stock 0 38,160,127 38,160,127
International Equity 0 63,193,748 63,193,748
Quality Income 15,545,344 42,140,675 57,686,019
Stock Index 0 19,868,667 19,868,667
VKAC Growth and Income 0 36,809,515 36,809,515
High Yield 0 22,003,349 22,003,349
Bond Debenture 15,195,000 52,882,993 68,077,993
Mid-Cap Value 0 3,467,799 3,467,799
Large Cap Research 0 5,687,997 5,687,997
Developing Growth 0 1,357,056 1,357,056
Balanced 0 825,130 825,130
Small Cap Equity 0 989,214 989,214
Equity Income 0 2,142,841 2,142,841
Growth & Income Equity 0 2,854,546 2,854,546
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1998, the cost of securities for federal income tax purposes and
the unrealized appreciation (depreciation) of investments for federal income tax
purposes for each Fund was as follows:
Federal Income Gross Unrealized Gross Unrealized
Portfolio: Tax Cost Appreciation (Depreciation)
- ------------------------------- ---------------------- ----------------------- ---------------------------
<S> <C> <C> <C>
Small Cap Stock $ 70,515,516 $10,393,021 $(6,502,209)
Quality Bond 42,786,281 561,810 (127,239)
Select Equity 177,957,664 26,402,913 (9,579,909)
Large Cap Stock 84,029,089 18,506,089 (2,421,554)
International Equity 93,961,426 14,365,881 (5,802,220)
Money Market 8,156,552 -- --
Quality Income 37,806,111 1,591,213 (227,603)
Stock Index 55,319,260 46,167,988 (1,632,052)
VKAC Growth and Income 44,509,477 9,898,836 (986,177)
High Yield 28,836,999 779,072 (1,265,796)
Bond Debenture 115,932,207 3,615,100 (3,999,551)
Mid-Cap Value 17,107,976 1,355,083 (983,756)
Large Cap Research 11,313,860 1,660,695 (207,494)
Developing Growth 13,736,498 3,120,115 (1,772,271)
Balanced 3,847,532 415,992 (113,312)
Small Cap Equity 2,178,677 344,263 (239,545)
Equity Income 4,317,990 372,052 (224,264)
Growth & Income Equity 7,630,440 1,114,189 (444,445)
</TABLE>
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
3. INVESTMENT TRANSACTIONS - cont.
<TABLE>
<CAPTION>
For temporary cash management purposes, the following Funds engaged in bank
borrowings for the year ended December 31, 1998, as follows:
Average Daily Weighted Average Maximum Dollar
Portfolio Borrowings Interest Rate Amount Borrowed
- ------------------------------- ----------------------- --------------------------- ----------------------
<S> <C> <C> <C>
Quality Income $ 319,329 6.50% $ 2,975,701
Stock Index 31,663 6.49% 888,199
High Yield 1,480 6.42% 391,910
International Equity 16,443 6.13% 1,202,218
Bond Debenture 11,803 6.50% 2,309,143
</TABLE>
<TABLE>
<CAPTION>
4. FUTURES CONTRACTS
Transactions in futures contracts for the year ended December 31, 1998, were as
follows:
VKAC
Large Quality Stock Growth and
Cap Stock Income Index Income
Portfolio Portfolio Portfolio Portfolio
------------------------- ------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Futures Contracts
Outstanding at
December 31, 1997 -- 35 22 4
Contracts Opened 26 460 158 36
Contracts Closed (14) (495) (155) (30)
------------------------- ------------------- ---------------------- ------------------
Futures Contracts
Outstanding at
December 31, 1998 12 -- 25 10
========================= =================== ====================== ==================
</TABLE>
<TABLE>
<CAPTION>
The futures contracts outstanding as of December 31, 1998 and the description
and unrealized appreciation were as follows:
Contracts Notional Value Unrealized Appreciation
-------------- ------------------ --------------------------
<S> <C> <C> <C>
Large Cap Stock Portfolio:
S & P 500 Index Futures 12 $ 3,736,500 $ 172,078
March 1999 - Long
Stock Index Portfolio:
S & P 500 Index Futures 25 $ 7,784,375 $ 309,375
March 1999 - Long
VKAC Growth and Income Portfolio:
S & P 500 Index Futures 10 $ 3,113,750 $87,281
March 1999 - Long
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
5. FORWARD FOREIGN CURRENCY CONTRACTS
Open forward foreign currency contracts for the Quality Bond Portfolio at December 31, 1998, were as follows:
Forward Foreign Currency
Contracts to Buy: Value at In Exchange Unrealized
Settlement Date Contracts to Receive December 31, 1998 for U.S. $ Depreciation
- ------------------------------ ---------------------------------- ------------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
2/12/99 1,299,688 Deutsche Mark $ 782,205 $ 789,556 $(7,351)
2/12/99 4,399,547 French Franc 789,252 797,366 (8,114)
------------------
(15,465)
==================
Forward Foreign Currency
Contracts to Sell: Value at In Exchange Unrealized
Settlement Date Contracts to Deliver December 31, 1998 for U.S. $ Appreciation
- ------------------------------ ---------------------------------- ------------------------- ----------------- -------------------
2/12/99 1,299,688 Deutsche Mark $ 782,205 $ 796,231 $ 14,026
2/12/99 4,399,547 French Franc 789,252 809,008 19,756
------------------
33,782
==================
</TABLE>
<TABLE>
<CAPTION>
Open forward foreign currency contracts for the International Equity Portfolio at December 31, 1998, were as follows:
Forward Foreign Currency Unrealized
Contracts to Buy: Value at In Exchange Appreciation/
Settlement Date Contracts to Receive December 31, 1998 for U.S. $ (Depreciation)
- ------------------------------ ---------------------------------- ------------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
1/25/99 600,000 British Pound Sterling $ 997,270 $ 989,340 $ 7,930
1/25/99 3,963,099 Deutsche Mark 2,383,007 2,410,000 (26,993)
1/25/99 345,886 New Zealand Dollar 182,714 173,306 9,408
------------------
(9,655)
==================
Forward Foreign Currency Unrealized
Contracts to Sell: Value at In Exchange Appreciation/
Settlement Date Contracts to Deliver December 31, 1998 for U.S. $ (Depreciation)
- ------------------------------ ---------------------------------- ------------------------- ----------------- ------------------
1/25/99 2,578,554 Australian Dollar $ 1,579,815 $ 1,503,348 $ (76,467)
1/25/99 600,000 British Pound Sterling 997,270 1,002,318 5,048
1/25/99 5,529,200 Deutsche Mark 3,324,701 3,381,093 56,392
1/25/99 625,000 Swiss Franc 456,743 467,115 10,372
1/25/99 901,736 New Zealand Dollar 476,351 443,654 (32,697)
------------------
(37,352)
==================
</TABLE>
<PAGE>
COVA SERIES TRUST
Notes to Financial Statements
December 31, 1998
6. MORTGAGE AND ASSET BACKED SECURITIES The Quality Income and Quality Bond
Portfolios invest in Mortgage and Asset Backed Securities. A Mortgage Backed
Security (MBS) is a pass-through security created by pooling and selling
participations in the principal and interest payments received from borrowers.
Most of these securities are issued 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). A Collateralized Mortgage Obligation (CMO) is a bond
which is collateralized by a pool of MBSs. The Quality Income and Quality Bond
Portfolios also invest in REMICs (Real Estate Mortgage Investment Conduits)
which are simply another form of CMO. These MBS pools are divided into classes
or tranches with each class having its own characteristics. For instance, a PAC
(Planned Amortization Class) is a specific class of mortgages with the most
stable cash flow and the lowest prepayment risk. Asset Backed Securities are
similar to MBSs but made up of pools of other assets, such as credit card
receivables, which are grouped together for investment purposes. Payments of
principal and interest on the securities are made from the cash flows of the
group of assets.
7. SUBSEQUENT EVENT
On December 4, 1998, the Securities and Exchange Commission issued an order
approving the substitution of shares of certain Trust Portfolios and The General
American Capital Company Money Market Fund ("Substitute Funds") for shares of
certain other Trust Portfolios ("Replaced Funds") held by Cova Life to fund
certain variable contracts issued by Cova Life. Cova Life is affiliated with
Conning Asset Management Company, investment advisor to The General American
Capital Company Money Market Fund. On January 8, 1999, the substitutions were
affected by redeeming shares of the Replaced Funds at net asset value and using
the proceeds to purchase shares of the Substitute Funds at net asset value on
the same date as follows:
<TABLE>
<CAPTION>
REPLACED FUND SUBSTITUTE FUND
- ---------------------------------------- ---------------------------------------
Cova Series Trust Cova Series Trust
- ---------------------------------------- ---------------------------------------
<S> <C>
Stock Index Portfolio Large Cap Stock Portfolio
Quality Income Portfolio Quality Bond Portfolio
High Yield Portfolio Bond Debenture Portfolio
VKAC Growth and Income Portfolio Lord Abbett Growth and Income Portfolio
Cova Series Trust General American Capital Company
- ---------------------------------------- ---------------------------------------
Money Market Portfolio Money Market Fund
</TABLE>
As a result of the substitution, the Replaced Funds ceased investment operations
effective January 8, 1999.
<PAGE>
OTHER INFORMATION:
YEAR 2000 ISSUE (UNAUDITED)
Like other mutual funds, as well as other financial and business organizations
around the world, the Trust could be adversely affected if the computer systems
used by the Adviser, the Sub-Advisers and other service providers, in performing
their administrative functions do not properly process and calculate date
related information and data as of and after January 1, 2000. This is commonly
known as the "Year 2000 Issue." The Adviser and Sub-Advisers are taking steps
that they believe are reasonably designed to address the Year 2000 Issue with
respect to computer systems that they use and to obtain reasonable assurances
that comparable steps are being taken by the Trust's other major service
providers. At this time, however, there can be no guarantees that these steps
will be sufficient to avoid any adverse impact to the Trust.
