File Nos. 33-39100
811-5200
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 18 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT ONE
__________________________________
(Exact Name of Registrant)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
_______________________________________________
(Name of Depositor)
One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644
______________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 831-5433
Name and Address of Agent for Service
Lorry J. Stensrud, President
Cova Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 523-1661
Copies to:
Judith A. Hasenauer and Jeffery K. Hoelzel
Blazzard, Grodd & Hasenauer, P.C. Vice President,
P.O Box 5108 General Counsel and Secretary
Westport, CT 06881 Cova Financial Services
Life Insurance Company
(203) 226-7866 One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on ___________ pursuant to paragraph (b) of Rule 485
__X__ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or amount
of securities in accordance with Rule 24f-2 under the Investment Company Act
of 1940. Registrant filed its Rule 24f-2 Notice for the most recent fiscal
year on or about February 26, 1996.
EXPLANATORY NOTE
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This Registration Statement contains eleven Portfolios of Cova Series Trust,
two Portfolios of Lord Abbett Series Fund, Inc. and one Portfolio of General
American Capital Company. Two versions of the Prospectus will be created from
this Registration Statement. The distribution system for each version of the
Prospectus is different. One version of the Prospectus will contain ten
Portfolios of Cova Series Trust and two Portfolios of Lord Abbett Series Fund,
Inc. Another version of the Prospectus will contain eight Portfolios of Cova
Series Trust and one Portfolio of General American Capital Company. These
Prospectuses will be filed with the Commission pursuant to Rule 497. The
Registrant undertakes to update this Explanatory Note each time a
Post-Effective Amendment is filed.
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------------------------------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Profile
Item 4. Condensed Financial Information . . . Appendix A
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Cova
Series Trust; Lord Abbett Series
Fund, Inc.; General American
Capital Company
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Fixed and Variable Annuity
Item 8. Annuity Period . . . . . . . . . . . . Income Phase
Item 9. Death Benefit. . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . Table of Contents of the
Statement of Additional
Information
</TABLE>
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -----------------------
PART B
Item 15. Cover Page . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . Company
Item 18. Services . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item so numbered in Part C to this Registration Statement.
PART A
THE FIXED AND VARIABLE ANNUITY
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
(FORMERLY, XEROX VARIABLE ANNUITY ACCOUNT ONE)
and
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(FORMERLY, XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY)
This prospectus describes the Fixed and Variable Annuity Contract offered by
Cova Financial Services Life Insurance Company (Cova).
The annuity contract has 15 investment choices - a fixed account which offers
an interest rate which is guaranteed by Cova, and 14 investment portfolios
listed below. The 14 investment portfolios are part of the Cova Series Trust,
the Lord Abbett Series Fund, Inc. or the General American Capital Company.
You can put your money in the fixed account and/or any of these investment
portfolios (except as noted).
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COVA SERIES TRUST
Managed by J.P. Morgan Investment Managed by Van Kampen American Capital
Management Inc.: Investment Advisory Corp.:
Select Equity Growth and Income
Large Cap Stock Money Market
Small Cap Stock Quality Income
International Equity High Yield
Quality Bond Stock Index
Managed by Lord, Abbett & Co.:
Bond Debenture
LORD ABBETT SERIES FUND, INC.:
Managed by Lord, Abbett & Co.
Growth and Income
Global Equity (Not available for new purchases)
GENERAL AMERICAN CAPITAL COMPANY
Managed by General American Investment
Management Company:
Money Market
</TABLE>
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Cova Fixed and
Variable Annuity Contract.
To learn more about the Cova Variable Annuity Contract, you can obtain a copy
of the Statement of Additional Information (SAI) dated May 1, 1996. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The Table of Contents of the SAI is on Page
__ of this prospectus. For a free copy of the SAI, call us at (800) 831-5433
or write us at : One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois
60181-4644.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
May 1, 1996.
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
EXAMPLES
1. THE ANNUITY CONTRACT
2. INCOME PHASE
3. PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
4. INVESTMENT OPTIONS
Cova Series Trust
Lord Abbett Series Fund, Inc.
General American Capital Company
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Approved Asset Allocation Programs
Voting Rights
Substitution
5. EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the Withdrawal Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
6. TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
7. ACCESS TO YOUR MONEY
Systematic Withdrawal Program
8. PERFORMANCE
9. DEATH BENEFIT
Upon Your Death
Death of Annuitant
10. OTHER INFORMATION
Cova
The Separate Account
Distributor
APPENDIX A
APPENDIX B
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you
as possible. By the very nature of the contract however, certain technical
words or terms are unavoidable. We have identified the following as some of
these words or terms. They are identified in the text in italic and the page
that is indicated here is where we believe you will find the best explanation
for the word or term.
PAGE
Accumulation Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Accumulation Unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Annuitant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Annuity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Annuity Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Fixed Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Income Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investment Portfolios. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Joint Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Non-qualified. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Purchase Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Qualified. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Tax Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
1. THE ANNUITY CONTRACT: The fixed and variable annuity contract offered by
Cova is a contract between you, the investor, and Cova, an insurance company.
The Contract provides a means for investing on a tax-deferred basis in a fixed
account of Cova and 14 investment portfolios. The Contract is intended for
retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
The fixed account offers an interest rate that is guaranteed by the insurance
company, Cova. This interest rate is set once each year. While your money is
in the fixed account, the interest your money will earn as well as your
principal is guaranteed by Cova.
This Contract also offers 14 investment portfolios which are listed in
Section 4. These portfolios are designed to offer a better return than the
fixed account. However, this is NOT guaranteed. You can also lose your money.
You can put money into any or all of the investment portfolios (except as
noted) and the fixed account. You can transfer between accounts up to 12 times
a year without charge or tax implications. After 12 transfers, the charge is
$25 or 2% of the amount transferred, which ever is less.
The Contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are taxed as income when you
make a withdrawal. The income phase occurs when you begin receiving regular
payments from your Contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine the amount of income payments during the
income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE): If you want to receive regular
income from your annuity, you can choose one of three options: (1) monthly
payments for your life (assuming you are the annuitant); (2) monthly payments
for your life, but with payments continuing to the beneficiary for 5, 10 or 20
years (as you select) if you die before the end of the selected period; and
(3) monthly payments for your life and for the life of another person (usually
your spouse) selected by you. Once you begin receiving regular payments, you
cannot change your payment plan.
During the income phase, you have the same investment choices you had during
the accumulation phase. You can choose to have payments come from the fixed
account, the investment portfolios or both. If you choose to have any part of
your payments come from the investment portfolios, the dollar amount of your
payments may go up or down.
3. PURCHASE: You can buy this Contract with $5,000 or more under most
circumstances. You can add $2,000 or more any time you like during the
accumulation phase. Your registered representative can help you fill out the
proper forms.
4. INVESTMENT OPTIONS: You can put your money in any or all of these
investment portfolios which are described in the prospectuses for the funds:
<TABLE>
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MANAGED BY J.P. MORGAN INVESTMENT MANAGED BY LORD, ABBETT & CO.
MANAGEMENT INC. Bond Debenture
Select Equity Growth and Income
Large Cap Stock Global Equity (not available for
Small Cap Stock new purchases)
International Equity MANAGED BY GENERAL AMERICAN INVESTMENT
Quality Bond MANAGEMENT COMPANY
MANAGED BY VAN KAMPEN AMERICAN Money Market
CAPITAL INVESTMENT ADVISORY CORP.
Growth and Income
Money Market
Quality Income
High Yield
Stock Index
</TABLE>
Depending upon market conditions, you can make or lose money in any of these
portfolios.
5. EXPENSES: The Contract has insurance features and investment features,
and there are costs related to each.
Each year Cova deducts a $30 contract fee from your Contract. Cova currently
waives this charge if your Contract is at least $50,000. Cova also deducts
for its insurance charges which total 1.40% of the average daily value of your
Contract allocated to the investment portfolios.
There are also investment charges which range from .11% to .95% of the average
daily value of the investment portfolio depending upon the investment
portfolio.
If you take your money out, Cova may assess a withdrawal charge which is equal
to 5% of the purchase payment you withdraw. When you make a withdrawal or you
begin receiving regular income payments from your annuity, Cova will assess a
state premium tax which ranges from 0-4% depending upon the state.
6. TAXES: Your earnings are not taxed until you take them out. If you take
money out, earnings come out first and are taxed as income. If you are
younger than 59 1/2 when you take money out, you may be charged a 10% federal
tax penalty on the earnings. Payments during the income phase are considered
partly a return of your original investment. That part of each payment is not
taxable as income.
7. ACCESS TO YOUR MONEY: You can take money out at any time during the
accumulation phase. After the first year, you can take up to 10% of your total
purchase payments each year without charge from Cova. Withdrawals in excess
of that will be charged 5% of each payment you take out. After Cova has had
a payment for 5 years, there is no charge for withdrawals. Of course, you
may also have to pay income tax and a tax penalty on any money you take
out. Each purchase payment you add to your Contract has its own 5 year
withdrawal charge period.
8. PERFORMANCE: The value of the Contract will vary up or down depending
upon the investment performance of the Portfolio(s) you choose. The following
chart shows total returns for each investment portfolio for the time periods
shown. These numbers reflect the insurance charges, the contract maintenance
charge, the withdrawal charge, the investment charges and all other expenses
of the investment portfolio. Past performance is not a guarantee of future
results.
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Calendar Year
Portfolio: 1995 1994 1993 1992 1991 1990
- -------------------------------------- ------ --------- ------ ------ ----- ------
MANAGED BY J.P. MORGAN INVESTMENT
MANAGEMENT INC.
Select Equity - - - - - -
Large Cap Stock - - - - - -
Small Cap Stock - - - - - -
International Equity - - - - - -
Quality Bond - - - - - -
MANAGED BY VAN KAMPEN AMERICAN
CAPITAL INVESTMENT ADVISORY CORP.
Growth and Income 25.10 (11.43) 8.46 - - -
Money Market (0.45) (2.65) (3.87) (2.98) - -
Quality Income 11.00 (11.12) 4.07 0.59 6.79 1.44
High Yield 9.47 (11.33) 14.65 11.93 19.60 (4.67)
Stock Index 29.64 (6.95) 1.98 (0.70) - -
MANAGED BY LORD, ABBETT & CO.
Bond Debenture - - - - - -
Growth and Income 22.46 (4.21) 7.73 8.39 18.36 (4.28)
Global Equity 3.78 (5.16) 19.49 (8.41) 5.74 -
MANAGED BY GENERAL AMERICAN INVESTMENT
MANAGEMENT COMPANY
Money Market - - - - - -
</TABLE>
9. DEATH BENEFIT: If you die before moving to the income phase, the person
you have chosen as your beneficiary will receive a death benefit. This death
benefit will be the greater of three amounts: 1) the money you've put in less
any money you've taken out, and the related withdrawal charges, accumulated at
4% until you reach age 80, or 2) the current value of your Contract, or 3) the
value of your Contract at the most recent 5th-year-anniversary plus any
money you've added since that anniversary minus any money you've taken out
since that anniversary, and the related withdrawal charges. If you die
after age 80, slightly different rules apply.
10. OTHER INFORMATION: Free Look. If you cancel the Contract within 10
days after receiving it (or whatever period is required in your state), we
will send your money back without assessing a withdrawal charge. You will
receive whatever your Contract is worth on the day we receive your request.
This may be more or less than your original payment. If we're required by law
to return your original payment, we will put your money in the Money Market
Portfolio during the free-look period.
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the Death Benefit without going through probate.
Who should purchase the Contract? This Contract is designed for people
seeking long-term tax-deferred accumulation of assets, generally for
retirement or other long-term purposes. The tax-deferred feature is most
attractive to people in high federal and state tax brackets. You should not
buy this Contract if you are looking for a short-term investment or if you
cannot take the risk of getting back less money than you put in.
Additional Features. This Contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month
while your Contract is still in the accumulation phase. Of course, you'll have
to pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically
invested in investment portfolios each month, theoretically giving you a lower
average cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* Cova will automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
* Under certain circumstances, Cova will give you your money without a
withdrawal charge if you need it while you're in a nursing home. We call this
feature the Nursing Home Waiver.
These features are not available in all states and may not be suitable for
your particular situation.
11. INQUIRIES: If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
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OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 2 below) 5% of purchase payment withdrawn
Transfer Fee (see Note 3 below) No charge for first 12 transfers in a
contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the
amount transferred.
Contract Maintenance Charge (see Note 4 below) $30 per contract per year
</TABLE>
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VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
-----
TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES 1.40%
</TABLE>
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Other Expenses
INVESTMENT PORTFOLIO CHARGES (after expense
(as a percentage of the average daily net reimbursement for
assets of an investment portfolio) Management certain Portfolios Total Portfolio
Fees (see Note 5 below) Annual Expenses
----------- ------------------- ----------------
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity* .75% .10% .85%
Large Cap Stock* .65% .10% .75%
Small Cap Stock* .85% .10% .95%
International Equity* .85% .10% .95%
Quality Bond* .55% .10% .65%
Managed by Lord, Abbett & Co.
Bond Debenture* .75% .10% .85%
Managed By Van Kampen American Capital Investment
Advisory Corp.
Growth and Income .60% .09% .69%
Money Market# .00% .11% .11%
Quality Income .50% .10% .60%
High Yield .75% .11% .86%
Stock Index .50% .11% .61%
Lord Abbett Series Fund, Inc.
Managed by Lord Abbett
Growth and Income## .50% .02% .52%
Global Equity### .00% .11% .11%
General American Capital Company
Managed by General American Investment Management
Company
Money Market .205% .00% .205%
<FN>
* Estimated. The Portfolio commenced regular investment operations on April 1, 1996.
#Cova Investment Advisory Corporation (Cova Advisory), the investment adviser for Cova Series Trust,
currently waives its fees for the Money Market Portfolio. Although not obligated to, Cova Advisory
expects to continue to waive its fees for the Money Market Portfolio. In the future, Cova Advisory may
charge its fees on a partial or complete basis. Absent the management fee waiver, the total management
fee on an annual basis for the Money Market Portfolio is .50%. The examples shown below for the Money
Market Portfolio are calculated based upon a waiver of the management fee.
## Although the expenses for the Growth and Income Portfolio of Lord Abbett Series Fund, Inc. do not
reflect a 12b-1 plan, one has been adopted which provides for payments to Lord, Abbett & Co. for
remittance to a life insurance company for certain distribution expenses (see the Fund Prospectus).
The 12b-1 Plan provides that such remittances, in the aggregate, will not exceed .15%, on an annual
basis, of the daily net asset value of shares of the Growth and Income Portfolio. The 12b-1 plan has
not been implemented. The examples below for this Portfolio do not reflect the imposition of the 12b-1
fee.
### Lord, Abbett & Co. (Lord Abbett), the investment manager for the Lord Abbett Series Fund, Inc.,
currently waives its management fee and reimburses a portion of the expenses of the Global Equity
Portfolio. Although not obligated to, Lord Abbett expects to continue to waive the management fee for
the Global Equity Portfolio. In the future, Lord Abbett may charge this fee on a partial or complete
basis. Absent the management fee waiver, the management fee on an annual basis for the Global Equity
Portfolio is .75%. The examples shown below for the Global Equity Portfolio are calculated based upon
a waiver of the management fee and a reimbursement of expenses.
</TABLE>
EXAMPLES:
You will pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized.
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Time Periods
1 year 3 years 5 years 10 years
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity (a) 73.80 (a)118.16
(b) 23.80 (b) 73.16
Large Cap Stock (a) 72.80 (a)115.15
(b) 22.80 (b) 70.15
Small Cap Stock (a) 74.80 (a)121.17
(b) 24.80 (b) 76.17
International Equity (a) 74.80 (a)121.17
(b) 24.80 (b) 76.17
Quality Bond (a) 71.79 (a)112.12
(b) 21.79 (b) 67.12
Managed by Lord, Abbett & Co.
Bond Debenture (a) 73.80 (a)118.16
(b) 23.80 (b) 73.16
Managed by Van Kampen American Capital
Investment Advisory Corp.
Money Market (a) 66.36 (a) 95.62 (a)132.07 (a)188.79
(b) 16.36 (b) 50.62 (b) 87.07 (b)188.79
Stock Index (a) 71.39 (a)110.91 (a)157.85 (a)241.80
(b) 21.39 (b) 65.91 (b)112.85 (b)241.80
High Yield (a) 73.90 (a)118.46 (a)170.49 (a)267.24
(b) 23.90 (b) 73.46 (b)125.49 (b)267.24
Quality Income (a) 71.29 (a)110.60 (a)157.34 (a)240.77
(b) 21.29 (b) 65.60 (b)112.34 (b)240.77
Growth and Income (a) 72.19 (a)113.33 (a)161.92 (a)250.02
(b) 22.19 (b) 68.33 (b)116.92 (b)250.02
LORD ABBETT SERIES FUND, INC.
Managed by Lord, Abbett & Co.
Growth and Income (a) 70.49 (a)108.17 (a)153.26 (a)232.47
(b) 20.49 (b) 63.17 (b)108.26 (b)232.47
Global Equity (a) 66.36 (a) 95.62 (a)132.07 (a)188.79
(b) 16.36 (b) 50.62 (b) 87.07 (b)188.79
GENERAL AMERICAN CAPITAL COMPANY
Managed by General American Investment Management
Company
Money Market (a) 67.31 (a) 98.54
(b) 17.31 (b) 53.54
</TABLE>
Explanation of Fee Table and Examples
1. The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract.
2. The withdrawal charge is 5% of the purchase payments you withdraw. After
Cova has had a purchase payment for 5 years, there is no charge by Cova for a
withdrawal of that purchase payment. You may also have to pay income tax and
a tax penalty on any money you take out. After the first year, you can take
up to 10% of your total purchase payments each year without a charge from
Cova.
3. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is for the Dollar Cost Averaging,
Automatic Rebalancing or approved Asset Allocation Programs.
4. Cova will not charge the contract maintenance charge if the value
of your contract is $50,000 or more, although, if you make a complete
withdrawal, Cova will charge the contract maintenance charge.
5. Since August 20, 1990, Cova has been reimbursing certain investment
portfolios of Cova Series Trust for all operating expenses (exclusive of the
management fees) in excess of approximately .10%. For the year ended
December 31, 1995, Lord Abbett reimbursed a portion of the expenses for
the Global Equity Portfolio. The actual expense percentages for all
operating expenses (exclusive of the management fees) for the year ended
December 31, 1995 were: .25% for the Quality Income Portfolio, .34% for the
High Yield Portfolio, .28% for the Stock Index Portfolio, .14% for the
Money Market Portfolio, .59% for the Cova Series Trust Growth and Income
Portfolio and .83% for the Global Equity Portfolio.
Absent the expense reimbursement and management fee waiver, the percentages
shown for total expenses (on an annualized basis) for the year or period ended
December 31, 1995 would have been .75% for the Quality Income Portfolio ,
1.09% for the High Yield Portfolio, .64% for the Money Market Portfolio, .78%
for the Stock Index Portfolio, 1.19% for the Cova Series Trust's Growth and
Income Portfolio and 1.58% for the Global Equity Portfolio.
6. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
7. The assumed average contract size is $30,000.
8. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
There is accumulation unit value history contained in Appendix A -
Condensed Financial Information.
1. THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered
by Cova.
An annuity is a contract between you, the owner, and an insurance company
(in this case Cova), where the insurance company promises to pay you an
income, in the form of annuity payments, beginning on a designated date that's
at least 30 days in the future. Until you decide to begin receiving annuity
payments, your annuity is in the accumulation phase. Once you begin
receiving annuity payments, your contract switches to the income phase. The
Contract benefits from tax deferral.
Tax deferral means that you are not taxed on earnings or appreciation on
the assets in your contract until you take money out of your contract.
The contract is called a variable annuity because you can choose among 14
investment portfolios. Depending upon market conditions, you can make or lose
money in any of these portfolios. If you select the variable annuity portion
of the Contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends upon the investment performance of the investment
portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers
an interest rate that is guaranteed by Cova. This interest rate is set once
each year. Cova guarantees that the interest credited to the fixed account
will not be less than 3% per year with respect to contracts issued on or
after May 1, 1996. If you select the fixed account, your money will be
placed with the other general assets of Cova. If you select the fixed
account, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the total interest
credited to your contract. The amount of the annuity payments you receive
during the income phase from the fixed account portion of the contract will
remain level for the entire income phase.
As owner of the contract, you exercise all rights under the contract.
You can change the owner at any time by notifying Cova in writing. You and
your spouse can be named joint owners. We have described more information on
this in Section 10 - Other Information.
2. INCOME PHASE
Under the contract you can receive regular income payments. You can
choose the month and year in which those payments begin. We call that date
the annuity date. Your annuity date must be the first day of a
calendar month. You can also choose among income plans. We call those
annuity options.
We ask you to choose your annuity date and annuity option when you
purchase the contract. You can change either at any time before the annuity
date with 30 days notice to us. Your annuity date cannot be any earlier than
one month after you buy the contract. Annuity payments must begin by the
annuitant's 85th birthday or 10 years from the date the contract was issued,
whichever is later. The annuitant is the person whose life we look to when we
make annuity payments.
If you do not choose an annuity option at the time you purchase the
contract, we will assume that you selected Option 2 which provides a life
annuity with 10 years of guaranteed payments.
During the income phase, you have the same investment choices you had
just before the start of the income phase. At the annuity date, you can choose
whether payments will come from the fixed account, the investment portfolio(s)
or a combination of both. If you don't tell us otherwise, your annuity
payments will be based on the investment allocations that were in place on the
annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things: 1) the value of your contract in the investment portfolio(s) on the
annuity date, 2) the 3% assumed investment rate used in the annuity table for
the contract, and 3) the performance of the investment portfolios you
selected. If the actual performance exceeds the 3% assumed rate, your annuity
payments will increase. Similarly, if the actual rate is less than 3%, your
annuity payments will decrease.
You can choose one of the following annuity options. After annuity
payments begin, you cannot change the annuity option.
OPTION 1. LIFE ANNUITY. Under this option, we will make an annuity
payment each month so long as the annuitant is alive. After the annuitant
dies, we stop making annuity payments.
OPTION 2. LIFE ANNUITY WITH 5, 10 OR 20 YEARS GUARANTEED. Under this
option, we will make an annuity payment each month so long as the annuitant is
alive. However, if, when the annuitant dies, we have made annuity payments
for less than the selected guaranteed period, we will then continue to make
annuity payments for the rest of the guaranteed period to the beneficiary. If
the beneficiary does not want to receive annuity payments, he or she can ask
us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will
make annuity payments each month so long as the annuitant and a second person
are both alive. When either of these people dies, we will continue to make
annuity payments, so long as the survivor continues to live. The amount of
the annuity payments we will make to the survivor can be equal to 100%, 66
2/3% or 50% of the amount that we would have paid if both were alive.
Annuity payments are made monthly unless you have less than $5,000 to
apply toward a payment ($2,000 if the contract is issued in Massachusetts or
Texas). In that case, Cova may provide your annuity payment in a single lump
sum. Likewise, if your annuity payments would be less than $100 a month ($20
in Texas), Cova has the right to change the frequency of payments so that your
annuity payments are at least $100 ($20 in Texas).
3. PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you give us to buy the contract. The
minimum we will accept is $5,000 when the contract is bought as a non-
qualified contract. If you are buying the contract as part of an IRA
(Individual Retirement Annuity), 401(k) or other qualified plan, the minimum
we will accept is $2,000. The maximum we accept is $1 million without our
prior approval. You can make additional purchase payments of $2,000 or more
to either type of contract.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment to
the fixed account and/or one or more of the investment portfolios you have
selected. If you make additional purchase payments, we will allocate them in
the same way as your first purchase payment unless you tell us otherwise.
There is a $500 minimum balance requirement for the fixed account and for each
investment portfolio.
If you change your mind about owning this contract, you can cancel it
within 10 days after receiving it (or the period required in your state).
When you cancel the contract within this time period, Cova will not assess a
withdrawal charge. You will receive back whatever your contract is worth on
the day we receive your request. In certain states or if you have purchased
the contract as an IRA, we may be required to give you back your purchase
payment if you decide to cancel your contract within 10 days after receiving
it (or whatever period is required in your state). If that is the case, we
will put your purchase payment in the Money Market Portfolio of the Cova
Series Trust for 15 days after we allocate your first purchase payment.
(In some states, the period may be longer.) At the end of that period, we
will re-allocate those funds as you selected.
Once we receive your purchase payment and the necessary information, we
will issue your contract and allocate your first purchase payment within 2
business days. If you do not give us all of the information we need, we will
contact you to get it. If for some reason we are unable to complete this
process within 5 business days, we will either send back your money or get
your permission to keep it until we get all of the necessary information. If
you add more money to your contract by making additional purchase payments, we
will credit these amounts to your contract within one business day. Our
business day closes when the New York Stock Exchange closes, usually 4:00 P.M.
Eastern time.
ACCUMULATION UNITS
The value of the variable annuity portion of your contract will go up or
down depending upon the investment performance of the investment portfolio(s)
you choose. In order to keep track of the value of your contract, we use a
unit of measure we call an accumulation unit. (An accumulation unit
works like a share of a mutual fund.) During the income phase of the
contract we call the unit an annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
(1) determining the total amount of money invested in the particular
investment portfolio;
(2) subtracting from that amount any insurance charges and any other
charges such as taxes we have deducted; and
(3) dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with
accumulation units. The number of accumulation units credited is determined
by dividing the amount of the purchase payment allocated to an investment
portfolio divided by the value of the accumulation unit for that investment
portfolio.
We calculate the value of an accumulation unit for each investment
portfolio after the New York Stock Exchange closes each day and then credit
your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from
you. You have told us you want this to go to the Quality Bond Portfolio.
When the New York Stock Exchange closes on that Monday, we determine that the
value of an accumulation unit for the Quality Bond Portfolio is $13.90. We
then divide $5,000 by $13.90 and credit your contract on Monday night with
360.23 accumulation units for the Quality Bond Portfolio.
4. INVESTMENT OPTIONS
The Contract offers 14 investment portfolios which are described below.
Additional investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE
INVESTING. COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
COVA SERIES TRUST
Cova Series Trust is managed by Cova Advisory, which is an indirect
subsidiary of Cova. Cova Series Trust is a mutual fund with multiple
portfolios. Each investment portfolio has a different investment objective.
Cova Investment Advisory Corporation has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
portfolios are available under the contract:
J.P. Morgan Investment Management Inc. is the sub-adviser to the following
portfolios:
Select Equity Portfolio
Large Cap Stock Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolio:
Bond Debenture Portfolio
Van Kampen American Capital Investment Advisory Corp. is the sub-adviser to
the following portfolios:
Growth and Income Portfolio
Money Market Portfolio
Quality Income Portfolio
High Yield Portfolio
Stock Index Portfolio
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios.
Each portfolio is managed by Lord, Abbett & Co. The following portfolios are
available under the contract:
Growth and Income Portfolio
Global Equity Portfolio (not available for new purchases)
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple
portfolios. Each portfolio is managed by General American Investment
Management Company. The following portfolio is available under the contract:
Money Market Fund
TRANSFERS
You can transfer money among the fixed account and the 14 investment
portfolios.
TRANSFERS DURING THE ACCUMULATION PHASE. You can make 12 transfers every
year during the accumulation phase without charge. We measure a year from the
annivesary of the day we issued your Contract. You can make a transfer to or
from the fixed account and to or from any investment portfolio. If you make
more than 12 transfers in a year, there is a transfer fee deducted. The fee is
$25 per transfer or, if less, 2% of the amount transferred. The following
apply to any transfer during the accumulation phase:
1. The minimum amount which you can transfer is $500 or your entire
value in the investment portfolio or fixed account.
2. Your request for transfer must clearly state which investment
portfolio(s) or the fixed account are involved in the transfer.
3. Your request for transfer must clearly state how much the
transfer is for.
4. You cannot make any transfers within 7 calendar days of the
annuity date.
TRANSFERS DURING THE INCOME PHASE. You can only make transfers between
the investment portfolios once each year. We measure a year from the
anniversary of the day we issued your contract. You cannot transfer from the
fixed account to an investment portfolio, but you can transfer from one or
more investment portfolios to the fixed account at any time. If you make more
than 12 transfers in a year, a transfer fee will be charged.
Cova has reserved the right during the year to terminate or modify the
transfer provisions described above.
You can make transfers by telephone. If you own the contract with a joint
owner, unless Cova is instructed otherwise, Cova will accept instructions from
either you or the other owner. Cova will use reasonable procedures to confirm
that instructions given us by telephone are genuine. If Cova fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. Cova tape records all telephone instructions.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a
set amount each month from the Money Market Portfolio or the fixed account to
any of the other investment portfolio(s). By allocating amounts on a regular
schedule as opposed to allocating the total amount at one particular time, you
may be less susceptible to the impact of market fluctuations.
The minimum amount which can be transferred each month is $500. You must
have at least $6,000 in the Money Market Portfolio or the fixed account, (or
the amount required to complete your program, if less) in order to participate
in the Dollar Cost Averaging Program.
All Dollar Cost Averaging transfers will be made on the 15th day of the
month unless that day is not a business day. If it is not, then the transfer
will be made the next business day.
If you participate in the Dollar Cost Averaging Program, the transfers
made under the program are not taken into account in determining any transfer
fee.
AUTOMATIC REBALANCING PROGRAM
Once your money has been allocated among the investment portfolios, the
performance of each portfolio may cause your allocation to shift. You can
direct us to automatically rebalance your contract to return to your original
percentage allocations by selecting our Automatic Rebalancing Program. You
can tell us whether to rebalance quarterly, semi-annually or annually. We
will measure these periods from the anniversary of the date we issued your
contract. The transfer date will be the 1st day after the end of the period
you selected. If you participate in the Automatic Rebalancing Program, the
transfers made under the program are not taken into account in determining any
transfer fee.
EXAMPLE:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Quality Bond Portfolio and
60% to be in Select Equity Portfolio. Over the next 2 1/2 months the bond
market does very well while the stock market performs poorly. At the end of
the first quarter, the Quality Bond Portfolio now represents 50% of your
holdings because of its increase in value. If you had chosen to have your
holdings rebalanced quarterly, on the first day of the next quarter, Cova
would sell some of your units in the Quality Bond Portfolio to bring its value
back to 40% and use the money to buy more units in the Select Equity Portfolio
to increase those holdings to 60%.
APPROVED ASSET ALLOCATION PROGRAMS
Cova recognizes the value to certain owners of having available, on a
continuous basis, advice for the allocation of your money among the investment
options available under the contracts. Certain providers of these types of
services have agreed to provide such services to owners in accordance with
Cova's administrative rules regarding such programs.
Cova has made no independent investigation of these programs. Cova has
only established that these programs are compatible with our administrative
systems and rules. Approved asset allocation programs are only available
during the accumulation phase.
Even though Cova permits the use of approved asset allocation programs,
the contract was not designed for professional market timing organizations.
Repeated patterns of frequent transfers is disruptive to the operations of the
investment portfolios, and should Cova become aware of such disruptive
practices, we may modify the transfer provisions of the contract.
If you participate in an Approved Asset Allocation Program, the transfers
made under the program are not taken into account in determining any transfer
fee.
VOTING RIGHTS
Cova is the legal owner of the investment portfolio shares. However,
Cova believes that when an investment portfolio solicits proxies in
conjunction with a vote of shareholders, it is required to obtain from you and
other owners instructions as to how to vote those shares. When we receive
those instructions, we will vote all of the shares we own in proportion to
those instructions. This will also include any shares that Cova owns on its
own behalf. Should Cova determine that it is no longer required to comply
with the above, we will vote the shares in our own right.
SUBSTITUTION
Cova may be required to substitute one of the investment portfolios you
have selected with another portfolio. We would not do this without the prior
approval of the Securities and Exchange Commission. We will give you notice
of our intent to do this.
5. EXPENSES
There are charges and other expenses associated with the contracts that
reduce the return on your investment in the contract. These charges and
expenses are:
INSURANCE CHARGES
Each day, Cova makes a deduction for its insurance charges. Cova does
this as part of its calculation of the value of the accumulation units and the
annuity units. The insurance charge has two parts: 1) the mortality and
expense risk premium and 2) the administrative expense risk charge.
Mortality and Expense Risk Premium. This charge is equal, on an annual
basis, to 1.25% of the daily value of the contracts invested in an investment
portfolio, after expenses have been deducted. This charge is for all the
insurance benefits e.g., guarantee of annuity rates, the death benefits, for
certain expenses of the contract, and for assuming the risk (expense risk)
that the current charges will be sufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then Cova will bear the loss. Cova does, however, expect to
profit from this charge. The mortality and expense risk premium cannot be
increased. Cova may use any profits we make from this charge to pay for the
costs of distributing the contract.
Administrative Expense Charge. This charge is equal, on an annual
basis, to .15% of the daily value of the contracts invested in an investment
portfolio, after expenses have been deducted. This charge, together with the
contract maintenance charge (see below) is for all the expenses associated
with the administration of the contract. Some of these expenses are:
preparation of the contract, confirmations, annual reports and statements,
maintenance of contract records, personnel costs, legal and accounting fees,
filing fees, and computer and systems costs. Because this charge is taken out
of every unit value, you may pay more in administrative costs than those that
are associated solely with your contract. Cova does not intend to profit from
this charge. However, if this charge and the contract maintenance charge are
not enough to cover the costs of the contracts in the future, Cova will bear
the loss.
CONTRACT MAINTENANCE CHARGE
During the accumulation phase, every year on the anniversary of the date
when your contract was issued, Cova deducts $30 from your contract as a
contract maintenance charge. (In South Carolina, the charge is the lesser of
$30 or 2% of the value of the contract.) This charge is for administrative
expenses (see above). This charge can not be increased.
Cova will not deduct this charge, if when the deduction is to be made,
the value of your contract is $50,000 or more. Cova may some time in the
future discontinue this practice and deduct the charge.
If you make a complete withdrawal from your contract, the contract
maintenance charge will also be deducted. A prorata portion of the charge
will be deducted if the annuity date is other than an anniversary. After the
annuity date, the charge will be collected monthly out of the annuity payment.
WITHDRAWAL CHARGE
During the accumulation phase, you can make withdrawals from your
contract. Cova keeps track of each purchase payment. Once a year after the
first year, you can withdraw up to 10% of your total purchase payments and no
withdrawal charge will be assessed on the 10%, if on the day you make your
withdrawal the value of your contract is $5,000 or more. Otherwise, the
charge is 5% of each purchase payment you take out. However, after Cova has
had a purchase payment for 5 years, there is no charge when you withdraw that
purchase payment. For purposes of the withdrawal charge, Cova treats
withdrawals as coming from the oldest purchase payment first. When the
withdrawal is for only part of the value of your contract, the withdrawal
charge is deducted from the remaining value in your contract.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the contract. Thus, for tax purposes, earnings are considered to
come out first.
Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
After you have owned the contract for one year, if you, or your joint
owner, has been confined to a nursing home or hospital for at least 90
consecutive days under a doctor's care and you need part or all of the money
from your contract, Cova will not impose a withdrawal charge. You or your
joint owner cannot have been so confined when you purchased your contract if
you want to take advantage of this provision. This is called the Nursing Home
Waiver. This provision is not available in all states.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
Cova will reduce or eliminate the amount of the withdrawal charge when
the contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be
purchasing the contract or a prospective purchaser already had a relationship
with Cova. Cova will not deduct a withdrawal charge under a contract issued to
an officer, director or employee of Cova or any of its affiliates.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some
of these taxes are due when the contract is issued, others are due when
annuity payments begin. It is Cova's current practice to not charge anyone
for these taxes until annuity payments begin or a complete withdrawal is made.
Cova may some time in the future discontinue this practice and assess the
charge when the tax is due. Premium taxes generally range from 0% to 4%,
depending on the state.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the
day we issue your contract. If you make more than 12 transfers a year, we
will deduct a transfer fee of $25 or 2% of the amount that is transferred
whichever is less.
If the transfer is part of the Dollar Cost Averaging Program, the
Automatic Rebalancing Program or an Approved Asset Allocation Program, it will
not count in determining the transfer fee.
INCOME TAXES
Cova will deduct from the contract for any income taxes which it incurs
because of the contract. At the present time, we are not making any such
deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the
various investment portfolios, which are described in the attached fund
prospectuses.
6. TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any
individual. You should consult your own tax adviser about your own
circumstances. Cova has included in the Statement of Additional Information
an additional discussion regarding taxes.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs -
usually retirement. Congress recognized how important saving for retirement
was and provided special rules in the Internal Revenue Code (Code) for
annuities.
Simply stated these rules provide that you will not be taxed on the
earnings on the money held in your annuity contract until you take the money
out. This is referred to as tax deferral. There are different rules as to
how you will be taxed depending on how you take the money out and the type of
contract - qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your
contract until a distribution occurs - either as a withdrawal or as annuity
payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. For annuity payments, different rules apply. A
portion of each annuity payment is treated as a partial return of your
purchase payments and will not be taxed. The remaining portion of the annuity
payment will be treated as ordinary income. How the annuity payment is
divided between taxable and non-taxable portions depends upon the period over
which the annuity payments are expected to be made. Annuity payments received
after you have received all of your purchase payments are fully includible in
income.
When a non-qualified contract is owned by a non-natural person
(e.g., corporation or certain other entities other than tax-qualified trusts),
the contract will generally not be treated as an annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under any pension
plan, specially sponsored program or an individual retirement annuity, your
contract is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored
program, or an individual retirement annuity, your contract is referred to as
a qualified contract. Examples of qualified plans are: Individual Retirement
Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b)
contracts), H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension
and profit plans, which include 401(k) plans.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a
withdrawal as first coming from earnings and then from your purchase payments.
Such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts: (1)
paid on or after the taxpayer reaches age 59 1/2; (2) paid after you die; (3)
paid if the taxpayer becomes totally disabled (as that term is defined in the
Code); (4) paid in a series of substantially equal payments made annually (or
more frequently) under a lifetime annuity, (5) paid under an immediate
annuity; or (6) which come from purchase payments made prior to August 14,
1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts
does not apply to qualified contracts. There are special rules that govern
with respect to qualified contracts. We have provided a more complete
discussion in the Statement of Additional Information.
WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of purchase payments made by owners from
certain Tax-Sheltered Annuities. Withdrawals can only be made when an owner:
(1) reaches age 59 1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled
(as that term is defined in the Code); or (5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity
must satisfy certain diversification requirements in order to be treated as an
annuity contract. Cova believes that the investment portfolios are being
managed so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to
date provide guidance as to the circumstance under which you, because of the
degree of control you exercise over the underlying investments, and not Cova
would be considered the owner of the shares of the investment portfolios. If
this occurs, it will result in the loss of the favorable tax treatment for the
contract. It is unknown to what extent owners are permitted to select
investment portfolios, to make transfers among the investment portfolios or
what the number and type of investment portfolios owners may select from. If
any guidance is provided which is considered a new position, then the guidance
would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This
would mean that you, as the owner of the contract, could be treated as the
owner of the investment portfolios.
Due to the uncertainty in this area, Cova reserves the right to modify
the contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making a
withdrawal (either a partial or a complete withdrawal); (2) by electing to
receive annuity payments; or (3) when a death benefit is paid to your
beneficiary. Under most circumstances, withdrawals can only be made during
the accumulation phase.
When you make a complete withdrawal you will receive the value of the
contract on the day you made the withdrawal less any applicable withdrawal
charge, less any premium tax and less any contract maintenance charge. (See
Section 5. Expenses for a discussion of the charges.)
Unless you instruct Cova otherwise, any partial withdrawal will be made
pro-rata from all the investment portfolios and the fixed account you
selected. Under most circumstances the amount of any partial withdrawal must
be for at least $500. Cova requires that after a partial withdrawal is made
you keep at least $500 in any selected investment portfolio.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
There are limits to the amount you can withdraw from a qualified plan
referred to as a 403(b) plan. For a more complete explanation see Section 6.
Taxes and the discussion in the Statement of Additional Information.
SYSTEMATIC WITHDRAWAL PROGRAM
If you are 59 1/2 or older, you may use the Systematic Withdrawal
Program. This program provides an automatic monthly payment to you of up to
10% of your total purchase payments each year. No withdrawal charge will be
made for these payments. Cova does not have any charge for this program, but
reserves the right to charge in the future. If you use this program, you may
not also make a single 10% free withdrawal. For a discussion of the
withdrawal charge and the 10% free withdrawal, see Section 5. Expenses.
All Systematic Withdrawals will be paid on the 15th day of the month
unless that day is not a business day. If it is not, then the payment will be
the next business day.
Income taxes may apply to Systematic Withdrawals.
8. PERFORMANCE
Cova periodically advertises performance of the various investment
portfolios. Cova will calculate performance by determining the percentage
change in the value of an accumulation unit by dividing the increase
(decrease) for that unit by the value of the accumulation unit at the
beginning of the period. This performance number reflects the deduction of
the insurance charges. It does not reflect the deduction of any applicable
contract maintenance charge and withdrawal charge. The deduction of any
applicable contract maintenance charge and withdrawal charges would reduce the
percentage increase or make greater any percentage decrease. Any
advertisement will also include total return figures which reflect the
deduction of the insurance charges, contract maintenance charges, and
withdrawal charges.
Appendix B contains performance information that you may find
informative. It is divided into various parts, depending upon the type of
performance information shown. Future performance will vary and the results
shown are not necessarily representative of future results.
PART 1. This section shows actual investment performance of the
investment portfolios that were operating under the contract before May 1,
1996. Chart 1 contained in Appendix B sets out the actual performance at both
the underlying investment portfolio level and at the accumulation unit level.
The performance figures for the investment portfolios reflect the deduction of
the actual fees and expenses paid by the Portfolio. There is performance
figures for the accumulation units which reflect the insurance charges as well
as the fees and expenses of the investment portfolio. There is also
performance figures for the accumulation units which reflect the insurance
charges, the contract maintenance charge, the fees and expenses of the
investment portfolio, and assumes that you make a withdrawal at the end of the
period and therefore the withdrawal charge is reflected.
PART 2. This section shows the actual investment performance of the
GAIMCO Money Market Fund. Even though the GAIMCO Money Market Fund was not
available under the contract until May 1, 1996, the GAIMCO Money Market Fund
has been in existence for some time and therefore has an investment
performance history. In order to show how investment experience of the GAIMCO
Money Market Fund affects accumulation unit values, hypothetical performance
information was developed.
Chart 2 contained in Appendix B sets out hypothetical information based
upon the historical experience of the GAIMCO Money Market Fund and is for the
periods shown. The performance figures for the GAIMCO Money Market Fund
reflect the deduction of the actual fees and expenses paid by this portfolio.
There is performance figures for the accumulation units which reflect the
insurance charges as well as the fees and expenses of the portfolio. There is
also performance figures for the accumulation units which reflect the
insurance charges, the contract maintenance charge, the fees and expenses of
the portfolio, and assumes that you make a withdrawal at the end of the period
and therefore the withdrawal charge is reflected.
PART 3. The Bond Debenture investment portfolio is newly created and
therefore does not yet have its own performance record. However, it has the
same investment objective and follows substantially the same investment
strategies as a certain mutual fund advised by the same manager or
sub-adviser. This fund is sold to the public (Public Fund) and has an
investment performance record. In order to demonstrate how the performance of
the Public Fund affects accumulation unit values, hypothetical performance
information was developed.
Chart 3 contained in Appendix B shows the historical performance of the
Public Fund. These performance figures reflect the deduction of the
historical fees and expenses paid by the Public Fund and not those paid by the
investment portfolio. The hypothetical figures for the accumulation units
assume the deduction of the fees and expenses anticipated to actually be paid
by the investment portfolio, but uses the actual performance results of the
Public Fund. There is hypothetical performance figures for the accumulation
units which reflect the insurance charges as well as the portfolio expenses.
There is also hypothetical performance figures for the accumulation units
which reflect the insurance charges, the contract maintenance charge, the
portfolio expenses, and assumes that you make a withdrawal at the end of the
period and therefore the withdrawal charge is reflected.
PART 4. J.P. Morgan Investment Management Inc. is the sub-adviser for
five investment portfolios. The portfolios are newly formed and have no
performance history. However, all of these investment portfolios (except the
International Equity Portfolio) have investment objectives, policies and
strategies substantially similar to those employed by the sub-adviser with
respect to certain private accounts (Private Accounts). The overall
operations of the portfolios are comparable to those of the Private Accounts
so that the performance of these Private Accounts is deemed relevant to the
investor. In order to demonstrate how the actual investment experience of
these Private Accounts affects accumulation unit values, hypothetical
performance information was developed.
Chart 4 contained in Appendix B shows hypothetical performance
information derived from the historical performance of composites of the
comparable Private Accounts with respect to the Select Equity, Large Cap
Stock, Small Cap Stock and Quality Bond investment portfolios. The
hypothetical performance figures for the investment portfolios represent the
actual performance results of the composites of comparable Private Accounts,
adjusted to reflect the deduction of the fees and expenses anticipated to be
paid by the investment portfolio. The actual composite performance figures of
the Private Accounts are time-weighted rates of return which include all
income and accrued income and realized and unrealized gains or losses, but do
not reflect the deduction of investment advisory fees actually charged to the
Private Accounts. There is hypothetical performance figures for the
accumulation units which reflects the actual performance results of the
composites of comparable Private Accounts, adjusted to reflect the deduction
of the fees and expenses anticipated to be paid by the investment portfolio
and the insurance charges. There is also hypothetical performance figures for
the accumulation units which reflects the actual performance results of the
composites of comparable Private Accounts, adjusted to reflect the deduction
of the fees and expenses anticipated to be paid by the investment portfolio
plus the insurance charges, the contract maintenance charge, and also assumes
that you make a withdrawal at the end of the period and therefore the
withdrawal charge is reflected.
Please note that Appendix B does not contain performance information for the
International Equity Portfolio.
9. DEATH BENEFIT
UPON YOUR DEATH
If you die before annuity payments begin, Cova will pay a death benefit
to your beneficiary (see below). If you have a joint owner, the death benefit
will be paid when the first of you dies. Joint owners must be spouses. The
surviving joint owner will be treated as the beneficiary.
The amount of the death benefit depends on how old you or your joint
owner is.
Prior to you, or your joint owner, reaching age 80, the death benefit
will be the greater of:
1. Total purchase payments, less withdrawals (and any withdrawal
charges paid on the withdrawal) accumulated at 4% from the date your contract
was issued until the date of death; or
2. The value of your contract at the time the death benefit is to be
paid; or
3. The value of your contract on the most recent five year
anniversary, plus any subsequent purchase payments, less any withdrawals (and
any withdrawal charges paid on the withdrawals).
After you, or your joint owner, reach age 80, the death benefit will be
the greater of:
1. Total purchase payments, less withdrawals (and any withdrawal
charges paid on the withdrawals) accumulated at 4% from the date your contract
was issued until you or your joint owner reach age 80, plus any subsequent
purchase payments, less any withdrawals (and any withdrawal charges paid on
the withdrawals) ; or
2. The value of your contract at the time the death benefit is to be
paid; or
3. The value of your contract on the most recent five year
anniversary before the date of death on or before you or your joint owner
reach age 80, plus any subsequent purchase payments, less any withdrawals (and
any withdrawal charges paid on the withdrawals).
The death benefit provisions described above may not be available in your
state. In those states where it is not available, the death benefit will be
as follows:
Prior to you, or your joint owner, reaching age 80, the death benefit
will be the greater of:
1. Total purchase payments, less withdrawals (and any withdrawal
charges paid on the withdrawals);
2. The value of your Contract at the time of the death benefit is to
be paid; or
3. The value of your Contract on the most recent five year
anniversary before the date of death, plus any subsequent purchase payments,
less any withdrawals (and any withdrawal charges paid on the withdrawals.)
After you, or your joint owner, reach age 80, the death benefit will be
the greater of:
1. Total purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals);
2. The value of your contract at the time the death benefit is to be
paid; or
3. The value of your contract on the most recent five year
anniversary on or before you or your joint owner reach age 80, plus any
subsequent purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals);
The entire death benefit must be paid within 5 years of the date of death
unless the beneficiary elects to have the death benefit payable under an
annuity option. The death benefit payable under an annuity option must be
paid over the beneficiary's lifetime or for a period not extending beyond
the beneficiary's life expectancy. Payment must begin within one year of the
date of death. If the beneficiary is the spouse of the owner, he/she can
continue the contract in his/her own name at the then current value. If a
lump sum payment is elected and all the necessary requirements are met,
the payment will be made within 7 days.
DEATH OF ANNUITANT
If the annuitant, not an owner or joint owner, dies before annuity
payments begin, you can name a new annuitant. If no annuitant is named within
30 days of the death of the annuitant, you will become the annuitant. However,
if the owner is a non-natural person (for example, a corporation), then the
death or change of annuitant will be treated as the death of the owner, and a
new annuitant may not be named.
Upon the death of the annuitant after annuity payments begin, the death
benefit, if any, will be as provided for in the annuity option selected.
10. OTHER INFORMATION
COVA
Cova Financial Services Life Insurance Company ("Cova") was incorporated
on August 17, 1981 as Assurance Life Company, a Missouri corporation and
changed its name to Xerox Financial Services Life Insurance Company in
1985. On June 1, 1995, a wholly-owned subsidiary of General American Life
Insurance Company purchased Cova which on that date changed its name to Cova
Financial Services Life Insurance Company.
Cova is licensed to do business in the District of Columbia and all
states except California, Maine, New Hampshire, New York and Vermont.
THE SEPARATE ACCOUNT
Cova has established a separate account, Cova Variable Annuity Account
One (Separate Account), to hold the assets that underlie the contracts. The
Board of Directors of Cova adopted a resolution to establish the Separate
Account under Missouri insurance law on February 24, 1987. We have registered
the Separate Account with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940.
The assets of the Separate Account are held in Cova's name on behalf of
the Separate Account and legally belong to Cova. However, those assets that
underlie the contracts, are not chargeable with liabilities arising out of any
other business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts the Company may issue.
DISTRIBUTOR
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois 60181-4644, acts as the distributor of the
contracts. Life Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions up to 5.5% of purchase payments
but may pay, under certain circumstances, an additional .5% commission.
Sometimes, Cova enters into an agreement with the broker-dealer to pay the
broker-dealer persistency bonuses, in addition to the standard commissions. To
the extent that the withdrawal charge is insufficient to cover the actual cost
of distribution, Cova may use any of its corporate assets, including any
profit from the mortality and expense risk premium, to make up any difference.
OWNERSHIP
Owner. You, as the owner of the contract, have all the rights
under the contract. Prior to the annuity date, the owner is as designated at
the time the contract is issued, unless changed. On and after the annuity
date, the annuitant is the owner. The beneficiary becomes the owner when a
death benefit is payable.
Joint Owner. The contract can be owned by joint owners.
Any joint owner must be the spouse of the other owner (except in
Pennsylvania). Upon the death of either joint owner, the surviving spouse
will be the designated beneficiary. Any other beneficiary designation at the
time the contract was issued or as may have been later changed will be treated
as a contingent beneficiary unless otherwise indicated.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any
death benefit. The beneficiary is named at the time the contract is issued
unless changed at a later date. Unless an irrevocable beneficiary has been
named, you can change the beneficiary at any time before you die.
ASSIGNMENT
You can assign the contract at any time during your lifetime. Cova will
not be bound by the assignment until it receives the written notice of the
assignment. Cova will not be liable for any payment or other action we take
in accordance with the contract before we receive notice of the assignment.
AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be
limitations on your ability to assign the contract.
SUSPENSION OF PAYMENTS OR TRANSFERS
Cova may be required to suspend or postpone payments for withdrawal or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary
weekend and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or Cova cannot reasonably
value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of owners.
Cova has reserved the right to defer payment for a withdrawal or transfer
from the fixed account for the period permitted by law but not for more than
six months.
FINANCIAL STATEMENTS
The consolidated financial statements of Cova and the Separate Account
have been included in the Statement of Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Page
Company
Experts
Legal Opinions
Distribution
Performance Information
Tax Status
Annuity Provisions
Financial Statements
APPENDIX A
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUE HISTORY
The following schedule includes accumulation unit values for the periods
indicated. This data has been extracted from the Separate Account's Financial
Statements. The Separate Account's Financial Statements have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, whose report
is included in the Statement of Additional Information. This information
should be read in conjunction with the Separate Account's Financial Statements
and related notes which are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
For the period from
Year or Year or Year or Year or Year or Year or December 11, 1989
Period Period Period Period Period Period (Start of
Ended Ended Ended Ended Ended Ended Operations) through
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 December 31, 1989
---------- ---------- ---------- ---------- ---------- ---------- --------------------
COVA SERIES TRUST
Quality Income Sub-Account
Beginning of Period $ 13.17 $ 13.97 $ 12.75 $ 12.02 $ 10.62 $ 9.97 $ 10.00
End of Period 15.33 13.17 13.97 12.75 12.02 10.62 9.97
Number of Accum. Units Outstanding 2,690,633 2,576,412 3,659,656 1,891,499 563,960 564,940 253,695
High Yield Sub-Account
Beginning of Period $ 16.98 $ 18.02 $ 14.99 $ 12.75 $ 10.06 $ 10.02 $ 10.00
End of Period 19.52 16.98 18.02 14.99 12.75 10.06 10.02
Number of Accum. Units Outstanding 1,870,232 1,157,642 1,045,815 361,296 298,202 280,854 250,000
Money Market Sub-Account
Beginning of Period $ 10.90 $ 10.61 $ 10.46 $ 10.21 $ 10.00 * *
End of Period 11.43 10.90 10.61 10.46 10.21
Number of Accum. Units Outstanding 2,987,132 6,963,421 617,575 385,448 527,571
Growth and Income Sub-Account
Beginning of Period (5/1/92 -
Start of operations) $ 11.20 $ 11.92 $ 10.47 $ 10.00 * * *
End of Period 14.61 11.20 11.92 10.47
Number of Accum. Units Outstanding 1,342,833 977,209 547,643 250,919
Stock Index Sub-Account
Beginning of Period $ 11.68 $ 11.87 $ 11.05 $ 10.55 $ 10.00 * *
End of Period 15.77 11.68 11.87 11.05 10.55
Number of Accum. Units Outstanding 5,436,980 3,151,443 7,691,151 3,164,251 639,923
LORD ABBETT SERIES FUND, INC.
Growth and Income Sub-Account
Beginning of Period $ 16.64 $ 16.42 $ 14.50 $ 12.73 $ 10.15 $ 10.06 $ 10.00
End of Period 21.31 16.64 16.42 14.50 12.73 10.15 10.06
Number of Accum. Units Outstanding 8,947,108 6,875,139 4,994,582 2,560,999 1,426,577 1,041,342 14,482
Global Equity Sub-Account
Beginning of Period $ 13.33 $ 13.29 $ 10.64 $ 10.97 $ 9.79 $ 10.00 *
End of Period 14.52 13.33 13.29 10.64 10.97 9.79
Number of Accum. Units Outstanding 172,206 233,186 273,399 305,314 391,234 262,309
<FN>
* The Lord Abbett Global Equity Portfolio started regular investment
operations on April 9, 1990. The Van Kampen American Capital Money Market
Portfolio started regular investment operations on July 1, 1991, the Van Kampen
American Capital Stock Index Portfolio started regular investment operations
on November 1, 1991, and the Van Kampen American Capital Growth and Income
Portfolio started regular investment operations on May 1, 1992. The following
Portfolios managed by J.P. Morgan Investment Management Inc. started regular
investment operations on April 1, 1996: Select Equity, Large Cap Stock, Small
Cap Stock, International Equity and Quality Bond. The Bond Debenture
Portfolio managed by Lord, Abbett & Co. also started regular investment
operations on April 1, 1996. The GAIMCO Money Market Fund was not made available
under the contract until May 1, 1996.
</TABLE>
APPENDIX B
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
PART 1 COVA SERIES TRUST AND LORD ABBETT SERIES FUND, INC., EXISTING
PORTFOLIOS
Van Kampen American Capital Investment Advisory Corp. is the sub-adviser for
the following portfolios of Cova Series Trust: Money Market, Stock Index, High
Yield, Quality Income and Growth and Income. Lord, Abbett & Co. is the
investment adviser for Lord Abbett Series Fund, Inc. It currently has two
operating portfolios: Growth and Income and Global Equity. (The Global Equity
Portfolio is not available for new purchases.) All of these portfolios began
operations before May 1, 1996. As a result, performance information is
available for these portfolios as well as for the accumulation unit values.
The performance figures shown for the portfolios in Column A in the chart
below reflect the actual fees and expenses paid by the portfolio. Column B
presents performance figures for the accumulation units which
reflects the insurance charges as well as the fees and expenses of the
investment portfolio. Column C presents performance figures for the
accumulation units which reflects the insurance charges, the contract
maintenance charge, the fees and expenses of the investment portfolio, and
assumes that you make a withdrawal at the end of the period and therefore the
withdrawal charge is reflected. For the Cova Series Trust Portfolios,
inception was December 11, 1989 for the Quality Income and High Yield
Portfolios; July 1, 1991 for the Money Market Portfolio; November 1, 1991 for
the Stock Index Portfolio; and May 1, 1992 for the Growth and Income
Portfolio. For the Lord Abbett Series Fund, Inc. Portfolios, inception was
December 11, 1989 for the Growth and Income Portfolio and April 9, 1990 for
the Global Equity Portfolio.
Average Annual Total Return
For the periods ended 12/31/95
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cova Series Trust
---------- ------- -------------
Column A Column B Column C
Portfolio Performance Accumulation Unit Performance
---------- ------------
Portfolio 1 year 5 years since 1 year 5 years since 1 year 5 years since
- ----------------- ---------- ------------ ---------- ------- ------------- ---------- ------------ -------- ----------
inception inception inception
---------- ---------- ----------
Growth and Income 32.24% -- 12.26% 30.49% -- 10.97% 25.10% -- 9.54%
Money Market 6.01% -- 4.47% 4.85% -- 3.00% ( .45%) -- 1.62%
Quality Income 17.99% 9.12% 8.93% 16.41% 7.62% 7.31% 11.00% 6.33% 6.29%
High Yield 16.69% 15.14% 13.35% 14.99% 14.17% 11.68% 9.47% 13.02% 10.73%
Stock Index 36.87% -- 14.59% 35.06% -- 11.57% 29.64% -- 10.25%
- ----------------- ---------- ------------ ---------- ------- ------------- ---------- ------------ -------- ----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lord Abbett Series Fund, Inc.
---------- ------- ------------- -----------
Column A Column B Column C
Portfolio Performance Accumulation Unit Performance
Portfolio 1 year 5 years since 1 year 5 years since 1 year 5 years since
- ----------------- ---------- ------------ ---------- ------- ------------- ----------- ------------ -------- ----------
inception inception inception
---------- ----------- ----------
Growth and Income 29.82% 17.59% 14.86% 28.03% 15.99% 13.31% 22.46% 14.86% 12.38%
Global Equity 10.43% 9.70% 8.22% 9.17% 8.19% 6.72% 3.78% 6.96% 5.61%
- ----------------- ---------- ------------ ---------- ------- ------------- ----------- ------------ -------- ----------
</TABLE>
PART 2 GAIMCO MONEY MARKET FUND
Even though the GAIMCO Money Market Fund was not available under the contract
until May 1, 1996, the GAIMCO Money Market Fund has been in existence for
sometime and therefore has an investment performance history. In order to
show how investment performance of the GAIMCO Money Market Fund affects
accumulation unit values, we have developed hypothetical performance
information.
The chart below shows the actual investment performance of the GAIMCO Money
Market Fund and the hypothetical accumulation unit performance calculated by
assuming that accumulation units were invested in the GAIMCO Money Market Fund
for the same periods.
The performance figures in Column A below for the GAIMCO Money Market Fund
reflect the actual fees and expenses paid by the portfolio. Column B
presents hypothetical performance figures for the accumulation
units which reflects the insurance charges as well as the fees and expenses of
the GAIMCO Money Market Fund. Column C presents hypothetical
performance figures for the accumulation units which reflects the insurance
charges, the contract maintenance charge, the fees and expenses of the GAIMCO
Money Market Fund, and assumes that you make a withdrawal at the end of the
period and therefore the withdrawal charge is reflected.
Average Annual Total Return
For the periods ended 12/31/95
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAIMCO Money Market Fund
------------ ------- ------------- -------------
Column A Column B Column C
Fund Performance Hypothetical Accumulation Unit
Performance
Portfolio 1 year 5 years 10 years 1 year 5 years 10 years 1 year 5 years 10 years
- ------------- ------- -------- ------------ ------- ------------- ------------- ------- ------------ ---------
Money Market 6.17% 4.82% 6.46% 4.77% 3.42% 5.06% (.33)% (1.18)% 4.96%
- ------------- ------- -------- ------------ ------- ------------- ------------- ------- ------------ ---------
</TABLE>
PART 3 PUBLIC FUND
The investment portfolio set out in the chart below is newly created and does
not yet have its own performance record. However, it has the same investment
objectives and follows substantially the same investment strategies as a
mutual fund advised by the same sub-adviser. This fund is sold to the public
and is referred to here as a Public Fund.
The chart below shows the historical performance of the Public Fund. The
performance figures in Column A reflect the deduction of the historical fees
and expenses paid by the Public Fund and not those paid by the investment
portfolio. Column B presents hypothetical performance figures for the
accumulation units which reflects the insurance charges and the deduction of
the fees and expenses anticipated to actually be paid by the investment
portfolio. Column C presents hypothetical performance figures
for the accumulation units which reflects the insurance charges, the contract
maintenance charge, the deduction of the fees and expenses anticipated to
actually be paid by the investment portfolio and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
Average Annual Total Return
For the periods ended 12/31/95
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Public Fund
------- -------------
Column A Column B Column C
Public Fund Performance Hypothetical Accumulation Unit
Performance
Portfolio 1 year 5 years 10 years 1 year 5 years 10 years 1 year 5 years 10 years
- ------------------- ------- -------- ------------ ------- ------------- ------------- ------- ------------ ---------
Lord Abbett Bond
Debenture Fund 17.50% 16.00% 10.10% 16.10% 14.60% 8.70% 11.00% 10.00% 8.60%
- ------------------- ------- -------- ------------ ------- ------------- ------------- ------- ------------ ---------
</TABLE>
PART 4 HYPOTHETICAL PERFORMANCE INFORMATION DERIVED FROM PRIVATE ACCOUNTS
The investment portfolios set out in the chart below are newly created and do
not yet have their own performance record. However, they have investment
objectives, policies and strategies substantially similar to those employed by
J.P. Morgan Investment Management Inc. with respect to certain Private
Accounts. Thus, the performance information derived from these Private
Accounts is deemed relevant to the investor. The performance of the
investment portfolios may vary from the Private Account composite information
because each investment portfolio will be actively managed and its investments
will vary from time to time and will not be identical to the past portfolio
investments of the Private Accounts. Moreover, the Private Accounts are not
registered under the 1940 Act and therefore are not subject to certain
investment restrictions that are imposed by the 1940 Act, which, if imposed,
could have adversely affected the Private Accounts' performances.
The chart below shows hypothetical performance information derived from
historical composite performance of the Private Accounts included in the
Active Equity Composite, Structured Stock Selection Composite, Small Cap
Directly Invested Composite and Public Bond Composite. The hypothetical
performance figures for the investment portfolios in Column A represent the
actual performance results of the composites of comparable Private Accounts,
adjusted to reflect the deduction of the fees and expenses anticipated to be
paid by the investment portfolio. The actual Private Account composite
performance figures are time-weighted rates of return which include all
income and accrued income and realized and unrealized gains or losses, but
do not reflect the deduction of investment advisory fees actually charged
to the Private Accounts. Column B presents the hypothetical performance
figures for the accumulation units which reflects the actual performance
results of the composites of comparable Private Accounts, adjusted to
reflect the deduction of the fees and expenses anticipated to be paid by
the investment portfolio and the insurance charges. Column C presents the
hypothetical performance figures for the accumulation units which reflects
the insurance charges, the contract maintenance charge, the actual performance
results of the composites of comparable Private Accounts, adjusted to reflect
the deduction of the fees and expenses anticipated to be paid by the
investment portfolio. The right column also assumes that you make a withdrawal
at the end of the period and therefore the withdrawal charge is reflected.
Inception was June 1, 1987 for the Public Bond Composite and November 1, 1989
for the Structured Stock Selection Composite.
Hypothetical Performance Information Derived from Private Account Composite
Performance Reduced by Anticipated Investment Portfolio Fees and Expenses
For the periods ended 12/31/95
Performance Derived from Private Accounts
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Hypothetical Investment Portfolio Performance
Column A Column B
Hypothetical
Portfolio 1 year 5 years 10 Years 1 year 5 years 10 Years or
or Since Inception Since Inception
- ---------------------------- ------------- ----------- --------------- ------- --------- ----------------
Active Equity Composite 32.56% 17.71% 15.51% 31.16% 16.31% 14.11%
(Select Equity Portfolio)
Structured Stock Selection
Composite 37.47% 17.40% 14.05% 36.07% 16.00% 12.65%
(Large Cap Stock Portfolio)
Small Cap Directly Invested
Composite 35.29% 20.75 12.00% 33.89% 19.35% 10.60%
(Small Cap Stock Portfolio)
Public Bond Composite 17.71% 9.46% 9.52% 16.31% 8.06% 8.12%
(Quality Bond Portfolio)
- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Unit Performance
Column C
Portfolio 1 Year 5 years 10 Years
Or Since Inception
- ---------------------------- ------- ------------ -------------------
Active Equity Composite 26.06% 11.71% 14.01%
(Select Equity Portfolio)
Structured Stock Selection
Composite 30.97% 11.40% 12.55%
(Large Cap Stock Portfolio)
Small Cap Directly Invested
Composite 28.79% 14.75% 10.50%
(Small Cap Stock Portfolio)
Public Bond Composite 11.21% 3.46% 8.02%
(Quality Bond Portfolio)
- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RECAP
Perfor- Accumu-
Chart mance lation
Column A Column B
10 Yrs or 10 Yrs or
Portfolio Type # 1 Yr 5 Yrs Since Inception 1 Yr 5 Yrs Since Inception
------- ------ ------- ---------------- ------ ----- ----------------
----------
MANAGED BY J. P. MORGAN
INVESTMENT MANAGEMENT INC.
Select Equity Private Account 4 32.56% 17.71% 15.51% 31.16% 16.31% 14.11%
Composite
Large Cap Stock Private Account 4 37.47% 17.40% 14.05% 36.07% 16.00% 12.65%
Composite
Small Cap Stock Private Account 4 35.29% 20.75% 12.00% 33.89% 19.35% 10.60%
Composite
Quality Bond Private Account 4 17.71% 9.46% 9.52% 16.31% 8.06% 8.12%
Composite
MANAGED BY LORD, ABBETT & CO.
Growth and Income Existing Portfolio 1 29.82% 17.59% 14.86% 28.03% 15.99% 13.31%
Global Equity Existing Portfolio 1 10.43% 9.70% 8.22% 9.17% 8.19% 6.72%
Bond Debenture Public Fund 3 17.50% 16.00% 10.10% 16.10% 14.60% 8.70%
MANAGED BY GENERAL AMERICAN
INVESTMENT MANAGEMENT COMPANY
Money Market 2 6.17% 4.82% 6.46% 4.77% 3.42% 5.06%
MANAGED BY VAN KAMPEN
AMERICAN CAPITAL INVESTMENT
ADVISORY CORP.
Growth and Income Existing Portfolio 1 32.24% -- 12.26% 30.49% -- 10.97%
Money Market Existing Portfolio 1 6.01% -- 4.47% 4.85% -- 3.00%
Quality Income Existing Portfolio 1 17.99% 9.12% 8.93% 16.41% 7.62% 7.31%
High Yield Existing Portfolio 1 16.69% 15.14% 13.35% 14.99% 14.17% 11.68%
Stock Index Existing Portfolio 1 36.87% -- 14.59% 35.06% -- 11.57%
- ----------------------------- ------------------ ----- ------ -------- ------- -------- ------- --------
<S> <C> <C> <C>
Perfor-
Unit mance
Column C
Portfolio 1 Yr 5 Yrs 10 Yrs
or Since Inception
------ ------- --------------------
MANAGED BY J. P. MORGAN
INVESTMENT MANAGEMENT INC.
Select Equity 26.06% 11.71% 14.01%
Large Cap Stock 30.97% 11.40% 12.55%
Small Cap Stock 28.79% 14.75% 10.50%
Quality Bond 11.21% 3.46% 8.02%
MANAGED BY LORD, ABBETT & CO.
Growth and Income 22.46% 14.86% 12.38%
Global Equity 3.78% 6.96% 5.61%
Bond Debenture 11.00% 10.00% 8.60%
MANAGED BY GENERAL AMERICAN
INVESTMENT MANAGEMENT COMPANY
Money Market (.33)% (1.18)% 4.96%
MANAGED BY VAN KAMPEN
AMERICAN CAPITAL INVESTMENT
ADVISORY CORP.
Growth and Income 25.10% -- 9.54%
Money Market (.45)% -- 1.62%
Quality Income 11.00% 6.33% 6.29%
High Yield 9.47% 13.02% 10.73%
Stock Index 29.64% -- 10.25%
- ----------------------------- --------- ------ --------
</TABLE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
(FORMERLY, XEROX VARIABLE ANNUITY ACCOUNT ONE)
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(FORMERLY, XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY)
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1996, FOR THE INDIVIDUAL
FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS DESCRIBED HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE
THE COMPANY AT: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois
60181-4644, (800) 831-5433.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1996.
TABLE OF CONTENTS
Page
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTION
Reduction or Elimination of the Withdrawal Charge
PERFORMANCE INFORMATION
Total Return
Historical Unit Values
Reporting Agencies
Hypothetical Information - Money Market Fund
Hypothetical Information - Public Fund Performance
Hypothetical Information - Private Accounts
TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other than Natural Persons
Tax Treatment of Assignments
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations
ANNUITY PROVISIONS
Variable Annuity
Fixed Annuity
Annuity Unit
Net Investment Factor
Mortality and Expense Guarantee
FINANCIAL STATEMENTS
COMPANY
Cova Financial Services Life Insurance Company (the "Company") was originally
incorporated on August 17, 1981 as Assurance Life Company, a Missouri
corporation and changed its name to Xerox Financial Services Life Insurance
Company in 1985. On June 1, 1995 a wholly-owned subsidiary of General
American Life Insurance Company ("General American") purchased the Company
from Xerox Financial Services, Inc. ("XFS"). The acquisition of the Company
included related companies ("Acquisition"). On June 1, 1995, the Company
changed its name to Cova Financial Services Life Insurance Company. The
Company presently is licensed to do business in the District of Columbia and
all states except California, Maine, New Hampshire, New York and Vermont.
General American is a St. Louis-based mutual company with more than $250
billion of life insurance in force and approximately $15 billion in assets.
It provides life and health insurance, retirement plans, and related financial
services to individuals and groups.
In conjunction with the Acquisition, the Company entered into a financing
reinsurance transaction that caused OakRe Life Insurance Company ("OakRe"), a
Missouri licensed insurer and a wholly-owned XFS subsidiary, to assume the
benefits and risks of existing single premium deferred annuity deposits
(SPDAs) which aggregated to $3,059 million at December 31, 1994. In exchange,
the Company transferred specifically identified assets to OakRe which had a
carrying value of $3,150.4 million at December 31, 1994. Ownership of OakRe
was retained by XFS subsequent to the Acquisition. The receivable from OakRe
to the Company that was created by this transaction will be liquidated over
the remaining crediting rate guaranty periods (which will be substantially all
expired in five years) by the transfer of cash in the amount of the then
current account value, less a recapture fee to OakRe on policies retained
beyond their 30-day no-fee surrender window by the Company, upon the next
crediting reset date of each annuity policy. The Company may then retain
and assume the benefits and risks of those deposits thereafter.
All of the Company's deposit obligations are fully guaranteed by General
American and the receivable from OakRe equal to the SPDA obligations is
guaranteed by OakRe's parent, XFS. In the event that both OakRe and XFS
default on the receivable, the Company may draw funds from a standby bank
irrevocable letter of credit established by XFS in the amount of $500 million.
In substance, the structure of the Acquisition allowed the seller, XFS, to
retain substantially all of the existing financial benefits and risks of the
existing business, while General American obtained the corporate licenses,
marketing and administrative capabilities of the Company, and access to the
retention of the policyholder deposit base that persists beyond the next
crediting rate reset date.
On April 1, 1996, the Company contributed initial capital to the Select
Equity, Large Cap Stock, Small Cap Stock, International Equity, Quality Bond,
and Bond Debenture Sub-Accounts of the Separate Account. As of May 1, 1996,
the capital contributed to these Sub-Accounts represented approximately 100%
of the total assets of each such Sub-Account. The Company currently intends to
remove these assets from the Sub-Accounts on a prorata basis in proportion to
money invested in the Sub-Accounts by Contract Owners.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995
and 1994 and for each of the years in the three-year period ended December 31,
1995, and the financial statements of the Separate Account as of December 31,
1995 and 1994, included herein, have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTION
Cova Life Sales Company ("Life Sales") acts as the distributor. Prior to June
1, 1995, Cova Life Sales Company was known as Xerox Life Sales Company. Life
Sales is an affiliate of the Company. The offering is on a continuous basis.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
The amount of the Withdrawal Charge on the Contracts may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group
of individuals in a manner that results in savings of sales expenses. The
entitlement to reduction of the Withdrawal Charge will be determined by the
Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than
for a smaller group because of the ability to implement large numbers of
Contracts with fewer sales contacts.
2. The total amount of purchase payments to be received will be
considered. Per Contract sales expenses are likely to be less on larger
purchase payments than on smaller ones.
3. Any prior or existing relationship with the Company will be
considered. Per Contract sales expenses are likely to be less when there is a
prior existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts.
4. There may be other circumstances, of which the Company is not
presently aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Withdrawal Charge.
The Withdrawal Charge may be eliminated when the Contracts are issued to an
officer, director or employee of the Company or any of its affiliates. In no
event will reductions or elimination of the Withdrawal Charge be permitted
where reductions or elimination will be unfairly discriminatory to any person.
PERFORMANCE INFORMATION
Total Return
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an Investment Portfolio over a period of time, usually a
calendar year, determined by dividing the increase (decrease) in value for
that unit by the Accumulation Unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.25% Mortality and Expense Risk Premium, a .15% Administrative
Expense Charge, the investment advisory fee for the underlying Investment
Portfolio being advertised and any applicable Contract Maintenance Charges and
Withdrawal Charges.
The hypothetical value of a Contract purchased for the time periods described
in the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Withdrawal Charge to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P (1 + T) = ERV
<TABLE>
<CAPTION>
<S> <C> <C>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods
used (or fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the time
periods used.
</TABLE>
The Company may also advertise performance data which will be calculated in
the same manner as described above but which will not reflect the deduction of
any Withdrawal Charge. The deduction of any Withdrawal Charge would reduce
any percentage increase or make greater any percentage decrease.
Owners should note that the investment results of each Investment Portfolio
will fluctuate over time, and any presentation of the Investment Portfolio's
total return for any period should not be considered as a representation of
what an investment may earn or what an Owner's total return may be in any
future period.
Historical Unit Values
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Investment
Portfolios against established market indices such as the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to
the Investment Portfolio being compared. The Standard & Poor's 500
Composite Stock Price Index is an unmanaged, unweighted average of 500 stocks,
the majority of which are listed on the New York Stock Exchange. The Dow
Jones Industrial Average is an unmanaged, weighted average of thirty blue chip
industrial corporations listed on the New York Stock Exchange. Both the
Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average assume quarterly reinvestment of dividends.
Reporting Agencies
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts with the
unit values of variable annuities issued by other insurance companies. Such
information will be derived from the Lipper Variable Insurance Products
Performance Analysis Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment
companies.The rankings compiled by Lipper may or may not reflect the deduction
of asset-based insurance charges. The Company's sales literature utilizing
these rankings will indicate whether or not such charges have been deducted.
Where the charges have not been deducted, the sales literature will indicate
that if the charges had been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect
the deduction of asset-based insurance charges. In addition, VARDS prepares
risk adjusted rankings, which consider the effects of market risk on total
return performance. This type of ranking may address the question as to which
funds provide the highest total return with the least amount of risk. Other
ranking services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
Hypothetical Information - Money Market Fund
Although the Accumulation Units which invest in the Money Market Fund managed
by General American Investment Management Company have no investment
performance history as yet, the Money Market Fund has been in existence for
some time and consequently has an investment performance history. In order to
demonstrate how actual investment experience of the Money Market Fund affects
Accumulation Unit values, hypothetical performance information was developed.
The information is based upon the historical experience of the Money Market
Fund and is for the periods shown. The prospectus contains a chart of
hypothetical information.
Future performance of the Money Market Fund will vary and the hypothetical
results shown are not necessarily representative of future results.
Performance for periods ending after those shown may vary substantially from
the examples shown. The hypothetical performance of the Money Market Fund is
calculated for a specified period of time by assuming an initial Purchase
Payment of $1,000 allocated to the Portfolio. There is hypothetical
performance figures for the accumulation units which reflect the insurance
charges as well as the portfolio expenses. There is also hypothetical
performance figures for the accumulation units which reflect the insurance
charges, the contract maintenance charge, the portfolio expenses, and assumes
that you make a withdrawal at the end of the period and therefore the
withdrawal charge is reflected. The percentage increases (decreases) are
determined by subtracting the initial Purchase Payment from the ending value
and dividing the remainder by the beginning value. The hypothetical
performance may also show figures when no withdrawal is assumed.
Hypothetical Information - Public Fund Performance
Lord, Abbett & Co. is the sub-adviser for the Bond Debenture investment
portfolio. This portfolio is newly-organized and does not yet have its own
performance record. However, it has the same investment objective and follows
substantially the same investment strategies as a mutual fund advised by the
same sub-adviser whose shares are sold to the public (Public Fund).
Set forth in the prospectus is the historical performance of this Public Fund.
Investors should not consider this performance data as an indication of the
future performance of this portfolio. The performance figures reflect the
deduction of the historical fees and expenses paid by the Public Fund and not
those to be paid by the investment portfolio. The figures do not reflect the
deduction of the insurance charges and the contract maintenance charge.
Investors should refer to the prospectus for the Contracts for information
pertaining to those charges. The results shown reflect the reinvestment of
dividends and distributions, and were calculated in the same manner that was
used by the Public Fund to calculate their own performance.
The performance of the Public Fund is commonly measured as total return. An
average annual compounded rate of return ("T") may be computed by using the
redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of time ("n") according to
the formula:
n
P (1 + T) = ERV
The table contained in the prospectus shows the average annualized total
returns for the fiscal year ended December 31, 1995, of a 1-year, 5-year and
10-year investment in the Public Fund.
In order to demonstrate how the performance of the Public Fund would
affect Accumulation Unit values, the prospectus contains hypothetical
performance information. In determining the hypothetical performance of the
Accumulation Units, the actual performance of the Public Fund was used.
The performance of the Accumulation Units will vary and the hypothetical
results shown are not necessarily representative of future results.
Performance for periods ending after those shown may vary substantially
from the examples shown. The performance of the Accumulation Units is
calculated for the specified period of time by assuming an initial Purchase
Payment of $1,000 allocated to the investment portfolio and a deduction
of all charges and deductions. The hypothetical performance figures for the
Accumulation Units assume the deduction of the fees and expenses anticipated
to actually be paid by the investment portfolio. There is hypothetical
performance figures for the accumulation units which reflects the insurance
charges as well as the fees and expenses of the Money Market Fund. There is
also hypothetical performance figures for the accumulation units which
reflects the insurance charges, the contract maintenance charge, the
withdrawal charge and the fees and expenses of the Money Market Fund. The
percentage increases (decreases) are determined by subtracting the initial
Purchase Payment from the ending value and dividing the remainder by the
beginning value.
Hypothetical Information - Private Accounts
J.P. Morgan Investment Management Inc. is the sub-adviser for the Select
Equity, Large Cap Stock, Small Cap Stock, and Quality Bond investment
portfolios. These portfolios are newly formed and have no performance history.
They have investment objectives, policies and strategies substantially
similar to those employed by the sub-adviser with respect to certain private
accounts (Private Accounts) represented in the Active Equity Composite, the
Structured Stock Selection Composite, the Small Cap Directly Invested
Composite and the Public Bond Composite, respectively. The overall operations
of the portfolios are comparable to those of the Private Accounts so that the
performance of these Private Accounts is deemed relevant to the investor.
Set forth in the prospectus is the hypothetical performance information
derived from the historical composite performance of these Private Accounts
included in the Active Equity Composite, the Structured Stock Selection
Composite, the Small Cap Directly Invested Composite and the Public Bond
Composite. Investors should not consider this performance data as an
indication of the future performance of the comparable investment portfolios.
The composite performance figures of the Private Accounts are time-weighted
rates of return which include all income and accrued income and realized and
unrealized gains or losses, and reflect the monthly deduction of the
investment advisory fees and expenses which are anticipated to be paid by the
respective investment portfolios. The figures do not reflect the deduction of
the insurance charges and the contract maintenance charge. Investors should
refer to the prospectus for the Contracts for information pertaining to those
charges.
The table contained in the prospectus shows the average annualized total
returns for the fiscal year ended December 31, 1995, of a 1-year, 5-year and
10 year (where available) or since inception investment in the composite of
comparable Private Accounts adjusted to reflect the deduction of the
investment advisory fees and expenses which are anticipated to be paid by the
respective investment portfolios.
In order to demonstrate how the actual investment experience of these Private
Accounts would affect Accumulation Unit values, the hypothetical composite
performance information was developed. The composite information is based
upon the performance of the composites of comparable Private Accounts with
substantially similar investment objectives, policies and strategies as the
respective portfolios reduced by the investment advisory fees and expenses
which are anticipated to be paid by the respective investment portfolios. The
hypothetical performance of these Accumulation Units is calculated for a
specified period of time by assuming an initial Purchase Payment of $1,000
allocated to the investment portfolios. There is hypothetical performance
figures for the accumulation units which reflects the actual performance
results of the composites of comparable Private Accounts, adjusted to reflect
the deduction of the fees and expenses anticipated to be paid by the
investment portfolio and the insurance charges. There is also hypothetical
performance figures for the accumulation units which reflects the insurance
charges, the contract maintenance charge, the withdrawal charge and the actual
performance results of the composites of comparable Private Accounts, adjusted
to reflect the deduction of the fees and expenses anticipated to be paid by
the investment portfolio. The percentage increases (decreases) are determined
by subtracting the initial Purchase Payment from the ending value and dividing
the remainder by the beginning value.
The performance of the comparable investment portfolios may be at variance
from the composite performance of the Private Accounts because such accounts
are not mutual funds and are not subject to the various requirements and
limitations applicable to mutual funds under the Investment Company Act of
1940 and the Internal Revenue Code.
There is no performance information for the International Equity Portfolio,
which is also managed by J.P. Morgan Investment Management Inc., in the
Prospectus.
The future performance of the investment portfolios will vary and the
hypothetical results shown are not necessarily representative of future
results.
TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE
POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF
THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE
TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is
not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total withdrawal
(total surrender), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the purchase payments, while for Qualified Contracts there
may be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by
the ratio that the cost basis of the Contract (adjusted for any period or
refund feature) bears to the expected return under the Contract. The exclusion
amount for payments based on a variable annuity option is determined by
dividing the cost basis of the Contract (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
be paid. Payments received after the investment in the Contract has been
recovered (i.e. when the total of the excludable amount equals the
investment in the Contract) are fully taxable. The taxable portion is taxed
at ordinary income tax rates. For certain types of Qualified Plans there
may be no cost basis in the Contract within the meaning of Section 72 of
the Code. Owners, Annuitants and Beneficiaries under the Contracts should seek
competent financial advice about the tax consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification
of the Contract as an annuity contract would result in the imposition of
federal income tax to the Owner with respect to earnings allocable to the
Contract prior to the receipt of payments under the Contract. The Code
contains a safe harbor provision which provides that annuity contracts such as
the Contract meet the diversification requirements if, as of the end of each
quarter, the underlying assets meet the diversification standards for a
regulated investment company and no more than fifty-five percent (55%) of the
total assets consist of cash, cash items, U.S. Government securities and
securities of other regulated investment companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the
investment portfolios underlying variable contracts such as the Contract. The
Regulations amplify the diversification requirements for variable contracts
set forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if: (1) no more than 55% of the value of the total
assets of the portfolio is represented by any one investment; (2) no more than
70% of the value of the total assets of the portfolio is represented by any
two investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Investment Portfolios underlying the Contracts
will be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be
contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered as the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the
Owner with respect to earnings allocable to the Contract prior to receipt of
payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owners
being retroactively determined to be the owners of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from
such combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts
generally will not be treated as annuities for federal income tax purposes.
However, this treatment is not applied to a Contract held by a trust or other
entity as an agent for a natural person nor to Contracts held by Qualified
Plans. Purchasers should consult their own tax counsel or other tax adviser
before purchasing a Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at
the rate of 10% from non-periodic payments. However, the Owner, in most cases,
may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for federal income tax. The 20% withholding
requirement generally does not apply to: a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary or for a specified period of 10 years or more; or
b) distributions which are required minimum distributions; or c) the portion
of the distributions not includible in gross income (i.e. returns of after-tax
contributions). Participants should consult their own tax counsel or other
tax adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any premature distribution. However, the penalty is not imposed on
amounts received: (a) after the taxpayer reaches age 59 1/2; (b) after
the death of the Owner; (c) if the taxpayer is totally disabled (for this
purpose disability is as defined in Section 72(m)(7) of the Code); (d) in a
series of substantially equal periodic payments made not less frequently
than annually for the life (or life expectancy) of the taxpayer or for the
joint lives (or joint life expectancies) of the taxpayer and his or her
Beneficiary; (e) under an immediate annuity; or (f) which are allocable to
purchase payments made prior to August 14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that
benefits under a Qualified Plan may be subject to the terms and conditions of
the plan regardless of the terms and conditions of the Contracts issued
pursuant to the plan. Some retirement plans are subject to distribution and
other requirements that are not incorporated into the Company's administrative
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law. Following are general
descriptions of the types of Qualified Plans with which the Contracts may be
used. Such descriptions are not exhaustive and are for general informational
purposes only. The tax rules regarding Qualified Plans are very complex and
will have differing applications depending on individual facts and
circumstances. Each purchaser should obtain competent tax advice prior to
purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans
are not transferable except upon surrender or annuitization. Various penalty
and excise taxes may apply to contributions or distributions made in violation
of applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection
with Qualified Plans will utilize annuity tables which do not differentiate on
the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
a. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
Qualified Plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit of
the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places
limitations and restrictions on all Plans including on such items as: amount
of allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals
- - Qualified Contracts" below.) Purchasers of Contracts for use with an H.R. 10
Plan should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
b. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includible in the gross income of the
employees until the employees receive distributions from the Contracts. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals -
Qualified Contracts" and "Tax-Sheltered Annuities - Withdrawal Limitations"
below.) Employee loans are not allowable under the Contracts. Any employee
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
c. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which will be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts"
below.) Under certain conditions, distributions from other IRAs and other
Qualified Plans may be rolled over or transferred on a tax-deferred basis into
an IRA. Sales of Contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Purchasers of Contracts to be qualified as Individual Retirement Annuities
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
d. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the Contracts to provide benefits under the Plan.
Contributions to the Plan for the benefit of employees will not be includible
in the gross income of the employees until distributed from the Plan. The tax
consequences to participants may vary depending upon the particular plan
design. However, the Code places limitations and restrictions on all
Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Purchasers of Contracts for use with Corporate Pension or Profit Sharing Plans
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under
the retirement plan. Special tax rules may be available for certain
distributions from a Qualified Contract. Section 72(t) of the Code imposes a
10% penalty tax on the taxable portion of any distribution from qualified
retirement plans, including Contracts issued and qualified under Code
Sections 401 (H.R. 10 and Corporate Pension and Profit-Sharing Plans), 403(b)
(Tax-Sheltered Annuities) and 408(b) (Individual Retirement Annuities). To
the extent amounts are not includible in gross income because they have been
rolled over to an IRA or to another eligible Qualified Plan, no tax penalty
will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Owner or Annuitant (as applicable) reaches age 59 1/2; (b)
distributions following the death or disability of the Owner or Annuitant
(as applicable) (for this purpose disability is as defined in Section 72(m)
(7) of the Code); (c) after separation from service, distributions that
are part of substantially equal periodic payments made not less frequently
than annually for the life (or life expectancy) of the Owner or Annuitant
(as applicable) or the joint lives (or joint life expectancies) of such Owner
or Annuitant (as applicable) and his or her designated Beneficiary; (d)
distributions to an Owner or Annuitant (as applicable) who has separated
from service after he has attained age 55; (e) distributions made to
the Owner or Annuitant (as applicable) to the extent such distributions
do not exceed the amount allowable as a deduction under Code Section 213
to the Owner or Annuitant (as applicable) for amounts paid during the
taxable year for medical care; and (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order. The exceptions stated in (d),
(e) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity without the requirement that there be a separation from service.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year following the year in which the employee attains
age 70 1/2. Required distributions must be over a period not exceeding the
life expectancy of the individual or the joint lives or life expectancies of
the individual and his or her designated beneficiary. If the required
minimum distributions are not made, a 50% penalty tax is imposed as to the
amount not distributed. In addition, distributions in excess of $150,000 per
year may be subject to an additional 15% excise tax unless an exemption applies.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include
any investment results. The limitations on withdrawals became effective on
January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect transfers between Tax-Sheltered Annuity Plans.
Owners should consult their own tax counsel or other tax adviser regarding any
distributions.
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not
predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable investment portfolio(s) of the Separate
Account. At the Annuity Date, the Contract Value in each investment portfolio
will be applied to the applicable Annuity Tables. The Annuity Table used will
depend upon the Annuity Option chosen. If, as of the Annuity Date, the then
current Annuity Option rates applicable to this class of Contracts provide a
first Annuity Payment greater than guaranteed under the same Annuity Option
under this Contract, the greater payment will be made. The dollar amount of
Annuity Payments after the first is determined as follows:
<TABLE>
<CAPTION>
<S> <C>
(1) the dollar amount of the first Annuity Payment is divided by the
value of an Annuity Unit as of the Annuity Date. This
establishes the number of Annuity Units for each monthly
payment. The number of Annuity Units remains fixed during the
Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity
Unit value for the last Valuation Period of the month preceding
the month for which the payment is due. This result is the
dollar amount of the payment.
</TABLE>
The total dollar amount of each Variable Annuity Payment is the sum of all
Investment Portfolio's Variable Annuity Payments reduced by the applicable
Contract Maintenance Charge.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period which
are guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on
the day immediately preceding the Annuity Date will be used to determine the
Fixed Annuity monthly payment. The first monthly Annuity Payment will be
based upon the Annuity Option elected and the appropriate Annuity Option
Table.
ANNUITY UNIT
The value of an Annuity Unit for each Investment Portfolio was arbitrarily
set initially at $10. This was done when the first Eligible Investment shares
were purchased. The Investment Portfolio Annuity Unit value at the end of any
subsequent Valuation Period is determined by multiplying the Investment
Portfolio Annuity Unit value for the immediately preceding Valuation Period by
the product of (a) the Net Investment Factor for the day for which the Annuity
Unit Value is being calculated, and (b) 0.999919.
NET INVESTMENT FACTOR
The Net Investment Factor for any Investment Portfolio for any Valuation
Period is determined by dividing:
<TABLE>
<CAPTION>
<S> <C>
(a) the Accumulation Unit value as of the close of the current
Valuation Period, by
(b) the Accumulation Unit value as of the close of the immediately
preceding Valuation Period.
</TABLE>
The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment after
the first Annuity Payment will not be affected by variations in mortality or
expense experience.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
KPMG Peat Marwick LLP
1010 Market Street
St. Louis, MO 63101-2085
INDEPENDENT AUDITOR'S REPORT
The Contract Owners of Cova Variable
Annuity Account One
Cova Financial Services Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Quality Income, High Yield, Growth and Income, Money Market, and Stock Index
sub-accounts (investment options within the Van Kampen Merritt Series Trust)
and the Growth and Income and Global Equity sub-accounts (investment options
within the Lord Abbett Series Fund, Inc.) of Cova Variable Annuity Account One
of Cova Financial Services Life Insurance Company (the Separate Account) as of
December 31, 1995, and the related statement of operations for the year then
ended, and the statement of changes in contract owners' equity for each of the
two years in the period then ended, and the financial highlights for each of
the periods presented. These financial statements and financial highlights
are the responsibility of the Company'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. Our procedures included confirmation of investments
owned at December 31, 1995 by correspondence with the Van Kampen Merritt
Series Trust and the Lord Abbett Series Fund, Inc. 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 the
sub-accounts of Cova Variable Annuity Account One of Cova Financial Services
Life Insurance Company as of December 31, 1995, and the results of their
operations for the year then ended, the changes in their contract owners'
equity for each of the two years in the period then ended, and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
By: /s/ KPMG PEAT MARWICK LLP
___________________________
KPMG Peat Marwick LLP
February 9, 1996
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS
INVESTMENTS:
<TABLE>
<CAPTION>
<S> <C>
VAN KAMPEN MERRITT SERIES TRUST:
Quality Income Portfolio - 3,795,029 shares at a net asset value of $10.87 per share (cost $39,788,169) $ 41,257,437
High Yield Portfolio - 3,495,538 shares at a net asset value of $10.45 per share (cost $36,977,062) 36,515,856
Growth and Income Portfolio - 1,568,033 shares at a net asset value of $12.51 per share (cost $17,983,818) 19,619,568
Money Market Portfolio - 34,132,295 shares at a net asset value of $1.00 per share (cost $34,132,295) 34,132,295
Stock Index Portfolio - 6,195,688 shares at a net asset value of $13.84 per share (cost $74,796,201) 85,772,259
LORD ABBETT SERIES FUND, INC:
Growth and Income Portfolio - 12,510,916 shares at a net asset value of $15.24 per share (cost $168,182,678) 190,651,303
Global Equity Portfolio - 218,212 shares at a net asset value of $11.46 per share (cost $2,347,939) 2,500,282
--------------
TOTAL ASSETS $ 410,449,000
LIABILITIES AND CONTRACT OWNERS' EQUITY
FEES PAYABLE TO COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY $ 46,951
CONTRACT OWNERS' EQUITY:
Trust Quality Income - 2,690,633 accumulation units at $15.331971 per unit 41,252,707
Trust High Yield - 1,870,232 accumulation units at $19.522535 per unit 36,511,673
Trust Growth and Income - 1,342,833 accumulation units at $14.608904 per unit 19,617,323
Trust Money Market - 2,987,132 accumulation units at $11.425133 per unit 34,128,376
Trust Stock Index - 5,436,980 accumulation units at $15.773906 per unit 85,762,417
Fund Growth and Income - 8,947,108 accumulation units at $21.306277 per unit 190,629,558
Fund Global Equity - 172,206 accumulation units at $14.517502 per unit 2,499,995
--------------
TOTAL CONTRACT OWNERS' EQUITY 410,402,049
--------------
TOTAL LIABILITIES AND CONTRACT OWNERS' EQUITY $ 410,449,000
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
VAN KAMPEN MERRITT
LORD ABBETT
SERIES TRUST
SERIES FUND, INC.
<TABLE>
<CAPTION>
QUALITY HIGH GROWTH & MONEY STOCK GROWTH & GLOBAL
INCOME YIELD INCOME MARKET INDEX INCOME EQUITY
----------- ------------ ---------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ 2,492,472 $ 2,739,550 $1,564,298 $ 3,041,467 $ 3,700,759 $ 14,542,511 $187,705
----------- ------------ ---------- ----------- ----------- ------------ --------
Total Income 2,492,472 2,739,550 1,564,298 3,041,467 3,700,759 14,542,511 187,705
EXPENSES:
Mortality and Expense
Risk Fee 486,430 363,864 172,191 646,185 737,442 1,822,160 34,676
Administrative Fee 58,371 43,664 20,663 77,542 88,493 218,659 4,161
Total Expenses 544,801 407,528 192,854 723,727 825,935 2,040,819 38,837
Net Investment Income 1,947,671 2,332,022 1,371,444 2,317,740 2,874,824 12,501,692 148,868
Net Realized Gain/(Loss)
on Investments 16,010 (117,175) 45,687 _ _ 2,588,787 382,600 62,728
Net Change in Unrealized
Gain on Investments 3,599,953 1,785,959 2,247,668 109,903 11,838,391 22,183,647 5,346
Net Realized and Unrealized
Gain on Investments 3,615,963 1,668,784 2,293,355 109,903 14,427,178 22,566,247 68,074
Net Increase in Contract
Owners' Equity Resulting
From Operations $5,563,6343 $4,000,8066 $3,664,799 $2,427,6433 $17,302,002 $35,067,9399 $216,942
=========== ============ ========== =========== =========== ============ ========
TOTAL
------------
<S> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ 28,268,762
------------
Total Income 28,268,762
EXPENSES:
Mortality and Expense
Risk Fee 4,262,948
Administrative Fee 511,553
Total Expenses 4,774,501
Net Investment Income 23,494,261
Net Realized Gain/(Loss)
on Investments 2,978,637
Net Change in Unrealized
Gain on Investments 41,770,867
Net Realized and Unrealized
Gain on Investments 44,749,504
Net Increase in Contract
Owners' Equity Resulting
From Operations $68,243,7655
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS' EQUITY
For the Year Ended December 31, 1995
VAN KAMPEN MERRITT
LORD ABBETT
SERIES TRUST
SERIES FUND, INC.
________________________________________________________
___________________
<TABLE>
<CAPTION>
QUALITY HIGH GROWTH & MONEY STOCK GROWTH &
INCOME YIELD INCOME MARKET INDEX INCOME
------------- ------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income $ 1,947,671 $ 2,332,022 $ 1,371,444 $ 2,317,740 $ 2,874,824 $ 12,501,692
Net Realized Gain/(Loss)
on Investments 16,010 (117,175) 45,687 _ _ 2,588,787 382,600
Net Unrealized Gain
on Investments 3,599,953 1,785,959 2,247,668 109,903 11,838,391 22,183,647
NET INCREASE IN CONTRACT
Owners' Equity
Resulting from
Operations 5,563,634 4,000,806 3,664,799 2,427,643 17,302,002 35,067,939
From Account Unit Transactions:
Redemptions by Cova
Financial Services Life
Insurance Company _ _ _ _ _ _ _ _ _ _ _ _
Proceeds from Units of
the Account Sold 2,609,198 3,648,081 2,179,253 27,608,801 2,384,152 29,457,859
Payments for Units of the
Account Redeemed (5,173,896) (2,111,627) (717,441) (4,508,332) (4,199,482) (18,058,651)
Account Transfers 4,321,271 11,321,086 3,550,031 (67,277,501) 33,469,082 29,746,158
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit
Transactions 1,756,573 12,857,540 5,011,843 (44,177,032) 31,653,752 41,145,366
Net Increase/(Decrease) in
Contract Owners' Equity 7,320,207 16,858,346 8,676,642 (41,749,389) 48,955,754 76,213,305
Contract Owners' Equity:
Beginning of Period 33,932,500 19,653,327 10,940,681 75,877,765 36,806,663 114,416,253
End of Period $41,252,7077 $36,511,673 $19,617,323 $ 34,128,376 $85,762,417 $190,629,558
============= ============ ============ ============= ============ =============
GLOBAL
EQUITY TOTAL
------------ -------------
<S> <C> <C>
FROM OPERATIONS:
Net Investment Income $ 148,868 $ 23,494,261
Net Realized Gain/(Loss)
on Investments 62,728 2,978,637
Net Unrealized Gain
on Investments 5,346 41,770,867
NET INCREASE IN CONTRACT
Owners' Equity
Resulting from
Operations 216,942 68,243,765
From Account Unit Transactions:
Redemptions by Cova
Financial Services Life
Insurance Company (131,875) (131,875)
Proceeds from Units of
the Account Sold 686,017 68,573,361
Payments for Units of the
Account Redeemed (1,244,057) (36,013,486)
Account Transfers (135,353) 14,994,774
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit
Transactions (825,268) 47,422,774
Net Increase/(Decrease) in
Contract Owners' Equity (608,326) 115,666,539
Contract Owners' Equity:
Beginning of Period 3,108,321 294,735,510
End of Period $ 2,499,995 $410,402,049
============ =============
</TABLE>
See accompanying notes to financial statements.
VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS' EQUITY
For the Year Ended December 31, 1994
VAN KAMPEN MERRITT
LORD ABBETT
SERIES TRUST
SERIES FUND, INC.
TOTAL
$12,184,894
(2,376,747)
(12,420,870)
(2,612,723)
(165,388)
51,347,975
(17,333,821)
3,525,880
37,374,646
34,761,923
259,973,587
$294,735,510
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>
<CAPTION>
VAN KAMPEN MERRITT SERIES TRUST - QUALITY INCOME PORTFOLIO
For the Year For the Year For the Year
Ended Ended Ended
12/31/95 12/31/94 12/31/93
-------------- -------------- --------------
<S> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 13.17 $ 13.97 $ 12.75
Net Investment Income .72 .60 1.00
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions 1.44 (1.40) .22
Total from Investment Operations Operations1.38(.80)1.22.73.140 O 2.16 (.80) 1.22
- -------------------------------------------------------------------
Accumulation Unit Value,
End of Period $ 15.33 $ 13.17 $ 13.97
============== ============== ==============
Total Return* 16.41% 5.70% 9.50%
Contract Owners Equity ,
End of Period (in thousands) $ 41,253 $ 33,933 $ 51,111
Ratio of Expenses to Average
Contract Owners' Equity 1.40% 1.40% 1.40%
Ratio of Net Investment Income
to Average Contract
Owners' Equity 4.99% 4.48% 8.30%
Number of Units Outstanding
at End of Period 2,690,633 2,576,412 3,659,656
For the Year For the Year
Ended Ended
12/31/92 12/31/91
-------------- --------------
<S> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 12.02 $ 10.62
Net Investment Income .64 .67
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions .09 .73
Total from Investment Operations Operations1.38(.80)1.22.73.140 O .73 1.40
- -------------------------------------------------------------------
Accumulation Unit Value,
End of Period $ 12.75 $ 12.02
============== ==============
Total Return* 6.10% 13.20%
Contract Owners Equity ,
End of Period (in thousands) $ 24,124 $ 6,779
Ratio of Expenses to Average
Contract Owners' Equity 1.40% 1.40%
Ratio of Net Investment Income
to Average Contract
Owners' Equity 5.45% 6.09%
Number of Units Outstanding
at End of Period 1,891,499 563,960
<FN>
* Investment returns do not reflect any annual contract maintenance fees
or withdrawal charges.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>
<CAPTION>
VAN KAMPEN MERRITT SERIES TRUST - HIGH YIELD PORTFOLIO
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 16.98 $ 18.02 $ 14.99 $ 12.75 $ 10.06
-------------- -------------- -------------- -------------- --------------
Net Investment Income 1.44 1.38 1.80 2.26 1.14
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions 1.10 (2.42) 1.23 (.02) 1.55
Total from Investment Operations 2.54 (1.04) 3.03 2.24 2.69
Accumulation Unit Value,
End of Period $ 19.52 $ 16.98 $ 18.02 $ 14.99 $ 12.75
============== ============== ============== ============== ==============
Total Return* 14.99% (5.79)% 20.21% 17.53% 26.73%
Contract Owners Equity ,
End of Period (in thousands) $ 36,512 $ 19,653 $ 18,846 $ 5,416 $ 3,803
Ratio of Expenses to Average
Contract Owners' Equity 1.40% 1.40% 1.40% 1.40% 1.40%
Ratio of Net Investment Income
to Average Contract
Owners' Equity 7.98% 7.92% 13.05% 16.04% 9.83%
Number of Units Outstanding
at End of Period 1,870,232 1,157,642 1,045,815 361,296 298,202
<FN>
* Investment returns do not reflect any annual contract maintenance fees or
withdrawal charges.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>
<CAPTION>
VAN KAMPEN MERRITT SERIES TRUST - GROWTH & INCOME PORTFOLIO
For the Period From
For the Year For the Year For the Year 5/1/92
Ended Ended Ended (Commencement of Operations)
12/31/95 12/31/94 12/31/93 Through 12/31/92
<S> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 11.20 $ 11.92 $ 10.47 $ 10.00
-------------- -------------- -------------- -----------------------------
Net Investment Income 1.02 .19 .54 .19
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions 2.39 (.91) .91 .28
Total from Investment Operations 3.41 (.72) 1.45 .47
Accumulation Unit Value,
End of Period $ 14.61 $ 11.20 $ 11.92 $ 10.47
============== ============== ============== =============================
Total Return** 30.49% (6.07)% 13.84% 7.09%*
Contract Owners Equity ,
End of Period (in thousands) $ 19,617 $ 10,941 $ 6,528 $ 2,627
Ratio of Expenses to Average
Contract Owners' Equity 1.40% 1.40% 1.40% 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 9.92% 2.05% 7.54% 3.82%*
Number of Units Outstanding
at End of Period 1,342,833 977,209 574,643 250,919
<FN>
* Annualized
** Investment returns do not reflect any annual contract maintenance fees or
withdrawal charges.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>
<CAPTION>
VAN KAMPEN MERRITT SERIES TRUST - MONEY MARKET PORTFOLIO
For the Year Months For the Year For the Year For the Year
Ended Ended Ended Ended
12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 10.90 $ 10.61 $ 10.46 $ 10.21
--------------------- -------------- -------------- --------------
Net Investment Income .50 .30 .19 .25
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions .03 (.01) (.04) --
Total from Investment Operations .53 .29 .15 .25
Accumulation Unit Value,
End of Period $ 11.43 $ 10.90 $ 10.61 $ 10.46
===================== ============== ============== ==============
Total Return** 4.85% 2.70% 1.45% 2.44%
Contract Owners Equity ,
End of Period (in thousands) $ 34,128 $ 75,878 $ 6,552 $ 4,031
Ratio of Expenses to Average
Contract Owners' Equity 1.40% 1.40% 1.40% 1.40%
Ratio of Net Investment Income
to Average Contract
Owners' Equity 4.48% 2.90% 1.78% 2.46%
Number of Units Outstanding
at End of Period 2,987,132 6,963,421 617,575 385,448
For the Period
From 11/1/91
Through 12/31/91 12/31/91
<S> <C>
Accumulation Unit Value,
Beginning of Period $ 10.00
--------------------------
Net Investment Income .21
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions --
Total from Investment Operations .21
Accumulation Unit Value,
End of Period $ 10.21
==========================
Total Return** 4.19%*
Contract Owners Equity ,
End of Period (in thousands) $ 5,386
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 4.04%*
Number of Units Outstanding
at End of Period 527,571
<FN>
* Annualized
** Investment returns do not reflect any annual contract maintenance
fees or withdrawal charges.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>
<CAPTION>
VAN KAMPEN MERRITT SERIES TRUST - STOCK INDEX PORTFOLIO
For the Year Months For the Year For the Year For the Year For the Period
Ended Ended Ended Ended From 11/1/91
12/31/95 12/31/94 12/31/93 12/31/92 Through 12/31/91
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 11.68 $ 11.87 $ 11.05 $ 10.55 $ 10.00
--------------------- -------------- -------------- -------------- ------------------
Net Investment Income .51 .37 .22 .52 (.02)
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions 3.58 (.56) .60 (.02) .57
Total from Investment Operations 4.09 (.19) .82 .50 .55
Accumulation Unit Value,
End of Period $ 15.77 $ 11.68 $ 11.87 $ 11.05 $ 10.55
===================== ============== ============== ============== ==================
Total Return** 35.06% (1.58)% 7.35% 4.75% 38.03%*
Contract Owners Equity ,
End of Period (in thousands) $ 85,762 $ 36,807 $ 91,269 $ 34,979 $ 6,753
Ratio of Expenses to Average
Contract Owners' Equity 1.40% 1.40% 1.40% 1.40% 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 4.85% 2.10% 2.99% 10.02% (1.40)%*
Number of Units Outstanding
at End of Period 5,436,980 3,151,443 7,691,151 3,164,251 639,923
<FN>
* Annualized
** Investment returns do not reflect any annual contract maintenance
fees or withdrawal charges.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>
<CAPTION>
LORD ABBETT SERIES FUND, INC. - GROWTH AND INCOME PORTFOLIO
For theYear For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 16.64 $ 16.42 $ 14.50 $ 12.73 $ 10.15
------------- -------------- -------------- -------------- --------------
Net Investment Income 1.37 .76 .88 1.06 .85
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions 3.30 (.54) 1.04 .71 1.73
Total from Investment Operations 4.67 .22 1.92 1.77 2.58
------------- -------------- -------------- -------------- --------------
Accumulation Unit Value,
- ---------------------------------
End of Period $ 21.31 $ 16.64 $ 16.42 $ 14.50 $ 12.73
- --------------------------------- ============= ============== ============== ============== ==============
Total Return* 28.03% 1.32% 13.24% 13.98% 25.42%
- --------------------------------- ------------- -------------- -------------- -------------- --------------
Contract Owners Equity ,
- ---------------------------------
End of Period (in thousands) $ 190,630 $ 114,416 $ 82,033 $ 37,146 $ 18,154
- --------------------------------- ------------- -------------- -------------- -------------- --------------
Ratio of Expenses to Average
- ---------------------------------
Contract Owners' Equity 1.40% 1.40% 1.40% 1.40% 1.40%
- --------------------------------- ------------- -------------- -------------- -------------- --------------
Ratio of Net Investment Income
- ---------------------------------
to Average Contract
- ---------------------------------
Owners' Equity 8.57% 5.40% 8.12% 10.59% 9.05%
- --------------------------------- ------------- -------------- -------------- -------------- --------------
Number of Units Outstanding
- ---------------------------------
at End of Period 8,947,108 6,875,139 4,994,582 2,560,999 1,426,577
- --------------------------------- ------------- -------------- -------------- -------------- --------------
<FN>
* Investment returns do not reflect any annual contract maintenance
fees or withdrawal charges.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>
<CAPTION>
LORD ABBETT SERIES FUND, INC. - GLOBAL EQUITY PORTFOLIO
For the Year Months For the Year For the Year For the Year For the Year
--------------------- -------------- -------------- -------------- --------------
Ended Ended Ended Ended Ended
--------------------- -------------- -------------- -------------- --------------
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
--------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
- ---------------------------------
Beginning of Period $ 13.33 $ 13.29 $ 10.64 $ 10.97 $ 9.79
- --------------------------------- --------------------- -------------- -------------- -------------- --------------
Net Investment Income .91 1.45 .24 .18 .14
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions .28 (1.41) 2.41 (.51) 1.04
Total from Investment Operations 1.19 .04 2.65 (.33) 1.18
--------------------- -------------- -------------- -------------- --------------
Accumulation Unit Value,
- ---------------------------------
End of Period $ 14.52 $ 13.33 $ 13.29 $ 10.64 $ 10.97
- --------------------------------- ===================== ============== ============== ============== ==============
Total Return* 8.91% .27% 24.91% (2.98)% 12.02%
- --------------------------------- --------------------- -------------- -------------- -------------- --------------
Contract Owners Equity ,
- ---------------------------------
End of Period (in thousands) $ 2,500 $ 3,108 $ 3,635 $ 3,249 $ 4,292
- --------------------------------- --------------------- -------------- -------------- -------------- --------------
Ratio of Expenses to Average
- ---------------------------------
Contract Owners' Equity 1.40% 1.40% 1.40% 1.40% 1.40%
- --------------------------------- --------------------- -------------- -------------- -------------- --------------
Ratio of Net Investment Income
- ---------------------------------
to Average Contract
- ---------------------------------
Owners' Equity 5.36% 9.78% 1.88% 1.38% 2.19%
- --------------------------------- --------------------- -------------- -------------- -------------- --------------
Number of Units Outstanding
- ---------------------------------
at End of Period 172,206 233,186 273,399 305,314 391,234
- --------------------------------- --------------------- -------------- -------------- -------------- --------------
<FN>
* Investment returns do not reflect any annual contract maintenance
fees or withdrawal charges.
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1995 and 1994
1. ORGANIZATION:
Cova Variable Annuity Account One, (formerly Xerox Variable Annuity Account
One) (the "Separate Account") is a separate investment account established by
a resolution of the Board of Directors of Cova Financial Services Life
Insurance Company ("Cova Life") formerly known as Xerox Financial Services
Life Insurance Company (Xerox Life). On June 1, 1995, a subsidiary of General
American Life Insurance Company (GALIC) purchased Xerox Life under the terms
of a stock purchase agreement. After closing of the sale transaction, Xerox
Life and the Separate Account were renamed. Operations of the separate
account were not affected by this transaction. The Separate Account operates
as a Unit Investment Trust under the Investment Company Act of 1940.
The Separate Account is divided into sub-accounts, with the assets of each
sub-account invested in either the Van Kampen Merritt Series Trust ("Trust")
or the Lord Abbett Series Fund, Inc. ("Fund"). The Trust is managed by Van
Kampen American Capital Investment Advisory Corp. During 1995 and prior, the
Trust consisted of five portfolios available for investment; the Quality
Income, High Yield, Growth & Income, Money Market, and Stock Index Portfolios.
The Fund had two portfolios available for investment during and prior to
1995; the Growth and Income Global Equity Portfolios. Not all portfolios of
the Trust and Fund are available for investment depending upon the nature and
specific terms of the different contracts currently being offered for sale.
Both the Trust and Fund are diversified, open-end, management investment
companies which are intended to meet differing investment objectives.
The Trust Quality Income Portfolio invests in U.S. Government issued debt
obligations and in various investment-grade debt instruments, including
mortgage pass-through obligations and collateralized mortgage obligations.
The Trust High Yield Portfolio invests in medium and lower-grade debt
securities and futures and options contracts. The Trust Growth and Income
Portfolio invests in common stocks and futures and options contracts. The
Trust Money Market Portfolio invests in short-term money market instruments.
The Trust Stock Index Portfolio invests in common stocks, stock index futures
and options, and short-term securities. The Fund Growth and Income Portfolio
invests in common stocks. The Fund Global Equity Portfolio invests in both
domestic and foreign common stocks and forward currency contracts.
In order to satisfy diversification requirements and provide for optimum
policyholder returns, Cova Life has made periodic contributions to the Trust
and Fund to provide for the initial purchases of investments. In return, Cova
Life has been credited with accumulation units of the Separate Account. As
additional funds were received through policyholder deposits, Cova Life has,
at its discretion and without adversely impacting the investment operations of
the Trust and Fund, removed its capital investment in the Separate Account by
liquidating all of its remaining accumulation units at December 31, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES:
A. INVESTMENT VALUATION
Investments in shares of the Trust and Fund are carried in the statement of
assets and liabilities at the underlying net asset value of the Trust and
Fund. The net asset value of the Trust and Fund has been determined on the
market value basis and is valued daily by the Trust and Fund investment
managers. Realized gains and losses are calculated by the average cost
method.
B. REINVESTMENT OF DIVIDENDS
Dividends received from net investment income and net realized capital gains
are reinvested in additional shares of the portfolio of the Trust or Fund
making the distribution or, at the election of the Separate Account, received
in cash. Dividend income and capital gain distributions are recorded as
income on the ex-dividend date.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1995 and 1994
C. FEDERAL INCOME TAXES
Operations of the Separate Account form a part of Cova Life, which is taxed as
a "Life Insurance Company" under the Internal Revenue Code ("Code"). Under
current provisions of the Code, no Federal income taxes are payable by Cova
Life with respect to earnings of the Separate Account.
Under the principles set forth in Internal Revenue Ruling 81-225 and Section
817(h) of the Code and regulations thereunder, Cova Life believes that it will
be treated as the owner of the assets invested in the Separate Account for
Federal income tax purposes, with the result that earnings and gains, if any,
derived from those assets will not be included in a contract owners' gross
income until amounts are withdrawn or received pursuant to an Optional Payment
Plan.
3. CONTRACT CHARGES:
There are no deductions made from purchase payments for sales charges at the
time of purchase. However, if all or a portion of the contract value is
withdrawn, a withdrawal charge is calculated and deducted from the contract
value. The withdrawal charge is imposed on withdrawals of contract values
attributable to purchase payments within five years after receipt and is equal
to 5% of the purchase payment withdrawn. After the first contract
anniversary, provided that the contract value prior to withdrawal exceeds
$5,000, an owner may make a withdrawal each contract year of up to 10% of the
aggregate purchase payments free from withdrawal charges. An annual contract
maintenance charge of $30 is imposed on all contracts with contract values
less than $50,000 on their policy anniversary. The charge covers the cost of
contract administration for the previous year and is prorated between the
sub-accounts to which the contract value is allocated.
Mortality and expense risks assumed by Cova Life are compensated by a charge
equivalent to an annual rate of 1.25% of the value of net assets. The
mortality risks assumed by Cova Life arise from its contractual obligation to
make annuity payments after the annuity date for the life of the annuitant,
and to waive the withdrawal charge in the event of the death of the contract
owner.
In addition, the Separate Account bears certain administration expenses, which
are equivalent to an annual rate of .15% of net assets. These charges cover
the cost of establishing and maintaining the contracts and Separate Account.
Cova Life currently advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes from the contract value at
the time annuity payments begin or upon withdrawal if Cova Life is unable to
obtain a refund. Cova Life, however, reserves the right to deduct premium
taxes when incurred.
4. ACCOUNT TRANSFERS:
Subject to certain restrictions, the contract owner may transfer all or a part
of the accumulated value of the contract among other offered and available
account options of the Separate Account and fixed rate annuities of Cova Life.
If more than 12 transfers have been made in the contract year, a transfer fee
of $25 per transfer or, if less, 2% of the amount transferred will be deducted
from the account value. If the owner is participating in the Dollar Cost
Averaging program, such related transfers are not taken into account in
determining any transfer fee.
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1995 and 1994
5. GAIN/(LOSS) ON INVESTMENTS:
The table below summarizes realized and unrealized gains and losses on
investments:
<TABLE>
<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS:
FOR THE YEAR FOR THE YEAR
ENDED ENDED
12/31/95 12/31/94
<S> <C> <C>
Trust Quality Income Portfolio:
Aggregate Proceeds From Sales $ 21,222,667 $ 55,910,839
Aggregate Cost 21,206,657 58,510,084
Net Realized Gain/(Loss) on Investments $ 16,010 $ (2,599,245)
============== ==============
Trust High Yield Portfolio:
Aggregate Proceeds From Sales $ 1,956,676 $ 9,145,332
Aggregate Cost 2,073,851 9,508,299
Net Realized Loss on Investments $ (117,175) $ (362,967)
============== ==============
Trust Growth and Income Portfolio:
Aggregate Proceeds From Sales $ 1,127,323 $ 1,423,903
Aggregate Cost 1,081,636 1,445,563
-------------- --------------
Net Realized Gain/(Loss) on Investments $ 45,687 $ (21,660)
- ------------------------------------------ ============== ==============
Trust Money Market Portfolio:
- ------------------------------------------
Aggregate Proceeds From Sales $ 71,027,222 $ 60,198,925
- ------------------------------------------ -------------- --------------
Aggregate Cost 71,027,222 60,198,925
- ------------------------------------------ -------------- --------------
Net Realized Gain/(Loss) on Investments _ _ --
- ------------------------------------------ ============== ==============
Trust Stock Index Portfolio:
- ------------------------------------------
Aggregate Proceeds From Sales $ 19,096,794 $ 67,994,793
- ------------------------------------------ -------------- --------------
Aggregate Cost 16,508,007 67,715,975
- ------------------------------------------ -------------- --------------
Net Realized Gain on Investments $ 2,588,787 $ 278,818
- ------------------------------------------ ============== ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1995 and 1994
5. GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>
<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS:
FOR THE YEAR FOR THE YEAR
Ended Ended
12/31/95 12/31/94
<S> <C> <C>
Fund Growth and Income Portfolio:
Aggregate Proceeds From Sales $ 4,042,598 $ 3,887,963
Aggregate Cost 3,659,998 3,701,950
Net Realized Gain on Investments $ 382,600 $ 186,013
============== ==============
Fund Global Equity Portfolio:
Aggregate Proceeds From Sales $ 945,473 $ 738,271
Aggregate Cost 882,745 595,977
Net Realized Gain on Investments $ 62,728 $ 142,294
============== ==============
UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
- ------------------------------------------------------
Trust Quality Income Portfolio:
End of Period $ 1,469,268 $ (2,130,685)
Beginning of Period (2,130,685) (687,104)
Net Change in Unrealized Gain/(Loss) on Investments $ 3,599,953 $ (1,443,581)
============== ==============
Trust High Yield Portfolio:
End of Period $ (461,206) $ (2,247,165)
Beginning of Period (2,247,165) 278,327
Net Change in Unrealized Gain/(Loss) on Investments $ 1,785,959 $ (2,525,492)
============== ==============
Trust Growth and Income Portfolio:
End of Period $ 1,635,750 $ (611,918)
Beginning of Period (611,918) 168,575
Net Change in Unrealized Gain/(Loss) on Investments $ 2,247,668 $ (780,493)
============== ==============
Trust Money Market Portfolio:
End of Period _ _ $ (109,903)
Beginning of Period (109,903) (32,286)
Net Change in Unrealized Gain/(Loss) on Investments $ 109,903 $ (77,617)
============== ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1995 and 1994
5. GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>
<CAPTION>
UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
FOR THE YEAR FOR THE YEAR
ENDED ENDED
12/31/94
<S> <C> <C> 12/31/95 12/31/94
Trust Stock Index Portfolio:
End of Period $ 10,976,058 $ (862,333)
Beginning of Period (862,333) 2,144,041
Net Change in Unrealized Gain/(Loss) on Investments $ 11,838,391 $ (3,006,374)
============== ==============
Fund Growth and Income Portfolio:
End of Period $ 22,468,625 $ 284,978
Beginning of Period 284,978 4,422,497
Net Change in Unrealized Gain/(Loss) on Investments $ 22,183,647 $ (4,137,519)
============== ==============
Fund Global Equity Portfolio:
End of Period $ 152,343 $ 146,997
Beginning of Period 146,997 596,791
Net Change in Unrealized Gain/(Loss) on Investments $ 5,346 $ (449,794)
============== ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1995 and 1994
6. ACCOUNT UNIT TRANSACTIONS:
The change in the number of accumulation units resulting from account unit
transactions is as follows:
VAN KAMPEN
MERRITT LORD ABBETT
SERIES TRUST SERIES FUND,
INC.
_______________________________________
___________ __________________
<TABLE>
__
<CAPTION>
QUALITY HIGH GROWTH & MONEY STOCK GROWTH & GLOBAL
INCOME YIELD INCOME MARKET INDEX INCOME EQUITY TOTAL
----------- ---------- ---------- ----------- ----------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1993 3,659,656 1,045,815 547,643 617,575 7,691,151 4,994,582 273,399 18,829,821
Redemptions by
Cova Life -- -- -- -- -- (10,000) -- (10,000)
Units Sold 254,048 200,146 151,404 2,494,509 272,775 783,757 -- 4,156,639
Units Redeemed (226,584) (78,180) (25,238) (367,835) (345,996) (264,803) (36,859) (1,345,495)
Units Transferred (1,110,708) (10,139) 303,400 4,219,172 (4,466.487) 1,371,603 (3,354) 303,487
Balances at
December 31, 1994 2,576,412 1,157,642 977,209 6,963,421 3,151,443 6,875,139 233,186 21,934,452
Redemptions by Cova Life -- -- -- -- -- -- (10,000) (10,000)
Units Sold 181,275 195,356 162,687 2,450,650 163,890 1,505,688 50,282 4,709,828
Units Redeemed (362,174) (114,779) (55,487) (405,521) (300,704) (940,462) (91,135) (2,270,262)
Units Transferred 295,120 632,013 258,424 (6,021,418) 2,422,351 1,506,743 (10,127) (916,894)
Balance at
December 31, 1995 2,690,633 1,870,232 1,342,833 2,987,132 5,436,980 8,947,108 172,206 23,447,124
</TABLE>
7. SUBSEQUENT EVENTS:
On February 9, 1996, the Board of Trustees of Van Kampen Merritt Series Trust
voted to change the name of the Trust to Cova Series Trust, replace Van Kampen
American Capital Investment Advisory Corp. with Cova Investment Advisory Corp.
as Trust manager, and engage Van Kampen American Capital Investment Advisory
COVA FINANCIAL SERVICES
LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
Cova Financial Services Life Insurance Company:
We have audited the accompanying consolidated balance sheet of Cova Financial
Services Life Insurance Company and subsidiary (a wholly owned subsidiary of
Cova Corporation) as of December 31, 1995 (Successor or the Company) and the
consolidated balance sheet of Xerox Financial Services Life Insurance Company
and subsidiary as of December 31, 1994 (Predecessor), and the related
consolidated statements of income, shareholders' equity and cash flows for the
periods from June 1, 1995 to December 31, 1995 (Successor period), and from
January 1, 1995 to May 31, 1995, and for the years ended December 31, 1994 and
1993 (Predecessor periods). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements 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 are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 Successor consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Cova
Financial Services Life Insurance Company and subsidiary as of December 31,
1995, and the results of their operations and their cash flows for the
Successor period, in conformity with generally accepted accounting principles.
Also, in our opinion, the aforementioned Predecessor consolidated financial
statements present fairly, in all material respects, the financial position of
Xerox Financial Services Life Insurance Company and subsidiary as of December
31, 1994, and the results of their operations and their cash flows for the
Predecessor periods, in conformity with generally accepted accounting
principles.
As discussed in note 3 to the consolidated financial statements, the Company
changed its method of accounting for investments to adopt the provisions of
the Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," at January 1, 1994.
St. Louis, Missouri
April 15, 1996
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
ASSETS 1995 1994
<S> <C> <C>
Investments:
Debt securities available for sale at market
(cost of $583,868 in 1995 and $2,163,588 in 1994) $ 594,556 $ 1,901,642
Equity securities at market (cost: $10,650 in 1994) -- 8,754
Mortgage loans 77,472 6,825
Real Estate -- 26,735
Policy loans 19,125 17,691
Other invested assets -- 7,597
Short-term investments at cost which approximates market 7,859 93,118
Total investments 699,012 2,062,362 3,566,750
Cash and cash equivalents - interest bearing 59,312 1,133,999
Cash - non-interest bearing 2,944 2,328
Receivable from sale of securities -- 25,829
Accrued investment income 9,116 33,222
Due from affiliates -- 12,938
Deferred policy acquisition costs 8,708 213,362
Present value of future profits 43,914 --
Goodwill 23,358 --
Guaranty assessments recoverable -- 12,192
Federal and state income taxes recoverable 1,397 33,851
Deferred tax benefits (net) 13,556 56,135
Receivable from OakRe 2,391,982 --
Reinsurance receivables 8,891 1,457
Other assets 2,426 2,080
Separate account assets 410,449 294,803
Total Assets $3,675,065 $ 3,884,558
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets (continued)
December 31, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY
PREDECESSOR
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
<S> <C> <C>
Policyholder deposits $3,033,763 $3,401,053
Future policy benefits 28,071 25,544
Payable on purchase of securities 5,327 46,285
Current Federal income tax payable 1,000 --
Accounts payable and other liabilities 20,143 17,985
Future purchase price payable to OakRe 23,967 --
Accrued liability for unrealized losses on off-balance-sheet
derivative instruments -- 18,398
Guaranty assessments 14,259 2,046
Separate account liabilities 410,449 294,636
Total Liabilities 3,536,979 $3,805,947
Shareholders' equity:
Common stock, $2 par value. (Authorized 5,000,000 shares;
issued and outstanding 2,899,446 shares in 1995 and 1994) 5,799 5,799
Additional paid-in capital 129,586 136,534
Retained earnings (63) 1,506
Net unrealized appreciation/(depreciation) on securities,
net of tax 2,764 (65,228)
Total Shareholders' Equity 138,086 78,611
Total Liabilities and Shareholders' Equity $3,675,065 $3,884,558
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994, and 1993
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Premiums (net of $106 premium ceded for the
Company in 1995, and $57,$231,$207 for the $ 921 $ 1,097 $ 2,787 $ 4,002
Predecessor in 1995, 1994 and 1993)
Net investment income 24,188 92,486 277,616 335,583
Net realized gain (loss) on sale of investments 1,324 (12,414) (101,361) 17,699
Other income 3,682 2,855 6,705 3,604
Total revenues 30,115 84,024 185,747 360,888
Benefits and expenses:
Interest on policyholder deposits 17,706 97,867 249,905 265,674
Current and future policy benefits (net of
reinsurance recoveries for the Company of $8
and Predecessor of $4,$888 & $7,480 in
1995, 1994 and 1993) 1,785 1,830 5,259 6,054
Operating and other expenses 7,126 12,777 24,479 29,414
Amortization of purchased intangible assets 3,030 -- -- --
Amortization of deferred acquisition costs 100 11,157 125,357 38,308
Total Benefits and Expenses 29,747 123,631 405,000 339,450
Income/(loss) before income taxes 368 (39,607) (219,253) 21,438
Income Taxes:
Current 1,011 (16,404) (46,882) 15,639
Deferred (580) 6,340 (30,118) (6,137)
Total income tax expense/(benefit) 431 (10,064) (77,000) 9,502
Net Income/(Loss) ($63) ($29,543) $(142,253)) $ 11,936
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholders Equity
Years ended December 31, 1995, 1994 and 1993
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994
1993
<S> <C> <C> <C> <C>
Common stock ($2 par value common stock;
Authorized 5,000,000 shares; issued and
outstanding 2,899,446 in 1995 and 1994 and
2,816,090 in 1993, Balance at beg. of period) $ 5,799 $ 5,799 $ 5,632 $ 5,392
Par value of additional shares issued -- -- 167 240
Balance at end of period 5,799 5,799 5,799 5,632
Additional paid-in capital:
Balance at beginning of period 137,749 136,534 120,763 116,003
Adjustment to reflect purchase acquisition
indicated in note 2 (52,163) -- -- --
Capital contribution 44,000 1,215 15,771 4,760
Balance at end of period 129,586 137,749 136,534 120,763
Retained earnings/(deficit):
Balance at beginning of period (36,441) 1,506 143,759 131,823
Adjustment to reflect purchase acquisition
indicated in note 2 36,441 -- -- --
Net income/(loss) (63) (29,543) (142,253) 11,936
Dividends to shareholder -- (8,404) -- --
Balance at end of period $ (63) $(36,441) $ 1,506 $143,759
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1995, 1994 and 1993
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994 1993
<S> <C> <C> <C> <C>
Net unrealized appreciation/(depreciation)of securities:
Balance at beginning of period $(28,837) $ (65,228) $ (321) $ (277)
Adjustment to reflect purchase acquisition
indicated in note 2 28,837 -- -- --
Implementation of change in accounting for
marketable debt and equity securities, net of
effects of deferred taxes of $18,375 and
deferred acquisition costs of $42,955 -- -- 34,125 --
Change in unrealized appreciation/(depreciation)
of debt and equity securities 10,724 178,010 (357,502) (74)
Change in deferred Federal income taxes (1,489) (18,458) 53,324 30
Change in deferred acquisition costs attributable
to unrealized losses/(gains) -- (123,161) 205,146 --
Change in present value of future profits
attributable to unrealized (gains) (6,471) -- -- --
Balance at end of period 2,764 (28,837) (65,228) (321)
Total Shareholders' Equity $138,086 $ 78,270 $ 78,611 $269,833
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994 1993
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Interest and dividend receipts $ 18,744 $ 131,439 $ 309,856 $ 343,122
Premiums received 921 1,097 2,787 4,002
Insurance and annuity benefit payments (2,799) (1,809) (3,755) (3,465)
Operating disbursements (10,480) (9,689) (26,023) (33,103)
Taxes on income refunded (paid) 60 48,987 17,032 (15,414)
Commissions and acquisition costs paid (17,456) (23,872) (26,454) (30,982)
Other 529 1,120 836 (1,585)
Net cash provided/(used in) by operating activities (10,481) 147,273 274,279 262,575
Cash flows from investing activities:
Cash used for the purch. of investment secur. (875,994) (575,891) (1,935,353) (3,685,448)
Proceeds from invest. secur. sold and matured 253,814 2,885,053 3,040,474 3,675,470
Other 179 (8,557) (8,185) 25,687
Net cash provided by/(used in) in investing activities $(622,003) $2,300,605 $ 1,096,936 $ 15,709
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994 1993
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Policyholder deposits $ 132,752 $ 130,660 $ 274,960 $ 348,392
Transfers (to)/from OakRe 628,481 (3,048,531) -- --
Transfer to Separate Accounts (37,946) (4,835) (33,548) (132,340)
Return of policyholder deposits (436,271) (290,586) (608,868) (446,396)
Dividends to Shareholder -- (8,404) -- --
Capital contributions received 44,000 1,215 15,938 5,000
Net cash provided by/(used in) financing activities 331,016 (3,220,481) (351,518) (225,344)
Increase in cash and cash equivalents (301,468) (772,603) 1,019,697 52,940
Cash and cash equivalents at beginning of period 363,724 1,136,327 116,630 63,690
Cash and cash equivalents at end of period $ 62,256 $ 363,724 $1,136,327 $ 116,630
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows, Continued
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994 1993
<S> <C> <C> <C> <C>
Reconciliation of net income/(loss)to net cash
provided by operating activities:
Net income/(loss) ($63) ($29,543) $(142,253) $ 11,936
Adjustments to reconcile net income/(loss)to net
cash provided by operating activities:
Increase/(decrease) in future policy benefits
(net of reinsurance) (1,013) 11 1,494 4,106
Increase/(decrease) in payables and accrued
liabilities (392) (10,645) 3,830 (7,940)
Decrease/(increase) in accrued investment
income (7,904) 32,010 21,393 1,443
Amortization of intangible assets and costs 3,831 11,309 125,722 38,652
Amortization and accretion of securities
premiums and discounts 307 2,410 3,635 (97)
Recapture commissions paid to OakRe (4,777) -- -- --
Net realized (gain)/loss on sale of investments (1,324) 12,414 101,361 (17,699)
(17,699)
Interest accumulated on policyholder
deposits 17,706 97,867 249,905 265,674
Investment expenses paid 642 2,373 7,296 6,924
Decrease/(Increase)in guaranty assessments (104) 5,070 (935) (4,076)
Increase/(decrease) in current and deferred
Federal income taxes 491 38,923 (59,263) (5,942)
Separate account net income/(loss) 1 1 2 (2,256)
Deferral of costs (14,568) (13,354) (30,024) (29,342)
Other (3,314) (1,573) (7,884) 1,192
Net cash provided by operating activities $(10,481) $ 147,273 $ 274,279 $262,575
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) NATURE OF BUSINESS AND ORGANIZATION
NATURE OF THE BUSINESS
Cova Financial Services Life Insurance Company and subsidiary (the Company),
formerly Xerox Financial Services Life Insurance Company (the Predecessor),
market and service single premium deferred annuities, immediate annuities,
variable annuities, and single premium whole-life insurance policies. The
Company is licensed to do business in 45 states and the District of Columbia.
Most of the policies issued present no significant mortality nor longevity
risk to the Company, but rather represent investment deposits by the
policyholders. Life insurance policies provide policy beneficiaries with
mortality benefits amounting to a multiple, which declines with age, of the
original premium.
Under the deferred annuity contracts, interest rates credited to policyholder
deposits are guaranteed by the Company for periods from one to ten years, but
in no case may renewal rates be less than 3%. The Company may assess
surrender fees against amounts withdrawn prior to scheduled rate reset and
adjust account values based on current crediting rates. Policyholders also
may incur certain Federal income tax penalties on withdrawals.
Although the Company markets its products through numerous distributors,
including regional brokerage firms, national brokerage firms and banks,
approximately 59%, 57% and 58% of the companies sales have been through two
specific brokerage firms, A.G. Edwards & Sons, Incorporated. and Edward D.
Jones & Company in 1995, 1994 and 1993, respectively.
ORGANIZATION
Prior to June 1, 1995 Xerox Financial Services, Inc. (XFSI) owned 100% or
2,899,446 shares of the Predecessor. XFSI is a wholly owned subsidiary of
Xerox Corporation.
On June 1, 1995 XFSI sold 100% of the issued and outstanding shares of the
Predecessor to Cova Corporation, a subsidiary of General American Life
Insurance Company (GALIC), a Missouri domiciled life insurance company, in
exchange for approximately $91.4 million in cash and $27.8 million in future
payables. In conjunction with this Agreement, the Predecessor also entered
into a financing reinsurance transaction that caused OakRe Life Insurance
Company(OakRe),a subsidiary of the Predecessor, to assume the existing single
premium deferred annuity deposits (SPDAs) of Cova Financial Services Life
Insurance Company, which had an aggregate carrying value at June 1, 1995 of
$2,982.0 million. In exchange, the Predecessor transferred specifically
identified assets to OakRe with a market value at June 1, 1995 of $2,986.0
million. Ownership of OakRe is retained by XFSI subsequent to the sale of the
Predecessor and other affiliates. The Receivable from OakRe to the Company
(Continued)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
that was created by this transaction will be liquidated over the remaining
crediting rate guaranty periods (which will be substantially expired in five
years) by the transfer of cash in the amount of the then current account
value, less a recapture commission fee to OakRe on policies retained beyond
their 30-day no-fee surrender window by the Company, upon the next crediting
rate reset date of each annuity policy. The Company may then reinvest that
cash for those policies that are retained and assume the benefits and risks of
those deposits thereafter.
In the event that both OakRe and XFSI default on the receivable, the Company
may draw funds from a standby bank irrevocable letter of credit established by
XFSI in the amount of $500 million. No funds were drawn on this letter of
credit during the period ending December 31, 1995.
In substance, terms of the agreement have allowed the seller, XFSI, to retain
substantially all of the existing financial benefits and risks of the existing
business, while the purchaser, GALIC, obtained the corporate operating and
product licenses, marketing and administrative capabilities of the Company,
and access to the retention of the policyholder deposit base that persists
beyond the next crediting rate reset date. Accordingly, the future gross
profits, as defined in note 3, of the Company on existing business will
consist of the gross profits on separate accounts, single premium deferred
annuities not reinsured to OakRe, single premium whole life policies, and
single premium immediate annuities, commencing at the date of closing; plus
the gross profits from SPDA deposits retained, commencing upon the expiration
of their current guaranteed crediting rate.
(2) CHANGE IN ACCOUNTING
Upon closing of the sale, the Company restated its financial statements in
accordance with "push down purchase accounting", which allocates the net
purchase price for the Company and its subsidiary of $91.4 million according
to the fair values of the acquired assets and liabilities, including the
estimated present value of future profits. These allocated values were
dependent upon policies in force and market conditions at the time of closing.
These allocations are summarized below:
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
(In Millions)
<S> <C> June 1, 1995
Assets acquired:
Debt securities $ 32.4
Policy loans 18.3
Cash and cash equivalents 363.7
Present value of future profits 46.7
Goodwill 24.1
Deferred tax benefit 26.8
Receivable from OakRe 2,969.0
Other assets 5.9
Separate account assets 332.7
-------------
3,819.6
Liabilities assumed:
Policyholder deposits 3,299.2
Future policy benefits 27.2
Future purchase price payable 27.8
Deferred Federal income taxes 12.3
Other liabilities 29.0
Separate account liabilities 332.7
3,728.2
-------------
Adjusted purchase price $ 91.4
=============
</TABLE>
In addition to revaluing all material tangible assets and liabilities to their
respective estimated market values as of the closing date of the sale, the
Company also recorded in its financial statements the excess of cost over fair
value of net assets acquired (goodwill) as well as the present value of future
profits to be derived from the purchased and reinsured business. These amounts
were determined in accordance with the purchase method of accounting. This new
basis of accounting resulted in an increase in shareholders equity of $13.1
million in 1995 reflecting the application of push down purchase accounting.
The Companys consolidated financial statements subsequent to June 1, 1995
reflect this new basis of accounting.
All amounts for periods ended before June 1, 1995 are labeled Predecessor and
are based on historical costs. The periods ending on or after such date are
labeled The Company, and are based on fair values at June 1, 1995 and
subsequent costs.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITIES
Effective January 1, 1994 the Predecessor adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS #115). SFAS #115 requires that investments in all
debt securities and those equity securities with readily determinable market
values be classified into one of three categories: held-to-maturity, trading,
or available-for-sale. Classification of investments is based on management's
current intent. All debt and equity securities at December 31, 1995 and 1994
were classified as available-for-sale. Securities available-for-sale are
carried at market value, with unrealized holding gains and losses reported as
a separate component of stockholders equity, net of deferred effects of income
tax and related effects on deferred acquisition costs.
Amortization of the discount or premium from the purchase of mortgage-backed
bonds is recognized using a level-yield method which considers the estimated
timing and amount of prepayments of the underlying mortgage loans. Actual
prepayment experience is periodically reviewed and effective yields are
recalculated when differences arise between the prepayments previously
anticipated and the actual prepayments received and currently anticipated.
When such a difference occurs, the net investment in the mortgage-backed bond
is adjusted to the amount that would have existed had the new effective yield
been applied since the acquisition of the bond, with a corresponding charge or
credit to interest income (the "retrospective method").
For investments in "high risk" (interest-only strips) collateralized mortgage
obligations (CMOs), the Company's accounting in 1993 followed the provisions
of the Financial Accounting Standards Board's Emerging Issues Task Force
Consensus No. 89-4. A new effective yield was calculated for each individual
high-risk CMO based on the amortized cost of the investment and the current
estimate of future cash flows (the "prospective method"). The recalculated
yield was then used to accrue interest income in the subsequent period.
In 1994, the Predecessor adopted Financial Accounting Standards Board's
Emerging Issues Task Force Consensus No. 93-18 which amends EITF 89-4 and
requires impairment tests to be performed using discounted cash flows at a
risk free discount rate. If the amortized cost of the security exceeds future
cash flows discounted at the risk free rate, then amortized cost is written
down to fair value. The adoption of this Consensus resulted in no adjustments
at January 1, 1994.
A realized loss is recognized and charged against income if the Company's
carrying value in a particular investment in the available-for-sale category
has experienced a significant decline in market value that is deemed to be
other than temporary.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
Investment income is recorded when earned. Realized capital gains and losses
on the sale of investments are determined on the basis of specific costs of
investments and are credited or charged to income. Gains or losses on
financial future or option contracts which qualify as hedges of investments
are treated as basis adjustments and are recognized in income over the life of
the hedged investments.
MORTGAGE LOANS AND OTHER INVESTED ASSETS
Real estate reserves are established when declines in collateral values,
estimated in light of current economic conditions and calculated in conformity
with Statement of Financial Accounting Standards No. 114, Accounting by
Creditors for Impairment of a Loan (SFAS 114), indicate a likelihood of loss.
Prior to year-end 1995, the Company evaluated its real estate-related assets
(including accrued interest) by estimating the probabilities of loss utilizing
various projections that included several factors relating to the borrower,
property, term of the loan, tenant composition, rental rates, other supply and
demand factors and overall economic conditions. Generally, at that time, the
reserve was based upon the excess of the loan amount over the estimated future
cash flows from the loan.
SFAS 114 defines impaired loans as loans in which it is probable that a
creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. In 1995, the Company adopted
Statement of Financial Accounting Standards No. 118, Accounting by Creditors
for Impairment of a Loan -- Income Recognition and Disclosures (SFAS 118).
SFAS 118 amends SFAS 114, providing clarification of income recognition issues
and requiring additional disclosures relating to impaired loans. The adoption
of SFAS 114 and 118 had no effect on the Companys financial position or
results of operations at or for the period ended December 31, 1995. The
Company had no impaired loans and no valuation allowances established for
potential losses on mortgage loans at December 31, 1995.
Mortgage loans and policy loans are carried at their unpaid principal
balances. Real estate is carried at cost less accumulated depreciation.
Other invested assets are carried at lower of cost or market.
Prior to 1995, when an investment supported by real estate collateral was
deemed "in-substance" foreclosed, the investment was reclassified as real
estate and recorded at its fair value, with any reduction in carrying value
recorded as a realized loss. The change in this valuation allowance was
recorded as a realized capital gain or loss in the statements of income.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency and demand deposits in banks, US
Treasury bills, money market accounts, and commercial paper with maturities
under 90 days, which are not otherwise restricted.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
SEPARATE ACCOUNT ASSETS
Separate accounts contain segregated assets of the Company that are
specifically assigned to variable annuity policyholders in the separate
accounts and are not available to other creditors of the Company. The
earnings of separate account investments are also assigned to the
policyholders in the separate accounts, and are not guaranteed or supported by
the other general investments of the Company. The Company earns mortality and
expense risk fees from the separate accounts and assesses withdrawal charges
in the event of early withdrawals. Separate accounts assets are valued at
fair value.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business which vary with and are directly related
to the production of new business, principally commissions, premium taxes,
sales costs, and certain policy issuance and underwriting costs, are deferred.
These deferred costs are amortized in proportion to estimated future gross
profits derived from investment income, realized gains and losses on sales of
securities, unrealized securities gains and losses recognized under SFAS #115,
interest credited to accounts, surrender fees, mortality costs, and policy
maintenance expenses. The estimated gross profit streams are periodically
reevaluated and the unamortized balance of deferred acquisition costs is
adjusted to the amount that would have existed had the actual experience and
revised estimates been known and applied from the inception of the policies
and contracts. The amortization and adjustments resulting from unrealized
gains and losses is not recognized currently in income but as an offset to the
unrealized gains and losses reflected as a separate component of equity.
The components of deferred policy acquistion costs were as follows:
<TABLE>
<CAPTION>
THE COMPANY
PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
(IN THOUSANDS OF DOLLARS) 12/31/95 5/31/95
1994 1993
<S> <C> <C> <C> <C>
Deferred policy acquisition costs,
beginning of period $ 92,398 $ 213,362 $ 146,504 $155,470
Effects of push down purchase
accounting (92,398) -- -- --
Commissions and expenses deferred 8,809 13,354 30,025 29,342
Amortization (100) (11,157) (125,357) (38,308)
Deferred policy acquisition costs
attributable to unrealized
gains/(losses) -- (123,161) 162,190 --
Deferred policy acquistion costs,
end of period $ 8,709 $ 92,398 $ 213,362 $146,504
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
PURCHASE RELATED INTANGIBLE ASSETS AND LIABILITIES
In accordance with the purchase method of accounting for business
combinations, two intangible assets and a future payable related to accrued
purchase price consideration were established as of the purchase date:
Present value of future profits
As of June 1, 1995 the Company established an intangible asset which
represents the present value of future profits to be derived from both the
purchased and transferred blocks of business. Certain estimates were utilized
in the computation of this asset including estimates of future policy
retention, investment income, interest credited to policyholders, surrender
fees, mortality costs, and policy maintenance costs discounted a pre-tax rate
of 18% (12% net after tax). In addition, as the Company has the option of
retaining its SPDA policies after they reach their next interest rate reset
date and are recaptured from OakRe, a component of this asset represents
estimates of future profits on recaptured business. This asset will be
amortized according to the estimated profit stream and will periodically be
adjusted as actual profits materialize and are different from the estimates.
The asset will also be adjusted for amounts attributable to realized and
unrealized securities gains and losses. Any adjustments to the unamortized
balance will be applied as if the revised estimates had been known and applied
since inception. The amortization period is the remaining life of the
policies, which is estimated to be 20 years from the date of original policy
issue. Based on current assumptions, amortization of the original in-force
PVFP asset, expressed as a percentage of the original in-force asset, are
projected to be 7.6%, 7.6%, 6.6%, 5.4% and 5.3% for the years ended December
31, 1996 through 2000, respectively. Actual amortization incurred during
these years may be more or less as assumptions are modified to incorporate
actual results.
The components of present value of future profits are as follows:
<TABLE>
<CAPTION>
The Company
7 Months Ended
(In Thousands) 12/31/95
<S> <C>
Present value of future profits - beginning of period $ 46,709
Interest added 1,941
Commissions capitalized 5,759
Gross amortization, excluding interest (4,024)
Present value of future profits attributable to
unrealized gains (6,471)
---------
Present value of future profits - end of period $ 43,914
=========
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
Future payable
Pursuant to the financial reinsurance agreement with OakRe, the receivable
from OakRe becomes due in installments when the SPDA policies reach their next
crediting rate reset date. For any recaptured policies that continue in force
into the next guarantee period, the Company will pay a commission to OakRe of
1.75% up to 40% of policy account values originally reinsured and 3.5%
thereafter. On policies that are recaptured and subsequently exchanged to a
variable annuity policy, the Company will pay a commission to OakRe of 0.50%.
The Company has recorded a future payable that represents the present value of
the anticipated future commission payments payable to OakRe over the remaining
life of the financial reinsurance agreement discounted at an estimated
borrowing rate of 6.5%. This liability will be periodically adjusted as actual
results differ from the estimates used in establishing the total purchase
price. This liability, which can be anticipated with a high degree of
certainty, represents a contingent purchase price payable for the policies
transferred to OakRe on the purchase date and has been pushed down to the
Company through the financial reinsurance agreement. The Company expects that
this payable will be substantially extinguished over the next five years.
The components of this future payable are as follows:
<TABLE>
<CAPTION>
The Company
7 Months Ended
(In Thousands) 12/31/95
<S> <C>
Future payable - beginning of period $ 27,797
Interest added 947
Payments to OakRe (4,777)
---------
Future payable - end of period $ 23,967
=========
</TABLE>
Goodwill
Under the push down method of purchase accounting, the excess of purchase
price over the fair value of assets and liabilities acquired and present value
of future profits less future payable is established as an asset and referred
to as Goodwill. Goodwill will also be periodically adjusted to account for any
retroactive changes to present value of future profits and future payables as
actual results differ from original assumptions and are applied retroactively
as of the original purchase date. The Company has elected to amortize goodwill
on the straight line basis over a 20 year period.
Deferred Tax Assets and Liabilities
Xerox Financial Services, Inc. (XFSI) and General American agreed to file an
election to treat the acquisition of the Company as an asset acquisition under
the provisions of Internal Revenue Code Section 338(h)(10). As a result of
that election, the tax basis of the Companys assets as of the date of
acquisition were revalued based upon fair market values. The principal effect
of the election was to establish a tax asset on the tax-basis balance sheet of
approximately $35.3 million for the value of the business acquired that is
amortizable for tax purposes.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
POLICYHOLDER DEPOSITS
The Company recognizes its liability for policy amounts that are not subject
to policyholder mortality nor longevity risk at the stated contract value,
which is the sum of the original deposit and accumulated interest, less any
withdrawals.
FUTURE POLICY BENEFITS
Reserves are held for future annuity benefits that subject the Company to
risks to make payments contingent upon the continued survival of an individual
or couple (longevity risk). These reserves are valued at the present value of
estimated future benefits discounted for interest, expenses, and mortality.
The assumed mortality is the 1983 Individual Annuity Mortality Tables
discounted at 5.75% to 8.50%, depending upon year of issue.
Current mortality benefits payable are recorded for reported claims and
estimates of amounts incurred but not reported.
PREMIUM REVENUE
The Company recognizes premium revenue at the time of issue on annuity
policies that subject it to longevity risks.
The Company currently assesses no explicit life insurance premium for its
commitment to make payments in excess of its recorded liability that are
contingent upon policyholder mortality. Benefits paid in excess of the
recorded liability are recognized when incurred.
Amounts collected on policies not subject to any mortality or longevity risk
are recorded as increases in the policyholder deposits liability.
FEDERAL INCOME TAXES
Prior to June 1,1995 the revenues and expenses of the Predecessor were
included in a consolidated Federal income tax return with its parent company
and other affiliates. Allocations of Federal income taxes were based upon
separate return calculations.
After June 1, 1995 the Company will be filing its own separate income tax
return, independent from its ultimate parent, GALIC.
The Company accounts for deferred income taxes according to Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS
#109).
Under the asset and liability method of SFAS #109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amount of existing assets
and liabilities and their respective tax bases and operating loss and tax
credit carry forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
(continued)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
those temporary differences are expected to be recovered or settled. Under
SFAS #109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income to the period that includes the enactment
date.
RISKS AND UNCERTAINTIES
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
The following elements of the consolidated financial statements are most
affected by the use of estimates and assumptions:
- Investment market valuation
- Amortization of deferred policy acquisition costs
- Calculation and amortization of present value of future profits
- Recoverability of Goodwill
- Recoverability of guaranty fund assessments
The market value of the Company's investments is subject to the risk that
interest rates will change and cause a temporary increase or decrease in the
liquidation value of debt securities. To the extent that fluctuations in
interest rates cause the cash flows of assets and liabilities to change, the
Company might have to liquidate assets prior to their maturity and recognize a
gain or loss. Interest rate exposure for the investment portfolio is managed
through asset/liability management techniques which attempt to control the
risks presented by differences in the probable cash flows and reinvestment of
assets with the timing of crediting rate changes in the Company's policies and
contracts. Changes in the estimated prepayments of mortgage-backed securities
also may cause retrospective changes in the amortization period of securities
and the related recognition of income.
The amortization of deferred acquisition costs is based on estimates of
long-term future gross profits from existing policies. These gross profits
are dependent upon policy retention and lapses, the spread between investment
earnings and crediting rates, and the level of maintenance expenses. Changes
in circumstances or estimates may cause retrospective adjustment to the
periodic amortization expense and the carrying value of the deferred expense.
In a similar manner, the amortization of present value of future profits is
based on estimates of long-term future profits from existing and recaptured
policies.
These gross profits are dependent upon policy retention and lapses, the spread
between investment earnings and crediting rates, and the level of maintenance
expenses. Changes in circumstances or estimates may cause retrospective
adjustment to the periodic amortization expense and the carrying value of the
asset.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long Lived Assets and for Long Lived Assets
to be Disposed of (SFAS 121), which was adopted by the Company in the fourth
quarter of 1995, the Company has considered the recoverability of Goodwill and
has concluded that no circumstances have occurred which would give rise to
impairment of Goodwill for the period ending December 31, 1995.
The Company is subject to assessments in substantially all jurisdictions where
it is licensed to fund guaranteed benefits to policyholders of non-affiliated
insolvent insurers licensed in those jurisdictions. Such assessments
generally are limited to a percentage of the premiums written by the Company
and are fully or partially recoverable as credits against future premium tax
payments in the majority of jurisdictions. The Company is at risk to extent
that the Company may not incur sufficient premium taxes to permit full
recovery of available credits. The Company has been indemnified by OakRe
against any guaranty assessments incurred that relate to insolvencies
occurring prior to June 1, 1995. See note 11 - Guaranty Fund Assessments.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard No. 107, "Disclosures About Fair
Value of Financial Instruments" (SFAS #107) applies fair value disclosure
practices with regard to financial instruments, both assets and liabilities,
for which it is practical to estimate fair value. In cases where quoted
market prices are not readily available, fair values are based on estimates
that use present value or other valuation techniques.
These techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. Although fair value
estimates are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, might
not be realized in the immediate settlement of the instruments. SFAS #107
excludes certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Because of this, and further because a value of
a business is also based upon its anticipated earning power, the aggregate
fair value amounts presented do not represent the underlying value of the
Company.
SFAS #115 takes SFAS #107 another step and requires balance sheet adjustments
of debt investments available for sale and equity investments to fair value
with a corresponding adjustment to shareholders' equity. The Predecessor
adopted SFAS #115 in 1994 and classified all of its investments as "available
for sale". The effects of implementing SFAS #115 as of January 1, 1994 was a
net increase in Shareholders' Equity of approximately $29.2 million.
The Predecessor adopted Statement of Financial Accounting Standard No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments" (SFAS #119), as of December 31, 1994. SFAS #119 requires
increased disclosures about derivative financial instruments including the
amount, nature, and terms of all derivative financial instruments as well as
(continued)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
disclosure of the purposes for which derivative financial instruments are
held, end-of-period fair values and any net gains or losses arising from
trading of derivative financial instruments.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS
AND ACCRUED INVESTMENT INCOME:
The carrying values amounts reported in the balance sheets for these
instruments approximate their fair values. Short-term debt securities are
considered "available for sale."
INVESTMENT SECURITIES (INCLUDING MORTGAGE-BACKED SECURITIES):
Fair values for debt securities are based on quoted market prices, where
available. For debt securities not actively traded, fair value estimates are
obtained from independent pricing services. In some cases, such as private
placements and certain mortgage-backed securities, fair values are estimated
by discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the investments. (See
note 4 for fair value disclosures). Fair values for mortgages are based on
management estimates and incorporate independent appraisals of underlying real
property. As of December 31, 1995, fair value of the Companys mortgage loans
are equivalent to the carrying value.
INTEREST RATE SWAPS AND FINANCIAL FUTURES CONTRACTS:
The fair value of interest rate swaps and financial futures contracts are the
amounts the Company would receive or pay to terminate the contracts at the
reporting date, thereby taking into account the current unrealized gains or
losses of open contracts. Amounts are based on quoted market prices, or
pricing models or formulas using current assumptions. (See note 6 for fair
value disclosures).
INVESTMENT CONTRACTS:
The Company's policy contracts require the beneficiaries to commence receipt
of payments by the later of age 85 or 10 years after purchase, and
substantially all permit earlier surrenders, generally subject to fees and
adjustments. Fair values for the Company's liabilities for investment type
contracts (Policyholder Deposits) are estimated as the amount payable on
demand. As of December 31, 1995 and 1994 the cash surrender value of
policyholder funds on deposit were $2,228,009 and $129,404,638 respectively,
less than their stated carrying value. Of the contracts permitting surrender,
90% provide the option to surrender without fee or adjustment during the 30
days following reset of guaranteed crediting rates. The Company has not
determined a practical method to determine the present value of this option.
All of the Company's deposit obligations are fully guaranteed by the acquirer,
GALIC, and the receivable from OakRe equal to the SPDA obligations is
guaranteed by OakRe's parent, XFSI.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
REINSURANCE:
Reinsurance is not material to the Companys operation or its financial
statements. The Company, however, has adopted the provisions of Statement of
Financial Accounting Standard No. 113, Accounting and Reporting for
Reinsurance of Short Duration and Long Duration Contracts (SFAS 113). The
adoption of this accounting standard had no effect on the financial statements
other than gross reporting of balance sheet amounts and disclosure of
reinsurance amounts netted against revenues and expenses.
The financing reinsurance agreement entered into with OakRe does not meet the
conditions for reinsurance accounting under SFAS No. 113. The net assets
initially transferred to OakRe were established as a receivable and are
subsequently increased as interest is accrued on the underlying liabilities
and decreased as funds are transferred back to the Company when policies reach
their crediting rate reset date or benefits are claimed.
OTHER
Certain 1993 and 1994 amounts have been reclassified to conform to the 1995
presentation.
(4) INVESTMENTS
The Company's investments in debt and equity securities are considered
available for sale and carried at estimated fair value, with the aggregate
unrealized appreciation or depreciation being recorded as a separate component
of shareholder equity. The carrying value and amortized cost of investments at
December 31, 1995 and 1994 are as follows:
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
THE COMPANY
1995
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
AMORTIZED
VALUE GAINS LOSSES VALUE
COST
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Debt Securities:
US. Government Treasuries $ 4,307 $ 156 -- $ 4,307 $ 4,151
Mortgage-backed and derivative
securities:
Collateralized mortgage obligations 252,148 4,344 $ (237) 252,148 248,041
Corporate, state, municipalities, and
political subdivisions 338,101 7,261 (836) 338,101 331,676
Total debt securities 594,556 11,761 (1,073) 594,556 583,868
Mortgage loans 77,472 -- -- 77,472 77,472
Policy loans 19,125 -- -- 19,125 19,125
Short term investments 7,859 36 -- 7,859 7,823
Total investments $699,012 $11,797 $(1,073) $699,012 $688,288
<FN>
As of December 31, 1995, the Company has no impaired investments and no valuation
allowances established for potential losses on its investments.
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
PREDECESSOR
1994
GROSS GROSS ESTIMATED COST
OR
CARRYING UNREALIZED UNREALIZED FAIR
AMORTIZED
VALUE GAINS LOSSES VALUE
COST
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Debt Securities:
US. Government Treasuries $ 10,834 $ 80 $ (1,787) $ 10,834 $ 12,541
Mortgage-backed and
derivative securities:
GNMA 6,447 186 -- 6,447 6,261
FNMA & FHLMC 272 6 -- 272 266
Collateralized mortgage obligations 1,188,257 490 (185,964) 1,188,257 1,373,731
Foreign governments 27,947 -- (4,355) 27,947 32,302
Corporate, state, municipalities, and
political subdivisions 654,848 9,884 (80,583) 654,848 725,547
Redeemable preferred stocks 13,037 194 (97) 13,037 12,940
Total debt securities 1,901,642 10,840 (272,786) 1,901,642 2,163,588
Other invested assets (1) 7,597 466 (1,335) 6,728 7,597
Equity securities 8,754 -- -- 8,754 8,754
Real estate (1) 26,735 2,034 (153) 28,616 26,735
Mortgage loans 6,825 -- (1,245) 5,580 6,825
Policy loans 17,691 -- -- 17,691 17,691
Short term investments 93,118 4,060 (4,654) 93,118 93,712
Total investments(1) $2,062,362 $17,400 $(280,173) $2,062,129 $2,324,902
Company's beneficial interest in separate
account assets $ 167 N/A N/A $ 167 N/A
<FN>
(1) The Company has established valuation allowances of approximately $200,000 and $400,000 as
of December 31, 1994 for estimated potential losses on real estate and other invested assets,
respectively.
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The amortized cost and estimated market value of debt securities at December
31, 1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Maturities of mortgage-backed securities will be substantially shorter than
their contractual maturity because they require monthly principal installments
and mortgagees may prepay principal.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
<S> <C> <C>
(in thousands of dollars)
Due after one year through five years $135,221 $137,828
Due after five years through ten years 176,906 180,132
Due after ten years 23,700 24,448
Mortgage-backed securities 248,041 252,148
Total $583,868 $594,556
<FN>
At December 31, 1995, approximately 99.25% of the Company's debt securities
are investment grade or are non-rated but considered to be of investment
grade. Of the 0.75% non-investment grade debt securities, all are rated as
BB+.
</TABLE>
Included in debt securities in 1994 and the first five months of 1995 are
investments in interest-only mortgage-backed stripped securities (IOs) and
similar IOettes. Accounting for investments in "high risk" (interest only)
collateralized mortgage obligations (CMOs), is in accordance with the
provisions of the Financial Standards Board's Emerging Issues Task Force
Consensus Nos. 89-4 and 93-18. An effective yield is calculated for each high
risk CMO based on the current amortized cost of the investment and the current
estimate of future cash flow. The recalculated effective yield is used to
record interest income in subsequent periods (the "prospective method"). If
the anticipated cash flow for any "high risk" CMO discounted at the comparable
risk-free rate is less than the unamortized cost, an impairment loss is
recorded and the unamortized cost adjusted. The write-down is treated as a
realized loss. Write-downs of approximately $3,341,163 and $51,120,276 were
recorded in 1994 and 1993, respectively. At December 31, 1994 the Predecessor
held such securities with a carrying value of $36,441,742. The weighted
average of the effective yield that was used to accrue interest income in 1994
was 11.88%.
FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The Company participates in a securities lending program whereby certain
securities are loaned to third parties, primarily major brokerage firms. The
agreement with a custodian bank facilitating such lending requires a minimum
of 102% of the initial market value of the domestic loaned securities to be
maintained in a collateral pool. To further minimize the credit risk related
to this lending program, the Company monitors the financial condition of the
counter parties to these agreements. Securities loaned at December 31, 1995
had market values totaling $16,034,037. Cash, letters of credit, and
government securities of $16,353,995 was held by the custodian bank as
collateral to secure this agreement. Income on the Companys security lending
program in 1995 was immaterial.
Debt securities with a recorded investment of $0 and $2,827,500, were
non-income producing during the years ended December 31,1995 and 1994.
Information related to troubled debt restructurings during 1994 is as follows:
<TABLE>
<CAPTION>
THE
PREDECESSOR
DEBT MORTGAGE
SECURITIES LOANS
TOTAL
(in thousands of
dollars)
<S> <C> <C> <C>
Aggregate carrying value at December 31, 1994 $3,306 -- $3,306
Gross interest income included in net income
during 1994 205 -- 205
Gross interest income that would have been
earned during 1994 if there had been no
restructuring 538 -- 538
</TABLE>
Information related to troubled debt restructuring during 1993 is as follows:
<TABLE>
<CAPTION>
THE
PREDECESSOR
DEBT
MORTGAGE
SECURITIES LOANS
TOTAL
(in thousands of
dollars)
<S> <C> <C> <C>
Aggregate carrying value at December 31, 1993 $5,275 $6,405 $11,680
Gross interest income included in net income
during 1993 589 568 1,157
Gross interest income that would have been
earned during 1993 if there had been no
restructuring 904 712 1,616
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The components of net investment income were as follows:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994
1993
(in thousands of dollars)
<S> <C> <C> <C> <C>
Income on debt securities $19,629 $ 63,581 $ 267,958 $327,489
Income on equity securities -- 302 645 725
Income on short-term investments 2,778 28,060 11,705 4,624
Income on cash on deposit -- -- 316 1,711
Income on interest rate swaps -- 377 (244) 3,365
Income on policy loans 868 624 1,376 1,147
Interest on mortgage loans 1,444 248 1,162 1,053
Income on foreign exchange -- 184 (433) (281)
Income of real estate -- 1,508 3,278 586
Income on separate account investments -- (1) 2 2,256
Miscellaneous interest 109 (24) (853) (168)
--
Total investment income 24,828 94,859 284,912 342,507
Investment expenses (640) (2,373) (7,296) (6,924)
Net investment income $24,188 $ 92,486 $ 277,616 $335,583
Realized capital gains/(losses) were as follows:
Debt securities $ 1,344 $(16,749) $ (79,300) $ 12,716
Mortgage loans -- 1,431 (3,452) (453)
Equity securities -- (423) (76) 2,489
Real estate -- (124) -- 2,335
Short-term investments (20) (1,933) (282) 612
Other assets -- (76) 147 --
Interest rate swaps -- 5,460 (18,398) --
Net realized gains/(losses) on investments $ 1,324 $(12,414) $(101,361) $ 17,699
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
- -----------------------------------------------------
7 MONTHS 5 MONTHS
ENDED ENDED
12/31/95 5/31/95 1994 1993
<S> <C> <C> <C> <C>
Unrealized gains/(losses) were as follows:
Debt securities $10,688 $(85,410) $(261,947) $ --
Equity securities -- -- -- (494)
Short-term investments 36 879 (594) --
Effects on deferred acquisition costs amortization -- 39,030 162,190 --
Effects on present value of future profits (6,471) -- -- --
Unrealized gains/(losses) before income tax 4,253 (45,501) (100,351) (494)
Unrealized income tax benefit/(expense) (1,489) 16,664 35,123 173
Net unrealized gains (losses) on investments $ 2,764 $(28,837) $ (65,228) $(321)
</TABLE>
Proceeds from sales of investments in debt securities for the Company during
1995 were $214,811,186, and for the Predecessor were $2,786,998,780. Gross
gains of $1,533,501 and gross losses of $190,899 were realized by the Company
on its sales. Included in these amounts for the Company are $373,768 of
gross gains realized on the sale of non-investment grade securities. The
Predecessor realized gross gains of $9,499,191 and gross losses of $26,249,279
on its sales. Included in these amounts are $6,367,297 of gross gains and
$7,607,167 of gross losses realized on the sale of non-investment grade
securities.
Proceeds from sales of investments in debt securities during 1994 were
$3,081,863,341. Gross gains of $59,472,808 and gross losses of $136,394,109
were realized on those sales. Included in these amounts are $6,455,887 of
gross gains and $6,692,683 of gross losses realized on the sale of
non-investment grade securities.
Proceeds from sales of investments in debt securities during 1993 were
$3,635,309,534. Gross gains of $229,942,137 and gross losses of $198,648,778
were realized on those sales. Included in these amounts are $47,042,511 of
gross gains and $9,163,938 of gross losses realized on the sale of
non-investment grade securities.
Unrealized appreciation/(depreciation) of debt securities for the Company in
1995, and the Predecessor in 1995, 1994 and 1993 were $10,688,000,
$176,537,000, $(357,401,000), and $15,171,000, respectively. Unrealized
appreciation/(depreciation)of debt securities is calculated as the change
between the cost and market values of debt securities for the years then
ended.
Securities with a book value of approximately $6,933,755 at December 31, 1995
were deposited with government authorities as required by law.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(5) SECURITIES GREATER THAN 10% OF SHAREHOLDERS' EQUITY
As of December 31, 1995 the Company held the following individual securities
which exceeded 10% of shareholders' equity:
<TABLE>
<CAPTION>
Long-term Debt Amortized
Securities Cost
- -----------------------------------
<S> <C>
Countrywide Mtg. 1933-12 A4 $18,681,636
American Airlines 14,940,484
</TABLE>
As of December 31, 1994 the Company held the following individual securities
which exceeded 10% of shareholders' equity:
<TABLE>
<CAPTION>
Long-term Debt Amortized Long-term Debt Amortized
Securities Cost Securities Cost
<S> <C> <C> <C>
PRU HOME MTG SEC 1994 SER 26-A $43,947,846 VIRGINIA STATE HOUSING DEV AUTH 1994-A $14,300,000
PRU HOME MTG SEC 1993 SER 19-A9 41,024,780 PRU HOME MTG SEC 1994 SER 8-A2 14,228,882
HOUSING SEC INC 1994 SER 1-A8 34,293,893 FHLMC MC MTG PRT CRT SER 1628-G 13,841,422
FNMA REMIC TR 1994-51 PE 34,079,290 FNMA REMIC TR 1993 SER 33-ZA 13,613,754
FHLMC MC MTG PRT CRT SER 1162-Z 34,029,681 FNMA REMIC TR 1994 SER 58-B 13,502,865
RES FUNDING CORP 1994 SER S7-A3 33,929,196 FNMA REMIC TR 1994 SER 58-A 13,402,600
RES FUNDING CORP 1993 SER S18-A6 30,771,180 TELEPHONE & DATA SYSTEMS 13,382,782
FHLMC MC MTG PRT CRT SER 1652-E 29,880,047 ARGENTINA FRB 13,051,979
G E CAPITAL 1994 SER 4-A6 29,587,419 FHA PROJECT LOAN 223-F(MANASSAS VA) 12,985,981
RES FUNDING CORP 1994 SER S10-A3 28,743,601 PARAMOUNT COMMUNICATIONS 12,985,579
FNMA REMIC TR 1993 SER 131-Z 26,821,993 FNMA REMIC TR 1993 SER G22-ZA 12,962,715
CITICORP MTG 1994 SER 11-A1 26,271,938 FNMA REMIC TR 1992 SER 184-X 12,815,453
COUNTRYWIDE MTG 1993 SER 13-A2 24,027,743 TELARG 12,458,038
G E CAPITAL KRONE LINKED (CI) 23,500,000 UNITED AIRLINES 1991 ETC SER A2 12,420,542
G E CAPITAL MTG 1994 SER 12-A4 23,480,685 PRU HOME MTG SEC 1994 SER 6-A5 12,400,623
GRUMA SA DE CV 23,335,945 SIGNET MASTER TR 1994-4A 11,986,616
FHLMC MC MTG PRT CRT SER 1108-K 23,146,222 GENERAL MOTORS CORP DEBENTURE 11,856,797
FHLMC MC MTG PRT CRT SER 1468-ZA 22,546,223 PRU HOME MTG SEC 1993 SER 43-10 11,791,582
G E CAPITAL MTG 1994 SER 10-A12 21,288,675 CENTRAL BANK OF ARGENTINA 11,695,148
RES FUNDING CORP 1993 SER S26-A8 21,225,227 FHLMC MC MTG PRT CRT SER 1697-PG 11,544,588
LOUISIANA POWER & LIGHT(WATERFORD 3) 20,909,267 FNMA REMIC TR 1993 SER 29-SK 11,316,353
SEARS MTG ACC CORP 1993 SER 11-A5 20,861,498 PRU HOME MTG SEC 1993 SER 41-A4 11,272,637
FEDERAL HOME LOAN BANK 20,716,221 FHLMC MC MTG PRT CRT SER 1513-AF 11,266,102
FHLMC MC MTG PRT CRT SER 1244-G 20,697,580 FNMA REMIC TRUST 1993 SER 4-HB 11,181,840
PRU HOME MTG SEC 1993 SER 30-A9 20,570,432 PHILLIPS PETROLEUM 11,120,220
G E CAPITAL MTG 1992 SER 7 20,423,860 INTERAMERICAN DEV BANK 10,751,421
CSR AMERICA INC 19,916,660 COUNRTYWIDE MTG 1994 SER L-AB 10,603,498
FHLMC MC MTG PRT CRT SER 1364-I 19,892,880 CHASE MTG SEC 1994SER F-A7 10,516,592
FHLMC MC MTG PRT CRT SER 1574-F 19,825,320 FNMA REMIC TR 1994 SER 3-SC 10,434,265
SEARS MTG SEC CORP 1993-7 T7 19,709,253 NEWS AMERICAN HOLDINGS 10,310,547
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
FINANCIAL FUTURES CONTRACTS
The Predecessor was a party to financial futures contracts under a program of
hedging with off-balance sheet risk in the normal course of business to meet
the needs of its policyholders and to reduce its own exposure to fluctuations
in interest rates. The contracts involved, to varying degrees, elements of
interest rate risk in excess of the amount recognized in the consolidated
balance sheet.
Futures contracts are contracts for delayed delivery of securities in which
the seller agrees to make delivery at a specified future date for a specific
price. Risks arise from the possible inability of counter parties to meet the
terms of their contracts and from movements in securities values and interest
rates. When futures contracts are designated as hedges additional risks arise
due to the possibility that the futures contract will provide an imperfect
correlation to the hedged security.
As of December 31, 1994, the Predecessor held 65 5Yr T-note futures, 190 10Yr
T-note futures, and 50 T-bond futures contracts with a total notional face
amount of $30,500,000. The contracts matured in March, 1995, and resulted in
a net amount of $468,520 being applied as an increase in book value of the
underlying hedged securities. Collateral requirements were set by the Chicago
Board of Trade and averaged $1,121 per contract as of December 31, 1994.
INTEREST RATE SWAPS
During 1994 and the first five months of 1995, the Predecessor was party to
derivative financial instruments in the normal course of business for the
purposes of earning investment income and modifying the interest rate-related
risks of the portfolio.
The notional amounts of derivatives do not represent amounts exchanged by the
parties and, thus, are not a measure of the Company's exposure through the use
of derivatives. The amounts exchanged are determined by reference to the
notional amounts and the other terms of the instruments.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The following table summarizes various information regarding derivative
financial instruments as of December 31, 1994:
<TABLE>
<CAPTION>
FAIR MARKET LOSSES
NOTIONAL PURPOSE VALUE AT FROM
Amount Nature/Terms For Holding 12/31/94 Investment
- ----------- ----------------------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Open
- -----------
5,000,000 LIBOR/Mexican Par Bond Swap
2/17/1995 receive 10% fixed,
pay 6 Month LIBOR Investment $ (5,460,000) $ 0
35,000,000 Zero Coupon Swap Spread/Yield
Curve 8/19/1996 6 Month LIBOR Investment (12,937,750) 0
Closed
- -----------
25,000,000 Lehman Corporate Index Swap
1/1/1994 Investment 0 (77,305)
25,000,000 Lehman Corporate Index Swap
1/1/1994 Investment 0 (77,305)
</TABLE>
The Libor/Mexican Par Bond swap caused the Predecessor to receive or pay the
net of a fixed-rate of 10%, in exchange for paying 6 month LIBOR, times a
multiplier of six times the notional amount. The substance is as if the
Predecessor owned $30 million par of the bonds using funds borrowed at six
month LIBOR. At maturity, the Predecessor committed to acquire the $30
million par of the bonds if their market price was less than 72, for a payment
of $21.6 million. The Predecessor thereby assumed the market risk below that
price.
The Predecessor received or paid at maturity of the Zero Coupon Swap
Spread/Yield Curve swap an amount derived from both the relationship between
the 6 month LIBOR and the 10 year constant maturity treasury rates, and a
function (swap spread) that usually correlates to corporate bond quality
spreads. The Predecessor could lose money if the yield curve is flat or
inverted and the swap spread is small. The purpose of the instrument was to
offset the effects of holding very large amounts of cash equivalents in
conjunction with XFSIs plan to discontinue its ownership of the Predecessor.
Effective December 31, 1994, XFSI formally assumed the net obligation for this
instrument, resulting in a capital contribution to the Predecessor.
The unrealized depreciation was recorded as a realized loss as of December 31,
1994 based on the current evolving accounting practices for derivative
instruments where as at December 31, 1993 the unrealized loss was treated as
an off-balance-sheet item.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The following table summarizes various information regarding these derivative
financial instruments as of December 31, 1995:
<TABLE>
<CAPTION>
FAIR MARKET LOSSES
NOTIONAL PURPOSE VALUE AT FROM
Amount Nature/Terms For Holding 12/31/95 Investment in 1995
- ---------- ---------------------------- ----------- ------------ -------------------
<S> <C> <C> <C> <C>
Closed
- ----------
5,000,000 LIBOR/Mexican Par Bond Swap
2/17/1995 receive 10% fixed,
pay 6 Month LIBOR Investment $ 0 $ 0
</TABLE>
(7) POST-RETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company has no direct employees and no retired employees. All personnel
used to support the operations of the Company are supplied by contract by Cova
Life Management Company (CLMC), a wholly owned subsidiary of Cova Corporation.
The Company is allocated a portion of certain health care and life insurance
benefits for future retired employees of CLMC as determined in accordance with
Financial Accounting Standards Board Statement No. 106, "Employers' Accounting
For Postretirement Benefits Other Than Pensions" (SFAS #106). In 1995, the
Company was allocated a portion of benefit costs including severance pay,
accumulated vacations, and disability benefits as determined in accordance
with Financial Accounting Standards Board Statement No. 112, "Employers'
Accounting for Postemployment Benefits" (SFAS #112). At December 31, 1995
CLMC had no retired employees nor any employees fully eligible for retirement
and had no disbursements for such benefit commitments. The expense arising
from these obligations is not material.
(8) INCOME TAXES
The Company will file a consolidated Federal Income Tax return for the first
five months of 1995 with the Companys former ultimate parent, Xerox
Corporation, a New York corporation, along with Xerox Corporationss other
eligible subsidiaries. For the last seven months, the Company will file a
consolidated Federal Income Tax return with its wholly-owned subsidiary, First
Cova Life Insurance Company, a New York insurance company. Amounts payable or
recoverable related to periods before June 1, 1995 are subject to an
indemnification agreement with XFSI, which has the effect that the Company is
not at risk for any income taxes nor entitled to recoveries related to those
periods, except for approximately $1.4 million of state income taxes.
The actual Federal income tax expense differed from the expected tax expense
computed by applying the US. Federal statutory rate to income before taxes on
income as follows:
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of COVA Corporation)
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
1995 1995 1994 1993
7 MONTHS 5 MONTHS
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $129 35.0% $(13,862) 35.0% $(76,739) 35.0% $7,503 35.0%
State income taxes, net 11 3.0 (306) 0.8 (1,552) 0.7 1,631 7.6
Rate change effect on prior deferrals -- -- -- -- -- -- 456 2.1
Tax-exempt bond interest (22) (6.0) (332) 0.8 (1,208) 0.6 (123) (0.6)
Amortization of intangible assets 254 69.0 -- -- 111 (0.1) 111 0.5
Permanent difference due to derivative
transfer -- -- 4,399 (11.1) -- -- -- --
Other 59 16.1 37 (.1) 2,388 (1.1) (76) (0.3)
Total $431 117.1% $(10,064) 25.4% $(77,000) 35.1% $9,502 44.3%
</TABLE>
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 &
1994 follows:
<TABLE>
<CAPTION>
The Company Predecessor
1995 1994
<S> <C> <C>
Deferred tax assets:
Policy Reserves $ 7,601 $ 26,602
Liability for commissions on recapture 8,868 --
Tax basis of intangible assets purchased 13,141 --
DAC Proxy Tax 4,749 4,797
Permanent Impairments -- 4,934
Unrealized losses on investments -- 91,889
Book to tax differences on Investments 1,287
Other deferred tax assets 2,860 4,809
Total assets $37,219 $134,318
Deferred tax liabilities:
PVFP $16,774 --
Unrealized gains on investments 1,489 --
Deferred Acquisition Costs 5,316 74,676
Other deferred tax liabilities 84 3,507
Total liabilities $23,663 $ 78,183
Net Deferred Tax Asset/(Liability) $13,556 $ 56,135
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax assets will not be realized. Management believes
the deferred tax assets will be fully realized in the future based upon
expectation of the reversal of existing temporary differences, anticipated
future earnings, and consideration of all other available evidence.
Accordingly no valuation allowance is established.
(9) RELATED-PARTY TRANSACTIONS
The Company has entered into management, operations and services agreements
with both affiliated and unaffiliated companies. The affiliated companies are
Cova Life Management Company (CLMC), a Delaware corporation, which provides
management services and the employees necessary to conduct the activities of
the Company, and General American Investment Management Company, which
provides investment advice. Additionally, a portion of overhead and other
corporate expenses are allocated by the Companys ultimate parent, GALIC. The
unaffiliated companies are Johnson & Higgins, a New Jersey corporation, and
Johnson & Higgins/Kirke Van Orsdel, a Delaware corporation, which provide
various services for the Company including underwriting, claims and
administrative functions. The affiliated and unaffiliated service providers
are reimbursed for the cost of their services and are paid a service fee.
Expenses and fees paid to affiliated companies during the 7 months of 1995 for
the Company were $7,139,525, and the five months of 1995 and the years of 1994
and 1993 for the Predecessor were 6,364,609, $8,553,028, and $7,986,999,
respectively.
(10) STATUTORY SURPLUS AND DIVIDEND RESTRICTION
Generally accepted accounting principles (GAAP) differ in certain respects
from the accounting practices prescribed or permitted by insurance regulatory
authorities (statutory accounting principles).
The major differences arise principally from the immediate expense recognition
of policy acquisition costs and intangible assets for statutory reporting,
determination of policy reserves based on different discount rates and
methods, the non-recognition of financial reinsurance for GAAP reporting, the
establishment of an Asset Valuation Reserve as a contingent liability based on
the credit quality of the Company's investment securities, and an Interest
Maintenance Reserve as an unearned liability to defer the realized gains and
losses of fixed income investments presumably resulting from changes to
interest rates and amortize them into income over the remaining life of the
investment sold. In addition, SFAS #115 adjustments to record the carrying
values of debt securities and certain equity securities at market are applied
only under GAAP reporting and capital contributions in the form of notes
receivable from an affiliated company are not recognized under GAAP reporting.
Purchase accounting creates another difference as it requires the restatement
of GAAP assets and liabilities to their estimated fair values and shareholders
equity to the net purchase price. Statutory accounting does not recognize the
purchase method of accounting.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
As of December 31, the differences between statutory capital and surplus and
shareholder's equity determined in conformity with generally accepted
accounting principles (GAAP) were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(in thousands of dollars)
<S> <C> <C> <C>
Statutory Capital and Surplus $ 59,682 $ 100,071 $108,617
Reconciling items:
GAAP investment valuation reserves -- (600) (14,076)
Statutory Asset Valuation Reserves 13,378 45,470 43,060
Interest Maintenance Reserve 1,892 15,123 50,074
GAAP investment adjustments to fair value 10,724 (274,222) --
Deferred policy acquisition costs 8,708 213,362 146,504
GAAP basis policy reserves (11,233) 7,944 (45,784)
Deferred federal income taxes (net) 13,556 56,135 (8,933)
Modified coinsurance -- (10,534) (13,994)
Goodwill 23,001 -- --
Present value of future profits 43,914 -- --
Future purchase price payable (23,967) -- --
Elimination of notes contributed
to statutory surplus -- (72,000) --
Other (1,569) (2,138) 4,365
GAAP Shareholders' Equity $138,086 $ 78,611 $269,833
</TABLE>
Statutory net losses for the years ended December 31, 1995, 1994 and 1993 were
$(74,012,650), $(92,952,989),and $(13,299,824), respectively.
The maximum amount of dividends which can be paid by State of Missouri
insurance companies to shareholders without prior approval of the insurance
commissioner is the greater of 10% of statutory earned surplus or statutory
net gain from operations for the preceding year. Accordingly, the maximum
dividend permissible at December 31, 1995 was $ 0.
The National Association of Insurance Commissioners has developed certain Risk
Based Capital (RBC) requirements for life insurers. If prescribed levels of
RBC are not maintained, certain actions may be required on the part of the
Company or its regulators. At December 31, 1995 the Company's Total Adjusted
Capital and Authorized Control Level - RBC were, $73,060,575 and $18,224,056
respectively. This level of adjusted capital qualifies under all tests.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARY
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(11) GUARANTY FUND ASSESSMENTS
The Company participates with all life insurance companies licensed throughout
the United States, in associations formed to guarantee benefits to
policyholders of insolvent life insurance companies. Under state laws, as a
condition for maintaining the Companys authority to issue new business, the
Company is contingently liable for its share of claims covered by the guaranty
associations for insolvencies incurred through 1995, but for which assessments
have not yet been determined nor assessed, to a maximum in each state
generally of 2% of statutory premiums per annum in the given state. Most
states then permit recovery of assessments as a credit against premium or
other state taxes over, most commonly, five years.
At December 31, 1995, the National Organization of Life and Health Guaranty
Associations (NOLHGA) distributed a study of the major outstanding industry
insolvencies, with estimates of future assessments by state. Based on this
study, the Company has accrued a liability for approximately $14.3 million in
future assessments on insolvencies that occurred before December 31, 1995.
Under the coinsurance agreement between the Company and OakRe (see note 1),
OakRe is required to reimburse the Company for any future assessments that it
pays which relate to insolvencies occurring prior to June 1, 1995. As such,
the Company has recorded an additional receivable from OakRe for $14.3
million.
At the same time, the Company is liable to OakRe for 80% of any future premium
tax recoveries that are realized from any such assessments, and may retain the
PART C
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
a. Financial Statements
---------------------------------------------------------------
The following financial statements of the Variable Account are
included in Part B hereof:
1. Independent Auditors' Report.
2. Statement of Assets and Liabilities as of December 31, 1995.
3. Statement of Operations for the year ended December 31, 1995.
4. Statement of Changes in Contract Owners' Equity for the years
ended December 31, 1995 and 1994.
5. Financial Highlights for the five years in the period ended
December 31, 1995.
6. Notes to Financial Statements for the years ended December 31,
1995 and 1994.
The following consolidated financial statements of the Company
are included in Part B hereof:
1. Independent Auditors' Report.
2. Consolidated Balance Sheets of the Company as of December 31,
1995 and 1994.
3. Consolidated Statements of Income for the Company for the years
ended December 31, 1995, 1994 and 1993.
4. Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1995, 1994 and 1993.
5. Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
6. Notes to Consolidated Financial Statements, December 31, 1995,
1994 and 1993.
b. Exhibits
---------------------------------------------------------------
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account.*
2. Not Applicable.
3. Principal Underwriter's Agreement.###
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.***
5. Application for Variable Annuity.##
6.(i) Copy of Articles of Incorporation of the Company.#
(ii) Copy of the Bylaws of the Company.*
7. Not Applicable.
8. Not Applicable.
9. Opinion and Consent of Counsel.
10. Consent of Independent Accountants.
11. Not Applicable.
12. Agreement Governing Contribution.**
13. Calculation of Performance Information.
14. Company Organizational Chart.
27. Financial Data Schedule
<FN>
* incorporated by reference to Registrant's initial filing on
Form N-4 (File No. 811-5200) as filed on June 11, 1987.
** incorporated by reference to Registrant's Amendment No. 5 to
Form N-4 (File No. 811-5200) as filed on April 2, 1990.
*** incorporated by reference to Registrant's Amendment No. 8 to
Form N-4 (File No. 811-5200) as filed on June 10, 1991.
# incorporated by reference to Xerox Financial Services Life
Insurance Company, Pre-Effective Amendment No. 1 to Form S-1
(File No. 33-43099) as filed on December 24, 1991.
## incorporated by reference to Registrant's Amendment No. 13 to
Form N-4 (File No. 811-5200) as filed on May 1, 1992.
### incorporated by reference to Registrant's Amendment No. 14 to
Form N-4 (File No. 811-5200) as filed on May 1, 1993.
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
Leonard Rubenstein Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
William D. Anthony Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
Jerome P. Darga Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Judy M. Drew Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Judith A. Gallup Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Christopher Harden Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Eric T. Henry Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Jeffery K. Hoelzel Vice President, General Coun-
One Tower Lane, Suite 3000 sel, Secretary and Director
Oakbrook Terrace, IL 60181-4644
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer and Director
700 Market St.
St. Louis, MO 63101
Douglas E. Jacobs Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
William C. Mair Vice President,
One Tower Lane, Suite 3000 Controller and Director
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market St.
St. Louis, MO 63101
Patrice L. Peltier Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Myron H. Sandberg Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Schaus Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart is set forth in Exhibit 14.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 16, 1996, there were 11,588 non-qualified contract owners and
3,180 qualified contract owners.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article IV, Section 1) provide that:
Each person who is or was a director, officer or employee of the corporation
or is or was serving at the request of the corporation as a director, officer
or employee of another corporation, partnership, joint venture, trust or other
enterprise (including the heirs, executors, administrators or estate of such
person) shall be indemnified by the corporation as of right to the full extent
permitted or authorized by the laws of the State of Missouri, as now in effect
and as hereafter amended, against any liability, judgment, fine, amount paid
in settlement, cost and expenses (including attorney's fees) asserted or
threatened against and incurred by such person in his capacity as or arising
out of his status as a director, officer or employee of the corporation or if
serving at the request of the corporation, as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise.
The indemnification provided by this bylaw provision shall not be exclusive
of any other rights to which those indemnified may be entitled under any other
bylaw or under any agreement, vote of shareholders or disinterested directors
or otherwise, and shall not limit in any way any right which the corporation
may have to make different or further indemnification with respect to the same
or different persons or classes of persons.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(b) Cova Life Sales Company is the principal underwriter for the
Contracts. The following persons are the officers and directors of Cova Life
Sales Company. The principal business address for each officer and director
of Cova Life Sales Company is One Tower Lane, Suite 3000, Oakbrook Terrace,
Illinois 60181-4644.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
Judy M. Drew President, Chief Operations Officer and Director
Lorry J. Stensrud Director
Patricia E. Gubbe Vice President and Chief Compliance Officer
Patrice L. Peltier Vice President and Director
William C. Mair Director
Jeffery K. Hoelzel Secretary
Philip A. Haley Vice President
Frances S. Cook Assistant Secretary
Robert A. Miner Treasurer
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Christopher Harden, whose address is One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644 maintains physical possession of the accounts,
books or documents of the Variable Account required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that has caused this Registration Statement to
be signed on its behalf, in the City of Oakbrook Terrace, and State of
Illinois on this 18th day of April, 1996.
<TABLE>
<CAPTION>
<S> <C>
COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
By: /s/ JEFFERY K. HOELZEL
____________________________________
Jeffery K. Hoelzel
COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
Depositor
By: /s/ JEFFERY K. HOELZEL
____________________________________
Jeffery K. Hoelzel
</TABLE>
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ LORRY J. STENSRUD President and Director 4-18-96
- ---------------------- ------
Lorry J. Stensrud Date
Chairman of the Board and
- ---------------------- Director ------
Leonard M. Rubenstein Date
Director
- ---------------------- ------
J. Robert Hopson Date
William C. Mair* Controller and Director 4-18-96
- ---------------------- ------
William C. Mair Date
Jeffery K. Hoelzel* Director 4-18-96
- ---------------------- ------
Jeffery K. Hoelzel Date
E. Thomas Hughes, Jr.* Treasurer and Director 4-18-96
- ---------------------- ------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 4-18-96
- ---------------------- ------
Matthew P. McCauley Date
Patrice L. Peltier* Director 4-18-96
- ---------------------- ------
Patrice L. Peltier Date
John W. Barber* Director 4-18-96
- ---------------------- ------
John W. Barber Date
</TABLE>
*By: /S/ JEFFERY K. HOELZEL
____________________________________
Jeffery K. Hoelzel Attorney-in-Fact
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, E. Thomas Hughes, Jr., a Director
of Cova Financial Services Life Insurance Company, a corporation duly
organized under the laws of the State of Missouri, do hereby appoint Lorry J.
Stensrud and/or Jeffery K. Hoelzel, or either one of the foregoing
individually, as my attorney and agent, for me, and in my name as a Director
of this Company on behalf of the Company or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of variable annuity and variable life
insurance contracts under the Securities Act of 1933, as amended, and the
registration of unit investment trusts under the Investment Company Act of
1940, as amended, and to do and perform each and every act that said attorney
may deem necessary or advisable to comply with the intent of the aforesaid
Acts.
WITNESS my hand this 15th day of April, 1996.
WITNESS:
/S/DEBRA J. FERGUSON /S/E. THOMAS HUGHES, JR.
________________________________ ______________________________________
E. Thomas Hughes, Jr.
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Lorry J. Stensrud, President and
a Director of Cova Financial Services Life Insurance Company, a corporation
duly organized under the laws of the State of Missouri, do hereby appoint
Jeffery K. Hoelzel as my attorney and agent, for me, and in my name as
President and a Director of this Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities
and Exchange Commission all documents required for registration of variable
annuity and variable life insurance contracts under the Securities Act of
1933, as amended, and the registration of unit investment trusts under the
Investment Company Act of 1940, as amended, and to do and perform each and
every act that said attorney may deem necessary or advisable to comply with
the intent of the aforesaid Acts.
WITNESS my hand this 18th day of April, 1996.
WITNESS:
/S/ROBIN M. POKOP /S/LORRY J. STENSRUD
________________________________ ______________________________________
Lorry J. Stensrud
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Jeffery K. Hoelzel, a Director of
Cova Financial Services Life Insurance Company, a corporation duly organized
under the laws of the State of Missouri, do hereby appoint Lorry J. Stensrud
as my attorney and agent, for me, and in my name as a Director of this Company
on behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 11th day of April, 1996.
WITNESS:
/S/DELORES DELGADO /S/JEFFERY K. HOELZEL
________________________________ ______________________________________
Jeffery K. Hoelzel
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William C. Mair, Sr. Vice
President, Controller and a Director of Cova Financial Services Life Insurance
Company, a corporation duly organized under the laws of the State of Missouri,
do hereby appoint Lorry J. Stensrud and/or Jeffery K. Hoelzel, or either one
of the foregoing individually, as my attorney and agent, for me, and in my
name as Sr. Vice President, Controller and a Director of this Company on
behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 11th day of April, 1996.
WITNESS:
/S/DOLORES DELGADO /S/WILLIAM C. MAIR
________________________________ ______________________________________
William C. Mair
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Matthew P. McCauley, a Director
of Cova Financial Services Life Insurance Company, a corporation duly
organized under the laws of the State of Missouri, do hereby appoint Lorry J.
Stensrud and/or Jeffery K. Hoelzel, or either one of the foregoing
individually, as my attorney and agent, for me, and in my name as a Director
of this Company on behalf of the Company or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of variable annuity and variable life
insurance contracts under the Securities Act of 1933, as amended, and the
registration of unit investment trusts under the Investment Company Act of
1940, as amended, and to do and perform each and every act that said attorney
may deem necessary or advisable to comply with the intent of the aforesaid
Acts.
WITNESS my hand this 12th day of April, 1996.
WITNESS:
/S/VICTORIA A. QUINT /S/MATTHEW P. McCAULEY
________________________________ ______________________________________
Matthew P. McCauley
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Patrice L. Peltier, a Director of
Cova Financial Services Life Insurance Company, a corporation duly organized
under the laws of the State of Missouri, do hereby appoint Lorry J. Stensrud
and/or Jeffery K. Hoelzel, or either one of the foregoing individually, as my
attorney and agent, for me, and in my name as a Director of this Company on
behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 11th day of April, 1996.
WITNESS:
/S/REBECCA R. BEDORE /S/PATRICE L. PELTIER
________________________________ ______________________________________
Patrice L. Peltier
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, John W. Barber, a Director of
Cova Financial Services Life Insurance Company, a corporation duly organized
under the laws of the State of Missouri, do hereby appoint Lorry J. Stensrud
and/or Jeffery K. Hoelzel, or either one of the foregoing individually, as my
attorney and agent, for me, and in my name as a Director of this Company on
behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of April, 1996.
WITNESS:
/S/DELORES DELGADO /S/JOHN W. BARBER
________________________________ ______________________________________
John W. Barber
INDEX TO EXHIBITS
EXHIBIT NO.
99.B9 Opinion and Consent of Counsel
99.B10 Consent of Independent Accountants
99.B13 Calculation of Performance Information
99.B14 Company Organizational Chart
27 Financial Data Schedule
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 8
TO
FORM N-4
FOR
COVA VARIABLE ANNUITY ACCOUNT ONE
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 24, 1996
Board of Directors
Cova Financial Services Life
Insurance Company
One Tower Lane
Suite 3000
Oakbrook Terrace, IL 60181-4644
RE: Opinion of Counsel - Cova Variable Annuity Account One
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with
the Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-4 for the Fixed and Variable Annuity
Contracts (the "Contracts") to be issued by Cova Financial Services Life
Insurance Company and its separate account, Cova Variable Annuity Account One.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to
render the opinions expressed below.
We are of the following opinions:
1. Cova Financial Services Life Insurance Company is a valid and
existing stock life insurance company of the state of Missouri.
2. Cova Variable Annuity Account One is a separate investment account of
Cova Financial Services Life Insurance Company created and validly existing
pursuant to the Missouri Laws and the Regulations thereunder.
3. Upon the acceptance of purchase payments made by an Owner pursuant to
a Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such an Owner
will have a legally-issued, fully paid, non-assessable contractual interest
under such Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /S/ LYNN KORMAN STONE
_____________________________________
Lynn Korman Stone
CONSENT OF INDEPENDENT ACCOUNTANTS
The Contract Owners and Board of Directors of
Cova Variable Annuity Account One of Cova Financial Services Life
Insurance Company
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the statement of additional
information.
KPMG PEAT MARWICK LLP
St. Louis, Missouri
April 23, 1996
COVA VARIABLE ANNUITY HYPOTHETICAL PERFORMANCE CALCULATIONS
A. ASSUMPTIONS
1.40% INSURANCE CHARGE
5.00% WITHDRAWAL CHARGE
$30 CONTRACT MAINTENANCE CHARGE, ALLOCATED BASED ON THE AVERAGE POLICY SIZE OF
$30,000
B. PORTFOLIO PERFORMANCE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10 YR.
PORTFOLIO OR ITD 5 YR. 1 YR.
- ----------------------- ------ ----- -----
ACTIVE EQUITY COMPOSITE 15.51 17.71 32.56
STRUCTURED STOCK
SELECTION COMPOSITE 14.05 17.40 37.47
SMALL CAP DIRECTLY
INVESTED COMPOSITE 12.00 20.75 35.29
ACTIVE FIXED INCOME
COMPOSITE 9.52 9.46 17.71
L.A. BOND DEBENTURE 10.10 16.00 17.50
GAIMCO MONEY MARKET 6.46 4.82 6.17
- ----------------------- ------ ----- -----
</TABLE>
C. CALCULATIONS
NON-STANDARD STANDARD
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
10 YR. 10 YR.
PORTFOLIO OR ITD 5 YR. 1 YR. OR ITD 5 YR. 1 YR.
- ----------------------- ------ ----- ----- ------ ------ ------
ACTIVE EQUITY COMPOSITE 14.11 16.31 31.16 14.01 11.71 26.06
STRUCTURED STOCK
SELECTION COMPOSITE 12.65 16.00 36.07 12.55 11.40 30.97
SMALL CAP DIRECTLY
INVESTED COMPOSITE 10.60 19.35 33.89 10.50 14.75 28.79
ACTIVE FIXED INCOME
COMPOSITE 8.12 8.06 16.31 8.02 3.46 11.21
L.A. BOND DEBENTURE 8.70 14.60 16.10 8.60 10.00 11.00
GAIMCO MONEY MARKET 5.06 3.42 4.77 4.96 (1.18) (0.33)
- ----------------------- ------ ----- ----- ------ ------ ------
</TABLE>
COVA VARIABLE ANNUITY ACTUAL PERFORMANCE CALCULATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity - 5 Years
Original Purchase - 12/31/90
Valuation Date - 12/29/95
QUALITY INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 10.618874 94.172 94.172 $ 1,000.00
12/31/91 Contract Fee (7.44) 12.020179 (0.619) 93.553 $ 1,124.52
12/31/92 Contract Fee (7.23) 12.753941 (0.567) 92.986 $ 1,185.94
12/31/93 Contract Fee (6.79) 13.965941 (0.486) 92.500 $ 1,291.84
12/30/94 Contract Fee (6.58) 13.170448 (0.499) 92.000 $ 1,211.69
12/29/95 Contract Fee (6.51) 15.331971 (0.424) 91.576 $ 1,404.04
12/29/95 Value before Wthdrwl Chg 15.331971 0.000 91.576 $ 1,404.04
12/29/95 Withdrawl Charge 0.05 ($45.00) 15.331971 (2.935) 88.641 $ 1,359.04
12/29/95 Remaining Value 15.331971 0.000 88.641 $ 1,359.04
HIGH YIELD Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 10.064260 99.362 99.362 $ 1,000.00
12/31/91 Contract Fee (7.89) 12.754429 (0.619) 98.743 $ 1,259.41
12/31/92 Contract Fee (8.50) 14.990335 (0.567) 98.175 $ 1,471.68
12/31/93 Contract Fee (8.76) 18.020405 (0.486) 97.689 $ 1,760.40
12/30/94 Contract Fee (8.48) 16.977032 (0.499) 97.190 $ 1,650.00
12/29/95 Contract Fee (8.29) 19.522535 (0.424) 96.765 $ 1,889.11
12/29/95 Value before Wthdrwl Chg 19.522535 0.000 96.765 $ 1,889.11
12/29/95 Withdrawl Charge 0.05 ($45.00) 19.522535 (2.305) 94.460 $ 1,844.11
12/29/95 Remaining Value 19.522535 0.000 94.460 $ 1,844.11
GROWTH AND INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 10.146589 98.555 98.555 $ 1,000.00
12/31/91 Contract Fee (7.88) 12.725687 (0.619) 97.936 $ 1,246.31
12/31/92 Contract Fee (8.23) 14.504325 (0.567) 97.369 $ 1,412.27
12/31/93 Contract Fee (7.99) 16.424494 (0.486) 96.883 $ 1,591.25
12/30/94 Contract Fee (8.31) 16.642028 (0.499) 96.384 $ 1,604.02
12/29/95 Contract Fee (9.04) 21.306277 (0.424) 95.959 $ 2,044.53
12/29/95 Value before Wthdrwl Chg 21.306277 0.000 95.959 $ 2,044.53
12/29/95 Withdrawl Charge 0.05 ($45.00) 21.306277 (2.112) 93.847 $ 1,999.53
12/29/95 Remaining Value 21.306277 0.000 93.847 $ 1,999.53
GLOBAL EQUITY Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 9.793410 102.109 102.109 $ 1,000.00
12/31/91 Contract Fee (6.79) 10.970468 (0.619) 101.491 $ 1,113.40
12/31/92 Contract Fee (6.04) 10.643098 (0.567) 100.923 $ 1,074.14
12/31/93 Contract Fee (6.46) 13.294084 (0.486) 100.437 $ 1,335.22
12/30/94 Contract Fee (6.64) 13.298544 (0.499) 99.938 $ 1,329.03
12/29/95 Contract Fee (6.16) 14.517502 (0.424) 99.513 $ 1,444.69
12/29/95 Value before Wthdrwl Chg 14.517502 0.000 99.513 $ 1,444.69
12/29/95 Withdrawl Charge 0.05 ($45.00) 14.517502 (3.100) 96.414 $ 1,399.69
12/29/95 Remaining Value 14.517502 0.000 96.414 $ 1,399.69
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VA Standard 5 Year Return
Valuation Date - 12/29/95
ANNUALIZED
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------ ------------------- ------------ -------
Quality Income $ 1,000.00 $ 1,359.04 6.33%
High Yield $ 1,000.00 $ 1,844.11 13.02%
LA Growth & Income $ 1,000.00 $ 1,999.53 14.86%
LA Global Equity $ 1,000.00 $ 1,399.69 6.96%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity - 5 Years
Original Purchase - 12/31/90
Valuation Date - 12/29/95
QUALITY INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 10.618874 94.172 94.172 $ 1,000.00
12/31/91 Contract Fee 12.020179 0.000 94.172 $ 1,131.96
12/31/92 Contract Fee 12.753941 0.000 94.172 $ 1,201.06
12/31/93 Contract Fee 13.965941 0.000 94.172 $ 1,315.20
12/30/94 Contract Fee 13.170448 0.000 94.172 $ 1,240.29
12/29/95 Contract Fee 15.331971 0.000 94.172 $ 1,443.84
12/29/95 Value before Wthdrwl Chg 15.331971 0.000 94.172 $ 1,443.84
12/29/95 Withdrawl Charge 0.05 ($45.00) 15.331971 (2.935) 91.237 $ 1,398.84
12/29/95 Remaining Value 15.331971 0.000 91.237 $ 1,398.84
HIGH YIELD Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 10.064260 99.362 99.362 $ 1,000.00
12/31/91 Contract Fee 12.754429 0.000 99.362 $ 1,267.30
12/31/92 Contract Fee 14.990335 0.000 99.362 $ 1,489.46
12/31/93 Contract Fee 18.020405 0.000 99.362 $ 1,790.53
12/30/94 Contract Fee 16.977032 0.000 99.362 $ 1,686.86
12/29/95 Contract Fee 19.522535 0.000 99.362 $ 1,939.79
12/29/95 Value before Wthdrwl Chg 19.522535 0.000 99.362 $ 1,939.79
12/29/95 Withdrawl Charge 0.05 ($45.00) 19.522535 (2.305) 97.056 $ 1,894.79
12/29/95 Remaining Value 19.522535 0.000 97.056 $ 1,894.79
GROWTH AND INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 10.146589 98.555 98.555 $ 1,000.00
12/31/91 Contract Fee 12.725687 0.000 98.555 $ 1,254.18
12/31/92 Contract Fee 14.504325 0.000 98.555 $ 1,429.48
12/31/93 Contract Fee 16.424494 0.000 98.555 $ 1,618.72
12/30/94 Contract Fee 16.642028 0.000 98.555 $ 1,640.16
12/29/95 Contract Fee 21.306277 0.000 98.555 $ 2,099.85
12/29/95 Value before Wthdrwl Chg 21.306277 0.000 98.555 $ 2,099.85
12/29/95 Withdrawl Charge 0.05 ($45.00) 21.306277 (2.112) 96.443 $ 2,054.85
12/29/95 Remaining Value 21.306277 0.000 96.443 $ 2,054.85
GLOBAL EQUITY Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ---------- ---------- ------------ ---------- ----------
12/31/90 Purchase $1,000.00 9.793410 102.109 102.109 $ 1,000.00
12/31/91 Contract Fee 10.970468 0.000 102.109 $ 1,120.19
12/31/92 Contract Fee 10.643098 0.000 102.109 $ 1,086.76
12/31/93 Contract Fee 13.294084 0.000 102.109 $ 1,357.45
12/30/94 Contract Fee 13.298544 0.000 102.109 $ 1,357.91
12/29/95 Contract Fee 14.517502 0.000 102.109 $ 1,482.37
12/29/95 Value before Wthdrwl Chg 14.517502 0.000 102.109 $ 1,482.37
12/29/95 Withdrawl Charge 0.05 ($45.00) 14.517502 (3.100) 99.010 $ 1,437.37
12/29/95 Remaining Value 14.517502 0.000 99.010 $ 1,437.37
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Non-Standard 5 Year Return
Valuation Date - 12/29/95
ANNUALIZED
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------ -------------------- ------------ -------
Quality Income $ 1,000.00 $ 1,443.84 7.62%
High Yield $ 1,000.00 $ 1,939.79 14.17%
LA Growth & Income $ 1,000.00 $ 2,099.85 15.99%
LA Global Equity $ 1,000.00 $ 1,482.37 8.19%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity - Since Inception
Original Purchase - 12/11/89
(4/09/90 for G.E., 7/01/91 for M.M., 11/01/91 for S.I.,
Valuation Date - 12/29/95
QUALITY INCOME Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
12/11/89 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee (7.88) 10.642864 (0.740) 99.260
12/11/91 Contract Fee (5.34) 11.793541 (0.453) 98.807
12/11/92 Contract Fee (4.52) 12.690512 (0.356) 98.451
12/11/93 Contract Fee (4.40) 13.997342 (0.314) 98.136
12/11/94 Contract Fee (4.29) 13.179662 (0.326) 97.811
12/11/95 Contract Fee -4.07 15.200779 (0.268) 97.543
12/29/95 Value before Wthdrwl Chg 15.331971 0.000 97.543
12/29/95 Withdrawl Charge 0.05 ($49.09) 15.331971 (3.202) 94.341
12/29/95 Remaining Value 15.331971 0.000 94.341
HIGH YIELD Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
12/11/89 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee (7.43) 10.038196 (0.740) 99.260
12/11/91 Contract Fee (5.72) 12.639788 (0.453) 98.807
12/11/92 Contract Fee (5.31) 14.896607 (0.356) 98.451
12/11/93 Contract Fee (5.64) 17.930469 (0.315) 98.136
12/11/94 Contract Fee (5.47) 16.825188 (0.325) 97.811
12/11/95 Contract Fee -5.2 19.405032 (0.268) 97.543
12/29/95 Value before Wthdrwl Chg 19.522535 0.000 97.543
12/29/95 Withdrawl Charge 0.05 ($50.21) 19.522535 (2.572) 94.971
12/29/95 Remaining Value 19.522535 0.000 94.971
GROWTH AND INCOME Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
12/11/89 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee (7.39) 9.991916 (0.740) 99.260
12/11/91 Contract Fee (5.26) 11.635826 (0.452) 98.808
12/11/92 Contract Fee (5.07) 14.232895 (0.356) 98.452
12/11/93 Contract Fee (5.10) 16.227131 (0.314) 98.138
12/11/94 Contract Fee (5.25) 16.145116 (0.325) 97.813
12/11/95 Contract Fee -5.7 21.265128 (0.268) 97.545
12/29/95 Value before Wthdrwl Chg 21.306277 0.000 97.545
12/29/95 Withdrawl Charge 0.05 ($50.68) 21.306277 (2.379) 95.166
12/29/95 Remaining Value 21.306277 0.000 95.166
GLOBAL EQUITY Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
04/09/90 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee (7.30) 9.869362 (0.740) 99.260
12/11/91 Contract Fee (4.71) 10.418470 (0.452) 98.808
12/11/92 Contract Fee (3.74) 10.496291 (0.356) 98.452
12/11/93 Contract Fee (4.10) 13.030212 (0.315) 98.137
12/11/94 Contract Fee (4.25) 13.082656 (0.325) 97.812
12/11/95 Contract Fee -3.83 14.285390 (0.268) 97.544
12/29/95 Value before Wthdrwl Chg 14.517502 0.000 97.544
12/29/95 Withdrawl Charge 0.05 ($48.87) 14.517502 (3.366) 94.178
12/29/95 Remaining Value 14.517502 0.000 94.178
STOCK INDEX Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
11/01/91 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/91 Contract Fee (4.36) 9.641255 (0.452) 99.548
12/11/92 Contract Fee (3.94) 11.042649 (0.357) 99.191
12/11/93 Contract Fee (3.73) 11.858110 (0.315) 98.876
12/11/94 Contract Fee (3.71) 11.401457 (0.325) 98.551
12/11/95 Contract Fee -4.25 15.871130 (0.268) 98.283
12/29/95 Value before Wthdrwl Chg 15.773906 0.000 98.283
12/29/95 Withdrawl Charge 0.05 ($49.21) 15.773906 (3.120) 95.164
12/29/95 Remaining Value 15.773906 0.000 95.164
MONEY MARKET
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
07/01/91 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/91 Contract Fee (4.61) 10.188527 (0.452) 99.548
12/11/92 Contract Fee (3.72) 10.449186 (0.356) 99.192
12/11/93 Contract Fee (3.34) 10.617015 (0.315) 98.877
12/11/94 Contract Fee (3.53) 10.871571 (0.325) 98.553
12/11/95 Contract Fee -3.06 11.397944 (0.268) 98.284
12/29/95 Value before Wthdrwl Chg 11.425133 0.000 98.284
12/29/95 Withdrawl Charge 0.05 ($48.05) 11.425133 (4.205) 94.078
12/29/95 Remaining Value 11.425133 0.000 94.078
VKM GROWTH & INCOME Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
05/01/92 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/92 Contract Fee (3.69) 10.352054 (0.356) 99.644
12/11/93 Contract Fee (3.71) 11.795195 (0.315) 99.329
12/11/94 Contract Fee (3.50) 10.773452 (0.325) 99.004
12/11/95 Contract Fee -3.89 14.498752 (0.268) 98.736
12/29/95 Value before Wthdrwl Chg 14.608904 0.000 98.736
12/29/95 Withdrawl Charge 0.05 ($48.90) 14.608904 (3.347) 95.389
12/29/95 Remaining Value 14.608904 0.000 95.389
<S> <C>
05/01/92 for G.R.)
QUALITY INCOME Total
- -------------------
Date Value
- ------------------- -------------------
12/11/89 $ 1,000.00
12/11/90 $ 1,056.41
12/11/91 $ 1,165.28
12/11/92 $ 1,249.39
12/11/93 $ 1,373.65
12/11/94 $ 1,289.11
12/11/95 $ 1,482.73
12/29/95 $ 1,495.53
12/29/95 $ 1,446.44
12/29/95 $ 1,446.44
HIGH YIELD Total
- -------------------
Date Value
- ------------------- -------------------
12/11/89 $ 1,000.00
12/11/90 $ 996.39
12/11/91 $ 1,248.90
12/11/92 $ 1,466.58
12/11/93 $ 1,759.63
12/11/94 $ 1,645.69
12/11/95 $ 1,892.83
12/29/95 $ 1,904.29
12/29/95 $ 1,854.08
12/29/95 $ 1,854.08
GROWTH AND INCOME Total
- -------------------
Date Value
- ------------------- -------------------
12/11/89 $ 1,000.00
12/11/90 $ 991.80
12/11/91 $ 1,149.72
12/11/92 $ 1,401.26
12/11/93 $ 1,592.50
12/11/94 $ 1,579.20
12/11/95 $ 2,074.30
12/29/95 $ 2,078.31
12/29/95 $ 2,027.63
12/29/95 $ 2,027.63
GLOBAL EQUITY Total
- -------------------
Date Value
- ------------------- -------------------
04/09/90 $ 1,000.00
12/11/90 $ 979.64
12/11/91 $ 1,029.43
12/11/92 $ 1,033.38
12/11/93 $ 1,278.75
12/11/94 $ 1,279.65
12/11/95 $ 1,393.46
12/29/95 $ 1,416.10
12/29/95 $ 1,367.23
12/29/95 $ 1,367.23
STOCK INDEX Total
- -------------------
Date Value
- ------------------- -------------------
11/01/91 $ 1,000.00
12/11/91 $ 959.77
12/11/92 $ 1,095.33
12/11/93 $ 1,172.49
12/11/94 $ 1,123.63
12/11/95 $ 1,559.87
12/29/95 $ 1,550.31
12/29/95 $ 1,501.10
12/29/95 $ 1,501.10
MONEY MARKET
- -------------------
Date Value
- ------------------- -------------------
07/01/91 $ 1,000.00
12/11/91 $ 1,014.24
12/11/92 $ 1,036.47
12/11/93 $ 1,049.78
12/11/94 $ 1,071.42
12/11/95 $ 1,120.23
12/29/95 $ 1,122.91
12/29/95 $ 1,074.86
12/29/95 $ 1,074.86
VKM GROWTH & INCOME Total
- -------------------
Date Value
- ------------------- -------------------
05/01/92 $ 1,000.00
12/11/92 $ 1,031.52
12/11/93 $ 1,171.61
12/11/94 $ 1,066.62
12/11/95 $ 1,431.55
12/29/95 $ 1,442.42
12/29/95 $ 1,393.53
12/29/95 $ 1,393.53
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Standard Inception to Date Return
Valuation Date - 12/29/95
ANNUALIZED
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------- ------------------- --------------- -------
Quality Income $ 1,000.00 $ 1,446.44 6.29%
High Yield $ 1,000.00 $ 1,854.08 10.73%
LA Growth & Income $ 1,000.00 $ 2,027.63 12.38%
LA Global Equity $ 1,000.00 $ 1,367.23 5.61%
Stock Index $ 1,000.00 $ 1,501.10 10.25%
Money Market $ 1,000.00 $ 1,074.86 1.62%
VKM Growth & Income $ 1,000.00 $ 1,393.53 9.54%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity - Since Inception
Original Pruchase - 12/11/89
(4/09/90 for G.E., 7/01/91 for M.M., 11/01/91 for S.I.,
Valuation Date - 12/29/95
QUALITY INCOME Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
12/11/89 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee 10.642864 0.000 100.000
12/11/91 Contract Fee 11.793541 0.000 100.000
12/11/92 Contract Fee 12.690512 0.000 100.000
12/11/93 Contract Fee 13.997342 0.000 100.000
12/11/94 Contract Fee 13.179662 0.000 100.000
12/11/95 Contract Fee 15.200779 0.000 100.000
12/29/95 Value before Wthdrwl Chg 15.331971 0.000 100.000
12/29/95 Withdrawl Charge 0.05 ($49.09) 15.331971 (3.202) 96.798
12/29/95 Remaining Value 15.331971 0.000 96.798
HIGH YIELD Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
12/11/89 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee 10.038196 0.000 100.000
12/11/91 Contract Fee 12.639788 0.000 100.000
12/11/92 Contract Fee 14.896607 0.000 100.000
12/11/93 Contract Fee 17.930469 0.000 100.000
12/11/94 Contract Fee 16.825188 0.000 100.000
12/11/95 Contract Fee 19.405032 0.000 100.000
12/29/95 Value before Wthdrwl Chg 19.522535 0.000 100.000
12/29/95 Withdrawl Charge 0.05 ($50.21) 19.522535 (2.572) 97.428
12/29/95 Remaining Value 19.522535 0.000 97.428
GROWTH AND INCOME Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
12/11/89 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee 9.991916 0.000 100.000
12/11/91 Contract Fee 11.635826 0.000 100.000
12/11/92 Contract Fee 14.232895 0.000 100.000
12/11/93 Contract Fee 16.227131 0.000 100.000
12/11/94 Contract Fee 16.145116 0.000 100.000
12/11/95 Contract Fee 21.265128 0.000 100.000
12/29/95 Value before Wthdrwl Chg 21.306277 0.000 100.000
12/29/95 Withdrawl Charge 0.05 ($50.68) 21.306277 (2.379) 97.621
12/29/95 Remaining Value 21.306277 0.000 97.621
GLOBAL EQUITY Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
04/09/90 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/90 Contract Fee 9.869362 0.000 100.000
12/11/91 Contract Fee 10.418470 0.000 100.000
12/11/92 Contract Fee 10.496291 0.000 100.000
12/11/93 Contract Fee 13.030212 0.000 100.000
12/11/94 Contract Fee 13.082656 0.000 100.000
12/11/95 Contract Fee 14.285390 0.000 100.000
12/29/95 Value before Wthdrwl Chg 14.517502 0.000 100.000
12/29/95 Withdrawl Charge 0.05 ($48.87) 14.517502 (3.366) 96.634
12/29/95 Remaining Value 14.517502 0.000 96.634
STOCK INDEX Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
11/01/91 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/91 Contract Fee 9.641255 0.000 100.000
12/11/92 Contract Fee 11.042649 0.000 100.000
12/11/93 Contract Fee 11.858110 0.000 100.000
12/11/94 Contract Fee 11.401457 0.000 100.000
12/11/95 Contract Fee 15.871130 0.000 100.000
12/29/95 Value before Wthdrwl Chg 15.773906 0.000 100.000
12/29/95 Withdrawl Charge 0.05 ($49.21) 15.773906 (3.120) 96.880
12/29/95 Remaining Value 15.773906 0.000 96.880
MONEY MARKET
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
07/01/91 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/91 Contract Fee 10.188527 0.000 100.000
12/11/92 Contract Fee 10.449186 0.000 100.000
12/11/93 Contract Fee 10.617015 0.000 100.000
12/11/94 Contract Fee 10.871571 0.000 100.000
12/11/95 Contract Fee 11.397944 0.000 100.000
12/29/95 Value before Wthdrwl Chg 11.425133 0.000 100.000
12/29/95 Withdrawl Charge 0.05 ($48.05) 11.425133 (4.205) 95.795
12/29/95 Remaining Value 11.425133 0.000 95.795
VKM GROWTH & INCOME Units This Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held
- ------------------- ------------------------ -------- ----------- ----------- --------------- ----------
05/01/92 Purchase $ 1,000.00 10.000000 100.000 100.000
12/11/92 Contract Fee 10.352054 0.000 100.000
12/11/93 Contract Fee 11.795195 0.000 100.000
12/11/94 Contract Fee 10.773452 0.000 100.000
12/11/95 Contract Fee 14.498752 0.000 100.000
12/29/95 Value before Wthdrwl Chg 14.608904 0.000 100.000
12/29/95 Withdrawl Charge 0.05 ($48.90) 14.608904 (3.347) 96.653
12/29/95 Remaining Value 14.608904 0.000 96.653
<S> <C>
05/01/92 for G.R.)
QUALITY INCOME Total
- -------------------
Date Value
- ------------------- -------------------
12/11/89 $ 1,000.00
12/11/90 $ 1,064.29
12/11/91 $ 1,179.35
12/11/92 $ 1,269.05
12/11/93 $ 1,399.73
12/11/94 $ 1,317.97
12/11/95 $ 1,520.08
12/29/95 $ 1,533.20
12/29/95 $ 1,484.11
12/29/95 $ 1,484.11
HIGH YIELD Total
- -------------------
Date Value
- ------------------- -------------------
12/11/89 $ 1,000.00
12/11/90 $ 1,003.82
12/11/91 $ 1,263.98
12/11/92 $ 1,489.66
12/11/93 $ 1,793.05
12/11/94 $ 1,682.52
12/11/95 $ 1,940.50
12/29/95 $ 1,952.25
12/29/95 $ 1,902.05
12/29/95 $ 1,902.05
GROWTH AND INCOME Total
- -------------------
Date Value
- ------------------- -------------------
12/11/89 $ 1,000.00
12/11/90 $ 999.19
12/11/91 $ 1,163.58
12/11/92 $ 1,423.29
12/11/93 $ 1,622.71
12/11/94 $ 1,614.51
12/11/95 $ 2,126.51
12/29/95 $ 2,130.63
12/29/95 $ 2,079.95
12/29/95 $ 2,079.95
GLOBAL EQUITY Total
- -------------------
Date Value
- ------------------- -------------------
04/09/90 $ 1,000.00
12/11/90 $ 986.94
12/11/91 $ 1,041.85
12/11/92 $ 1,049.63
12/11/93 $ 1,303.02
12/11/94 $ 1,308.27
12/11/95 $ 1,428.54
12/29/95 $ 1,451.75
12/29/95 $ 1,402.88
12/29/95 $ 1,402.88
STOCK INDEX Total
- -------------------
Date Value
- ------------------- -------------------
11/01/91 $ 1,000.00
12/11/91 $ 964.13
12/11/92 $ 1,104.26
12/11/93 $ 1,185.81
12/11/94 $ 1,140.15
12/11/95 $ 1,587.11
12/29/95 $ 1,577.39
12/29/95 $ 1,528.18
12/29/95 $ 1,528.18
MONEY MARKET
- -------------------
Date Value
- ------------------- -------------------
07/01/91 $ 1,000.00
12/11/91 $ 1,018.85
12/11/92 $ 1,044.92
12/11/93 $ 1,061.70
12/11/94 $ 1,087.16
12/11/95 $ 1,139.79
12/29/95 $ 1,142.51
12/29/95 $ 1,094.47
12/29/95 $ 1,094.47
VKM GROWTH & INCOME Total
- -------------------
Date Value
- ------------------- -------------------
05/01/92 $ 1,000.00
12/11/92 $ 1,035.21
12/11/93 $ 1,179.52
12/11/94 $ 1,077.35
12/11/95 $ 1,449.88
12/29/95 $ 1,460.89
12/29/95 $ 1,411.99
12/29/95 $ 1,411.99
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Non-Standard Inception to Date Return
Valuation Date - 12/29/95
ANNUALIZED
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------- ----------------------- --------------- -------
Quality Income $ 1,000.00 $ 1,533.20 7.31%
High Yield $ 1,000.00 $ 1,952.25 11.68%
LA Growth & Income $ 1,000.00 $ 2,130.63 13.31%
LA Global Equity $ 1,000.00 $ 1,451.75 6.72%
Stock Index $ 1,000.00 $ 1,577.39 11.57%
Money Market $ 1,000.00 $ 1,142.51 3.00%
VKM Growth & Income $ 1,000.00 $ 1,460.89 10.97%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity Year-to-Date
Original Purchase - 12/31/94
Valuation Date - 12/31/95
QUALITY INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 13.170448 75.928 75.928 $1,000.00
12/29/95 Value before Wthdrwl Chg 15.331971 0.000 75.928 $1,164.12
12/29/95 Withdrawl Charge 0.05 ($50.00) 15.331971 (3.261) 72.668 $1,114.12
12/29/95 Contract Fee ($4.09) 15.331971 (0.267) 72.400 $1,110.03
12/29/95 Remaining Value 15.331971 0.000 72.400 $1,110.03
HIGH YIELD Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 16.977032 58.903 58.903 $1,000.00
12/29/95 Value before Wthdrwl Chg 19.522535 0.000 58.903 $1,149.94
12/29/95 Withdrawl Charge 0.05 ($50.00) 19.522535 (2.561) 56.342 $1,099.94
12/29/95 Contract Fee ($5.21) 19.522535 (0.267) 56.075 $1,094.73
12/29/95 Remaining Value 19.522535 0.000 56.075 $1,094.73
GROWTH AND INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 16.642028 60.089 60.089 $1,000.00
12/29/95 Value before Wthdrwl Chg 21.306277 0.000 60.089 $1,280.27
12/29/95 Withdrawl Charge 0.05 ($50.00) 21.306277 (2.347) 57.742 $1,230.27
12/29/95 Contract Fee ($5.68) 21.306277 (0.267) 57.475 $1,224.59
12/29/95 Remaining Value 21.306277 0.000 57.475 $1,224.59
GLOBAL EQUITY Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 13.298544 75.196 75.196 $1,000.00
12/29/95 Value before Wthdrwl Chg 14.517502 0.000 75.196 $1,091.66
12/29/95 Withdrawl Charge 0.05 ($50.00) 14.517502 (3.444) 71.752 $1,041.66
12/29/95 Contract Fee ($3.87) 14.517502 (0.287) 71.485 $1,037.79
12/29/95 Remaining Value 14.517502 0.000 71.485 $1,037.79
STOCK INDEX Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 11.679303 85.622 85.622 $1,000.00
12/29/95 Value before Wthdrwl Chg 15.773906 0.000 85.622 $1,350.59
12/29/95 Withdrawl Charge 0.05 ($50.00) 15.773906 (3.170) 82.452 $1,300.59
12/29/95 Contract Fee ($4.21) 15.773906 (0.267) 82.185 $1,296.38
12/29/95 Remaining Value 15.773906 0.000 82.185 $1,296.38
MONEY MARKET Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 10.896621 91.772 91.772 $1,000.00
12/29/95 Value before Wthdrwl Chg 11.425133 0.000 91.772 $1,048.50
12/29/95 Withdrawl Charge 0.05 ($50.00) 11.425133 (4.376) 87.395 $ 998.50
12/29/95 Contract Fee ($3.05) 11.425133 (0.267) 87.129 $ 995.46
12/29/95 Remaining Value 11.425133 0.000 87.129 $ 995.46
VKM GROWTH & INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 11.195845 89.319 89.319 $1,000.00
12/29/95 Value before Wthdrwl Chg 14.608904 0.000 89.319 $1,304.85
12/29/95 Withdrawl Charge 0.05 ($50.00) 14.608904 (3.423) 85.896 $1,254.85
12/29/95 Contract Fee ($3.90) 14.608904 (0.267) 85.630 $1,250.95
12/29/95 Remaining Value 14.608904 0.000 85.630 $1,250.95
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Non-Standard Year to Date Return
Valuation Date - 12/29/95
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------- ------------------ --------------- -------
Quality Income $ 1,000.00 $ 1,164.12 16.41%
High Yield $ 1,000.00 $ 1,149.94 14.99%
LA Growth & Income $ 1,000.00 $ 1,280.27 28.03%
LA Global Equity $ 1,000.00 $ 1,091.66 9.17%
Stock Index $ 1,000.00 $ 1,350.59 35.06%
Money Market $ 1,000.00 $ 1,048.50 4.85%
VKM Growth & Income $ 1,000.00 $ 1,304.85 30.49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity Year-to-Date
Original Purchase - 12/31/94
Valuation Date - 12/31/95
QUALITY INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 13.170448 75.928 75.928 $1,000.00
12/29/95 Value before Wthdrwl Chg 15.331971 0.000 75.928 $1,164.12
12/29/95 Withdrawl Charge 0.05 ($50.00) 15.331971 (3.261) 72.666 $1,114.12
12/29/95 Contract Fee ($4.09) 15.331971 (0.267) 72.400 $1,110.03
12/29/95 Remaining Value 15.331971 0.000 72.400 $1,110.03
HIGH YIELD Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 16.977032 58.903 58.903 $1,000.00
12/29/95 Value before Wthdrwl Chg 19.522535 0.000 58.903 $1,149.94
12/29/95 Withdrawl Charge 0.05 ($50.00) 19.522535 (2.561) 56.342 $1,099.94
12/29/95 Contract Fee ($5.21) 19.522535 (0.267) 56.075 $1,094.73
12/29/95 Remaining Value 19.522535 0.000 56.075 $1,094.73
GROWTH AND INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 16.642028 60.089 60.089 $1,000.00
12/29/95 Value before Wthdrwl Chg 21.306277 0.000 60.089 $1,280.27
12/29/95 Withdrawl Charge 0.05 ($50.00) 21.306277 (2.347) 57.742 $1,230.27
12/29/95 Contract Fee ($5.68) 21.306277 (0.267) 57.475 $1,224.59
12/29/95 Remaining Value 21.306277 0.000 57.475 $1,224.59
GLOBAL EQUITY Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 13.298544 75.196 75.196 $1,000.00
12/29/95 Value before Wthdrwl Chg 14.517502 0.000 75.196 $1,091.66
12/29/95 Withdrawl Charge 0.05 ($50.00) 14.517502 (3.444) 71.752 $1,041.66
12/29/95 Contract Fee ($3.87) 14.517502 (0.287) 71.485 $1,037.79
12/29/95 Remaining Value 14.517502 0.000 71.485 $1,037.79
STOCK INDEX Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 11.679303 85.622 85.622 $1,000.00
12/29/95 Value before Wthdrwl Chg 15.773906 0.000 85.622 $1,350.59
12/29/95 Withdrawl Charge 0.05 ($50.00) 15.773906 (3.170) 82.452 $1,300.59
12/29/95 Contract Fee ($4.21) 15.773906 (0.267) 82.185 $1,296.38
12/29/95 Remaining Value 15.773906 0.000 82.185 $1,296.38
MONEY MARKET Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 10.896621 91.772 91.772 $1,000.00
12/29/95 Value before Wthdrwl Chg 11.425133 0.000 91.772 $1,048.50
12/29/95 Withdrawl Charge 0.05 ($50.00) 11.425133 (4.376) 87.395 $ 998.50
12/29/95 Contract Fee ($3.05) 11.425133 (0.267) 87.129 $ 995.46
12/29/95 Remaining Value 11.425133 0.000 87.129 $ 995.46
VKM GROWTH & INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/94 Purchase $ 1,000.00 11.195845 89.319 89.319 $1,000.00
12/29/95 Value before Wthdrwl Chg 14.608904 0.000 89.319 $1,304.85
12/29/95 Withdrawl Charge 0.05 ($50.00) 14.608904 (3.423) 85.896 $1,254.85
12/29/95 Contract Fee ($3.90) 14.608904 (0.267) 85.630 $1,250.95
12/29/95 Remaining Value 14.608904 0.000 85.630 $1,250.95
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Standard Year to Date Return
Valuation Date - 12/29/95
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------- ----------------- ------------ -------
Quality Income $ 1,000.00 $ 1,110.03 11.00%
High Yield $ 1,000.00 $ 1,094.73 9.47%
LA Growth & Income $ 1,000.00 $ 1,224.59 22.46%
LA Global Equity $ 1,000.00 $ 1,037.79 3.78%
Stock Index $ 1,000.00 $ 1,296.38 29.64%
Money Market $ 1,000.00 $ 995.46 -0.45%
VKM Growth & Income $ 1,000.00 $ 1,250.95 25.10%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity Year-to-Date
Original Purchase - 12/31/93
Valuation Date - 12/31/94
QUALITY INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/93 Purchase $ 1,000.00 13.965941 71.603 71.603 $1,000.00
12/31/94 Value before Wthdrwl Chg 13.170448 0.000 71.603 $ 943.04
12/31/94 Withdrawl Charge 0.05 ($50.00) 13.170448 (3.796) 67.806 $ 893.04
12/31/94 Contract Fee ($4.21) 13.170448 (0.320) 67.487 $ 888.83
12/31/94 Remaining Value 13.170448 0.000 67.487 $ 888.83
HIGH YIELD Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/93 Purchase $ 1,000.00 18.020405 55.493 55.493 $1,000.00
12/31/94 Value before Wthdrwl Chg 16.977032 0.000 55.493 $ 942.10
12/31/94 Withdrawl Charge 0.05 ($50.00) 16.977032 (2.945) 52.547 $ 892.10
12/31/94 Contract Fee ($5.42) 16.977032 (0.320) 52.228 $ 886.68
12/31/94 Remaining Value 16.977032 0.000 52.228 $ 886.68
GROWTH AND INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/93 Purchase $ 1,000.00 16.424494 60.885 60.885 $1,000.00
12/31/94 Value before Wthdrwl Chg 16.642028 0.000 60.885 $1,013.24
12/31/94 Withdrawl Charge 0.05 ($50.00) 16.642028 (3.004) 57.880 $ 963.24
12/31/94 Contract Fee ($5.32) 16.642028 (0.320) 57.561 $ 957.93
12/31/94 Remaining Value 16.642028 0.000 57.561 $ 957.93
GLOBAL EQUITY Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/93 Purchase $ 1,000.00 13.294084 75.221 75.221 $1,000.00
12/31/94 Value before Wthdrwl Chg 13.329816 0.000 75.221 $1,002.69
12/31/94 Withdrawl Charge 0.05 ($50.00) 13.329816 (3.751) 71.470 $ 952.69
12/31/94 Contract Fee ($4.26) 13.329816 (0.320) 71.151 $ 948.43
12/31/94 Remaining Value 13.329816 0.000 71.151 $ 948.43
STOCK INDEX Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/93 Purchase $ 1,000.00 11.866746 84.269 84.269 $1,000.00
12/31/94 Value before Wthdrwl Chg 11.679303 0.000 84.269 $ 984.20
12/31/94 Withdrawl Charge 0.05 ($50.00) 11.679303 (4.281) 79.988 $ 934.20
12/31/94 Contract Fee ($3.73) 11.679303 (0.320) 79.669 $ 930.47
12/31/94 Remaining Value 11.679303 0.000 79.669 $ 930.47
MONEY MARKET Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/93 Purchase $ 1,000.00 10.610022 94.251 94.251 $1,000.00
12/31/94 Value before Wthdrwl Chg 10.896621 0.000 94.251 $1,027.01
12/31/94 Withdrawl Charge 0.05 ($50.00) 10.896621 (4.589) 89.662 $ 977.01
12/31/94 Contract Fee ($3.48) 10.896621 (0.320) 89.342 $ 973.53
12/31/94 Remaining Value 10.896621 0.000 89.342 $ 973.53
VKM GROWTH & INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/93 Purchase $ 1,000.00 11.919342 83.897 83.897 $1,000.00
12/29/94 Value before Wthdrwl Chg 11.195845 0.000 83.897 $ 939.30
12/29/94 Withdrawl Charge 0.05 ($50.00) 11.195845 (4.466) 79.431 $ 889.30
12/29/94 Contract Fee ($3.58) 11.195845 (0.320) 79.112 $ 885.72
12/29/94 Remaining Value 11.195845 0.000 79.112 $ 885.72
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Standard Year to Date Return
Valuation Date - 12/31/94
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------- ----------------- ------------ -------
Quality Income $ 1,000.00 $ $888.83 -11.12%
High Yield $ 1,000.00 $ 886.68 -11.33%
LA Growth & Income $ 1,000.00 $ 957.93 -4.21%
LA Global Equity $ 1,000.00 $ 948.43 -5.16%
Stock Index $ 1,000.00 $ 930.47 -6.95%
Money Market $ 1,000.00 $ 973.53 -2.65%
VKM Growth & Income $ 1,000.00 $ 885.72 -11.43%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity Year-to-Date
Original Purchase - 12/31/92
Valuation Date - 12/31/93
QUALITY INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/92 Purchase $ 1,000.00 12.753941 78.407 78.407 $1,000.00
12/29/93 Value before Wthdrwl Chg 13.965941 0.000 78.407 $1,095.03
12/29/93 Withdrawl Charge 0.05 ($50.00) 13.965941 (3.580) 74.827 $1,045.03
12/29/93 Contract Fee ($4.36) 13.965941 (0.312) 74.515 $1,040.67
12/29/93 Remaining Value 13.965941 0.000 74.515 $1,040.67
HIGH YIELD Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/92 Purchase $ 1,000.00 14.990335 66.710 66.710 $1,000.00
12/29/93 Value before Wthdrwl Chg 18.020405 0.000 66.710 $1,202.13
12/29/93 Withdrawl Charge 0.05 ($50.00) 18.020405 (2.775) 63.935 $1,152.13
12/29/93 Contract Fee ($5.63) 18.020405 (0.312) 63.623 $1,146.50
12/29/93 Remaining Value 18.020405 0.000 63.623 $1,146.50
GROWTH AND INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/92 Purchase $ 1,000.00 14.504325 68.945 68.945 $1,000.00
12/29/93 Value before Wthdrwl Chg 16.424494 0.000 68.945 $1,132.39
12/29/93 Withdrawl Charge 0.05 ($50.00) 16.424494 (3.044) 65.901 $1,082.39
12/29/93 Contract Fee ($5.13) 16.424494 (0.312) 65.588 $1,077.26
12/29/93 Remaining Value 16.424494 0.000 65.588 $1,077.26
GLOBAL EQUITY Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/92 Purchase $ 1,000.00 10.643098 93.958 93.958 $1,000.00
12/29/93 Value before Wthdrwl Chg 13.294084 0.000 93.958 $1,249.08
12/29/93 Withdrawl Charge 0.05 ($50.00) 13.294084 (3.761) 90.197 $1,199.08
12/29/93 Contract Fee ($4.15) 13.294084 (0.312) 89.884 $1,194.93
12/29/93 Remaining Value 13.294084 0.000 89.884 $1,194.93
STOCK INDEX Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/92 Purchase $ 1,000.00 11.054434 90.461 90.461 $1,000.00
12/29/93 Value before Wthdrwl Chg 11.866746 0.000 90.461 $1,073.48
12/29/93 Withdrawl Charge 0.05 ($50.00) 11.866746 (4.213) 86.248 $1,023.48
12/29/93 Contract Fee ($3.70) 11.866746 (0.312) 85.936 $1,019.78
12/29/93 Remaining Value 11.866746 0.000 85.936 $1,019.78
MONEY MARKET Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/92 Purchase $ 1,000.00 10.457561 95.625 95.625 $1,000.00
12/29/93 Value before Wthdrwl Chg 10.610022 0.000 95.625 $1,014.58
12/29/93 Withdrawl Charge 0.05 ($50.00) 10.610022 (4.713) 90.912 $ 964.58
12/29/93 Contract Fee ($3.31) 10.610022 (0.312) 90.600 $ 961.27
12/29/93 Remaining Value 10.610022 0.000 90.600 $ 961.27
VKM GROWTH & INCOME Units This Total Total
- -------------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ------------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/92 Purchase $ 1,000.00 10.470566 95.506 95.506 $1,000.00
12/29/93 Value before Wthdrwl Chg 11.919342 0.000 95.506 $1,138.37
12/29/93 Withdrawl Charge 0.05 ($50.00) 11.919342 (4.195) 91.311 $1,088.37
12/29/93 Contract Fee ($3.72) 11.919342 (0.312) 90.999 $1,084.65
12/29/93 Remaining Value 11.919342 0.000 90.999 $1,084.65
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Standard Year to Date Return
Valuation Date - 12/29/93
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------- ----------------- ------------ -------
Quality Income $ 1,000.00 $ 1,040.67 4.07%
High Yield $ 1,000.00 $ 1,146.50 14.65%
LA Growth & Income $ 1,000.00 $ 1,077.26 7.73%
LA Global Equity $ 1,000.00 $ 1,194.93 19.49%
Stock Index $ 1,000.00 $ 1,019.78 1.98%
Money Market $ 1,000.00 $ 961.27 -3.87%
VKM Growth & Income $ 1,000.00 $ 1,084.65 8.46%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity Year-to-Date
Original Purchase - 12/31/91
Valuation Date - 12/31/92
QUALITY INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/91 Purchase $ 1,000.00 12.020179 83.193 83.193 $1,000.00
12/29/92 Value before Wthdrwl Chg 12.753941 0.000 83.193 $1,061.04
12/29/92 Withdrawl Charge 0.05 ($50.00) 12.753941 (3.920) 79.273 $1,011.04
12/29/92 Contract Fee ($5.14) 12.753941 (0.403) 78.870 $1,005.90
12/29/92 Remaining Value 12.753941 0.000 78.870 $1,005.90
HIGH YIELD Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/91 Purchase $ 1,000.00 12.754429 78.404 78.404 $1,000.00
12/29/92 Value before Wthdrwl Chg 14.990335 0.000 78.404 $1,175.30
12/29/92 Withdrawl Charge 0.05 ($50.00) 14.990335 (3.335) 75.069 $1,125.30
12/29/92 Contract Fee ($6.04) 14.990335 (0.403) 74.666 $1,119.26
12/29/92 Remaining Value 14.990335 0.000 74.666 $1,119.26
GROWTH AND INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/91 Purchase $ 1,000.00 12.725687 78.581 78.581 $1,000.00
12/29/92 Value before Wthdrwl Chg 14.504325 0.000 78.581 $1,139.77
12/29/92 Withdrawl Charge 0.05 ($50.00) 14.504325 (3.447) 75.134 $1,089.77
12/29/92 Contract Fee ($5.85) 14.504325 (0.403) 74.731 $1,083.92
12/29/92 Remaining Value 14.504325 0.000 74.731 $1,083.92
GLOBAL EQUITY Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/91 Purchase $ 1,000.00 10.970468 91.154 91.154 $1,000.00
12/29/92 Value before Wthdrwl Chg 10.643098 0.000 91.154 $ 970.16
12/29/92 Withdrawl Charge 0.05 ($50.00) 10.643098 (4.698) 86.456 $ 920.16
12/29/92 Contract Fee ($4.29) 10.643098 (0.403) 86.053 $ 915.87
12/29/92 Remaining Value 10.643098 0.000 86.053 $ 915.87
STOCK INDEX Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/91 Purchase $ 1,000.00 10.553371 94.756 94.756 $1,000.00
12/29/92 Value before Wthdrwl Chg 11.054434 0.000 94.756 $1,047.48
12/29/92 Withdrawl Charge 0.05 ($50.00) 11.054434 (4.523) 90.233 $ 997.48
12/29/92 Contract Fee ($4.46) 11.054434 (0.403) 89.830 $ 993.02
12/29/92 Remaining Value 11.054434 0.000 89.830 $ 993.02
MONEY MARKET Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/91 Purchase $ 1,000.00 10.209267 97.950 97.950 $1,000.00
12/29/92 Value before Wthdrwl Chg 10.458092 0.000 97.950 $1,024.37
12/29/92 Withdrawl Charge 0.05 ($50.00) 10.458092 (4.781) 93.169 $ 974.37
12/29/92 Contract Fee ($4.22) 10.458092 (0.403) 92.766 $ 970.16
12/29/92 Remaining Value 10.458092 0.000 92.766 $ 970.16
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VA Standard Year to Date Return
Valuation Date - 12/29/92
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------ ----------------- --------------- -------
Quality Income $ 1,000.00 $ 1,005.90 0.59%
High Yield $ 1,000.00 $ 1,119.26 11.93%
LA Growth & Income $ 1,000.00 $ 1,083.92 8.39%
LA Global Equity $ 1,000.00 $ 915.87 -8.41%
Stock Index $ 1,000.00 $ 993.02 -0.70%
Money Market $ 1,000.00 $ 970.16 -2.98%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity Year-to-Date
Original Purchase - 12/31/90
Valuation Date - 12/31/91
QUALITY INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/90 Purchase $ 1,000.00 10.618874 94.172 94.172 $1,000.00
12/29/91 Value before Wthdrwl Chg 12.020179 0.000 94.172 $1,131.96
12/29/91 Withdrawl Charge 0.05 ($56.60) 12.020179 (4.709) 89.463 $1,075.37
12/29/91 Contract Fee ($7.44) 12.020179 (0.619) 88.844 $1,067.93
12/29/91 Remaining Value 12.020179 0.000 88.844 $1,067.93
HIGH YIELD Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/90 Purchase $ 1,000.00 10.064260 99.362 99.362 $1,000.00
12/29/91 Value before Wthdrwl Chg 12.754429 0.000 99.362 $1,267.30
12/29/91 Withdrawl Charge 0.05 ($63.36) 12.754429 (4.968) 94.393 $1,203.93
12/29/91 Contract Fee ($7.89) 12.754429 (0.619) 93.775 $1,196.04
12/29/91 Remaining Value 12.754429 0.000 93.775 $1,196.04
GROWTH AND INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/90 Purchase $ 1,000.00 10.146589 98.555 98.555 $1,000.00
12/29/91 Value before Wthdrwl Chg 12.725687 0.000 98.555 $1,254.18
12/29/91 Withdrawl Charge 0.05 ($62.71) 12.725687 (4.928) 93.628 $1,191.47
12/29/91 Contract Fee ($7.88) 12.725687 (0.619) 93.008 $1,183.59
12/29/91 Remaining Value 12.725687 0.000 93.008 $1,183.59
GLOBAL EQUITY Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/90 Purchase $ 1,000.00 9.793410 102.109 102.109 $1,000.00
12/29/91 Value before Wthdrwl Chg 10.970468 0.000 102.109 $1,120.19
12/29/91 Withdrawl Charge 0.05 ($56.01) 10.970468 (5.105) 97.004 $1,064.18
12/29/91 Contract Fee ($6.79) 10.970468 (0.619) 96.385 $1,057.39
12/29/91 Remaining Value 10.970468 0.000 96.385 $1,057.39
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Standard Year to Date Return
Valuation Date - 12/29/91
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------ ----------------- ------------ -------
Quality Income $ 1,000.00 $ 1,067.93 6.79%
High Yield $ 1,000.00 $ 1,196.04 19.60%
LA Growth & Income $ 1,000.00 $ 1,183.59 18.36%
LA Global Equity $ 1,000.00 $ 1,057.39 5.74%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Monthly Returns
Variable Annuity Year-to-Date
Original Purchase - 12/31/89
Valuation Date - 12/31/90
QUALITY INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/89 Purchase $ 1,000.00 9.966029 100.341 100.341 $1,000.00
12/29/90 Value before Wthdrwl Chg 10.618874 0.000 100.341 $1,065.51
12/29/90 Withdrawl Charge 0.05 ($50.00) 10.618874 (4.709) 95.632 $1,015.51
12/29/90 Contract Fee ($1.08) 10.618874 (0.102) 95.531 $1,014.43
12/29/90 Remaining Value 10.618874 0.000 95.531 $1,014.43
HIGH YIELD Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/89 Purchase $ 1,000.00 10.020510 99.795 99.795 $1,000.00
12/29/90 Value before Wthdrwl Chg 10.064260 0.000 99.795 $1,004.37
12/29/90 Withdrawl Charge 0.05 ($50.00) 10.064260 (4.968) 94.827 $ 954.37
12/29/90 Contract Fee ($1.08) 10.064260 (0.107) 94.720 $ 953.28
12/29/90 Remaining Value 10.064260 0.000 94.720 $ 953.28
GROWTH AND INCOME Units This Total Total
- -----------------
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ----------------- ------------------------ ---- ----------- ---------- ------------- ---------- ---------
12/31/89 Purchase $ 1,000.00 10.063418 99.370 99.370 $1,000.00
12/29/90 Value before Wthdrwl Chg 10.146589 0.000 99.370 $1,008.26
12/29/90 Withdrawl Charge 0.05 ($50.00) 10.146589 (4.928) 94.442 $ 958.26
12/29/90 Contract Fee ($1.08) 10.146589 (0.106) 94.336 $ 957.18
12/29/90 Remaining Value 10.146589 0.000 94.336 $ 957.18
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Standard Year to Date Return
Valuation Date - 12/29/90
Total Value Total
Portfolio Purchase Amount Units Held Return
- ------------------ ----------------- ------------ -------
Quality Income $ 1,000.00 $ 1,014.43 1.44%
High Yield $ 1,000.00 $ 953.28 -4.67%
LA Growth & Income $ 1,000.00 $ 957.18 -4.28%
</TABLE>
Exhibit 99.B14
COMPANY ORGANIZATIONAL CHART - COVA CORPORATION
Cova Corporation, a Missouri corporation, is owned by General American Life
Insurance Company, a Missouri corporation.
Cova Corporation owns 100% of Cova Financial Services Life Insurance Company,
a Missouri company, Cova Financial Life Insurance Company, a California
company, and Cova Life Management Company, a Delaware company.
Cova Financial Services Life Insurance Company owns 100% of First Cova Life
Insurance Company, a New York company.
Cova Life Management Company owns 100% of Cova Investment Advisory
Corporation, an Illinois company, Cova Investment Allocation Corporation, an
Illinois company, and Cova Life Sales Company, a Delaware company.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 374,208,162
<INVESTMENTS-AT-VALUE> 410,449,000
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 410,449,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46,951
<TOTAL-LIABILITIES> 46,951
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 23,447,124
<SHARES-COMMON-PRIOR> 21,934,452
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 410,402,049
<DIVIDEND-INCOME> 28,268,762
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,774,501
<NET-INVESTMENT-INCOME> 23,494,261
<REALIZED-GAINS-CURRENT> 2,978,637
<APPREC-INCREASE-CURRENT> 41,770,867
<NET-CHANGE-FROM-OPS> 68,243,765
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,709,828
<NUMBER-OF-SHARES-REDEEMED> (3,197,156)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 115,666,539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 347,817,917
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
