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. 10 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 24 [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 Frances S. Cook
Blazzard, Grodd & Hasenauer, P.C. First Vice President and
P.O Box 5108 Associate Counsel
Westport, CT 06881 Cova Financial Services
(203) 226-7866 Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
It is proposed that this filing will become effective:
__X__ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 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.
Title of Securities Registered:
Individual Variable Annuity Contracts
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 28, 1997.
EXPLANATORY NOTE
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This Registration Statement contains nineteen Portfolios of Cova Series Trust,
one Portfolio of Lord Abbett Series Fund, Inc., one Portfolio of General
American Capital Company, three Portfolios of AIM Variable Insurance Funds, two
Portfolios of Variable Insurance Products Fund, one Portfolio of Variable
Insurance Products Fund II, two Portfolios of Variable Insurance Products Fund
III, and six Portfolios of MFS Variable Insurance Trust. Three versions of the
Prospectus will be created from this Registration Statement. The distribution
system for each version of the Prospectus is different. These Prospectuses will
be filed with the Commission pursuant to Rule 497 under the Securities Act of
1933. The Registrant undertakes to update this Explanatory Note, as needed, 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; Investment
Options
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
Cova Financial Services Life Insurance Company December ___, 1997
PROFILE of the Fixed and Variable Annuity Contract
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
CONSIDER AND KNOW BEFORE PURCHASING THE CONTRACT. THE CONTRACT IS MORE FULLY
DESCRIBED IN THE PROSPECTUS WHICH ACCOMPANIES THIS PROFILE. PLEASE READ THE
PROSPECTUS CAREFULLY.
1. THE ANNUITY CONTRACT. The fixed and variable annuity contract offered by Cova
is a contract between you, the owner, and Cova, an insurance company. The
Contract provides a means for investing on a tax-deferred basis in a fixed
account of Cova and 35 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. 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 35 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, whichever 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 Managed by Lord, Abbett & Co. Managed by Van Kampen
Investment Management Inc. Bond Debenture American Capital
Select Equity Growth and Income Investment Advisory Corp.
Small Cap Stock Mid-Cap Value VKAC Growth and Income
International Equity Large Cap Research Money Market
Quality Bond Developing Growth Quality Income
Large Cap Stock Lord Abbett Growth and Income High Yield
Stock Index Managed by A I M Advisors, Inc.
Managed by Conning Asset Managed by Mississippi Valley AIM V.I. Capital Appreciation
Management Company (formerly, Advisors, Inc. Managed by Fidelity Management AIM V.I. International Equity
General American Investment Balanced and Research Company AIM V.I. Value
Management Company) Small Cap Equity VIP III Growth Opportunities
Money Market Equity Income VIP Growth
Growth & Income Equity VIP III Growth & Income
VIP Equity-Income
VIP II Contrafund
(VIP, VIP II and VIP III refer to
Variable Insurance Products Fund, Variable
Insurance Products Fund II and Variable Insurance
Products Fund III, respectively)
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
MFS Emerging Growth
MFS Research
MFS Growth With Income
MFS High Income
MFS World Governments
MFS/Foreign & Colonial Emerging Markets Equity
</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 maintenance charge from your Contract.
Cova currently waives this charge if the value of 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.
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 begin receiving regular
income payments from your annuity, Cova will assess a state premium tax charge
which ranges from 0-4%, depending upon the state.
There are also investment charges which currently range from .11% to 1.50% of
the average daily value of the investment portfolio depending upon the
investment portfolio.
The following chart is designed to help you understand the expenses in the
Contract. The column "Total Annual Expenses" shows the total of the $30 contract
maintenance charge (which is represented as .10% below), the 1.40% insurance
charges and the investment expenses for each investment portfolio. The next two
columns show you two examples of the expenses, in dollars, you would pay under a
Contract. The examples assume that you invested $1,000 in a Contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. For year 1, the Total Annual Expenses are assessed as
well as the withdrawal charges. For year 10, the example shows the aggregate of
all the annual expenses assessed for the 10 years, but there is no withdrawal
charge.
The premium tax is assumed to be 0% in both examples.
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Examples:
Total Annual
Total Annual Total Annual Total Expenses At End of:
Insurance Portfolio Annual (1) (2)
Portfolio Charges Expenses Expenses 1 Year 10 Years
- --------------------- ------------- ------------- ------------- ------ --------
Managed by J.P. Morgan Investment
Management Inc.
Select Equity 1.50% 0.85% 2.35% $73.80 $266.24
Small Cap Stock 1.50% 0.95% 2.45% $74.80 $276.23
International Equity 1.50% 0.95% 2.45% $74.80 $276.23
Quality Bond 1.50% 0.65% 2.15% $71.79 $245.92
Large Cap Stock 1.50% 0.75% 2.25% $72.80 $256.13
Managed by Lord, Abbett & Co.
Bond Debenture 1.50% 0.85% 2.35% $73.80 $266.24
Growth and Income 1.50% 0.59% 2.09% $71.19 $239.74
Mid-Cap Value 1.50% 1.10% 2.60% $76.30 $291.02
Large Cap Research 1.50% 1.10% 2.60% $76.30 $291.02
Developing Growth 1.50% 1.00% 2.50% $75.30 $281.19
Lord Abbett Growth and Income 1.50% 0.75% 2.25% $72.80 $256.13
Managed by Van Kampen American
Capital Investment Advisory Corp.
VKAC Growth and Income 1.50% 0.70% 2.20% $72.29 $251.04
Money Market 1.50% 0.11% 1.61% $66.36 $188.79
Quality Income 1.50% 0.60% 2.10% $71.29 $240.77
High Yield 1.50% 0.85% 2.35% $73.80 $266.24
Stock Index 1.50% 0.60% 2.10% $71.29 $240.77
Managed by Conning Asset Management
Company
Money Market 1.50% 0.205% 1.705% $67.31 $199.08
Managed by Mississippi Valley
Advisors, Inc.
Balanced 1.50% 1.10% 2.60% $76.30 $291.02
Small Cap Equity 1.50% 1.10% 2.60% $76.30 $291.02
Equity Income 1.50% 1.10% 2.60% $76.30 $291.02
Growth & Income Equity 1.50% 1.10% 2.60% $76.30 $291.02
Managed by Fidelity Management &
Research Company
VIP III Growth Opportunities 1.50% 0.77% 2.27% $73.00 $258.16
VIP Growth 1.50% 0.69% 2.19% $72.19 $250.02
VIP III Growth & Income 1.50% 1.00% 2.50% $75.30 $281.19
VIP Equity-Income 1.50% 0.58% 2.08% $71.09 $238.70
VIP II Contrafund 1.50% 0.74% 2.24% $72.69 $255.12
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation 1.50% 0.73% 2.23% $72.59 $254.10
AIM V.I. International Equity 1.50% 0.96% 2.46% $74.90 $277.23
AIM V.I. Value 1.50% 0.73% 2.23% $72.59 $254.10
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
MFS Emerging Growth 1.50% 1.00% 2.50% $75.30 $281.19
MFS Research 1.50% 1.00% 2.50% $75.30 $281.19
MFS Growth With Income 1.50% 1.00% 2.50% $75.30 $281.19
MFS High Income 1.50% 1.00% 2.50% $75.30 $281.19
MFS World Governments 1.50% 1.00% 2.50% $75.30 $281.19
MFS/Foreign & Colonial Emerging
Markets Equity 1.50% 1.50% 3.00% $80.29 $329.29
</TABLE>
For the newly formed Portfolios the expenses have been estimated. The expenses
reflect any expense reimbursement or fee waiver. For more detailed information,
see the Fee Table in the Prospectus for the Contract.
6. TAXES. Your earnings are not taxed until you take them out. If you take money
out during the accumulation phase, 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. Each purchase payment you
add to your Contract has its own 5 year withdrawal charge period. After Cova has
had a payment for 5 years, there is no charge for withdrawing that payment. Of
course, you may also have to pay income tax and a tax penalty on any money you
take out.
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 investment expenses and all other expenses of the investment portfolio.
These numbers do not reflect any withdrawal charges which if applied would
reduce such performance. Past performance is not a guarantee of future results.
<TABLE>
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<S> <C> <C> <C> <C> <C> <C> <C>
Calendar Year
Portfolio 1996 1995 1994 1993 1992 1991 1990
- --------- ---- ---- ---- ---- ---- ---- ----
Managed by J.P. Morgan
Investment Management Inc.
Select Equity -- -- -- -- -- -- --
Small Cap Stock -- -- -- -- -- -- --
International Equity -- -- -- -- -- -- --
Quality Bond -- -- -- -- -- -- --
Large Cap Stock -- -- -- -- --
Managed by Lord, Abbett & Co.
Bond Debenture -- -- -- -- -- -- --
Growth and Income 16.23% 26.73% 0.26% 12.28% 12.69% 24.23% 0.74%
Mid-Cap Value -- -- -- -- -- -- --
Large Cap Research -- -- -- -- -- -- --
Developing Growth -- -- -- -- -- -- --
Lord Abbett Growth and Income -- -- -- -- -- -- --
Managed by Van Kampen
American Capital Investment
Advisory Corp.
VKAC Growth and Income 16.26% 30.36% -6.16% 13.76% -- -- --
Money Market 3.77% 4.38% 2.26% 1.37% 2.20% -- --
Quality Income 1.07% 16.09% -6.16% 8.90% 5.53% 12.25% 5.09%
High Yield 9.48% 14.75% -6.00% 20.02% 17.23% 26.14% -1.01%
Stock Index 20.14% 34.54% -2.27% 6.33% 4.45% -- --
Managed by Conning Asset
Management Company
Money Market -- -- -- -- -- -- --
Managed by Mississippi Valley
Advisors, Inc.
Balanced -- -- -- -- -- -- --
Small Cap Equity -- -- -- -- -- -- --
Equity Income -- -- -- -- -- -- --
Growth & Income Equity -- -- -- -- -- -- --
Managed by Fidelity Management
& Research Company -- -- -- -- -- -- --
VIP III Growth Opportunities -- -- -- -- -- -- --
VIP Growth -- -- -- -- -- -- --
VIP III Growth & Income -- -- -- -- -- -- --
VIP Equity-Income -- -- -- -- -- -- --
VIP II Contrafund -- -- -- -- -- -- --
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation -- -- -- -- -- -- --
AIM V.I. International Equity -- -- -- -- -- -- --
AIM V.I. Value -- -- -- -- -- -- --
Managed by Massachusetts Financial Services Company
MFS Emerging Growth -- -- -- -- -- -- --
MFS Research -- -- -- -- -- -- --
MFS Growth With Income -- -- -- -- -- -- --
MFS High Income -- -- -- -- -- -- --
MFS World Governments -- -- -- -- -- -- --
MFS/Foreign & Colonial
Emerging Markets Equity -- -- -- -- -- -- --
</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.
You can arrange to 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
THE FIXED AND VARIABLE ANNUITY
ISSUED BY
COVA VARIABLE ANNUITY ACCOUNT ONE
AND
COVA 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 36 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 35 investment portfolios listed
below. The 35 investment portfolios are part of Cova Series Trust, Lord Abbett
Series Fund, Inc., General American Capital Company, Variable Insurance
Products, Variable Insurance Products II, Variable Insurance Products III, AIM
Variable Insurance Funds, Inc., and MFS Variable Insurance Trust. You can put
your money in the fixed account and/or any of these investment portfolios
(except as noted).
<TABLE>
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COVA SERIES TRUST
MANAGED BY J.P. MORGAN MANAGED BY LORD, ABBETT & CO.: MANAGED BY VAN KAMPEN
INVESTMENT MANAGEMENT INC.: Bond Debenture AMERICAN CAPITAL
Select Equity Mid-Cap Value INVESTMENT ADVISORY CORP.:
Small Cap Stock Large Cap Research VKAC Growth and Income
International Equity Developing Growth Money Market
Quality Bond Lord Abbett Growth and Income Quality Income
Large Cap Stock High Yield
Stock Index
MANAGED BY MISSISSIPPI VALLEY LORD ABBETT SERIES FUND, INC.:
ADVISORS, INC. MANAGED BY LORD, ABBETT & CO.:
Balanced Growth and Income
Small Cap Equity
Equity Income
Growth & Income Equity
GENERAL AMERICAN CAPITAL VARIABLE INSURANCE PRODUCTS FUND:
COMPANY: MANAGED BY FIDELITY MANAGEMENT
MANAGED BY CONNING & RESEARCH COMPANY
INVESTMENT MANAGEMENT COMPANY VIP Growth
Money Market VIP Equity-Income
VARIABLE INSURANCE PRODUCTS FUND II:
MANAGED BY FIDELITY MANAGEMENT
& RESEARCH COMPANY
VIP II Contrafund
VARIABLE INSURANCE PRODUCTS FUND III:
MANAGED BY FIDELITY MANAGEMENT
& RESEARCH COMPANY
VIP III Growth Opportunities
VIP III Growth & Income
AIM VARIABLE INSURANCE FUNDS INC.,
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation
AIM V.I. International Equity
AIM V.I. Value
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
MFS Emerging Growth
MFS Research
MFS Growth With Income
MFS High Income
MFS World Governments
MFS/Foreign & Colonial Emerging Markets Equity
</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 Fixed and Variable Annuity Contract, you can obtain
a copy of the Statement of Additional Information (SAI) dated December , 1997.
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.
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
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.
December , 1997
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
FEE TABLE
EXAMPLES
1. THE ANNUITY CONTRACT
2. ANNUITY PAYMENTS (THE 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
Variable Insurance Products Fund
Variable Insurance Products Fund II
Variable Insurance Products Fund III
AIM Variable Insurance Funds, Inc.
MFS Variable Insurance Trust
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
Ownership
Beneficiary
Assignment
Suspension of Payments or Transfers
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Performance Information
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.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Date.............................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Fixed Account............................................................
Income Phase.............................................................
Investment Portfolios....................................................
Joint Owner..............................................................
Non-Qualified............................................................
Owner....................................................................
Purchase Payment.........................................................
Qualified................................................................
Tax Deferral.............................................................
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
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>
<CAPTION>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
-----
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
</TABLE>
<TABLE>
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INVESTMENT PORTFOLIO EXPENSES Other Expenses
(as a percentage of the average daily net (after expense
assets of an investment portfolio) Management reimbursement for Total Annual
Fees 12b-1 Fees certain Portfolios) Portfolio Expenses
----------- ------------- ---------------------- ------------------
COVA SERIES TRUST(a)
Managed by J.P. Morgan Investment Management Inc.
Select Equity(b) .75% -- .10% .85%
Small Cap Stock(b) .85% -- .10% .95%
International Equity(b) .85% -- .10% .95%
Quality Bond(b) .55% -- .10% .65%
Large Cap Stock(b) .65% -- .10% .75%
Managed by Lord, Abbett & Co.
Bond Debenture(b) .75% -- .10% .85%
Mid-Cap Value(c) 1.00% -- .10% 1.10%
Large Cap Research(c) 1.00% -- .10% 1.10%
Developing Growth(c) .90% -- .10% 1.00%
Lord Abbett Growth and Income(c) .65% -- .10% .75%
Managed by Mississippi Valley Advisors, Inc.
Balanced(c) 1.00% -- .10% 1.10%
Small Cap Equity(c) 1.00% -- .10% 1.10%
Equity Income(c) 1.00% -- .10% 1.10%
Growth & Income Equity(c) 1.00% -- .10% 1.10%
Managed By Van Kampen American Capital Investment
Advisory Corp.
VKAC Growth and Income .60% -- .10% .70%
Money Market(d) .00% -- .11% .11%
Quality Income .50% -- .10% .60%
High Yield .75% -- .10% .85%
Stock Index .50% -- .10% .60%
LORD ABBETT SERIES FUND, INC.
Managed by Lord, Abbett & Co.
Growth and Income(e) .50% .07% .02% .59%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset
Management Company
Money Market .205% -- .00% .205%
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Managed by Fidelity Management &
Research Company
Growth Opportunities (f) .61% -- .16% .77%
Growth (f) .61% -- .08% .69%
Growth & Income .50% -- .50% 1.00%
Equity-Income (f) .51% -- .07% .58%
Contrafund (f) .61% -- .13% .74%
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation .64% -- .09% .73%
AIM V.I. International Equity .75% -- .21% .96%
AIM V.I. Value . 64% -- .09% .73%
MFS VARIABLE INSURANCE TRUST
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (g) .75% -- .25% 1.00%
MFS Research (g) .75% -- .25% 1.00%
MFS Growth With Income (g) .75% -- .25% 1.00%
MFS High Income (g) .75% -- .25% 1.00%
MFS World Governments (g) .75% -- .25% 1.00%
MFS/Foreign & Colonial Emerging Markets Equity (g) 1.25% -- .25% 1.50%
</TABLE>
(a) Since August 20, 1990, Cova has been reimbursing the investment
portfolios of Cova Series Trust for all operating expenses (exclusive of the
management fees) in excess of approximately .10%. Absent the expense
reimbursement and management fee waiver, the percentages shown for total annual
portfolio expenses (on an annualized basis) for the year or period ended
December 31, 1996 would have been .71% for the Quality Income Portfolio, 1.04%
for the High Yield Portfolio, .74% for the Money Market Portfolio, .67% for the
Stock Index Portfolio, 1.02% for the VKAC Growth and Income Portfolio, 1.70% for
the Select Equity Portfolio, 2.68% for the Small Cap Stock Portfolio, 3.80% for
the International Equity Portfolio, 1.52% for the Quality Bond Portfolio, 1.23%
for the Large Cap Stock Portfolio and 2.05% for the Bond Debenture Portfolio.
(b) Annualized. The Portfolio commenced regular investment operations on
April 2, 1996.
(c) Estimated. The Portfolio has not yet commenced regular investment
operations.
(d) 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.
(e) The Growth and Income Portfolio of Lord Abbett Series Fund, Inc. has a
12b-1 plan 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. As of May 1, 1997, no payments had been made
under the 12b-1 plan. For the year ending December 31, 1997, the 12b-1 fees are
estimated to be .07%. The examples below for this Portfolio reflect the
estimated 12b-1 fees.
(f) A portion of the brokerage commissions that certain funds pay was used
to reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest earned on
uninvested cash balances was used to reduce custodian and transfer agent
expenses. Including these reductions, the total operating expenses presented in
the table would have been .56% for the VIP Equity-Income Portfolio, .67% for the
VIP Growth Portfolio, .71% for the VIP II Contrafund Portfolio and .76% for the
VIP III Growth Opportunities Portfolio.
(g) The adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, so that each Series' "Other Expenses" do not
exceed .25% annually for each Series listed above. Absent such reimbursement,
"Total Annual Portfolio Expenses" would be: 1.16% for the MFS Emerging Growth
Series, 1.48% for the MFS Research Series; 2.07% for the MFS Growth With Income
Series; 1.62% for the MFS High Income Series; 2.03% for the MFS World
Governments Series; and are estimated to be 1.73% for the MFS/ Foreign &
Colonial Emerging Markets Equity Series.
EXAMPLES:
You would 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.
<TABLE>
<CAPTION>
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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 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Small Cap Stock (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
International Equity (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
Quality Bond (a) $71.79 (a) $112.12 (a) $159.89 (a) $245.92
(b) $21.79 (b) $ 67.12 (b) $114.89 (b) $245.92
Large Cap Stock (a) $72.80 (a) $115.15 (a) $164.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Managed by Lord, Abbett & Co.
Bond Debenture (a) $73.80 (a) $118.16 (a)$ 169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b)$ 124.99 (b) $266.24
Mid-Cap Value (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Large Cap Research (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Developing Growth (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
Lord Abbett Growth and Income (a) $73.80 (a) $118.16
(b) $23.80 (b) $ 73.16
Managed by Mississippi Valley Advisors, Inc.
Balanced (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Small Cap Equity (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Equity Income (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Growth & Income Equity (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Managed by Van Kampen American Capital
Investment Advisory Corp.
VKAC Growth and Income (a) $72.29 (a) $113.63 (a) $162.42 (a) $251.04
(b) $22.29 (b) $ 68.63 (b) $117.42 (b) $251.04
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
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
High Yield (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Stock Index (a) $71.29 (a) $110.60 (a) $157.34 (a) $240.77
(b) $21.29 (b) $ 65.60 (b) $112.34 (b) $240.77
LORD ABBETT SERIES FUND, INC.
Managed by Lord, Abbett & Co.
Growth and Income (a) $71.19 (a) $110.30 (a) $156.83 (a) $239.74
(b) $21.19 (b) $ 65.30 (b) $111.83 (b) $239.74
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market (a) $67.31 (a) $ 98.54 (a) $137.02 (a) $199.08
(b) $17.31 (b) $ 53.54 (b) $ 92.02 (b) $199.08
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Managed by Fidelity Management &
Research Company
VIP III Growth Opportunities (a) $73.00 (a) $115.75
(b) $23.00 (b) $ 70.75
VIP Growth (a) $72.19 (a) $113.33
(b) $22.19 (b) $ 68.33
VIP III Growth & Income (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
VIP Equity-Income (a) $71.09 (a) $110.00
(b) $21.09 (b) $ 65.00
VIP II Contrafund (a) $72.69 (a) $114.84
(b) $22.69 (b) $ 69.84
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation (a) $72.59 (a) $114.54
(b) $22.59 (b) $ 69.54
AIM V.I. International Equity (a) $74.90 (a) $121.47
(b) $24.90 (b) $ 76.47
AIM V.I. Value (a) $72.59 (a) $114.54
(b) $22.59 (b) $ 69.54
MFS VARIABLE INSURANCE TRUST
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS Research (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS Growth with Income (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS High Income (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS World Governments (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS/Foreign & Colonial Emerging
Markets Equity (a) $80.29 (a) $137.54
(b) $30.29 (b) $ 92.54
</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. The Fee Table reflects
expenses of the Separate Account as well as the investment portfolios.
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. Premium taxes are not reflected. Premium taxes may apply depending on
the state where you live.
6. The assumed average contract size is $30,000.
7. 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 an 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 35
investment portfolios and, 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. 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. ANNUITY PAYMENTS (THE 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 359.71
accumulation units for the Quality Bond Portfolio.
4. INVESTMENT OPTIONS
The contract offers 35 investment portfolios which are listed 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 Investment Advisory Corporation (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 Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
investment portfolios are available under the contract:
J.P. MORGAN INVESTMENT MANAGEMENT INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
MISSISSIPPI VALLEY ADVISORS, INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Balanced Portfolio
Small Cap Equity Portfolio
Equity Income Portfolio
Growth & Income Equity Portfolio
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. IS THE SUB-ADVISER TO THE
FOLLOWING PORTFOLIOS:
VKAC 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 portfolio is available
under the contract:
Growth and Income Portfolio
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company (formerly General
American Investment Management Company). The following portfolio is available
under the contract:
Money Market Fund
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Variable Insurance Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III are each a mutual fund with multiple
portfolios managed by Fidelity Management & Research Company. The following
portfolios are available under the contract:
Variable Insurance Products Fund:
VIP Growth Portfolio
VIP Equity-Income Portfolio
Variable Insurance Products Fund II:
VIP II Contrafund Portfolio (seeks capital appreciation)
Variable Insurance Products Fund III:
VIP III Growth Opportunities Portfolio
VIP III Growth & Income Portfolio
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is a mutual fund with multiple portfolios. A
I M Advisors, Inc. is the investment adviser to each portfolio. The following
portfolios are available under the contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
MFS VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust is a mutual fund with multiple portfolios.
Massachusetts Financial Services Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS High Income Series
MFS World Governments Series
MFS/Foreign & Colonial Emerging Markets Equity Series
TRANSFERS
You can transfer money among the fixed account and the 35 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
anniversary 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,
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.
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
the 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 are disruptive to the operations of the
investment portfolios, and when Cova becomes 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 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 insufficient 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
it makes 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 pro rata 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. 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-sharing 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 circumstances 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 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.
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
charge and withdrawal charges.
Cova may, from time to time, include in its advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
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.
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 withdrawals) 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
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, reaches 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 reaches 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 on
or before you or your joint owner reaches 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 they are 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 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, reaches 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 reaches 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 Cova 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,
under certain circumstances, may be paid 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 withdrawals 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
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 (except for the
unaudited Financial Statements for the period ended September 30, 1997) 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> <C>
Period Year or Year or Year or Year or Year or Year or Year or
Ended Period Period Period Period Period Period Period
9/30/97 Ended Ended Ended Ended Ended Ended Ended
(unaudited) 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
----------- ----------- ---------- ---------- ---------- ---------- ---------- ----------
COVA SERIES TRUST
Managed by Van Kampen American
Capital Investment Advisory Corp.
Quality Income Sub-Account
Beginning of Period $15.54 $ 15.33 $ 13.17 $ 13.97 $ 12.75 $ 12.02 $ 10.62 $ 9.97
End of Period $16.29 15.54 15.33 13.17 13.97 12.75 12.02 10.62
Number of Accum. Units Outstanding 2,586,950 3,334,960 2,690,633 2,576,412 3,659,656 1,891,499 563,960 564,940
High Yield Sub-Account
Beginning of Period $21.42 $ 19.52 $ 16.98 $ 18.02 $ 14.99 $ 12.75 $ 10.06 $ 10.02
End of Period $23.07 21.42 19.52 16.98 18.02 14.99 12.75 10.06
Number of Accum. Units Outstanding 1,458,818 2,001,184 1,870,232 1,157,642 1,045,815 361,296 298,202 280,854
Money Market Sub-Account
Beginning of Period $11.88 $ 11.43 $ 10.90 $ 10.61 $ 10.46 $ 10.21 $ 10.00 *
End of Period $12.24 11.88 11.43 10.90 10.61 10.46 10.21
Number of Accum. Units Outstanding 4,255,070 2,584,926 2,987,132 6,963,421 617,575 385,448 527,571
VKAC Growth and Income Sub-Account
Beginning of Period $17.01 $ 14.61 $ 11.20 $ 11.92 $ 10.47 $ 10.00 * *
End of Period $21.07 17.01 14.61 11.20 11.92 10.47
Number of Accum. Units Outstanding 2,187,652 1,905,896 1,342,833 977,209 547,643 250,919
Stock Index Sub-Account
Beginning of Period $19.04 $ 15.77 $ 11.68 $ 11.87 $ 11.05 $ 10.55 $ 10.00 *
End of Period $24.34 19.04 15.77 11.68 11.87 11.05 10.55
Number of Accum. Units Outstanding 3,529,378 4,680,855 5,436,980 3,151,443 7,691,151 3,164,251 639,923
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $11.29 $ 10.10 * * * * *
End of Period $12.66 11.29
Number of Accum. Units Outstanding 3,058,369 659,663
Mid-Cap Value Sub-Account
Beginning of Period $10.00 * * * * * *
End of Period $10.44
Number of Accum. Units Outstanding 10,000
Large Cap Research Sub-Account
Beginning of Period $10.00 * * * * * *
End of Period $10.04
Number of Accum. Units Outstanding 100,000
Developing Growth Sub-Account
Beginning of Period $10.00 * * * * * *
End of Period $11.19
Number of Accum. Units Outstanding 10,000
Managed by J.P. Morgan Investment
Management Inc.
Select Equity Sub-Account
Beginning of Period $10.84 $ 10.08 * * * * *
End of Period $14.20 10.84
Number of Accum. Units Outstanding 5,494,928 2,044,523
Small Cap Stock Sub-Account
Beginning of Period $11.31 $ 10.51 * * * * *
End of Period $13.78 11.31
Number of Accum. Units Outstanding 3,179,176 1,237,405
International Equity Sub-Account
Beginning of Period $10.97 $ 10.21 * * * * *
End of Period $12.10 10.97
Number of Accum. Units Outstanding 4,390,462 1,306,892
Quality Bond Sub-Account
Beginning of Period $10.37 $ 9.90 * * * * *
End of Period $10.88 10.37
Number of Accum. Units Outstanding 1,017,806 508,830
Large Cap Stock Sub-Account
Beginning of Period $11.33 $ 10.00 * * * * *
End of Period $14.62 11.33
Number of Accum. Units Outstanding 865,130 1,389,606
Managed by Mississippi Valley Advisors, Inc.
Balanced Sub-Account
Beginning of Period $10.00 * * * * * *
End of Period $10.48
Number of Accum. Units Outstanding 20,827
Small Cap Equity Sub-Account
Beginning of Period $10.00 * * * * * *
End of Period $11.16
Number of Accum. Units Outstanding 15,141
Equity Income Sub-Account
Beginning of Period $10.00 * * * * * *
End of Period $10.87
Number of Accum. Units Outstanding 24,231
Growth & Income Equity Sub-Account
Beginning of Period $10.00 * * * * * *
End of Period $10.74
Number of Accum. Units Outstanding 55,548
LORD ABBETT SERIES FUND, INC.
Growth and Income Sub-Account
Beginning of Period $25.09 $ 21.31 $ 16.64 $ 16.42 $ 14.50 $ 12.73 $ 10.15 $ 10.06
End of Period $30.94 25.09 21.31 16.64 16.42 14.50 12.73 10.15
Number of Accum. Units Outstanding 14,473,804 11,732,301 8,947,108 6,875,139 4,994,582 2,560,999 1,426,577 1,041,342
GENERAL AMERICAN CAPITAL COMPANY
Money Market Fund
Beginning of Period $10.23 $ 10.00 * * * * *
End of Period $10.5 10.23
Number of Accum. Units Outstanding 154,036 34,964
<S> <C>
For the period
from 12/11/89
(Start of
Operations)
through
12/31/89
-------------
COVA SERIES TRUST
Managed by Van Kampen American
Capital Investment Advisory Corp.
Quality Income Sub-Account
Beginning of Period $ 10.00
End of Period 9.97
Number of Accum. Units Outstanding 253,695
High Yield Sub-Account
Beginning of Period $ 10.00
End of Period 10.02
Number of Accum. Units Outstanding 250,000
Money Market Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
VKAC Growth and Income Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
Stock Index Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
Managed by J.P. Morgan Investment
Management Inc.
Select Equity Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
Small Cap Stock Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
International Equity Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
Quality Bond Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
Large Cap Stock Sub-Account
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
LORD ABBETT SERIES FUND, INC.
Growth and Income Sub-Account
Beginning of Period $ 10.00
End of Period 10.06
Number of Accum. Units Outstanding 14,482
GENERAL AMERICAN CAPITAL COMPANY
Money Market Fund
Beginning of Period *
End of Period
Number of Accum. Units Outstanding
<FN>
* The Cova Series Trust Money Market Portfolio started regular investment
operations on July 1, 1991, the Cova Series Trust Stock Index Portfolio started
regular investment operations on November 1, 1991, and the Cova Series Trust
VKAC Growth and Income Portfolio started regular investment operations on May 1,
1992. The accumulation unit values shown above for the beginning of the period
for the Select Equity, Small Cap Stock, International Equity, Quality Bond,
Large Cap Stock Portfolios managed by J.P. Morgan Investment Management Inc.,
and the Bond Debenture Portfolio managed by Lord, Abbett & Co. reflect the date
these investment portfolios were offered for sale to the public (5/1/96). The
Money Market Fund managed by Conning Asset Management Company started regular
investment operations on June 3, 1996. The Mid-Cap Value, Large Cap Research and
Developing Growth Portfolios started regular investment operations on ________,
1997. The Balanced, Small Cap Equity, Equity Income and Growth & Income Equity
Portfolios managed by Mississippi Valley Advisors, Inc. commenced regular
investment operations on _________, 1997. The Lord Abbett Growth and Income
Portfolio has not commenced regular investment operations. The investment
portfolios managed by Fidelity Management & Research Company Inc., A I M
Advisors, Inc., and Massachusetts Financial Services Company have not yet
commenced regular investment operations.
</FN>
</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, LORD ABBETT SERIES FUND, INC. AND GENERAL AMERICAN CAPITAL
COMPANY 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 VKAC Growth and Income. J.P. Morgan Investment
Management Inc. is the sub-adviser for the following portfolios of Cova Series
Trust: Select Equity, Small Cap Stock, International Equity, Quality Bond and
Large Cap Stock. Lord, Abbett & Co. is the sub-adviser to the Bond Debenture
Portfolio of Cova Series Trust. Lord, Abbett & Co. is the investment adviser for
Lord Abbett Series Fund, Inc. which currently has one operating portfolio:
Growth and Income. Conning Asset Management Company is the adviser for the Money
Market Fund of General American Capital Company. All of these portfolios began
operations before May 1, 1997. 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 reflect the insurance
charges as well as the fees and expenses of the investment portfolio. Column C
presents performance figures for the accumulation units which reflect the
insurance charges, the contract maintenance charge, the fees and expenses of the
investment portfolio, and assume that you make a withdrawal at the end of the
period and therefore the withdrawal charge is reflected. For the Cova Series
Trust Portfolios performance is shown from the dates shares were first offered
to the public as follows: 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; May 1, 1992 for the VKAC Growth and Income
Portfolio; May 1, 1996 for the Select Equity, Small Cap Stock, International
Equity, Quality Bond, Large Cap Stock and Bond Debenture Portfolios and July 1,
1997 for the Balanced, Small Cap Equity, Equity Income and Growth & Income
Equity Portfolios. For the Lord Abbett Series Fund, Inc. Growth and Income
Portfolio operations commenced on December 11, 1989 and June 3, 1996 for the
Money Market Fund of General American Capital Company.
PART 1 COVA SERIES TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Column A Column B Column C
Portfolio Performance Accumulation Unit Performance
Portfolio 1 yr 5 yrs since 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------- ------------ ---------- -------- ------------- ---------- ------------ ------ -------
inception inception inception
---------- ---------- ----------
VKAC Growth and Income 36.27% 17.78% 16.24% 33.87% 16.38% 14.84% 28.58% 15.56% 14.05%
Money Market 5.51% 4.69% 4.69% 4.11% 3.29% 3.29% - 1.05% 2.18% 2.33%
Quality Income 9.05% 6.35% 7.85% 7.65% 4.95% 6.45% 2.43% 3.81% 5.68%
High Yield 12.68% 10.45% 12.70% 11.28% 9.05% 11.30% 5.96% 7.94% 10.62%
Stock Index 39.16% 19.37% 17.62% 37.76% 17.97% 16.22% 32.42% 17.14% 15.46%
Select Equity 42.02% -- 28.68% 40.62% -- 27.28% 35.42% -- 24.16%
Small Cap Stock 31.34% -- 22.38% 29.94% -- 20.98% 24.75% -- 17.80%
International Equity 18.21% -- 14.08% 16.81% -- 12.68% 11.64% -- 9.43%
Quality Bond 9.02% -- 8.28% 7.62% -- 6.88% 2.47% -- 3.58%
Large Cap Stock 41.52% -- 32.07% 40.12% -- 30.67% 34.92% -- 27.57%
Bond Debenture 18.18% -- 18.65% 16.78% -- 17.25% 11.60% -- 14.04%
Balanced -- -- 22.03% -- -- 20.63% -- -- .67%
Small Cap Equity -- -- 56.50% -- -- 55.10% -- -- 30.85%
Equity Income -- -- 41.16% -- -- 39.76% -- -- 17.39%
Growth & Income Equity -- -- 34.61% -- -- 33.21% -- -- 11.66%
</TABLE>
PART 1 LORD ABBETT SERIES FUND, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Column A Column B Column C
Portfolio Performance Accumulation Unit Performance
Portfolio 1 yr 5 yrs since 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------- ------------ ---------- ------- ------------- ---------- ------------ ------ ---------
inception inception inception
---------- ---------- ---------
Growth and Income 33.52% 19.30% 16.96% 32.12% 17.90% 15.56% 26.69% 16.97% 14.93%
</TABLE>
PART 1 GENERAL AMERICAN CAPITAL COMPANY
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Column A Column B Column C
Portfolio Performance Accumulation Unit Performance
Portfolio 1 yr since inception 1 yr since inception 1 yr since inception
- ----------------- ------- --------------- ------- ---------------- ------- ----------------
Money Market 5.56% 5.54% 4.16% 4.14% (0.98)% 0.57%
</TABLE>
PART 2 - GENERAL AMERICAN CAPITAL COMPANY, VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II AND VARIABLE INSURANCE PRODUCTS FUND III,
AIM VARIABLE INSURANCE FUNDS, INC. AND MFS VARIABLE INSURANCE TRUST ("Existing
Funds")
Shares of the General American Capital Company Money Market Fund were first
offered under the Contract on June 3, 1996. Shares of the Portfolios of Variable
Insurance Products Fund, Variable Insurance Products Fund II and Variable
Insurance Products Fund III, AIM Variable Insurance Funds, Inc. and MFS Variable
Insurance Trust were first offered under the contract as of the date of this
prospectus. However, the Existing Funds have been in existence for some time and
therefore have an investment performance history. In order to show how
investment performance of the Existing Funds affect accumulation unit values, we
have developed performance information.
The chart below shows the investment performance of the Existing Funds and the
accumulation units performance calculated by assuming that accumulation units
were invested in the Portfolio of the Existing Fund for the same periods.
The performance figures in Column A for the Existing Funds reflect the fees and
expenses paid by the Portfolio. Column B presents performance figures for the
accumulation units which reflect the insurance charges as well as the fees and
expenses of the Portfolio. Column C presents 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 2 GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio Column A Column B Column C
Inception Fund Performance Accumulation Unit Performance
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Money Market
</TABLE>
PART 2 VARIABLE INSURANCE PRODUCTS FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio Column A Column B Column C
Inception Fund Performance Accumulation Unit Performance
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- --------- ------------- ------- --------- --------
VIP Growth 10/9/86 27.05% 21.38% 14.70% 25.65% 19.98% 13.30% 20.55% 15.38% 13.20%
VIP Equity-Income 10/9/86 33.92% 21.48% 14.04% 32.52% 20.08% 12.64% 27.42% 15.48% 12.54%
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND II
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Column A Column B Column C
Portfolio Portfolio Fund Performance Accumulation Performance
inception since since Unit since
date 1 yr inception 1 yr inception 1 yr inception
- ---------------- --------- ------------- ------------ ------- ------------- ----------- ------------
VIP II Contrafund 1/3/95 36.56% 31.71% 35.16% 30.31% 30.06% 25.71%
</TABLE>
PART 2 VARIABLE INSURANCE PRODUCTS FUND III
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Column A Column B Column C
Portfolio Portfolio Fund Performance Accumulation Performance
inception since since Unit since
date 1 yr inception 1 yr inception 1 yr inception
- ---------------- --------- ------------- ------------ ------- ------------- ----------- ------------
VIP III Growth
Opportunities 1/3/95 36.01% 27.62% 34.61% 26.22% 29.51% 21.62%
VIP III Growth
& Income 12/31/96 -- 32.22% -- 30.82% -- 26.22%
PART 2 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Column A Column B Column C
Portfolio Portfolio Fund Performance Accumulation Performance
inception since since Unit since
date 1 yr inception 1 yr inception 1 yr inception
- ---------------- --------- ------------- ------------ ------- ------------- --------- ------------
AIM V.I. Capital
Appreciation 5/5/93 25.01% 22.19% 23.61% 20.79% 18.51% 16.19%
AIM V.I.
International
Equity 5/5/93 22.53% 15.73% 21.13% 14.33% 16.03% 9.73%
AIM V.I. Value 5/5/93 34.08% 21.43% 32.68% 20.03% 27.58% 15.43%
</TABLE>
PART 2 MFS VARIABLE INSURANCE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Column A Column B Column C
Portfolio Portfolio Fund Performance Accumulation Performance
inception since since Unit since
date 1 yr inception 1 yr inception 1 yr inception
- ---------------- --------- ------------- ------------ ------- ------------- --------- ------------
MFS Emerging Growth 7/24/95 23.78% 28.49% 22.47% 27.09% 17.37% 22.49%
MFS Research 7/26/95 28.99% 26.18% 27.59% 24.78% 22.49% 20.18%
MFS Growth With Income 10/9/95 33.88% 29.23% 32.48% 27.83% 27.38% 23.23%
MFS High Income 7/26/95 14.74% 13.24% 13.34% 11.84% 8.24% 7.24%
MFS World Governments 6/14/94 2.06% 5.58% .66% 4.18% (4.44)% (0.42)%
</TABLE>
- ---------------------------
- --------------------------- STAMP
- ---------------------------
Cova Financial Services Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
Please send me, at no charge, the Statement of Additional Information
dated December ____, 1997, for The Annuity Contract issued by Cova.
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED DECEMBER____, 1997, 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 DECEMBER ____, 1997.
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 - Existing Funds
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. 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 $275 billion
of life insurance in force and approximately $19 billion in assets. It provides
life and health insurance, retirement plans, and related financial services to
individuals and groups.
On April 1, 1996, the Company contributed initial capital to the Large Cap
Stock and Quality Bond Sub-Accounts of the Separate Account. As of September 30,
1997, the capital contributed to the Large Cap Stock Sub-Account represented
approximately __% of the total assets of such Sub-Account and the capital
contributed to the Quality Bond Sub-Account represented approximately ___ of the
total assets of such Sub-Account. The Company currently intends to remove these
assets from the Sub-Accounts on a pro rata basis in proportion to money invested
in the Sub-Accounts by Contract Owners.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and 1995
and the related consolidated statements of income, shareholder's equity and cash
flows for the year ended December 31, 1996 and the periods from June 1, 1995
through December 31, 1995 and January 1, 1995 through May 31, 1995 and for the
year ended December 31, 1994 and the combined statement of assets and
liabilities of the Separate Account as of December 31, 1996 and the related
statement of operations for the year then ended and the statements of changes in
contract owners' equity for the years ended December 31, 1996 and 1995, 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 any reduction or elimination of the Withdrawal Charge be permitted
where the reduction 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 expenses 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.
Performance Information - Existing Funds
The Money Market Fund of General American Capital Company was first offered
under the Contract on June 3, 1996. Shares of the Portfolios of AIM Variable
Insurance Funds, Inc., Variable Insurance Products Fund, Variable Insurance
Products Fund II, Variable Insurance Products Fund III and MFS Variable
Insurance Trust were first offered under the Contract as of the date of the
prospectus. However, certain Portfolios of General American Capital Company, AIM
Variable Insurance Funds, Inc., Variable Insurance Products Fund, Variable
Insurance Products Fund II, Variable Insurance Products Fund III and MFS
Variable Insurance Trust ("Existing Funds") have been in existence for some time
and therefore have an investment performance history. In order to demonstrate
how investment experience of the Existing Funds affects Accumulation Unit
values, performance information was developed. The information is based upon the
historical experience of the Existing Funds and is for the periods shown. The
prospectus contains a chart of performance information.
Future performance of the Existing Funds 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 Existing Funds is calculated for a specified period of
time by assuming an initial Purchase Payment of $1,000 allocated to the
Portfolio. There are performance figures for the Accumulation Units which
reflect the insurance charges as well as the Portfolio expenses. There are also
performance figures for the Accumulation Units which reflect the insurance
charges, the contract maintenance charge, the Portfolio expenses, and assume
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 performance may also show figures when no
withdrawal is assumed.
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 HEREIN 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 herein 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
herein. 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; (f) distributions
made to an alternate payee pursuant to a qualified domestic relations order; (g)
distributions from an Individual Retirement Annuity for the purchase of medical
insurance (as described in Section 213(d)(1)(D) of the Code) for the Owner or
Annuitant (as applicable) and his or her spouse and dependents if the Owner or
Annuitant (as applicable) has received unemployment compensation for at least 12
weeks (this exception will no longer apply after the Owner or Annuitant (as
applicable) has been re-employed for at least 60 days); (h) distributions from
an Individual Retirement Annuity made to the Owner or Annuitant (as applicable)
to the extent such distributions do not exceed the qualified higher education
expenses (as defined in Section 72(t)(7) of the Code) of the Owner or Annuitant
(as applicable) for the taxable; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8)of
the Code.) The exceptions stated in (d) 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 begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. 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.
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:
(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.
The total dollar amount of each Variable Annuity Payment is the sum of all
investment portfolios' 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 investment portfolio 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:
(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.
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.
COVA VARIABLE ANNUITY ACCOUNT ONE
Financial Statements
(UNAUDITED)
September 30, 1997
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997 (Unaudited)
(In thousands of dollars)
ASSETS
INVESTMENTS:
<TABLE>
<CAPTION>
<S> <C>
COVA SERIES TRUST:
Quality Income Portfolio - 3,933,677 shares at a net asset value of $10.73 per share (cost $41,496) $ 42,207
High Yield Portfolio - 3,028,141 shares at a net asset value of $11.13 per share (cost $32,096 ) 33,697
Growth and Income Portfolio - 2,686,458 shares at a net asset value of $17.24 per share (cost $34,476) 46,325
Money Market Portfolio - 52,103,875 shares at a net asset value of $1.00 per share (cost $52,104) 52,104
Stock Index Portfolio - 4,172,727 shares at a net asset value of $20.60 per share (cost $58,709 ) 85,942
Bond Debenture Portfolio - 3,185,066 shares at a net asset value of $12.15 per share (cost $36,502) 38,707
Quality Bond Portfolio - 1,067,007 shares at a net asset value of $10.38 per share (cost $10,843) 11,071
Small Cap Stock Portfolio - 3,278,475 shares at a net asset value of $13.36 per share (cost $36,370) 43,794
Large Cap Stock Portfolio - 884,997 shares at a net asset value of $14.34 per share (cost $8,934) 12,694
Select Equity Portfolio - 5,534,428 shares at a net asset value of $14.11 per share (cost $63,844) 78,075
International Equity Portfolio - 4,388,348 shares at a net asset value of $12.11 per share (cost $48,963) 53,130
Balanced Portfolio - 20,767 shares at a net asset value of $10.51 per share (cost $213) 218
Growth & Income Equity Portfolio - 55,385 shares at a net asset value of $10.77 per share (cost $580) 597
Small Cap Equity Portfolio - 15,097 shares at a net asset value of $11.19 per share (cost $161) 169
Equity Income Portfolio - 24,159 shares at a net asset value of $10.90 per share (cost $254) 263
Mid-Cap Value Portfolio - 10,000 shares at a net asset value of $10.44 per share (cost $100 ) 104
Large Cap Research Portfolio - 10,000 shares at a net asset value of $10.04 per share (cost $100) 100
Developing Growth Portfolio - 10,000 shares at a net asset value of $11.19 per share (cost $100) 112
LORD ABBETT SERIES FUND, INC:
Growth and Income Portfolio - 21,136,644 shares at a net asset value of $21.22 per share (cost $322,534) 448,429
GENERAL AMERICAN CAPITAL COMPANY:
Money Market Portfolio - 90,467 shares at a net asset value of $17.97 per share (cost $1,590 ) 1,626
Total Assets $949,364
</TABLE>
See accompanying notes to unaudited financial statements
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES (Continued)
September 30, 1997 (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES AND CONTRACT OWNERS EQUITY
Contract Owners' Equity:
Accumulation Phase:
Trust Quality Income - 2,586,950 accumulation units at $16.290615 per unit $ 42,143
Trust High Yield - 1,458,818 accumulation units at $23.069578 per unit 33,654
Trust Growth and Income - 2,187,652 accumulation units at $21.166476 per unit 46,304
Trust Money Market - 4,255,070 accumulation units at $12.244078 per unit 52,100
Trust Stock Index 3,529,378 accumulation units at $24.342237 per unit 85,913
Trust Bond Debenture - 3,058,369 accumulation units at $12.656085 per unit 38,707
Trust Quality Bond - 1,017,806 accumulation units at $10.877551 per unit 11,071
Trust Small Cap Stock - 3,179,176 accumulation units at $13.775226 per unit 43,794
Trust Large Cap Stock - 865,130 accumulation units at $14.621557 per unit 12,649
Trust Select Equity - 5,494,928 accumulation units at $14.200213 per unit 78,029
Trust International Equity - 4,390,462 accumulation units at $12.101316 per unit 53,130
Trust Balanced - 20,827 accumulation units at $10.478753 per unit 218
Trust Growth and Income Equity - 55,548 accumulation units at $10.741146 per unit 597
Trust Small Cap Equity - 15,141 accumulation units at $11.156281 per unit 169
Trust Equity Income - 24,231 accumulation units at $10.870351 per unit 263
Trust Mid Cap - 10,000 accumulation units at $10.436222 per unit 104
Trust Large Cap Research - 100,000 accumulation units at $10.041286 per unit 100
Trust Developing Growth - 10,000 accumulation units at $11.192242 per unit 112
Fund Growth and Income - 14,473,804 accumulation units at $30.940092 per unit 447,820
GACC Money Market - 154,036 accumulation units at $10.553104 per unit 1,626
ANNUITIZATION PHASE:
Trust Quality Income - 4,955 annuity units at 12.934418 per unit 64
Trust High Yield - 2,351 annuity units at 18.316777 per unit 43
Trust Growth and Income - 1,142 annuity units at 18.032832 per unit 21
Trust Money Market - 440 annuity units at 10.178462 per unit 4
Trust Stock Index - 1,429 annuity units at 20.438245 per unit 29
Trust Large Cap Stock - 3,182 annuity units at 13.984438 per unit 45
Trust Select Equity - 3,402 annuity units at 13.581454 per unit 46
Fund Growth and Income - 24,773 annuity units at 24.565806 per unit 609
Total Contract Owners' Equity 949,364
Total Liabilities and Contract Owners' Equity $949,364
</TABLE>
See accompanying notes to unaudited financial statements
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997 (Unaudited)
(In thousands of dollars)
COVA
SERIES TRUST
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
QUALITY HIGH GROWTH & MONEY STOCK BOND QUALITY SMALL CAP LARGE CAP
INCOME YIELD INCOME MARKET INDEX DEBENTURE BOND STOCK EQUITY
--------- ------ --------- ------- -------- ---------- -------- ----------- -----------
STOCK
-----------
INVESTMENT INCOME:
- -------------------------------
INCOME:
- -------------------------------
Dividends and Capital Gains $ 2,647 $1,652 $ 778 $ 1,994 $ 793 $ 385 $ 221 $ 165 $ 139
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
Total Income 2,647 1,652 778 1,994 793 385 221 165 139
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
EXPENSES:
- -------------------------------
Mortality and Expense
- -------------------------------
Risk Fee 497 378 361 456 710 162 67 235 135
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
Administrative Fee 60 45 43 55 85 19 8 28 16
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
Total Expenses 557 423 404 511 795 181 75 263 151
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
Net Investment Income 2,090 1,229 374 1,483 (2) 204 146 (98) (12)
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
NET REALIZED GAIN
- -------------------------------
ON INVESTMENTS 300 726 475 -- 11,332 25 32 14 1,517
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
NET CHANGE IN UNREALIZED
- -------------------------------
GAIN/(LOSS) ON INVESTMENTS (224) 1,111 7,648 -- 6,962 1,934 198 6,890 2,229
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
NET REALIZED AND UNREALIZED
- -------------------------------
GAIN/(LOSS) ON INVESTMENTS 76 1,837 8,123 -- 18,294 1,959 230 6,904 3,746
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
NET INCREASE INCONTRACT
- -------------------------------
OWNERS' EQUITYRESULTING
- -------------------------------
FROM OPERATIONS $ 2,166 $3,066 $ 8,497 $ 1,483 $18,292 $ 2,163 $ 376 $ 6,806 $ 3,734
- ------------------------------- --------- ------ --------- ------- -------- ---------- -------- ----------- -----------
<S> <C> <C>
SELECT INTL
EQUITY EQUITY
-------- -------
INVESTMENT INCOME:
- -------------------------------
INCOME:
- -------------------------------
Dividends and Capital Gains $ 436 $ 346
- ------------------------------- -------- -------
Total Income 436 346
- ------------------------------- -------- -------
EXPENSES:
- -------------------------------
Mortality and Expense
- -------------------------------
Risk Fee 433 293
- ------------------------------- -------- -------
Administrative Fee 51,917 35
- ------------------------------- -------- -------
Total Expenses 485 328
- ------------------------------- -------- -------
Net Investment Income (49) 18
- ------------------------------- -------- -------
NET REALIZED GAIN
- -------------------------------
ON INVESTMENTS 23 11
- ------------------------------- -------- -------
NET CHANGE IN UNREALIZED
- -------------------------------
GAIN/(LOSS) ON INVESTMENTS 13,021 3,371
- ------------------------------- -------- -------
NET REALIZED AND UNREALIZED
- -------------------------------
GAIN/(LOSS) ON INVESTMENTS 13,044 3,382
- ------------------------------- -------- -------
NET INCREASE INCONTRACT
- -------------------------------
OWNERS' EQUITYRESULTING
- -------------------------------
FROM OPERATIONS $12,995 $ 3,400
- ------------------------------- -------- -------
</TABLE>
See accompanying notes to unaudited financial statements
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997 (Unaudited) (Continued)
(In thousands of dollars)
COVA
LORD ABBETT
SERIES TRUST
SERIES FUND, INC. GACC
__________________________________________________ _____________ ______
<TABLE>
<CAPTION>
Growth & Income Growth &
----------------- ----------
Small Cap Equity Mid-Cap Large Cap Developing
---------- ------- -------- --------- -----------
Balanced Equity Equity Income Value Research Growth INCOME
--------- ----------------- ---------- ------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends and Capital Gains -- -- -- -- -- -- --
Distributions $ 0
Total Income -- -- -- -- -- -- -- 0
EXPENSES:
Mortality and Expense
Risk Fee -- 1 -- -- -- -- -- 3,387
Administrative Fee -- -- -- -- -- -- -- 406
Total Expenses -- 1 -- -- -- -- -- 3,793
Net Investment Income -- (1) -- -- -- -- -- (3,793)
NET REALIZED GAIN/(LOSS)
ON INVESTMENTS -- -- -- -- -- -- -- 572
NET CHANGE IN UNREALIZED
GAIN/(LOSS) ON INVESTMENTS 5 17 8 10 4 -- 12 79,407
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS 5 17 8 10 4 -- 12 79,979
NET INCREASE IN CONTRACT
OWNERS' EQUITY RESULTING
FROM OPERATIONS $ 5 $ 16 $ 8 $ 10 $ 4 -- $ 12 $ 76,186
Global Money
-------- --------
EQUITY MARKET TOTAL
-------- -------- --------
<S> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends and Capital Gains
Distributions $ 0 $ 0 $ 9,556
Total Income 0 0 9,556
EXPENSES:
Mortality and Expense
Risk Fee 8 14 7,137
Administrative Fee 1 2 855
Total Expenses 9 16 7,992
Net Investment Income (9) (16) 1,564
NET REALIZED GAIN/(LOSS)
ON INVESTMENTS (36) 32 15,023
NET CHANGE IN UNREALIZED
GAIN/(LOSS) ON INVESTMENTS (1) 30 122,632
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS (37) 62 137,655
NET INCREASE IN CONTRACT
OWNERS' EQUITY RESULTING
FROM OPERATIONS ($46) $ 46 $139,219
</TABLE>
See accompanying notes to unaudited financial statements
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS EQUITY
For the Nine Months Ended September 30, 1997 (Unaudited)
(In thousands of dollars)
COVA
SERIES TRUST
_____________________________________________________________________________
_________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quality High Growth & Money Stock Bond Quality Small Cap
INCOME YIELD INCOME MARKET INDEX DEBENTURE BOND STOCK
--------- --------- ---------- --------- --------- ----------- --------- -----------
FROM OPERATIONS:
- ----------------------------
Net Investment Income $ 2,090 $ 1,229 $ 374 $ 1,483 ($2) $ 204 $ 146 ($98)
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Net Realized Gain
- ----------------------------
on Investments 300 726 475 -- 11,332 25 32 14
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Net Unrealized Gain/(Loss)
- ----------------------------
on Investments (224) 1,111 7,648 -- 6,962 1,934 198 6,890
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Net Increase in Contract
- ----------------------------
Owners' Equity Resulting
- ----------------------------
from Operations
- ----------------------------
2,166 3,066 8,497 1,483 18,292 2,163 376 6,806
--------- --------- ---------- --------- --------- ----------- --------- -----------
From Account Unit
- ----------------------------
Transactions:
- ----------------------------
Contributions by Cova -- -- -- -- -- -- -- --
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Redemptions by Cova -- -- -- -- -- -- (2,144) --
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Proceeds from Units of
- ----------------------------
the Account Sold 398 647 1,955 40,202 2,075 5,814 1,742 6,435
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Payments for Units of the
- ----------------------------
Account Redeemed (5,916) (1,874) (1,379) (5,412) (8,323) (491) (257) (584)
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Account Transfers (6,267) (11,013) 4,836 (14,877) (15,211) 23,770 6,078 17,144
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Net Increase/(Decrease) in
- ----------------------------
Contract Owners' Equity
- ----------------------------
From Account Unit
- ----------------------------
Transactions (11,785) (12,240) 5,412 19,913 (21,459) 29,093 5,419 22,995
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Net Increase/(Decrease) in
- ----------------------------
Contract Owners' Equity (9,619) (9,174) 13,909 21,396 (3,167) 31,256 5,795 29,801
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
Contract Owners' Equity:
- ----------------------------
Beginning of Period 51,826 42,871 32,416 30,708 89,109 7,451 5,276 13,993
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
End of Period $ 42,207 $ 33,697 $ 46,325 $ 52,104 $ 85,942 $ 38,707 $ 11,071 $ 43,794
- ---------------------------- --------- --------- ---------- --------- --------- ----------- --------- -----------
<S> <C> <C> <C>
Large Cap Select Intl
STOCK EQUITY EQUITY
----------- -------- --------
FROM OPERATIONS:
- ----------------------------
Net Investment Income ($12) ($49) $ 18
- ---------------------------- ----------- -------- --------
Net Realized Gain
- ----------------------------
on Investments 1,517 23 11
- ---------------------------- ----------- -------- --------
Net Unrealized Gain/(Loss)
- ----------------------------
on Investments 2,229 13,021 3,371
- ---------------------------- ----------- -------- --------
Net Increase in Contract
- ----------------------------
Owners' Equity Resulting
- ----------------------------
from Operations
- ----------------------------
3,734 12,995 3,400
----------- -------- --------
From Account Unit
- ----------------------------
Transactions:
- ----------------------------
Contributions by Cova -- -- --
- ---------------------------- ----------- -------- --------
Redemptions by Cova (14,430) -- --
- ---------------------------- ----------- -------- --------
Proceeds from Units of
- ----------------------------
the Account Sold 3,444 14,115 8,828
- ---------------------------- ----------- -------- --------
Payments for Units of the
- ----------------------------
Account Redeemed (293) (847) (734)
- ---------------------------- ----------- -------- --------
Account Transfers 4,488 29,653 27,303
- ---------------------------- ----------- -------- --------
Net Increase/(Decrease) in
- ----------------------------
Contract Owners' Equity
- ----------------------------
From Account Unit
- ----------------------------
Transactions (6,791) 42,921 35,397
- ---------------------------- ----------- -------- --------
Net Increase/(Decrease) in
- ----------------------------
Contract Owners' Equity (3,057) 55,916 38,797
- ---------------------------- ----------- -------- --------
Contract Owners' Equity:
- ----------------------------
Beginning of Period 15,751 22,159 14,333
- ---------------------------- ----------- -------- --------
End of Period $ 12,694 $78,075 $53,130
- ---------------------------- ----------- -------- --------
</TABLE>
See accompanying notes to unaudited financial statements
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS EQUITY
For the Nine Months Ended September 30, 1997 (Unaudited) (Continued)
(In thousands of dollars)
COVA
LORD ABBETT
SERIES TRUST
SERIES FUND, INC. GACC
____________________________________________________________________
________________ ________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth & Income Small Cap Large Cap Growth &
----------------- ----------- ---------- ----------
Equity Mid-Cap Developing
-------- -------- -----------
Balanced Equity Equity Income Value Research Growth Income
---------- ----------------- ----------- -------- -------- ---------- ----------- ----------
FROM OPERATIONS:
Net Investment Income -- ($1) -- -- -- -- -- (3,793)
Net Realized Gain/(Loss)
on Investments -- -- -- -- -- -- -- 572
Net Unrealized Gain/(Loss)
on Investments 5 17 8 10 4 -- 12 79,407
Net Increase in Contract
Owners' Equity Resulting
from Operations 5 16 8 10 4 -- 12 76,186
From Account Unit
Transactions:
Contributions by Cova 1 1 1 1 100 100 100 --
Redemptions by Cova (1) (1) (1) (1) -- -- -- --
Proceeds from Units of
the Account Sold 78 291 52 91 -- -- -- 32,390
Payments for Units of the
Account Redeemed (1) (1) -- (2) -- -- -- (15,417)
Account Transfers 136 291 109 164 -- -- -- 60,912
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit
Transactions 212 580 160 252 100 100 100 77,885
Net Increase/(Decrease) in
Contract Owners' Equity 218 597 169 263 104 100 112 154,071
Contract Owners' Equity:
Beginning of Period 0 0 0 0 0 0 0 294,358
End of Period $ 218 $ 597 $ 169 $ 263 $ 104 $ 100 $ 112 $ 448,429
<S> <C> <C> <C>
Global Money
-------- --------
Equity Market Total
-------- -------- ---------
FROM OPERATIONS:
Net Investment Income (9) (16) 1,564
Net Realized Gain/(Loss)
on Investments (36) 32 15,023
Net Unrealized Gain/(Loss)
on Investments (1) 30 122,632
Net Increase in Contract
Owners' Equity Resulting
from Operations (46) 46 139,219
From Account Unit
Transactions:
Contributions by Cova -- -- 304
Redemptions by Cova -- -- (16,578)
Proceeds from Units of
the Account Sold 5 1,531 120,093
Payments for Units of the
Account Redeemed (114) (51) (41,696)
Account Transfers (2,228) (258) 125,030
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit
Transactions (2,337) 1,222 187,153
Net Increase/(Decrease) in
Contract Owners' Equity (2,383) 1,268 326,372
Contract Owners' Equity:
Beginning of Period 2,383 358 622,992
End of Period $ 0 $ 1,626 $949,364
</TABLE>
See accompanying notes to unaudited financial statements
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS EQUITY
For the Year Ended December 31, 1996
(In thousands of dollars)
COVA LORD ABBETT SERIES TRUST
SERIES FUND, INC. GACC
<TABLE>
<CAPTION>
QUALITY HIGH GROWTH & MONEY STOCK BOND QUALITY SMALL LARGE
Income Yield Income Market Index Debenture Bond Cap Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income $ 1,465 $ 2,924 $ 1,322 $ 1,284 $ 3,048 $ 200 $ 143 $ 509 $ 310
Net Realized Gain/(Loss)
on Investments 44 (169) 164 -- 3,892 13 44 47 85
Net Unrealized Gain/(Loss)
on Investments (534) 952 2,566 -- 9,295 271 30 533 1,531
Net Increase in Contract
Owners' Equity Resulting
from Operations 975 3,707 4,052 1,284 16,235 484 217 1,089 1,926
From Account Unit
Transactions:
Contributions by Cova -- -- -- -- -- 500 5,000 5,000 15,000
Redemptions by Cova -- -- -- -- -- (508) (3,000) (5,135) (3,846)
Proceeds from Units of
the Account Sold 1,603 1,989 2,777 43,943 3,731 3,795 995 6,112 800
Payments for Units of the
Account Redeemed (4,251) (2,299) (866) (3,044) (4,891) (164) (19) (71) --
Account Transfers 12,246 2,962 6,836 45,603 (11,728) 3,344 2,083 6,998 1,871
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit
Transactions 9,598 2,652 8,747 (4,704) (12,888) 6,967 5,059 12,904 13,825
Net Increase/(Decrease) in
Contract Owners' Equity 10,573 6,359 12,799 (3,420) 3,347 7,451 5,276 13,993 15,751
Contract Owners' Equity:
Beginning of Period 41,253 36,512 19,617 34,128 85,762 -- -- -- --
End of Period $ 51,826 $42,871 $ 32,416 $30,708 $ 89,109 $ 7,451 $ 5,276 $ 13,993 $15,751
SELECT INTL GROWTH & GLOBAL Money
Cap Stock Equity Equity INCOME EQUITY Market TOTAL
--------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income $ 228 $ 25 $ 15,839 $ 262 ($1) $ 27,558
Net Realized Gain/(Loss)
on Investments (17) 72 532 43 -- 4,750
Net Unrealized Gain/(Loss)
on Investments 1,210 796 24,020 (151) 6 40,525
Net Increase in Contract
Owners' Equity Resulting
from Operations 1,421 893 40,391 154 5 72,833
From Account Unit
Transactions:
Contributions by Cova 5,000 5,000 -- -- -- 35,500
Redemptions by Cova (4,922) (5,128) -- -- -- (22,539)
Proceeds from Units of
the Account Sold 10,306 5,710 31,434 231 88 113,514
Payments for Units of the
Account Redeemed (115) (60) (13,615) (328) -- (29,723)
Account Transfers 10,469 7,918 45,518 (174) 265 43,005
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit
Transactions 20,738 13,440 63,337 (271) 353 139,757
Net Increase/(Decrease) in
Contract Owners' Equity 22,159 14,333 103,728 (117) 358 212,590
Contract Owners' Equity:
Beginning of Period -- -- 190,630 2,500 -- 410,402
End of Period $ 22,159 $14,333 $ 294,358 $ 2,383 $ 358 $622,992
</TABLE>
See accompanying notes to unaudited financial statements
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO UNAUDITED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1997
1. ORGANIZATION:
Cova 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"). 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 the Cova Series Trust ("Trust"), the Lord Abbett
Series Fund, Inc. ("Fund") or General American Capital Company (GACC). The
Trust consists of eighteen portfolios of which five portfolios are managed by
Van Kampen American Capital Investment Advisory Corp., five are managed by
J.P. Morgan Investment Management, Inc., four are managed by Mississippi
Valley Advisors, Inc. and four portfolios are managed by Lord, Abbett & Co.
The Trust portfolios available for investment are the Quality Income, High
Yield, Growth and Income, Money Market, Stock Index, Select Equity, Large Cap
Stock, Small Cap Stock, International Equity, Quality Bond, Bond Debenture,
Balanced, Small Cap Equity, Equity Income, Growth & Income Equity, Mid-Cap
Value, Large Cap Research and Developing Growth Portfolios. The Fund has one
portfolio available for investment: the Growth and Income Portfolio. GACC
has the Money Market Portfolio available for investment. Not all portfolios of
the Trust, Fund and GACC are available for investment depending upon the
nature and specific terms of the different contracts currently being offered
for sale. The Trust, Fund and GACC are all diversified, open-end, management
investment companies which are intended to meet differing investment
objectives.
In order to satisfy diversification requirements and provide for optimum
policyholder returns, Cova has made periodic contributions to the Trust and
Fund to provide for the initial purchases of investments. In return, Cova has
been credited with accumulation units of the Separate Account. As additional
funds are received through policyholder deposits, Cova 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
accumulation units. Cova contributed approximately $35.5 million and $0.3
million in 1996 and 1997, respectively, to the separate account of which,
after subsequent redemptions, net of realized and unrealized gains and losses
on investments, approximately $1.3 million remains as of September 30, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES:
A. INVESTMENT VALUATION
Investments in shares of the Trust, Fund and GACC are carried in the statement
of assets and liabilities at the underlying net asset value of the Trust, Fund
and GACC. The net asset value of the Trust, Fund and GACC has been determined
on the market value basis and is valued daily by the Trust, Fund and GACC
investment managers. Realized gains and losses are calculated by the average
cost method.
B. REINVESTMENT OF DIVIDENDS
With the exception of GACC, 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.
GACC follows the Federal income tax practice known as consent dividending,
whereby substantially all of its net investment income and net realized
capital gains are deemed to be passed through to the Separate Account. As a
result, GACC does not distribute any dividends or capital gains. During
December of each year, accumulated investment income and capital gains of the
underlying GACC fund are allocated to the Separate Account by increasing the
cost basis and recognizing a capital gain in the Separate Account.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO UNAUDITED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1997
C. FEDERAL INCOME TAXES
Operations of the Separate Account form a part of Cova, 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
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 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. GENERAL:
The accompanying unaudited financial statements include all adjustments,
consisting of normal recurring accruals, that management considers necessary
for fair presentation of the Separate Accounts financial position and results
of operations as of and for the interim periods presented. Certain footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, although the Separate Account believes the disclosures in
these financial statements are adequate to present fairly the information
contained herein. The results of operations for the nine months ended
September 30, 1997, are not necessarily indicative of the results to be
expected for the full year.
COVA VARIABLE ANNUITY ACCOUNT ONE
Financial Statements
December 31, 1996
(With Independent Auditors' Report Thereon)
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(In thousands of dollars)
ASSETS
INVESTMENTS:
<TABLE>
<CAPTION>
<S> <C>
COVA SERIES TRUST:
Quality Income Portfolio - 4,773,562 shares at a net asset value of $10.69 per share (cost $50,095) $ 51,030
High Yield Portfolio - 3,864,501 shares at a net asset value of $10.63 per share (cost $40,574) 41,065
Growth and Income Portfolio - 2,212,069 shares at a net asset value of $13.99 per share (cost $26,737) 30,939
Money Market Portfolio - 30,708,197 shares at a net asset value of $1.00 per share (cost $30,708) 30,708
Stock Index Portfolio - 5,310,381 shares at a net asset value of $16.13 per share (cost $65,367) 85,638
Bond Debenture Portfolio - 659,052 shares at a net asset value of $10.97 per share (cost $6,959) 7,230
Quality Bond Portfolio - 510,720 shares at a net asset value of $10.08 per share (cost $5,119) 5,149
Small Cap Stock Portfolio - 1,229,042 shares at a net asset value of $10.92 per share (cost 12,890) 13,424
Large Cap Stock Portfolio - 1,383,680 shares at a net asset value of $11.11 per share (cost $13,844) 15,375
Select Equity Portfolio - 2,034,176 shares at a net asset value of $10.74 per share (cost $20,641) 21,851
International Equity Portfolio - 1,301,665 shares at a net asset value of $10.96 per share (cost $13,470) 14,265
LORD ABBETT SERIES FUND, INC:
Growth and Income Portfolio - 17,288,936 shares at a net asset value of $17.03 per share (cost $247,869) 294,358
Global Equity Portfolio - 220,660 shares at a net asset value of $10.80 per share (cost $2,382) 2,383
GENERAL AMERICAN CAPITAL COMPANY:
Money Market Portfolio - 20,751 shares at a net asset value of $17.24 per share (cost $352) 358
DIVIDENDS RECEIVABLE:
COVA SERIES TRUST
Quality Income Portfolio 796
High Yield Portfolio 1,806
Growth and Income Portfolio 1,477
Stock Index Portfolio 3,471
Bond Debenture Portfolio 221
Quality Bond Portfolio 127
Small Cap Portfolio 569
Large Cap Portfolio 376
Select Equity Portfolio 308
International Equity Portfolio 68
--------
TOTAL DIVIDENDS RECEIVABLE 9,219
TOTAL ASSETS $622,992
========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES AND CONTRACT OWNERS' EQUITY
CONTRACT OWNERS' EQUITY:
Trust Quality Income - 3,334,960 accumulation units at $15.540273 per unit $ 51,826
Trust High Yield - 2,001,184 accumulation units at $21.422784 per unit 42,871
Trust Growth and Income - 1,905,896 accumulation units at $17.008151 per unit 32,416
Trust Money Market - 2,584,926 accumulation units at $11.879722 per unit 30,708
Trust Stock Index - 4,680,855 accumulation units at $19.036956 per unit 89,109
Trust Bond Debenture Portfolio - 659,663 accumulation units at $11.294930 per unit 7,451
Trust Quality Bond Portfolio - 508,830 accumulation units at $10.368764 per unit 5,276
Trust Small Cap Stock Portfolio - 1,237,405 accumulation units at $11.308419 per unit 13,993
Trust Large Cap Stock Portfolio - 1,389,606 accumulation units at $11.334979 per unit 15,751
Trust Select Equity Portfolio - 2,044,523 accumulation units at $10.838053 per unit 22,159
Trust International Equity Portfolio - 1,306,892 accumulation units at $10.967004 per unit 14,333
Fund Growth and Income - 11,732,301 accumulation units at $25.089525 per unit 294,358
Fund Global Equity - 154,609 accumulation units at $15.414356 per unit 2,383
GACC Money Market Portfolio - 34,964 accumulation units at $10.233546 per unit 358
TOTAL CONTRACT OWNERS' EQUITY $622,992
--------
TOTAL LIABILITIES AND CONTRACT OWNERS' EQUITY $622,992
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(In thousands of dollars)
COVA
LORD ABBETT
SERIES TRUST
SERIES FUND, INC. GACC
<TABLE>
<CAPTION>
QUALITY HIGH GROWTH & MONEY STOCK BOND QUALITY SMALL
INCOME YIELD INCOME MARKET INDEX DEBENTURE BOND CAP STOCK STOCK
--------- ------- --------- ------- ------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends and Capital Gains
Distributions $ 2,167 $3,473 $ 1,684 $ 1,749 $ 4,267 $ 236 $ 195 $ 583
Total Income 2,167 3,473 1,684 1,749 4,267 236 195 583
EXPENSES:
Mortality and Expense
Risk Fee 627 490 323 415 1,088 32 46 66
Administrative Fee 75 59 39 50 131 4 6 8
Total Expenses 702 549 362 465 1,219 36 52 74
Net Investment Income 1,465 2,924 1,322 1,284 3,048 200 143 509
NET REALIZED GAIN/(LOSS)
ON INVESTMENTS 44 (169) 164 -- 3,892 13 44 47
NET CHANGE IN UNREALIZED
GAIN/(LOSS) ON INVESTMENTS (534) 952 2,566 -- 9,295 271 30 533
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS (490) 783 2,730 -- 13,187 284 74 580
NET INCREASE IN CONTRACT
OWNERS' EQUITY RESULTING
FROM OPERATIONS $ 975 $3,707 $ 4,052 $ 1,284 $16,235 $ 484 $ 217 $ 1,089
LARGE SELECT INTL GROWTH & GLOBAL Money
CAP STOCK STOCK EQUITY EQUITY INCOME EQUITY Market Total
---------------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends and Capital Gains
Distributions $ 445 $ 330 $ 103 $ 19,230 $ 298 -- $34,760
Total Income 445 330 103 19,230 298 -- 34,760
EXPENSES:
Mortality and Expense
Risk Fee 120 91 69 3,028 32 1 6,428
Administrative Fee 15 11 9 363 4 -- 774
Total Expenses 135 102 78 3,391 36 1 7,202
Net Investment Income 310 228 25 15,839 262 (1) 27,558
NET REALIZED GAIN/(LOSS)
ON INVESTMENTS 85 (17) 72 532 43 -- 4,750
NET CHANGE IN UNREALIZED
GAIN/(LOSS) ON INVESTMENTS 1,531 1,210 796 24,020 (151) 6 40,525
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS 1,616 1,193 868 24,552 (108) 6 45,275
NET INCREASE IN CONTRACT
OWNERS' EQUITY RESULTING
FROM OPERATIONS $ 1,926 $ 1,421 $ 893 $ 40,391 $ 154 $ 5 $72,833
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS' EQUITY
For the Year Ended December 31, 1996
(In thousands of dollars)
COVA
LORD ABBETT
SERIES TRUST
SERIES FUND, INC. GACC
_________
<TABLE>
<CAPTION>
QUALITY HIGH GROWTH & MONEY STOCK BOND QUALITY SMALL LARGE
INCOME YIELD INCOME MARKET INDEX DEBENTURE BOND CAP STOCK
--------- -------- ---------- --------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income $ 1,465 $ 2,924 $ 1,322 $ 1,284 $ 3,048 $ 200 $ 143 $ 509 $ 310
Net Realized Gain/(Loss)
on Investments 44 (169) 164 -- 3,892 13 44 47 85
Net Unrealized Gain/(Loss)
on Investments (534) 952 2,566 -- 9,295 271 30 533 1,531
Net Increase in Contract
Owners' Equity Resulting
from Operations 975 3,707 4,052 1,284 16,235 484 217 1,089 1,926
From Account Unit
Transactions:
Contributions by Cova -- -- -- -- -- 500 5,000 5,000 15,000
Redemptions by Cova -- -- -- -- -- (508) (3,000) (5,135) (3,846)
Proceeds from Units of
the Account Sold 1,603 1,989 2,777 43,943 3,731 3,795 995 6,112 800
Payments for Units of the
Account Redeemed (4,251) (2,299) (866) (3,044) (4,891) (164) (19) (71) --
Account Transfers 12,246 2,962 6,836 (45,603) (11,728) 3,344 2,083 6,998 1,871
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit 9,598 2,652 8,747 (4,704) (12,888) 6,967 5,059 12,904 13,825
Transactions
Net Increase/(Decrease) in
Contract Owners' Equity 10,573 6,359 12,799 (3,420) 3,347 7,451 5,276 13,993 15,751
Contract Owners' Equity:
Beginning of Period 41,253 36,512 19,617 34,128 85,762 -- -- -- --
End of Period $ 51,826 $42,871 $ 32,416 $ 30,708 $ 89,109 $ 7,451 $ 5,276 $13,993 $ 15,751
SELECT INTL GROWTH & GLOBAL Money
CAP STOCK EQUITY EQUITY INCOME EQUITY MARKET TOTAL
----------- -------- ---------- -------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net Investment Income $ 228 $ 25 $ 15,839 $ 262 ($1) $ 27,558
Net Realized Gain/(Loss)
on Investments (17) 72 532 43 -- 4,750
Net Unrealized Gain/(Loss)
on Investments 1,210 796 24,020 (151) 6 40,525
Net Increase in Contract
Owners' Equity Resulting
from Operations 1,421 893 40,391 154 5 72,833
From Account Unit
Transactions:
Contributions by Cova 5,000 5,000 -- -- -- 35,500
Redemptions by Cova (4,922) (5,128) -- -- -- (22,539)
Proceeds from Units of
the Account Sold 10,306 5,710 31,434 231 88 113,514
Payments for Units of the
Account Redeemed (115) (60) (13,615) (328) -- (29,723)
Account Transfers 10,469 7,918 45,518 (174) 265 43,005
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit 20,738 13,440 63,337 (271) 353 139,757
Transactions
Net Increase/(Decrease) in
Contract Owners' Equity 22,159 14,333 103,728 (117) 358 212,590
Contract Owners' Equity:
Beginning of Period -- -- 190,630 2,500 -- 410,402
End of Period $ 22,159 $14,333 $ 294,358 $ 2,383 $ 358 $622,992
</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
(In thousands of dollars)
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>
From Operations:
Net Investment Income $ 1,948 $ 2,332 $ 1,371 $ 2,318 $ 2,875 $ 12,502 $ 149 $ 23,495
Net Realized Gain/(Loss)
on Investments 16 (117) 46 _ _ 2,589 383 63 2,980
Net Unrealized Gain
on Investments 3,600 1,786 2,248 110 11,838 22,184 5 41,771
Net Increase in Contract
Owners' Equity
Resulting from
Operations 5,564 4,001 3,665 2,428 17,302 35,069 217 68,246
From Account Unit Transactions:
Redemptions by Cova _ _ _ _ _ _ _ _ _ _ _ _ (132) (132)
Proceeds from Units of
the Account Sold 2,609 3,648 2,179 27,608 2,384 29,458 686 68,572
Payments for Units of the
Account Redeemed (5,174) (2,111) (718) (4,508) (4,200) (18,059) (1,244) (36,014)
Account Transfers 4,321 11,321 3,550 (67,278) 33,469 29,746 (135) 14,994
Net Increase/(Decrease) in
Contract Owners' Equity
From Account Unit
Transactions 1,756 12,858 5,011 (44,178) 31,653 41,145 (825) 47,420
Net Increase/(Decrease) in
Contract Owners' Equity 7,320 16,859 8,676 (41,750) 48,955 76,214 (608) 115,666
Contract Owners' Equity:
Beginning of Period 33,933 19,653 10,941 75,878 36,807 114,416 3,108 294,736
End of Period $ 41,253 $36,512 $ 19,617 $ 34,128 $85,762 $ 190,630 $ 2,500 $410,402
========= ======== ========== ========= ======== ========== ======== =========
</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>
COVA SERIES TRUST - QUALITY INCOME PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94
-------------- -------------- --------------
<S> <C> <C> <C>
ACCUMULATION UNIT VALUE,
BEGINNING OF PERIOD $ 15.33 $ 13.17 $ 13.97
NET INVESTMENT INCOME .45 .72 .60
NET REALIZED AND UNREALIZED
GAIN/(LOSS) FROM SECURITY
TRANSACTIONS (.24) 1.44 (1.40)
TOTAL FROM INVESTMENT OPERATIONS OPERATIONS1.38(.80)1.22.73.140 O .21 2.16 (.80)
- -------------------------------------------------------------------
ACCUMULATION UNIT VALUE,
END OF PERIOD $ 15.54 $ 15.33 $ 13.17
============== ============== ==============
TOTAL RETURN* 1.36% 16.41% (5.70)%
CONTRACT OWNERS EQUITY,
END OF PERIOD (IN THOUSANDS) $ 51,826 $ 41,253 $ 33,933
RATIO OF EXPENSES TO AVERAGE
CONTRACT OWNERS' EQUITY 1.40% 1.40% 1.40%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE CONTRACT
OWNERS' EQUITY 2.94% 4.99% 4.48%
NUMBER OF UNITS OUTSTANDING
AT END OF PERIOD 3,334,960 2,690,633 2,576,412
FOR THE YEAR FOR THE YEAR
ENDED ENDED
12/31/93 12/31/92
-------------- --------------
<S> <C> <C>
ACCUMULATION UNIT VALUE,
BEGINNING OF PERIOD $ 12.75 $ 12.02
NET INVESTMENT INCOME 1.00 .64
NET REALIZED AND UNREALIZED
GAIN/(LOSS) FROM SECURITY
TRANSACTIONS .22 .09
TOTAL FROM INVESTMENT OPERATIONS OPERATIONS1.38(.80)1.22.73.140 O 1.22 .73
- -------------------------------------------------------------------
ACCUMULATION UNIT VALUE,
END OF PERIOD $ 13.97 $ 12.75
============== ==============
TOTAL RETURN* 9.50% 6.10%
CONTRACT OWNERS EQUITY,
END OF PERIOD (IN THOUSANDS) $ 51,111 $ 24,124
RATIO OF EXPENSES TO AVERAGE
CONTRACT OWNERS' EQUITY 1.40% 1.40%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE CONTRACT
OWNERS' EQUITY 8.30% 5.45%
NUMBER OF UNITS OUTSTANDING
AT END OF PERIOD 3,659,656 1,891,499
<FN>
* INVESTMENT RETURNS DO NOT REFLECT ANY CONTRACT BASED CHARGES (WITHDRAWAL CHARGES, CONTRACT MAINTENANCE FEES OR
ACCOUNT TRANSFER CHARGES),
BUT DO REFLECT MORTALITY AND EXPENSE CHARGES, ADMINISTRATION EXPENSE CHARGES AS WELL AS ALL EXPENSES OF THE
UNDERLYING PORTFOLIOS
(INVESTMENT ADVISORY FEES AND PORTFOLIO OPERATING EXPENSES).
</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>
COVA SERIES TRUST - HIGH YIELD PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 19.52 $ 16.98 $ 18.02 $ 14.99 $ 12.75
-------------- -------------- -------------- -------------- --------------
Net Investment Income 1.55 1.44 1.38 1.80 2.26
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions .35 1.10 (2.42) 1.23 (.02)
Total from Investment Operations 1.90 2.54 (1.04) 3.03 2.24
Accumulation Unit Value,
End of Period $ 21.42 $ 19.52 $ 16.98 $ 18.02 $ 14.99
============== ============== ============== ============== ==============
Total Return* 9.73% 14.99% (5.79)% 20.21% 17.53%
Contract Owners Equity,
End of Period (in thousands) $ 42,871 $ 36,512 $ 19,653 $ 18,846 $ 5,416
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 7.52% 7.98% 7.92% 13.05% 16.04%
Number of Units Outstanding
at End of Period 2,001,184 1,870,232 1,157,642 1,045,815 361,296
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees or
account transfer charges),
but do reflect mortality and expense charges, administration expense charges as well as all expenses of the
underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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>
COVA SERIES TRUST - GROWTH & INCOME PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)
FOR THE PERIOD FROM
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR 5/1/92 (COMMENCEMENT
ENDED ENDED ENDED ENDED OF OPERATIONS)
12/31/96 12/31/95 12/31/94 12/31/93 THROUGH 12/31/92
--------------
<S> <C> <C> <C> <C> <C>
ACCUMULATION UNIT VALUE,
BEGINNING OF PERIOD $ 14.61 $ 11.20 $ 11.92 $ 10.47 $ 10.00
-------------- -------------- -------------- -------------- ----------------------
NET INVESTMENT INCOME .68 1.02 .19 .54 .19
NET REALIZED AND UNREALIZED
GAIN/(LOSS) FROM SECURITY
TRANSACTIONS 1.72 2.39 (.91) .91 .28
TOTAL FROM INVESTMENT OPERATIONS 2.40 3.41 (.72) 1.45 .47
ACCUMULATION UNIT VALUE,
END OF PERIOD $ 17.01 $ 14.61 $ 11.20 $ 11.92 $ 10.47
============== ============== ============== ============== ======================
TOTAL RETURN** 16.42% 30.49% (6.07)% 13.84% 7.09%*
CONTRACT OWNERS EQUITY,
END OF PERIOD (IN THOUSANDS) $ 32,416 $ 19,617 $ 10,941 $ 6,528 $ 2,627
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 5.16% 9.92% 2.05% 7.54% 3.82%*
NUMBER OF UNITS OUTSTANDING
AT END OF PERIOD 1,905,896 1,342,833 977,209 574,643 250,919
<FN>
* ANNUALIZED
** INVESTMENT RETURNS DO NOT REFLECT ANY CONTRACT BASED CHARGES (WITHDRAWAL CHARGES, CONTRACT MAINTENANCE FEES OR
ACCOUNT TRANSFER CHARGES),
BUT DO REFLECT MORTALITY AND EXPENSE CHARGES, ADMINISTRATION EXPENSE CHARGES AS WELL AS ALL EXPENSES OF THE
UNDERLYING PORTFOLIOS
(INVESTMENT ADVISORY FEES AND PORTFOLIO OPERATING EXPENSES).
</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>
COVA SERIES TRUST - MONEY MARKET PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 11.43 $ 10.90 $ 10.61 $ 10.46 $ 10.21
-------------- -------------- -------------- -------------- --------------
Net Investment Income .45 .50 .30 .19 .25
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions -- .03 (.01) (.04) --
Total from Investment Operations .45 .53 .29 .15 .25
Accumulation Unit Value,
End of Period $ 11.88 $ 11.43 $ 10.90 $ 10.61 $ 10.46
============== ============== ============== ============== ==============
Total Return* 3.98% 4.85% 2.70% 1.45% 2.44%
Contract Owners Equity,
End of Period (in thousands) $ 30,708 $ 34,128 $ 75,878 $ 6,552 $ 4,031
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 3.90% 4.48% 2.90% 1.78% 2.46%
Number of Units Outstanding
at End of Period 2,584,926 2,987,132 6,963,421 617,575 385,448
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees or
account transfer charges),
but do reflect mortality and expense charges, administration expense charges as well as all expenses of the
underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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>
COVA SERIES TRUST - STOCK INDEX PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Period $ 15.77 $ 11.68 $ 11.87 $ 11.05 $ 10.55
-------------- -------------- -------------- -------------- --------------
Net Investment Income .67 .51 .37 .22 .52
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions 2.60 3.58 (.56) .60 (.02)
Total from Investment Operations 3.27 4.09 (.19) .82 .50
Accumulation Unit Value,
End of Period $ 19.04 $ 15.77 $ 11.68 $ 11.87 $ 11.05
============== ============== ============== ============== ==============
Total Return* 20.69% 35.06% (1.58)% 7.35% 4.75%
Contract Owners Equity,
End of Period (in thousands) $ 89,109 $ 85,762 $ 36,807 $ 91,269 $ 34,979
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 3.53% 4.85% 2.10% 2.99% 10.02%
Number of Units Outstanding
at End of Period 4,680,855 5,436,980 3,151,443 7,691,151 3,164,251
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees or
account transfer charges),
but do reflect mortality and expense charges, administration expense charges as well as all expenses of the
underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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>
COVA SERIES TRUST - BOND DEBENTURE PORTFOLIO (MANAGED BY LORD, ABBETT & CO.)
For the Period From 5/01/96
Through 12/31/96
<S> <C>
Accumulation Unit Value,
Beginning of Period $ 10.10
----------------------------
Net Investment Income .32
Net Realized and Unrealized
Gain from Security
Transactions .87
Total from Investment Operations 1.19
Accumulation Unit Value,
End of Period $ 11.29
============================
Total Return** 18.17%*
Contract Owners Equity,
End of Period (in thousands) $ 7,451
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 7.76%*
Number of Units Outstanding
at End of Period 659,663
<FN>
* Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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>
COVA SERIES TRUST - QUALITY BOND PORTFOLIO (MANAGED BY J.P. MORGAN INVESTMENT
MANAGEMENT, INC.)
For the Period From 5/01/96
Through 12/31/96
<S> <C>
Accumulation Unit Value,
Beginning of Period $ 9.90
----------------------------
Net Investment Income .28
Net Realized and Unrealized
Gain from Security
Transactions .19
Total from Investment Operations .47
Accumulation Unit Value,
End of Period $ 10.37
============================
Total Return** 7.18%*
Contract Owners Equity,
End of Period (in thousands) $ 5,276
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 3.75%*
Number of Units Outstanding
at End of Period 508,830
<FN>
* Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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>
COVA SERIES TRUST - SMALL CAP STOCK PORTFOLIO (MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT, INC.)
For the Period From 5/01/96
Through 12/31/96
<S> <C>
Accumulation Unit Value,
Beginning of Period $ 10.51
----------------------------
Net Investment Income .39
Net Realized and Unrealized
Gain from Security
Transactions .41
Total from Investment Operations .80
Accumulation Unit Value,
End of Period $ 11.31
============================
Total Return** 11.49%*
Contract Owners Equity,
End of Period (in thousands) $ 13,993
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 9.65%*
Number of Units Outstanding
at End of Period 1,237,405
<FN>
* Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
(investment advisory fees and portfolio operating expenses)..
</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>
COVA SERIES TRUST - LARGE CAP STOCK PORFOLIO (MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT, INC.)
For the Period From 5/01/96
Through 12/31/96
<S> <C>
Accumulation Unit Value,
Beginning of Period $ 10.00
----------------------------
Net Investment Income .22
Net Realized and Unrealized
Gain from Security
Transactions 1.11
Total from Investment Operations 1.33
Accumulation Unit Value,
End of Period $ 11.33
============================
Total Return** 20.47%*
Contract Owners Equity,
End of Period (in thousands) $ 15,751
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 3.02%*
Number of Units Outstanding
at End of Period 1,389,606
<FN>
* Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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>
COVA SERIES TRUST - SELECT EQUITY PORTFOLIO (MANAGED BY J.P. MORGAN INVESTMENT
MANAGEMENT, INC.)
FOR THE PERIOD FROM 5/01/96
THROUGH 12/31/96
<S> <C>
Accumulation Unit Value,
Beginning of Period $ 10.08
----------------------------
Net Investment Income .10
Net Realized and Unrealized
Gain from Security
Transactions .66
Total from Investment Operations .76
Accumulation Unit Value,
End of Period $ 10.84
Total Return** 11.34%*
Contract Owners Equity,
End of Period (in thousands) $ 22,159
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 3.12%*
Number of Units Outstanding
at End of Period 2,044,523
<FN>
* Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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>
COVA SERIES TRUST - INTERNATIONAL EQUITY PORTFOLIO (MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT, INC.)
For the Period From 5/01/96
Through 12/31/96
<S> <C>
Accumulation Unit Value,
Beginning of Period $ 10.21
----------------------------
Net Investment Income .02
Net Realized and Unrealized
Gain from Security
Transactions .74
Total from Investment Operations .76
Accumulation Unit Value,
End of Period $ 10.97
============================
Total Return** 11.16%*
Contract Owners Equity,
End of Period (in thousands) $ 14,333
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity 0.46%*
Number of Units Outstanding
at End of Period 1,306,892
<FN>
* Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
(investment advisory fees and portfolio operating expenses).
</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
<S> <C> <C> <C> <C> <C>
For the Year For theYear For the Year For the Year For the Year
Ended Ended Ended Ended Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
Accumulation Unit Value,
Beginning of Period $ 21.31 $ 16.64 $ 16.42 $ 14.50 $ 12.73
-------------- ------------- -------------- -------------- --------------
Net Investment Income 1.32 1.37 .76 .88 1.06
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions 2.46 3.30 (.54) 1.04 .71
Total from Investment Operations 3.78 4.67 .22 1.92 1.77
-------------- ------------- -------------- -------------- --------------
Accumulation Unit Value,
- ---------------------------------
End of Period $ 25.09 $ 21.31 $ 16.64 $ 16.42 $ 14.50
- --------------------------------- ============== ============= ============== ============== ==============
Total Return* 17.76% 28.03% 1.32% 13.24% 13.98%
- --------------------------------- -------------- ------------- -------------- -------------- --------------
Contract Owners Equity,
- ---------------------------------
End of Period (in thousands) $ 294,358 $ 190,630 $ 114,416 $ 82,033 $ 37,146
- --------------------------------- -------------- ------------- -------------- -------------- --------------
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 6.59% 8.57% 5.40% 8.12% 10.59%
- --------------------------------- -------------- ------------- -------------- -------------- --------------
Number of Units Outstanding
- ---------------------------------
at End of Period 11,732,301 8,947,108 6,875,139 4,994,582 2,560,999
- --------------------------------- -------------- ------------- -------------- -------------- --------------
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees
or account transfer charges), but do reflect mortality and expense charges, administration expense charges as well as
all expenses of the underlying portfolio (investment advisory fees and portfolio operating expenses)
</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 For the Year For the Year For the Year For the Year
-------------- -------------- -------------- -------------- --------------
Ended Ended Ended Ended Ended
-------------- -------------- -------------- -------------- --------------
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value,
- ---------------------------------
Beginning of Period $ 14.52 $ 13.33 $ 13.29 $ 10.64 $ 10.97
- --------------------------------- -------------- -------------- -------------- -------------- --------------
Net Investment Income 1.70 .91 1.45 .24 .18
Net Realized and Unrealized
Gain/(Loss) from Security
Transactions (.81) .28 (1.41) 2.41 (.51)
Total from Investment Operations .89 1.19 .04 2.65 (.33)
-------------- -------------- -------------- -------------- --------------
Accumulation Unit Value,
- ---------------------------------
End of Period $ 15.41 $ 14.52 $ 13.33 $ 13.29 $ 10.64
- --------------------------------- ============== ============== ============== ============== ==============
Total Return* 6.18% 8.91% .27% 24.91% (2.98)%
- --------------------------------- -------------- -------------- -------------- -------------- --------------
Contract Owners Equity,
- ---------------------------------
End of Period (in thousands) $ 2,383 $ 2,500 $ 3,108 $ 3,635 $ 3,249
- --------------------------------- -------------- -------------- -------------- -------------- --------------
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 10.33% 5.36% 9.78% 1.88% 1.38%
- --------------------------------- -------------- -------------- -------------- -------------- --------------
Number of Units Outstanding
- ---------------------------------
at End of Period 154,609 172,206 233,186 273,399 305,314
- --------------------------------- -------------- -------------- -------------- -------------- --------------
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees
or account transfer charges), but do reflect mortality and expense charges, administration expense charges as well
as all expenses of the underlying portfolios (investment advisory fees and portfolio operating expenses).
</TABLE>
See accompanying notes to financial statements.
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>
GENERAL AMERICAN CAPITAL COMPANY - MONEY MARKET PORTFOLIO
For the Period From 6/03/96
-----------------------------
Through 12/31/96
-----------------------------
<S> <C>
Accumulation Unit Value,
- ---------------------------------
Beginning of Period $ 10.00
- --------------------------------- -----------------------------
Net Investment Income (.08)
Net Realized and Unrealized
Gain from Security
Transactions .31
Total from Investment Operations .23
Accumulation Unit Value,
End of Period $ 10.23
=============================
Total Return** 4.05%*
Contract Owners Equity,
End of Period (in thousands) $ 358
Ratio of Expenses to Average
Contract Owners' Equity 1.40%*
Ratio of Net Investment Income
to Average Contract
Owners' Equity (1.40)%*
Number of Units Outstanding
at End of Period 34,964
<FN>
* Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges), but do reflect mortality and expense charges, administration
expense charges as well as all expenses of the underlying portfolios (investment advisory fees and portfolio operating expenses).
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1996
and for the year ended December 31, 1995
1. Organization:
Cova 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"). 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 the Cova Series Trust ("Trust"), the Lord Abbett
Series Fund, Inc. ("Fund") or General American Capital Company (GACC). The
Trust consists of eleven portfolios of which five portfolios are managed by
Van Kampen American Capital Investment Advisory Corp., five are managed by
J.P. Morgan Investment Management, Inc. and one portfolio is managed by Lord,
Abbett & Co. The Trust portfolios available for investment are the Quality
Income, High Yield, Growth and Income, Money Market, Stock Index, Select
Equity, Large Cap Stock, Small Cap Stock, International Equity, Quality Bond,
and Bond Debenture Portfolios. The Fund has two portfolios available for
investment: the Growth and Income, and Global Equity Portfolios. GACC has
the Money Market Portfolio available for investment. Not all portfolios of the
Trust, Fund and GACC are available for investment depending upon the nature
and specific terms of the different contracts currently being offered for
sale. The Trust, Fund and GACC are all 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 certificates and collateralized mortgage obligations.
The Trust High Yield Portfolio invests primarily in medium and lower-grade
debt securities and futures and options contracts. The Trust Growth and
Income Portfolio invests primarily in common stocks and futures and options
contracts. The Trust Money Market and GACC Money Market Portfolios invest 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 Trust Select Equity and Large Cap Stock Portfolios invest in stocks of
large and medium-sized companies. The Trust Small Cap Stock Portfolio invests
primarily in the common stock of small U.S. companies. The Trust
International Equity Portfolio invests primarily in stocks of established
companies based in developed countries. The Trust Quality Bond Portfolio
invests primarily in higher grade debt securities. The Trust Bond Debenture
Portfolio invests primarily in convertible and discount debt securities. The
Fund Growth and Income Portfolio invests in common stocks. The Fund Global
Equity Portfolio invests primarily in both domestic and foreign common stocks
and forward currency contracts.
In order to satisfy diversification requirements and provide for optimum
policyholder returns, Cova has made periodic contributions to the Trust and
Fund to provide for the initial purchases of investments. In return, Cova has
been credited with accumulation units of the Separate Account. As additional
funds are received through policyholder deposits, Cova 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
accumulation units. In 1996, Cova contributed approximately $35.5 million to
the Separate Account of which, after subsequent redemptions, net of realized
and unrealized gains and losses on investments, approximately $15.0 million
remains as of December 31, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES:
A. INVESTMENT VALUATION
Investments in shares of the Trust, Fund and GACC are carried in the statement
of assets and liabilities at the underlying net asset value of the Trust, Fund
and GACC. The net asset value of the Trust, Fund and GACC has been determined
on the market value basis and is valued daily by the Trust, Fund and GACC
investment managers. Realized gains and losses are calculated by the average
cost method.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1996
and for the year ended December 31, 1995
B. REINVESTMENT OF DIVIDENDS
With the exception of GACC, 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.
GACC follows the Federal income tax practice known as consent dividending,
whereby substantially all of its net investment income and net realized
capital gains are deemed to be passed through to the Separate Account. As a
result, GACC does not distribute any dividends or capital gains. During
December of each year, accumulated investment income and capital gains of the
underlying GACC fund are allocated to the Separate Account by increasing the
cost basis and recognizing a capital gain in the Separate Account.
C. FEDERAL INCOME TAXES
Operations of the Separate Account form a part of Cova, 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
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 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.
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. 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.
For the year ended December 31, 1996, withdrawal and account transfer charges
of approximately $280 thousand and contract maintenance charges of
approximately $240 thousand were deducted from the contract values in the
Separate Account.
Mortality and expense risks assumed by Cova 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 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.
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1996
and for the year ended December 31, 1995
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 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 is unable to obtain a
refund. Cova, however, reserves the right to deduct premium taxes when
incurred.
4. GAIN/(LOSS) ON INVESTMENTS:
The table below summarizes realized and unrealized gains and losses on
investments:
<TABLE>
<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):
For the Year For the Year
-------------- --------------
Ended Ended
-------------- --------------
12/31/96 12/31/95
-------------- --------------
<S> <C> <C>
Trust Quality Income Portfolio:
- ------------------------------------------
Aggregate Proceeds From Sales $ 13,850 $ 21,223
- ------------------------------------------ -------------- --------------
Aggregate Cost 13,806 21,207
- ------------------------------------------ -------------- --------------
Net Realized Gain on Investments $ 44 $ 16
- ------------------------------------------ -------------- ==============
Trust High Yield Portfolio:
- ------------------------------------------
Aggregate Proceeds From Sales $ 22,909 $ 1,957
- ------------------------------------------ -------------- --------------
Aggregate Cost 23,078 2,074
- ------------------------------------------ -------------- --------------
Net Realized Loss on Investments $ (169) $ (117)
- ------------------------------------------ ============== ==============
Trust Growth and Income Portfolio:
- ------------------------------------------
Aggregate Proceeds From Sales $ 1,508 $ 1,127
- ------------------------------------------ -------------- --------------
Aggregate Cost 1,344 1,082
- ------------------------------------------ -------------- --------------
Net Realized Gain on Investments $ 164 $ 46
- ------------------------------------------ ============== ==============
Trust Money Market Portfolio:
- ------------------------------------------
Aggregate Proceeds From Sales $ 36,177 $ 71,027
- ------------------------------------------ -------------- --------------
Aggregate Cost 36,177 71,027
- ------------------------------------------ -------------- --------------
Net Realized Gain/(Loss) on Investments -- --
- ------------------------------------------ ============== ==============
Trust Stock Index Portfolio:
- ------------------------------------------
Aggregate Proceeds From Sales $ 21,062 $ 19,097
- ------------------------------------------ -------------- --------------
Aggregate Cost 17,170 16,508
- ------------------------------------------ -------------- --------------
Net Realized Gain on Investments $ 3,892 $ 2,589
- ------------------------------------------ ============== ==============
Trust Bond Debenture Portfolio
- ------------------------------------------
Aggregate Proceeds From Sales $ 635
- ------------------------------------------ --------------
Aggregate Cost 622 N/A
- ------------------------------------------ -------------- --------------
Net Realized Gain on Investments $ 13
- ------------------------------------------ ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1996
and for the year ended December 31, 1995
4. GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>
<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):
For the Year For the Year
-------------- -------------
Ended Ended
-------------- -------------
12/31/96 12/31/95
-------------- -------------
<S> <C> <C>
Trust Quality Bond Portfolio
- ------------------------------------
Aggregate Proceeds From Sales $ 2,991
- ------------------------------------ --------------
Aggregate Cost 2,947 N/A
- ------------------------------------ --------------
Net Realized Gain on Investments $ 44
==============
Trust Small Cap Stock Portfolio $ 1,882
Aggregate Proceeds From Sales 1,835 N/A
--------------
Aggregate Cost $ 47
==============
Net Realized Gain on Investments
Trust Large Cap Stock Portfolio
Aggregate Proceeds From Sale $ 1,423
Aggregate Cost 1,338 N/A
--------------
Net Realized Gain on Investments $ 85
==============
Trust Select Equity Portfolio
Aggregate Proceeds From Sales $ 1,680
Aggregate Cost 1,697 N/A
--------------
Net Realized Loss on Investments $ (17)
==============
Trust International Equity Portfolio
Aggregate Proceeds From Sales $ 4,568
Aggregate Cost 4,496 N/A
--------------
Net Realized Gain on Investments $ 72
==============
Fund Growth and Income Portfolio:
Aggregate Proceeds From Sales $ 2,696 $ 4,043
Aggregate Cost 2,164 3,660
Net Realized Gain on Investments $ 532 $ 383
============== =============
Fund Global Equity Portfolio:
Aggregate Proceeds From Sales $ 372 $ 946
Aggregate Cost 329 883
Net Realized Gain on Investments $ 43 $ 63
============== =============
</TABLE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1996
and for the year ended December 31, 1995
4. GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>
<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):
For the Year For the Year
-------------- --------------
Ended Ended
-------------- --------------
12/31/96 12/31/95
-------------- --------------
<S> <C> <C>
GACC Money Market Portfolio
- ----------------------------------------------------------------
Aggregate Proceeds From Sales $ 6
- ---------------------------------------------------------------- --------------
Aggregate Cost 6 N/A
- ---------------------------------------------------------------- --------------
Net Realized Gainon Investments --
==============
UNREALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):
- ----------------------------------------------------------------
Trust Quality Income Portfolio:
End of Period $ 935 $ 1,469
Beginning of Period 1,469 (2,131)
Net Change in Unrealized Gain/(Loss) on Investments $ (534) $ 3,600
==============
Trust High Yield Portfolio:
End of Period $ 491 $ (461)
Beginning of Period (461) (2,247)
Net Change in Unrealized Gain on Investments $ 952 $ 1,786
==============
Trust Growth and Income Portfolio:
End of Period $ 4,202 $ 1,636
Beginning of Period 1,636 (612)
Net Change in Unrealized Gain on Investments $ 2,566 $ 2,248
============== ==============
Trust Money Market Portfolio:
End of Period -- --
Beginning of Period -- (110)
Net Change in Unrealized Gain on Investments -- $ 110
============== ==============
Trust Stock Index Portfolio:
End of Period $ 20,271 $ 10,976
Beginning of Period 10,976 (862)
Net Change in Unrealized Gain on Investments $ 9,295 $ 11,838
============== ==============
Trust Bond Debenture Portfolio:
End of Period $ 271
Beginning of Period -- N/A
Net Change in Unrealized Gain on Investments $ 271
==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1996
and for the year ended December 31, 1995
4. GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>
<CAPTION>
UNREALIZED GAIN/(LOSS) ON INVESTMENT (IN THOUSANDS OF DOLLARS):
For the Year For the Year
Ended Ended
12/31/96 12/31/95
<S> <C> <C>
Trust Quality Bond Portfolio:
End of Period $ 30
Beginning of Period -- N/A
Net Change in Unrealized Gain on Investments $ 30
==============
Trust Small Cap Portfolio:
End of Period $ 533
Beginning of Period -- N/A
Net Change in Unrealized Gain on Investments $ 533
==============
Trust Large Cap Portfolio:
End of Period $ 1,531
Beginning of Period -- N/A
Net Change in Unrealized Gain on Investments $ 1,531
==============
Trust Select Equity Portfolio:
End of Period $ 1,210
Beginning of Period -- N/A
Net Change in Unrealized Gain on Investments $ 1,210
==============
Trust International Equity Portfolio:
End of Period $ 796
Beginning of Period -- N/A
Net Change in Unrealized Gain on Investments $ 796
==============
Fund Growth and Income Portfolio:
End of Period $ 46,489 $ 22,469
Beginning of Period 22,469 285
Net Change in Unrealized Gain on Investments $ 24,020 $ 22,184
============== =============
Fund Global Equity Portfolio:
End of Period $ 1 $ 152
Beginning of Period 152 147
Net Change in Unrealized Gain/(Loss) on Investments ($151) $ 5
============== =============
GACC Money Market Portfolio
End of Period $ 6 N/A
Beginning of Period --
Net Change in Unrealized Gain on Investments $ 6
==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 1996
and for the year ended December 31, 1995
5. ACCOUNT UNIT TRANSACTIONS:
The change in the number of accumulation units resulting from account unit
transactions is as follows:
COVA
LORD ABBETT
SERIES TRUST
SERIES FUND, INC. GACC
_____________________________________________________________________________
_______________ ______________ _______
<TABLE>
__
<CAPTION>
QUALITY HIGH GROWTH & MONEY STOCK BOND QUALITY SMALL
INCOME YIELD INCOME MARKET INDEX DEBENTURE BOND CAP STOCK
---------- ---------- ---------- ----------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 2,576,412 1,157,642 977,209 6,963,421 3,151,443 N/A N/A N/A
Redemptions by Cova -- -- -- -- -- -- -- --
Units Sold 181,275 195,356 162,687 2,450,650 163,890 -- -- --
Units Redeemed (362,175) (114,778) (55,487) (405,521) (300,704) -- -- --
Units Transferred 295,120 632,013 258,424 (6,021,418) 2,422,351 -- -- --
Balance at
December 31, 1995 2,690,633 1,870,232 1,342,833 2,987,132 5,436,980 N/A N/A N/A
Contributions by Cova Life -- -- -- -- -- 50,000 500,000 500,000
Redemptions by Cova -- -- -- -- -- (50,000) (294,154) (500,000)
Units Sold 106,671 98,690 180,267 3,772,567 216,989 360,638 98,567 580,659
Units Redeemed (280,149) (113,437) (59,321) (259,281) (283,639) (10,552) (2,065) (6,730)
Units Transferred 817,805 145,699 442,117 (3,915,492) (689,475) 309,577 206,482 663,476
Balance at
December 31, 1996 3,334,960 2,001,184 1,905,896 2,584,926 4,680,855 659,663 508,830 1,237,405
LARGE SELECT INTL GROWTH & GLOBAL MONEY
CAP STOCK EQUITY EQUITY INCOME EQUITY MARKET TOTAL
---------- ---------- ---------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 N/A N/A N/A 6,875,139 233,186 N/A 21,934,453
Redemptions by Cova -- -- -- -- (10,000) (10,000)
Units Sold -- -- -- 1,505,688 50,282 4,709,829
Units Redeemed -- -- -- (940,462) (91,135) (2,270,262)
Units Transferred -- -- -- 1,506,743 (10,127) (916,893)
Balance at
December 31, 1995 N/A N/A N/A 8,947,108 172,206 N/A 23,447,125
Contributions by Cova Life 1,500,000 500,000 500,000 -- -- -- 3,550,000
Redemptions by Cova (367,586) (500,000) (500,000) -- -- -- (2,211,740)
Units Sold 76,199 1,024,461 550,620 1,374,562 15,160 8,787 8,464,837
Units Redeemed (522) (11,729) (5,835) (587,874) (21,479) (96) (1,642,709)
Units Transferred 181,515 1,031,791 762,107 1,998,505 (11,278) 26,273 1,969,102
Balance at
December 31, 1996 1,389,606 2,044,523 1,306,892 11,732,301 154,609 34,964 33,576,614
</TABLE>
COVA FINANCIAL SERVICES
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(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 sheets of Cova Financial
Services Life Insurance Company and subsidiaries (a wholly owned subsidiary of
Cova Corporation) as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders equity and cash flows for the
year ended December 31, 1996 and the period from June 1, 1995 to December 31,
1995 (Successor periods), and from January 1, 1995 to May 31, 1995, and for
the year ended December 31, 1994 (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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cova
Financial Services Life Insurance Company and subsidiaries as of December 31,
1996 and 1995, and the results of their operations and their cash flows for
the Successor periods, in conformity with generally accepted accounting
principles. Also, in our opinion, the aforementioned Predecessor consolidated
financial statements present fairly, in all material respects, the results of
their operations and their cash flows for the Predecessor periods presented,
in conformity with generally accepted accounting principles.
St. Louis, Missouri
March 7, 1997
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets
December 31, 1996 and 1995
(In thousands of dollars)
<TABLE>
<CAPTION>
ASSETS 1996
1995
<S> <C> <C>
Investments:
Debt securities available for sale at market
(cost of $952,817 in 1996 and $583,868 in 1995) $ 949,611 $ 594,556
Mortgage loans (net) 244,103 77,472
Policy loans 22,336 19,125
Short-term investments at cost which approximates
market 4,404 7,859
---------- ----------
Total investments 1,220,454 699,012
---------- ----------
Cash and cash equivalents - interest bearing 38,322 59,312
Cash - non-interest bearing 5,501 2,944
Receivable from sale of securities 1,064 --
Accrued investment income 15,011 9,116
Deferred policy acquisition costs 49,833 14,468
Present value of future profits 46,389 38,155
Goodwill 20,849 23,358
Federal and state income taxes recoverable 1,461 397
Deferred tax benefits (net) 13,537 13,556
Receivable from OakRe 1,973,813 2,391,982
Reinsurance receivables 3,504 8,891
Other assets 2,205 2,425
Separate account assets 641,871 410,449
---------- ----------
Total Assets $4,033,814 $3,674,065
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
(continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets (Continued)
December 31, 1996 and 1995
(In thousands of dollars)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS EQUITY 1996 1995
<S> <C> <C>
Policyholder deposits $3,135,325 $3,033,763
Future policy benefits 32,342 28,071
Payable on purchase of securities 15,978 5,327
Accounts payable and other liabilities 19,764 20,143
Future purchase price payable to OakRe 16,051 23,967
Guaranty fund assessments 12,409 14,259
Separate account liabilities 626,901 410,449
----------- -----------
Total Liabilities 3,858,770 3,535,979
----------- -----------
Shareholders equity:
Common stock, $2 par value. (Authorized
5,000,000 shares; issued and outstanding
2,899,446 shares in 1996 and 1995) 5,799 5,799
Additional paid-in capital 166,491 129,586
Retained earnings 3,538 (63)
Net unrealized appreciation/(depreciation)
on securities, net of tax (784) 2,764
----------- -----------
Total Shareholders Equity 175,044 138,086
----------- -----------
Total Liabilities and Shareholders Equity $4,033,814 $3,674,065
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Income
Years ended December 31, 1996, 1995, and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Revenues:
Premiums $ 3,154 $ 921 $ 1,097 $ 2,787
Net investment income 70,629 24,188 92,486 277,616
Net realized gain (loss) on sale of investments 472 1,324 (12,414) (101,361)
Separate Account charges 7,205 2,957 1,818 3,992
Other income 1,320 725 1,037 2,713
------- -------- ---------- -----------
Total revenues 82,780 30,115 84,024 185,747
------- -------- ---------- -----------
Benefits and expenses:
Interest on policyholder deposits 50,100 17,706 97,867 249,905
Current and future policy benefits 5,130 1,785 1,830 5,259
Operating and other expenses 14,573 7,126 12,777 24,479
Amortization of purchased intangible assets 2,332 3,030 -- --
Amortization of deferred acquisition costs 4,389 100 11,157 125,357
------- -------- ---------- -----------
Total Benefits and Expenses 76,524 29,747 123,631 405,000
------- -------- ---------- -----------
Income/(loss) before income taxes 6,256 368 (39,607) (219,253)
------- -------- ---------- -----------
Income Taxes:
Current 1,740 1,011 (16,404) (46,882)
Deferred 915 (580) 6,340 (30,118)
------- -------- ---------- -----------
Total income tax expense/(benefit) 2,655 431 (10,064) (77,000)
------- -------- ---------- -----------
Net Income/(Loss) $ 3,601 $ (63) $ (29,543) $(142,253))
======= ======== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholders Equity
Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Common stock ($2 par value common stock;
Authorized 5,000,000 shares; issued and
outstanding 2,899,446 in 1996, 1995 and 1994
Balance at beg. of period) $ 5,799 $ 5,799 $ 5,799 $ 5,632
Par value of additional shares issued -- -- -- 167
--------- --------- ----------
Balance at end of period 5,799 5,799 5,799 5,799
--------- --------- --------- ----------
Additional paid-in capital:
Balance at beginning of period 129,586 137,749 136,534 120,763
Adjustment to reflect purchase acquisition
indicated in note 2 -- (52,163) -- --
Capital contribution 36,905 44,000 1,215 15,771
--------- --------- --------- ----------
Balance at end of period 166,491 129,586 137,749 136,534
--------- --------- --------- ----------
Retained earnings/(deficit):
Balance at beginning of period (63) (36,441) 1,506 143,759
Adjustment to reflect purchase acquisition -- 36,441 -- --
indicated in note 2
Net income/(loss) 3,601 (63) (29,543) (142,253)
Dividends to shareholder -- -- (8,404) --
--------- --------- --------- ----------
Balance at end of period $ 3,538 $ (63) $(36,441) $ 1,506
--------- --------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholders Equity (Continued)
Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Net unrealized appreciation/(depreciation)of securities:
Balance at beginning of period 2,764 $(28,837) $ (65,228) $ (321)
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 (13,915) 10,724 178,010 (357,502)
Change in deferred Federal income taxes 1,910 (1,489) (18,458) 53,324
Change in deferred acquisition costs attributable
to unrealized losses/(gains) 1,561 -- (123,161) 205,146
Change in present value of future profits
attributable to unrealized losses/(gains) 6,896 (6,471) -- --
--------- --------- ----------
Balance at end of period (784) 2,764 (28,837) (65,228)
--------- --------- ---------- ----------
Total Shareholders Equity $175,044 $138,086 $ 78,270 $ 78,611
========= ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Interest and dividend receipts $ 68,622 $ 18,744 $ 131,439 $ 309,856
Premiums received 3,154 921 1,097 2,787
Insurance and annuity benefit payments (3,729) (2,799) (1,809) (3,755)
Operating disbursements (17,158) (10,480) (9,689) (26,023)
Taxes on income refunded (paid) (3,016) 60 48,987 17,032
Commissions and acquisition costs paid (36,735) (17,456) (23,872) (26,454)
Other 937 529 1,120 836
---------- ---------- ----------- ------------
Net cash provided by/(used in) operating
activities 12,075 (10,481) 147,273 274,279
---------- ---------- ----------- ------------
Cash flows from investing activities:
Cash used for the purchase of investment
securities (715,274) (875,994) (575,891) (1,935,353)
Proceeds from investment securities sold and
matured 262,083 253,814 2,885,053 3,040,474
Other (14,166) 179 (8,557) (8,185)
---------- ---------- ----------- ------------
Net cash provided by/(used in) investing
activities $(467,357) $(622,003) $2,300,605 $ 1,096,936
---------- ---------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows (Continued)
Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Policyholder deposits $ 446,784 $ 132,752 $ 130,660 $ 274,960
Transfers from/(to) OakRe 574,010 628,481 (3,048,531) --
Transfer to Separate Accounts (119,592) (37,946) (4,835) (33,548)
Return of policyholder deposits (491,025) (436,271) (290,586) (608,868)
Dividends to Shareholder -- -- (8,404) --
Capital contributions received 20,000 44,000 1,215 15,938
---------- ---------- ------------- -----------
Net cash provided by/(used in) financing
activities 430,177 331,016 (3,220,481) (351,518)
---------- ---------- ------------- -----------
Increase/(decrease) in cash and cash
equivalents (25,105) (301,468) (772,603) 1,019,697
Cash and cash equivalents at beginning of
period 62,256 363,724 1,136,327 116,630
CFLIC contributed cash (Note 9) 6,672 -- -- --
Cash and cash equivalents at end of period $ 43,823 $ 62,256 $ 363,724 $1,136,327
========== ========== ============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(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
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Reconciliation of net income/(loss)to net cash
provided by operating activities:
Net income/(loss) $ 3,601 $ (63) $(29,543) $(142,253)
Adjustments to reconcile net income/(loss)
to net cash provided by operating activities:
Increase/(decrease) in future policy
benefits (net of reinsurance) 680 (1,013) 11 1,494
Increase/(decrease) in payables and accrued
liabilities 2,900 (392) (10,645) 3,830
Decrease/(increase) in accrued investment
income (4,778) (7,904) 32,010 21,393
Amortization of intangible assets 6,721 3,831 11,309 125,722
Amortization and accretion of securities
premiums and discounts 2,751 307 2,410 3,635
Recapture commissions paid to OakRe (4,483) (4,777) -- --
Net realized losson sale of
investments (472) (1,324) 12,414 101,361
Interest accumulated on policyholder
deposits 50,100 17,706 97,867 249,905
Investment expenses paid 1,151 642 2,373 7,296
Decrease/(Increase)in guaranty assessments -- (104) 5,070 (935)
Increase/(decrease) in current and deferred
Federal income taxes (351) 491 38,923 (59,263)
Separate account net loss (2,008) 1 1 2
Deferral of acquisition costs (34,803) (14,568) (13,354) (30,024)
Other (8,934) (3,314) (1,573) (7,884)
--------- ----------
Net cash provided by operating activities $ 12,075 $(10,481) $147,273 $ 274,279
========= ========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) NATURE OF BUSINESS AND ORGANIZATION
NATURE OF THE BUSINESS
Cova Financial Services Life Insurance Company (CFSLIC) and subsidiaries (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 47 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 66%, 59% and 57% of the companies sales have been through two
specific brokerage firms, A.G. Edwards & Sons, Incorporated. and Edward Jones
& Company in 1996, 1995 and 1994, 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 $22.7 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 economic
benefits and risks of 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 was
retained by XFSI subsequent to the sale of the Predecessor and other
affiliates. 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 expired in four 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 thereafter assume the benefits and risks of
those deposits.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 periods ending December 31, 1996 and 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.
The Company owns 100% of the outstanding shares of First Cova Life Insurance
Company (a New York domiciled insurance company) (FCLIC) and Cova Financial
Life Insurance Company (a California domiciled insurance company) (CFLIC).
Ownership of Cova Financial Life Insurance Company was obtained on December
31, 1996 as the result of a capital contribution by Cova Corporation. The
Company has presented the consolidated financial position and results of
operations for its subsidiaries from the dates of actual ownership (see note
9).
(2) CHANGE IN ACCOUNTING
Upon closing 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 then sole subsidiary FCLIC 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, however, these allocations were not finalized until 1996. The
table below summarizes the final allocation of purchase price:
<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 47.4
Goodwill 20.5
Deferred tax benefit 24.9
Receivable from OakRe 2,969.0
Other assets 5.9
Separate account assets 332.7
--------------
3,814.8
--------------
Liabilities assumed:
Policyholder deposits 3,299.2
Future policy benefits 27.2
Future purchase price payable 22.7
Deferred Federal income taxes 12.6
Other liabilities 29.0
Separate account liabilities 332.7
--------------
3,723.4
--------------
Adjusted purchase price $ 91.4
==============
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 predecessor historical costs. The periods ending on or after
such date are labeled The Company, and are based on the new cost basis of the
Company or fair values at June 1, 1995 and subsequent results of operations.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITIES
Investments in all debt securities and those equity securities with readily
determinable market values are 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, 1996 and 1995 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").
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.
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
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.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 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.
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, but did establish
a valuation allowance for potential losses on mortgage loans of $88 thousand
at December 31, 1996.
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 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.
SEPARATE ACCOUNT ASSETS
The separate account investments are 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 market value.
In order to provide for optimum policyholder returns, and to allow for the
replication of the investment performance of existing cloned mutual funds, the
Company has periodically transferred capital to the separate account to
provide for the initial purchase of investments in new portfolios. As
additional funds have been received through policyholder deposits, the Company
has periodically reduced its capital investment in the separate accounts. As
of December 31, 1996, approximately $15.0 million of capital investments
remained within the separate accounts.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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, 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 acquisition costs are shown below. The
effects on deferred policy acquisition costs of the consolidation of CFLIC
(see note 9) with the Company are presented separately.
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
(In Thousands) 1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Deferred policy acquisition costs,
beginning of period $14,468 $ 92,398 $ 213,362 $ 146,504
Effects of push down purchase
accounting -- (92,398) -- --
Commissions and expenses deferred 34,803 14,568 13,354 30,025
Amortization (4,389) (100) (11,157) (125,357)
Deferred policy acquisition costs
attributable to unrealized gains/(losses) 1,561 -- (123,161) 162,190
Effects on deferred policy acquisition
costs of CFLIC consolidation 3,390 -- -- --
--------
Deferred policy acquistion costs,
end of period $49,833 $ 14,468 $ 92,398 $ 213,362
======== ========= ========== ==========
</TABLE>
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 at a pre-tax
rate of 18% (12% net after tax).
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 in proportion to estimated
future gross profits derived from investment income, realized gains and losses
on sales of securities, unrealized securities gains and losses, 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 present value of future profits will be adjusted to
the amount that would have existed had the actual experience and revised
estimates been known and applied from the inception. 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 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 6.8%, 5.8%, 4.6%, 4.5% and 4.7% for the years ended December 31, 1997
through 2001, respectively. Actual amortization incurred during these years
may be more or less as assumptions are modified to incorporate actual results.
During 1996, the Company adjusted its original purchase accounting to include
a revised estimate of the ultimate renewal (recapture) rate. This adjustment
resulted in a re-allocation of the net purchased intangible asset between
present value of future profits, goodwill and the future payable. This final
allocation and the resulting impact on inception to date amortization was
recorded, in its entirety, in 1996. No restatement of the June 1, 1995
opening Balance Sheet was made.
The components of present value of future profits are below. The effects on
present value of future profits of the consolidation of CFLIC (see note 9)
with the Company are presented separately.
<TABLE>
<CAPTION>
The Company
7 Months
Ended
(In Thousands) 1996
12/31/95
<S> <C> <C>
Present value of future profits - beginning of period 38,155 46,709
Interest added 3,274 1,941
Net amortization (3,747) (4,024)
Present value of future profits attributable to unrealized gains 6,896 (6,471)
Adjustment due to revised push down purchase accounting 698 --
Effects on present value of future profits of CFLIC consolidation 1,113 --
Present value of future profits - end of period $46,389 $38,155
</TABLE>
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%.
(continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The Company has recorded a future payable that represents the present value
ofthe 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 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 by the year 2000.
The components of this future payable are below. The effects on the future
payable of the consolidation of CFLIC (see note 9) with the Company are
presented separately.
<TABLE>
<CAPTION>
The Company
7 Months
Ended
(In Thousands) 1996 12/31/95
<S> <C> <C>
Future payable - beginning of period $23,967 $27,797
Interest added 943 947
Payments to OakRe (4,483) (4,777)
Adjustment due to revised push down purchase accounting (5,059) --
Effects on future payable of CFLIC consolidation 683 --
--------
Future payable - end of period $16,051 $23,967
======== ========
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
Goodwill
Under the push down method of purchase accounting, the excess of purchase
price over the fair value of tangible and intangible assets and liabilities
acquired is established as an asset and referred to as Goodwill. The Company
has elected to amortize goodwill on the straight line basis over a 20 year
period. The components of goodwill are below. The effects on goodwill of the
consolidation of CFLIC (see note 9) with the Company are presented separately.
<TABLE>
<CAPTION>
<S> <C> <C>
(In Thousands) The Company
--------------------
7 Months Ended
1996 12/31/95
----------------
Goodwill - beginning of period $ 23,358 $ 24,060
Amortization (916) (702)
Adjustment due to revised push down purchase accounting
(3,626) --
Effects on goodwill of CFLIC consolidation 2,033 --
--------------------
Goodwill - end of period $ 20,849 $ 23,358
</TABLE>
Deferred Tax Assets and Liabilities
XFSI and GALIC 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 over ten
to fifteen years.
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. The average weighted interest crediting rate on the Companys
policyholder deposits as of December 31, 1996 was 5.77%.
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 5.50% 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.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 as the amounts are not
material to the financial statements.
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.
Subsequent to June 1, 1995, the Company filed its own separate income tax
return, independent from its ultimate parent, GALIC.
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 those temporary differences are expected
to be recovered or settled. 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
- Amortization of present value of future profits
- Recoverability of Goodwill
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.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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.
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, 1996.
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.
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
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."
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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, 1996, fair value of the Companys mortgage loans
are equivalent to their 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, 1996 and 1995 the cash surrender value of
policyholder funds on deposit were approximately $29.1 million and $2.2
million less than their stated carrying value, respectively. 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.
REINSURANCE:
The impact of reinsurance on the December 31, 1996 financial statements is not
considered material.
The financing reinsurance agreement entered into with OakRe does not meet the
conditions for reinsurance accounting under Generally Accepted Accounting
Principles (GAAP). 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 1994 and 1995 amounts have been reclassified to conform to the 1996
presentation.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(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, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996
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 $ 7,175 $ 29 ($50) $ 7,175 $ 7,196
Collateralized mortgage obligations 382,335 985 (2,721) 382,335 384,071
Corporate, state, municipalities, and
political subdivisions 560,101 3,971 (5,427) 560,101 561,557
Total debt securities 949,611 4,985 (8,198) 949,611 952,824
Mortgage loans 244,103 -- -- 244,103 244,103
Policy loans 22,336 -- -- 22,336 22,336
Short term investments 4,404 21 -- 4,404 4,383
Total investments $1,220,454 $5,006 ($8,198) $1,220,454 $1,223,646
Companys beneficial interest in
separate accounts $ 14,970 -- -- $ 14,970 --
</TABLE>
<TABLE>
<CAPTION>
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
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, 1996, the Company had no impaired investments. The Company did
establish a valuation allowance for potential losses on mortgage loans of $88 thousand as
of December 31, 1996.
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(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, 1996, 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>
1996
ESTIMATED
AMORTIZED MARKET
COST VALUE
<S> <C> <C>
(in thousands of dollars)
Due after one year through five years $233,232 $234,493
Due after five years through ten years 283,884 281,155
Due after ten years 51,630 51,628
Mortgage-backed securities 384,078 382,335
Total $952,824 $949,611
<FN>
At December 31, 1996, approximately 98.7% of the Company's debt securities are
investment grade or are non-rated but considered to be of investment grade.
Of the 1.3% 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 EITF 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 $3,341,163 were recorded in 1994. No IOs
or IOettes were held by the Company at December 31, 1996 or 1995. The
weighted average of the effective yield that was used to accrue interest
income in 1994 was 11.88%.
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, 1996
had market values totaling $16,612,411. Cash, letters of credit, and
government securities of $17,251,070 was held by the custodian bank as
collateral to secure this agreement. Income on the Companys security lending
program in 1996 was immaterial.
No debt securities were non-income producing during the years ended December
31, 1996 and 1995.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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>
The components of net investment income, realized capital gains/(losses) and
unrealized gains/(losses) were as follows:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
(in thousands of dollars)
<S> <C> <C> <C> <C>
Income on debt securities $53,632 $19,629 $ 63,581 $ 267,958
Income on equity securities -- -- 302 645
Income on short-term investments 2,156 2,778 28,060 11,705
Income on cash on deposit -- -- -- 316
Income on interest rate swaps -- -- 377 (244)
Income on policy loans 1,454 868 624 1,376
Interest on mortgage loans 13,633 1,444 248 1,162
Income on foreign exchange -- -- 184 (433)
Income of real estate -- -- 1,508 3,278
Income on separate account investments 772 -- (1) 2
Miscellaneous interest 133 109 (24) (853)
-------- --------- -----------------
Total investment income 71,780 24,828 94,859 284,912
---------
Investment expenses (1,151) (640) (2,373) (7,296)
-------- -------- ---------
Net investment income $70,629 $24,188 $ 92,486 $ 277,616
======== ======== ========= =================
Realized capital gains/(losses) were as follows:
Debt securities 469 $ 1,344 $(16,749) $ (79,300)
Mortgage loans 4 -- 1,431 (3,452)
Equity securities -- -- (423) (76)
Real estate -- -- (124) --
Short-term investments (1) (20) (1,933) (282)
Other assets -- -- (76) 147
Interest rate swaps -- -- 5,460 -- (18,398)
--------- -----------------
Net realized gains/(losses) on investments $ 472 $ 1,324 $(12,414) $ (101,361)
======== ======== ========= =================
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
(In thousands
of dollars)
<S> <C> <C> <C> <C>
Unrealized gains/(losses) were as follows:
Debt securities ($3,213) $10,688 $(85,410) $(261,947)
Short-term investments 21 36 879 (594)
Effects on deferred acquisition costs amortization 1,561 -- 39,030 162,190
Effects on present value of future profits 425 (6,471) -- --
Unrealized gains/(losses) before income tax (1,206) 4,253 (45,501) (100,351)
Unrealized income tax benefit/(expense) 422 (1,489) 16,664 35,123
Net unrealized gains (losses) on investments ($784) $ 2,764 $(28,837) ($65,228)
======== ========= ==========
</TABLE>
Proceeds from sales of investments in debt securities during 1996 were
$223,430,495. Gross gains of $1,158,518 and gross losses of $687,126 were
realized on those sales. Included in these amounts were $28,969 of gross
gains realized on the sale of non-investment grade securities.
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.
Unrealized appreciation/(depreciation) of debt securities for the Company in
1996 and 1995, and the Predecessor in 1995 and 1994 were $(13,900,000),
$10,688,000, $176,537,000, and $(357,401,000), 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 $7,032,267 at December 31, 1996
were deposited with government authorities as required by law.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(5) SECURITIES GREATER THAN 10% OF SHAREHOLDERS EQUITY
As of December 31, 1996 the Company held the following individual securities
which exceeded 10% of shareholders equity:
<TABLE>
<CAPTION>
LONG-TERM DEBT CARRYING
SECURITIES VALUE
<S> <C>
Countrywide Mtg. 1993-12 A4 $19,347,536
FNMA Remic Tr 1996-50 A1 19,104,500
</TABLE>
As of December 31, 1995 the Company held the following individual securities
which exceeded 10% of shareholders equity:
<TABLE>
<CAPTION>
LONG-TERM DEBT CARRYING
SECURITIES VALUE
<S> <C>
Countrywide Mtg. 1993-12 A4 $18,726,875
American Airlines 15,080,392
</TABLE>
(6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
FINANCIAL FUTURES CONTRACTS
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. Gains or losses are realized in daily cash settlements. 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
future 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.
The Company periodically enters into financial futures contracts in order to
hedge its short term investment spread risks encountered during occasional
periods of unusually large recapture activity. Gains and losses from these
anticipatory hedges are applied to the cost basis of the assets acquired with
recaptured funds. In 1996, $381,105 in net losses were recorded as basis
adjustments to hedged debt securities.
In order to limit its exposure to market fluctuations while it holds temporary
seed money investments within the separate account (see note 3), the Company
has adopted a hedging policy that involves holdings of futures contracts. As
of December 31, 1996, the Company held 35 S&P 500 index futures contracts, 5
5-year T-Note futures contracts and 10 10-year T-Note futures contracts with a
total notional face amount of $14,528,750 and a total fair market value of
$14,652,969. Collateral requirements set by the Chicago Board of Trade
averaged $9,800 per contract at December 31, 1996. At December 31, 1996, the
Company recorded as a component of net investment income, $1,639,717 of gross
losses from terminated contracts and $406,141 of gross gains from open
contracts. In 1996, the Company also recorded, as an offsetting component of
net investment income, a net gain of $2,007,720 from market appreciation on
the underlying hedged securities within the separate account.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(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. In 1996 and 1995, the Company
was allocated a portion of benefit costs including severance pay, accumulated
vacations, and disability benefits. At December 31, 1996 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 with its
wholly-owned subsidiary, FCLIC. 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 tax recoveries.
Income taxes are recorded in the statements of earnings and directly in
certain shareholders equity accounts. Income tax expense (benefit) for the
years ended December 31 was allocated as follows:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95
1994
(In thousands of dollars)
<S> <C> <C> <C> <C>
Statements of income:
Operating income (excluded realized
investment gains and losses) $ 2,493 $ (85) $ (5,038) $ (39,511)
Realized investment gains/(losses) 162 516 (5,026) (37,489)
-------- -------
Income tax expense/(benefit) included
in the statements of income 2,655 431 (10,064) (77,000)
Shareholders equity:
Unrealized gains/(losses) on securities
available for sale and intangible assets (1,910) 1,489 18,458 (53,324)
Total income tax expense/(benefit) $ 745 $1,920 $ 8,394 $(130,324)
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of COVA Corporation)
Notes to Consolidated Financial Statements
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:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
1996 1995 1995 1994
7 MONTHS 5 MONTHS
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $2,190 35.0% $129 35.0% $(13,862) 35.0% $(76,739) 35.0%
State income taxes, net 77 1.23 11 3.0 (306) 0.8 (1,552) 0.7
Tax-exempt bond interest -- -- (22) (6.0) (332) 0.8 (1,208) 0.6
Amortization of intangible assets 320 5.12 254 69.0 -- -- 111 (0.1)
Permanent difference due to derivative transfer
-- -- -- -- 4,399 (11.1) -- --
Other 68 1.09 59 16.1 37 (.1) 2,388 (1.1)
Total $2,655 42.44% $431 117.1% $(10,064) 25.4% $(77,000) 35.1%
====== ====== ===== ====== ========= ====== ========= =====
</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, 1996 &
1995 follows:
<TABLE>
<CAPTION>
1996 1995
(In thousands of dollars)
<S> <C> <C>
Deferred tax assets:
PVFP $ 1,639 --
Policy Reserves 19,237 $ 7,601
Liability for commissions on recapture 6,073 8,868
Tax basis of intangible assets purchased 6,230 13,141
DAC Proxy Tax 9,032 4,749
Unrealized losses on investments 422 --
Other deferred tax assets 827 2,860
Total assets $43,460 $37,219
------- -------
Deferred tax liabilities:
PVFP $19,169 $16,774
Unrealized gains on investments -- 1,489
Deferred Acquisition Costs 10,694 5,316
Other deferred tax liabilities 60 84
Total liabilities 29,923 23,663
-------
Net Deferred Tax Asset $13,537 $13,556
======= =======
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(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 Conning Asset Management, 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 1996 and the 7 months of 1995 for the Company were
$6,618,303, and $7,139,525, respectively, and the five months of 1995 and the
year 1994 for the Predecessor were 6,364,609, and $8,553,028, respectively.
On December 31, 1996 Cova Corporation transferred its ownership of Cova
Financial Life Insurance Company (CFLIC), an affiliated life insurer domiciled
in the state of California, to the Company. The transfer of ownership was
recorded as additional paid in capital and increased Shareholders Equity on
the Companys December 31, 1996 Balance Sheet by approximately $16.9 million.
This change in direct ownership had no effect on the operations of either the
Company or CFLIC as both entities had existed under common management and
control prior to the December 31, 1996 transfer. Although CFLICs Balance
Sheet is fully consolidated with the Companys December 31, 1996 Balance Sheet,
CFLICs 1996 Income Statement and Cash Flow have not been consolidated with the
Companys 1996 Income Statement or Cash Flow Statement. However, CFLICs
year-end cash balance of $6.7 million is included in the Cash Flow Statement.
(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 recognition of deferred taxes under GAAP reporting, 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 SUBSIDIARIES
(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>
1996 1995
(in thousands of dollars)
<S> <C> <C>
Statutory Capital and Surplus $ 75,354 $ 59,682
Reconciling items:
GAAP investment valuation reserves (88) --
Statutory Asset Valuation Reserves 17,599 13,378
Interest Maintenance Reserve 2,301 1,892
GAAP investment adjustments to fair value (3,191) 10,724
Deferred policy acquisition costs 49,833 14,468
GAAP basis policy reserves (30,202) (11,233)
Deferred federal income taxes (net) 13,537 13,556
Modified coinsurance -- --
Goodwill 20,849 23,358
Present value of future profits 46,389 38,155
Future purchase price payable (16,051) (23,967)
Other (1,286) (1,927)
GAAP Shareholders' Equity $175,044 $138,086
========= =========
</TABLE>
Statutory net losses for CFSLIC for the years ended December 31, 1996, 1995
and 1994 were $(13,575,788), $(74,012,650), and $(92,952,989), 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 during 1997 will be $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, 1996 the Company's Total Adjusted
Capital and Authorized Control Level - RBC were, $92,953,237, and $21,058,220
respectively. This level of adjusted capital qualifies under all tests.
(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 1996, 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.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
At December 31, 1996, 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 $12.4 million in
future assessments on insolvencies that occurred before December 31, 1996.
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 a receivable from Oakre for approximately $12.3
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
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
---------------------------------------------------------------
The following financial statements of the Separate Account are
included in Part B hereof:
1. Statement of Assets and Liabilities September 30, 1997
(unaudited).
2. Statement of Operations for the Nine Months Ended September
30, 1997 (unaudited).
3. Statement of Changes in Contract Owners Equity for the Nine
Months Ended September 30, 1997 (unaudited).
4. Statement of Changes in Contract Owners Equity for the Year
Ended December 31, 1996.
5. Notes to Unaudited Financial Statements for the Nine Months
Ended September 30, 1997.
6. Independent Auditors' Report.
7. Statement of Assets and Liabilities as of December 31, 1996.
8. Statement of Operations for the year ended December 31, 1996.
9. Statements of Changes in Contract Owners' Equity for the years
ended December 31, 1996 and 1995.
10. Financial Highlights for the five years in the period ended December
31, 1996.
11. Notes to Financial Statements for the years ended December 31,
1996 and 1995.
The following consolidated financial statements of the Company
are included in Part B hereof:
1. Independent Auditors' Report.
2. Consolidated Balance Sheets as of December 31, 1996 and 1995.
3. Consolidated Statements of Income for the years ended December
31, 1996, 1995 and 1994.
4. Consolidated Statements of Shareholder's Equity for the years
ended December 31, 1996, 1995 and 1994.
5. Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.
6. Notes to Consolidated Financial Statements - December 31, 1996,
1995 and 1994.
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. Not Applicable
* 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 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.
### incorporated by reference to Registrant's Amendment No. 18 to
Form N-4 (File No. 811-5200) as electronically filed on April 24,
1996.
#### incorporated by reference to Registrant's Amendment No. 20 to
Form N-4 (File No. 811-5200) as electronically filed on April 23,
1997.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
Name and Principal Positions and Offices
Business Address with Depositor
_______________________________ ____________________________________
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Leonard Rubenstein Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
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
Connie Doern Vice President
1776 West Lakes Pkwy
West Des Moines, IA 50266
Judy M. Drew 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
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
Lisa O. Kirchner Vice President
1776 West Lakes Pkwy
West Des Moines, IA 50266
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
Mark E. Reynolds Executive 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
Peter L. Witkewiz Vice President
1776 West Lakes Pkwy
West Des Moines, IA 50266
Kent R. Zimmerman Assistant Treasurer
700 Market Street
St. Louis, MO 63101
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart was filed as Exhibit 14 in Registrant's Amendment
No. 18 to Form N-4 and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of November 30, 1997, there were 22,081 Non-Qualified Contract Owners and
5,345 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) Cova Life Sales Company is the principal underwriter for the following
investment companies (other than Registrant):
Cova Variable Annuity Account Five
Cova Variable Life Account One
Cova Variable Life Account Five
First Cova Variable Annuity Account One
(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.
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
William C. Mair Director
Philip A. Haley Vice President
Frances S. Cook Assistant Secretary
Robert A. Miner Treasurer
(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.
d. Cova Financial Services Life Insurance Company ("Company") hereby
represents that the fees and charges deducted under the Contracts described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
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 it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Oakbrook
Terrace, and State of Illinois on this 16th day of December, 1997.
COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /s/ LORRY J. STENSRUD
_________________________________________
Lorry J. Stensrud, President
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
Depositor
/s/ LORRY J. STENSRUD
By: ________________________________________
Lorry J. Stensrud, President
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.
Chairman of the Board and
- ---------------------- Director --------
Richard A. Liddy Date
/S/ LORRY J. STENSRUD President and Director 12/16/97
- ---------------------- --------
Lorry J. Stensrud Date
- ---------------------- Director --------
Leonard M. Rubenstein Date
Director
- ---------------------- --------
J. Robert Hopson Date
William C. Mair* Controller and Director 12/16/97
- ---------------------- --------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 12/16/97
- ---------------------- --------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 12/16/97
- ---------------------- --------
Matthew P. McCauley Date
John W. Barber* Director 12/16/97
- ---------------------- --------
John W. Barber Date
/S/ MARK E. REYNOLDS Director 12/17/97
- ---------------------- --------
Mark E. Reynolds Date
/S/ LORRY J. STENSRUD
*By: ____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EXHIBIT NO.
99.B10 Consent of Independent Accountants
99.B13 Calculation of Performance Information
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 10 (File No. 33-39100)
TO
FORM N-4
FOR
COVA VARIABLE ANNUITY ACCOUNT ONE
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
Consent of Independent Auditors
The Board of Directors
Cova Financial Services Life Insurance Company
We consent to the reference to our firm under the caption "Experts" in the
statement of additional information and to the use of our report with respect to
the consolidated financial statements of Cova Financial Services Life Insurance
Company and subsidiaries as of December 31, 1996 and for the seven-month period
ended December 31, 1995, and the preacquisition five-month period ended May 31,
1995, and the year ended December 31, 1994, dated March 7, 1997, and our report
with respect to the financial statements of Cova Variable Annuity Account One as
of December 31, 1996 and for the years ended December 31, 1996 and 1995, dated
February 13, 1997, in the Post-Effective Amendment No. 10 to the Registration
Statement (Form N-4 No. 33-39100) of Cova Variable Annuity Account One.
/S/ KPMG PEAT MARWICK LLP
Chicago, Illinois
December 29, 1997
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE (MISSOURI)
STANDARD FIVE YEAR RETURN DATA
AS OF 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C>
VKM Quality Income
Date Transaction Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 12.792414 78.1713 78.1713 1,000.00
09/30/93 Contract Fee (4.48) 14.087144 (0.3181) 77.8532 1,096.73
09/30/94 Contract Fee (4.16) 13.197626 (0.3154) 77.5378 1,023.32
09/29/95 Contract Fee (4.09) 14.749674 (0.2773) 77.2605 1,139.57
09/30/96 Contract Fee (3.79) 15.132856 (0.2502) 77.0103 1,165.39
09/30/97 Contract Fee (3.82) 16.290615 (0.2343) 76.7760 1,250.73
09/30/97 Value 16.290615 0.0000 76.7760 1,250.73
09/30/97 Charge 0.05 (45.00) 16.290615 (2.7623) 74.0137 1,205.73
09/30/97 Remaining Value 16.290615 0.0000 74.0137 1,205.73
VKM High Yield
Date Transaction Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 14.957146 66.8577 66.8577 1,000.00
09/30/93 Contract Fee (5.46) 17.151467 (0.3181) 66.5395 1,141.25
09/30/94 Contract Fee (5.41) 17.166447 (0.3154) 66.2242 1,136.83
09/29/95 Contract Fee (5.26) 18.986151 (0.2773) 65.9469 1,252.08
09/30/96 Contract Fee (5.19) 20.731096 (0.2502) 65.6967 1,361.96
09/30/97 Contract Fee (5.40) 23.069578 (0.2343) 65.4624 1,510.19
09/30/97 Value 23.069578 0.0000 65.4624 1,510.19
09/30/97 Charge 0.05 (45.00) 23.069578 (1.9506) 63.5118 1,465.19
09/30/97 Remaining Value 23.069578 0.0000 63.5118 1,465.19
Lord Abbett Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 13.582631 73.6234 73.6234 1,000.00
09/30/93 Contract Fee (5.12) 16.101046 (0.3181) 73.3053 1,180.29
09/30/94 Contract Fee (5.32) 16.883319 (0.3154) 72.9899 1,232.31
09/29/95 Contract Fee (5.66) 20.421830 (0.2773) 72.7126 1,484.93
09/30/96 Contract Fee (5.86) 23.418841 (0.2502) 72.4624 1,696.99
09/30/97 Contract Fee (7.25) 30.940092 (0.2343) 72.2281 2,234.75
09/30/97 Value 30.940092 0.0000 72.2281 2,234.75
09/30/97 Charge 0.05 (45.00) 30.940092 (1.4544) 70.7737 2,189.75
09/30/97 Remaining Value 30.940092 0.0000 70.7737 2,189.75
VKM Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 10.414435 96.0206 96.0206 1,000.00
09/30/93 Contract Fee (3.37) 10.585828 (0.3181) 95.7024 1,013.09
09/30/94 Contract Fee (3.40) 10.793761 (0.3154) 95.3871 1,029.59
09/29/95 Contract Fee (3.13) 11.302712 (0.2773) 95.1098 1,075.00
09/30/96 Contract Fee (2.94) 11.760162 (0.2502) 94.8596 1,115.56
09/30/97 Contract Fee (2.87) 12.244078 (0.2343) 94.6253 1,158.60
09/30/97 Value 12.244078 0.0000 94.6253 1,158.60
09/30/97 Charge 0.05 (45.00) 12.244078 (3.6752) 90.9500 1,113.60
09/30/97 Remaining Value 12.244078 0.0000 90.9500 1,113.60
VKM Stock Index
Date Transaction Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 10.655811 93.8455 93.8455 1,000.00
09/30/93 Contract Fee (3.70) 11.645119 (0.3181) 93.5274 1,089.14
09/30/94 Contract Fee (3.72) 11.789237 (0.3154) 93.2120 1,098.90
09/29/95 Contract Fee (4.14) 14.939795 (0.2773) 92.9347 1,388.43
09/30/96 Contract Fee (4.42) 17.669922 (0.2502) 92.6845 1,637.73
09/30/97 Contract Fee (5.70) 24.342237 (0.2343) 92.4502 2,250.44
09/30/97 Value 24.342237 0.0000 92.4502 2,250.44
09/30/97 Charge 0.05 (45.00) 24.342237 (1.8486) 90.6016 2,205.44
09/30/97 Remaining Value 24.342237 0.0000 90.6016 2,205.44
VKM Growth & Income
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 9.912358 100.8842 100.8842 1,000.00
09/30/93 Contract Fee (3.76) 11.826119 (0.3181) 100.5660 1,189.31
09/30/94 Contract Fee (3.61) 11.450838 (0.3154) 100.2507 1,147.95
09/29/95 Contract Fee (3.84) 13.849109 (0.2773) 99.9734 1,384.54
09/30/96 Contract Fee (3.96) 15.811166 (0.2502) 99.7231 1,576.74
09/30/97 Contract Fee (4.96) 21.166476 (0.2343) 99.4889 2,105.83
09/30/97 Value Before Wthdrwl Chg 21.166476 0.0000 99.4889 2,105.83
09/30/97 Wthdrwl Chg and Cont Fee 0.05 (45.00) 21.166476 (2.1260) 97.3629 2,060.83
09/30/97 Remaining Value 21.166476 0.0000 97.3629 2,060.83
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE (MISSOURI)
STANDARD FIVE YEAR RETURNS
AVERAGE ANNUAL TOTAL RETURN
AS OF 9/30/97
<S> <C> <C> <C>
SUB-ACCOUNT PURCHASE TOTAL VALUE TOTAL
AMOUNT UNITS HELD RETURN
VKM Quality Income 1,000.00 1,205.73 3.81%
VKM High Yield 1,000.00 1,465.19 7.94%
Lord Abbett Growth & Income 1,000.00 2,189.75 16.97%
VKM Stock Index 1,000.00 2,205.44 17.14%
VKM Money Market 1,000.00 1,113.60 2.18%
VKM Growth & Income 1,000.00 2,060.83 15.56%
</TABLE>
FOR ILLUSTRATIVE PURPOSES, THE ABOVE RETURNS ASSUME THAT THE ANNUAL CONTRACT
MAINTENANCE CHARGE IS PRORATED AMONG THE SUB-ACCOUNTS BASED ON THE RATIO OF EACH
SUB-ACCOUNT'S ACCOUNT VALUE TO THE TOTAL CONTRACT
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE (MISSOURI)
NON-STANDARD FIVE YEAR RETURN DATA
AS OF 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C>
VKM Quality Income
Date Transaction Type Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 12.792414 78.1713 78.1713 1,000.00
09/30/93 Contract Fee 14.087144 0.0000 78.1713 1,101.21
09/30/94 Contract Fee 13.197626 0.0000 78.1713 1,031.68
09/29/95 Contract Fee 14.749674 0.0000 78.1713 1,153.00
09/30/96 Contract Fee 15.132856 0.0000 78.1713 1,182.96
09/30/97 Contract Fee 16.290615 0.0000 78.1713 1,273.46
09/30/97 Value 16.290615 0.0000 78.1713 1,273.46
09/30/97 Charge 0.05 16.290615 0.0000 75.4090 1,273.46
09/30/97 Remaining Value 16.290615 0.0000 75.4090 1,273.46
VKM High Yield
Date Transaction Type Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 14.957146 66.8577 66.8577 1,000.00
09/30/93 Contract Fee 17.151467 0.0000 66.8577 1,146.71
09/30/94 Contract Fee 17.166447 0.0000 66.8577 1,147.71
09/29/95 Contract Fee 18.986151 0.0000 66.8577 1,269.37
09/30/96 Contract Fee 20.731096 0.0000 66.8577 1,386.03
09/30/97 Contract Fee 23.069578 0.0000 66.8577 1,542.38
09/30/97 Value 23.069578 0.0000 66.8577 1,542.38
09/30/97 Charge 0.05 23.069578 0.0000 64.9071 1,542.38
09/30/97 Remaining Value 23.069578 0.0000 64.9071 1,542.38
Lord Abbett Growth and Income
Date Transaction Type Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 13.582631 73.6234 73.6234 1,000.00
09/30/93 Contract Fee 16.101046 0.0000 73.6234 1,185.41
09/30/94 Contract Fee 16.883319 0.0000 73.6234 1,243.01
09/29/95 Contract Fee 20.421830 0.0000 73.6234 1,503.53
09/30/96 Contract Fee 23.418841 0.0000 73.6234 1,724.18
09/30/97 Contract Fee 30.940092 0.0000 73.6234 2,277.92
09/30/97 Value 30.940092 0.0000 73.6234 2,277.92
09/30/97 Charge 0.05 30.940092 0.0000 73.6234 2,277.92
09/30/97 Remaining Value 30.940092 0.0000 73.6234 2,277.92
Date Transaction Type Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 10.414435 96.0206 96.0206 1,000.00
09/30/93 Contract Fee 10.585828 0.0000 96.0206 1,016.46
09/30/94 Contract Fee 10.793761 0.0000 96.0206 1,036.42
09/29/95 Contract Fee 11.302712 0.0000 96.0206 1,085.29
09/30/96 Contract Fee 11.760162 0.0000 96.0206 1,129.22
09/30/97 Contract Fee 12.244078 0.0000 96.0206 1,175.68
09/30/97 Value 12.244078 0.0000 96.0206 1,175.68
09/30/97 Charge 0.05 12.244078 0.0000 96.0206 1,175.68
09/30/97 Remaining Value 12.244078 0.0000 96.0206 1,175.68
Stock Index
Date Transaction Type Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 10.655811 93.8455 93.8455 1,000.00
09/30/93 Contract Fee 11.645119 0.0000 93.8455 1,092.84
09/30/94 Contract Fee 11.789237 0.0000 93.8455 1,106.37
09/29/95 Contract Fee 14.939795 0.0000 93.8455 1,402.03
09/30/96 Contract Fee 17.669922 0.0000 93.8455 1,658.24
09/30/97 Contract Fee 24.342237 0.0000 93.8455 2,284.41
09/30/97 Value 24.342237 0.0000 93.8455 2,284.41
09/30/97 Charge 0.05 24.342237 0.0000 93.8455 2,284.41
09/30/97 Remaining Value 24.342237 0.0000 93.8455 2,284.41
VKM Growth & Income
Date Transaction Type Rate Amount Unit Value Units This Total Total
Unit Value Transaction Units Held Value
09/30/92 Purchase 1,000.00 9.912358 100.8842 100.8842 1,000.00
09/30/93 Contract Fee 11.826119 0.0000 100.8842 1,193.07
09/30/94 Contract Fee 11.450838 0.0000 100.8842 1,155.21
09/29/95 Contract Fee 13.849109 0.0000 100.8842 1,397.16
09/30/96 Contract Fee 15.811166 0.0000 100.8842 1,595.10
09/30/97 Contract Fee 21.166476 0.0000 100.8842 2,135.36
09/30/97 Value 21.166476 0.0000 100.8842 2,135.36
09/30/97 Charge 0.05 21.166476 0.0000 100.8842 2,135.36
09/30/97 Remaining Value 21.166476 0.0000 100.8842 2,135.36
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE (MISSOURI)
NON-STANDARD FIVE YEAR RETURN
AVERAGE ANNUAL TOTAL RETURN
AS OF 9/30/97
SUB-ACCOUNT PURCHASE TOTAL VALUE TOTAL
AMOUNT UNITS HELD RETURN
<S> <C> <C> <C>
VKM Quality Income 1,000.00 1,273.46 4.95%
VKM High Yield 1,000.00 1,542.38 9.05%
Lord Abbett Growth & Income 1,000.00 2,277.92 17.90%
VKM Stock Index 1,000.00 2,284.41 3.29%
VKM Money Market 1,000.00 1,175.68 3.29%
VKM Growth & Income 1,000.00 2,135.36 16.38%
</TABLE>
FOR ILLUSTRATIVE PURPOSES, THE ABOVE RETURNS ASSUME THAT THE ANNUAL CONTRACT
MAINTENANCE CHARGE IS PRORATED AMONG THE SUB-ACCOUNTS BASED ON THE RATIO OF EACH
SUB-ACCOUNT'S ACCOUNT VALUE TO THE TOTAL CONTRACT VALUE.
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (Missouri)
STANDARD INCEPTION TO DATE RETURN DATA
AS OF 09/30/97
VKM Quality Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
12/11/89 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/90 Contract Fee (7.88) 10.642864 (0.7404) 99.2596 1,056.41
12/11/91 Contract Fee (5.34) 11.793541 (0.4528) 98.8068 1,165.28
12/11/92 Contract Fee (4.52) 12.690512 (0.3562) 98.4506 1,249.39
12/11/93 Contract Fee (4.40) 13.997342 (0.3143) 98.1363 1,373.65
12/11/94 Contract Fee (4.29) 13.179662 (0.3255) 97.8108 1,289.11
12/11/95 Contract Fee (4.07) 15.200779 (0.2677) 97.5430 1,482.73
12/11/96 Contract Fee (2.32) 15.540342 (0.1492) 97.3938 1,513.53
09/30/97 Value 16.290615 0.0000 97.3938 1,586.60
09/30/97 Charge 0.05 (46.88) 16.290615 (2.8777) 94.5161 1,539.73
09/30/97 Remaining Value 16.290615 0.0000 94.5161 1,539.73
VKM High Yield
Date Transaction Type Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
12/11/89 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/90 Contract Fee (7.43) 10.038196 (0.7402) 99.2598 996.39
12/11/91 Contract Fee (5.72) 12.639788 (0.4525) 98.8073 1,248.90
12/11/92 Contract Fee (5.31) 14.896607 (0.3565) 98.4508 1,466.58
12/11/93 Contract Fee (5.64) 17.930469 (0.3145) 98.1363 1,759.63
12/11/94 Contract Fee (5.47) 16.825188 (0.3251) 97.8112 1,645.69
12/11/95 Contract Fee (5.20) 19.405032 (0.2680) 97.5432 1,892.83
12/11/96 Contract Fee (3.17) 21.273774 (0.1492) 97.3940 2,071.94
09/30/97 Value 23.069578 0.0000 97.3940 2,246.84
09/30/97 Charge 0.05 (47.66) 23.069578 (2.0660) 95.3280 2,199.18
09/30/97 Remaining Value 23.069578 0.0000 95.3280 2,199.18
Lord Abbett Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
12/11/89 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/90 Contract Fee (7.39) 9.991916 (0.7396) 99.2604 991.80
12/11/91 Contract Fee (5.26) 11.635826 (0.4521) 98.8083 1,149.72
12/11/92 Contract Fee (5.07) 14.232895 (0.3562) 98.4521 1,401.26
12/11/93 Contract Fee (5.10) 16.227131 (0.3143) 98.1378 1,592.50
12/11/94 Contract Fee (5.25) 16.145116 (0.3252) 97.8127 1,579.20
12/11/95 Contract Fee (5.70) 21.265128 (0.2680) 97.5446 2,074.30
12/11/96 Contract Fee (3.76) 25.168559 (0.1492) 97.3954 2,451.30
09/30/97 Value 30.940092 0.0000 97.3954 3,013.42
09/30/97 Charge 0.05 (48.57) 30.940092 (1.5698) 95.8256 2,964.85
09/30/97 Remaining Value 30.940092 0.0000 95.8256 2,964.85
VKM Stock Index
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
11/01/91 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/91 Contract Fee (4.36) 9.641255 (0.4522) 99.5478 959.77
12/11/92 Contract Fee (3.94) 11.042649 (0.3568) 99.1910 1,095.33
12/11/93 Contract Fee (3.73) 11.858110 (0.3146) 98.8764 1,172.49
12/11/94 Contract Fee (3.71) 11.401457 (0.3254) 98.5510 1,123.63
12/11/95 Contract Fee (4.25) 15.871130 (0.2678) 98.2832 1,559.87
12/11/96 Contract Fee (2.84) 19.034668 (0.1492) 98.1340 1,867.95
09/30/97 Value 24.342237 0.0000 98.1340 2,388.80
09/30/97 Charge 0.05 (47.81) 24.342237 (1.9640) 96.1700 2,340.99
09/30/97 Remaining Value 24.342237 0.0000 96.1700 2,340.99
VKM Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/91 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/91 Contract Fee (4.61) 10.188527 (0.4525) 99.5475 1,014.24
12/11/92 Contract Fee (3.72) 10.449186 (0.3560) 99.1915 1,036.47
12/11/93 Contract Fee (3.34) 10.617015 (0.3146) 98.8769 1,049.78
12/11/94 Contract Fee (3.53) 10.871571 (0.3247) 98.5522 1,071.42
12/11/95 Contract Fee (3.06) 11.397944 (0.2685) 98.2838 1,120.23
12/11/96 Contract Fee (1.77) 11.851727 (0.1492) 98.1345 1,163.06
09/30/97 Value 12.244078 0.0000 98.1345 1,201.57
09/30/97 Charge 0.05 (46.41) 12.244078 (3.7906) 94.3439 1,155.15
09/30/97 Remaining Value 12.244078 0.0000 94.3439 1,155.15
VKM Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
05/01/92 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/92 Contract Fee (3.69) 10.352054 (0.3565) 99.6435 1,031.52
12/11/93 Contract Fee (3.71) 11.795195 (0.3145) 99.3290 1,171.61
12/11/94 Contract Fee (3.50) 10.773452 (0.3249) 99.0041 1,066.62
12/11/95 Contract Fee (3.89) 14.498752 (0.2683) 98.7358 1,431.55
12/11/96 Contract Fee (2.53) 16.954792 (0.1492) 98.5866 1,671.52
09/30/97 Value 21.166476 0.0000 98.5866 2,086.73
09/30/97 Charge 0.05 (47.44) 21.166476 (2.2414) 96.3453 2,039.29
09/30/97 Remaining Value 21.166476 0.0000 96.3453 2,039.29
JPM Quality Bond
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 9.897228 101.0384 101.0384 1,000.00
12/11/96 Contract Fee (1.55) 10.364657 (0.1492) 100.8892 1,045.68
09/30/97 Value 10.877551 0.0000 100.8892 1,097.43
09/30/97 Charge 0.05 (46.25) 10.877551 (4.2523) 96.6368 1,051.17
09/30/97 Remaining Value 10.877551 0.0000 96.6368 1,051.17
JPM Small Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.512560 95.1243 95.1243 1,000.00
12/11/96 Contract Fee (1.65) 11.086421 (0.1492) 94.9751 1,052.93
09/30/97 Value 13.775226 0.0000 94.9751 1,308.30
09/30/97 Charge 0.05 (46.59) 13.775226 (3.3821) 91.5930 1,261.71
09/30/97 Remaining Value 13.775226 0.0000 91.5930 1,261.71
JPM Large Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.003025 99.9698 99.9698 1,000.00
12/11/96 Contract Fee (1.69) 11.353003 (0.1492) 99.8205 1,133.26
09/30/97 Value 14.621557 0.0000 99.8205 1,459.53
09/30/97 Charge 0.05 (46.69) 14.621557 (3.1930) 96.6275 1,412.84
09/30/97 Remaining Value 14.621557 0.0000 96.6275 1,412.84
JPM Select Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.083890 99.1681 99.1681 1,000.00
12/11/96 Contract Fee (1.61) 10.779321 (0.1492) 99.0188 1,067.36
09/30/97 Value 14.200213 0.0000 99.0188 1,406.09
09/30/97 Charge 0.05 (46.64) 14.200213 (3.2843) 95.7345 1,359.45
09/30/97 Remaining Value 14.200213 0.0000 95.7345 1,359.45
JPM International Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.214899 97.8962 97.8962 1,000.00
12/11/96 Contract Fee (1.60) 10.726728 (0.1492) 97.7470 1,048.51
09/30/97 Value 12.101316 0.0000 97.7470 1,182.87
09/30/97 Charge 0.05 (46.40) 12.101316 (3.8340) 93.9130 1,136.47
09/30/97 Remaining Value 12.101316 0.0000 93.9130 1,136.47
Lord Abbett Bond Debenture
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.097690 99.0326 99.0326 1,000.00
12/11/96 Contract Fee (1.67) 11.194096 (0.1492) 98.8833 1,106.91
09/30/97 Value 12.656085 0.0000 98.8833 1,251.48
09/30/97 Charge 0.05 (46.46) 12.656085 (3.6709) 95.2124 1,205.02
09/30/97 Remaining Value 12.656085 0.0000 95.2124 1,205.02
GAIMCO Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
06/03/96 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/96 Contract Fee (1.52) 10.210737 (0.1492) 99.8508 1,019.55
09/30/97 Value 10.553104 0.0000 99.8508 1,053.74
09/30/97 Charge 0.05 (46.22) 10.553104 (4.3795) 95.4713 1,007.52
09/30/97 Remaining Value 10.553104 0.0000 95.4713 1,007.52
MVA Balanced
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 10.478753 0.0000 100.0000 1,047.88
09/30/97 Charge 0.05 (46.21) 10.478753 (4.4098) 95.5902 1,001.67
09/30/97 Remaining Value 10.478753 0.0000 95.5902 1,001.67
MVA Small Cap Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 11.156281 0.0000 100.0000 1,115.63
09/30/97 Charge 0.05 (46.29) 11.156281 (4.1489) 95.8511 1,069.34
09/30/97 Remaining Value 11.156281 0.0000 95.8511 1,069.34
MVA Equity Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 10.870351 0.0000 100.0000 1,087.04
09/30/97 Charge 0.05 (46.25) 10.870351 (4.2550) 95.7450 1,040.78
09/30/97 Remaining Value 10.870351 0.0000 95.7450 1,040.78
MVA Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 10.741146 0.0000 100.0000 1,074.11
09/30/97 Charge 0.05 (46.24) 10.741146 (4.3048) 95.6952 1,027.88
09/30/97 Remaining Value 10.741146 0.0000 95.6952 1,027.88
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Separate Account One (Missouri)
Standard Inception to Date Return
Average Annual Total Return
As of 9/30/97
Sub-Account Purchase Total Value Total Inception Current Days Since
Amount Units Held Return Date Date Inception
<S> <C> <C> <C> <C> <C> <C>
VKM Quality Income 1,000.00 1,539.73 5.68% 12/11/89 09/30/97 2,850
VKM High Yield 1,000.00 2,199.18 10.62% 12/11/89 2,850
Lord Abbett Growth & Income 1,000.00 2,964.85 14.93% 12/11/89 2,850
VKM Stock Index 1,000.00 2,340.99 15.46% 11/01/91 2,160
VKM Money Market 1,000.00 1,155.15 2.33% 07/01/91 2,283
VKM Growth & Income 1,000.00 2,039.29 14.05% 05/01/92 1,978
JPM Quality Bond 1,000.00 1,051.17 3.58% 04/30/96 518
JPM Small Capital Stock 1,000.00 1,261.71 17.80% 04/30/96 518
JPM Large Capital Stock 1,000.00 1,412.84 27.57% 04/30/96 518
JPM Select Equity 1,000.00 1,359.45 24.16% 04/30/96 518
JPM International Equity 1,000.00 1,136.47 9.43% 04/30/96 518
Lord Abbett Bond Debenture 1,000.00 1,205.02 14.04% 04/30/96 518
GAIMCO Money Market 1,000.00 1,007.52 0.57% 06/03/96 484
MVA Balanced 1,000.00 1,001.67 0.67% 07/01/97 91
MVA Small Cap Equity 1,000.00 1,069.34 30.85% 07/01/97 91
MVA Equity Income 1,000.00 1,040.78 17.39% 07/01/97 91
MVA Growth & Income 1,000.00 1,027.88 11.66% 07/01/97 91
</TABLE>
For illustrative purposes, the above returns assume that the annual contract
maintenance charge is prorated among the sub-accounts based on the ratio of each
sub-account's account value to the total contract value.
<TABLE>
<CAPTION>
Cova Variable Annuity Separate Account One (Missouri)
Standard Inception to Date Return
Total Return
As of 9/30/97
Sub-Account Purchase Total Value Total
Amount Units Held Return
<S> <C> <C> <C>
VKM Quality Income 1,000.00 1,539.73 53.97%
VKM High Yield 1,000.00 2,199.18 119.92%
Lord Abbett Growth & Income 1,000.00 2,964.85 196.49%
VKM Stock Index 1,000.00 2,340.99 134.10%
VKM Money Market 1,000.00 1,155.15 15.52%
VKM Growth & Income 1,000.00 2,039.29 103.93%
JPM Quality Bond 1,000.00 1,051.17 5.12%
JPM Small Capital Stock 1,000.00 1,261.71 26.17%
JPM Large Capital Stock 1,000.00 1,412.84 41.28%
JPM Select Equity 1,000.00 1,359.45 35.95%
JPM International Equity 1,000.00 1,136.47 13.65%
Lord Abbett Bond Debenture 1,000.00 1,205.02 20.50%
GAIMCO Money Market 1,000.00 1,007.52 0.75%
MVA Balanced 1,000.00 1,001.67 0.17%
MVA Small Cap Equity 1,000.00 1,069.34 6.93%
MVA Equity Income 1,000.00 1,040.78 4.08%
MVA Growth & Income 1,000.00 1,027.88 2.79%
</TABLE>
For illustrative purposes, the above returns assume that the annual contract
maintenance charge is prorated among the sub-accounts based on the ratio of each
sub-account's account value to the total contract.
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (Missouri)
Standard One Year Return Data
As of 09/30/97
VKM Quality Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 15.132856 66.0814 66.0814 1,000.00
09/30/97 Value 16.290615 0.0000 66.0814 1,076.51
09/30/97 Charge 0.05 (50.00) 16.290615 (3.0693) 63.0121 1,026.51
09/30/97 Contract Fee (2.25) 16.290615 (0.1384) 62.8738 1,024.25
09/30/97 Remaining Value 16.290615 0.0000 62.8738 1,024.25
VKM High Yield
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 000.00 20.731096 48.2367 48.2367 1,000.00
09/30/97 Value 23.069578 0.0000 48.2367 1,112.80
09/30/97 Charge 0.05 (50.00) 23.069578 (2.1674) 46.0694 1,062.80
09/30/97 Contract Fee (3.19) 23.069578 (0.1384) 45.9310 1,059.61
09/30/97 Remaining Value 23.069578 0.0000 45.9310 1,059.61
Lord Abbett Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 23.418841 42.7007 42.7007 1,000.00
09/30/97 Value 30.940092 0.0000 42.7007 1,321.16
09/30/97 Charge 0.05 (50.00) 30.940092 (1.6160) 41.0846 1,271.16
09/30/97 Contract Fee (4.28) 30.940092 (0.1384) 40.9463 1,266.88
09/30/97 Remaining Value 30.940092 0.0000 40.9463 1,266.88
VKM Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 11.760162 85.0328 85.0328 1,000.00
09/30/97 Value 12.244078 0.0000 85.0328 1,041.15
09/30/97 Charge 0.05 (50.00) 12.244078 (4.0836) 80.9492 991.15
09/30/97 Contract Fee (1.69) 12.244078 (0.1384) 80.8109 989.45
09/30/97 Remaining Value 12.244078 0.0000 80.8109 989.45
VKM Stock Index
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 17.669922 56.5933 56.5933 1,000.00
09/30/97 Value 24.342237 0.0000 56.5933 1,377.61
09/30/97 Charge 0.05 (50.00) 24.342237 (2.0540) 54.5393 1,327.61
09/30/97 Contract Fee (3.37) 24.342237 (0.1384) 54.4010 1,324.24
09/30/97 Remaining Value 24.342237 0.0000 54.4010 1,324.24
VKM Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 15.811166 63.2464 63.2464 1,000.00
09/30/97 Value 21.166476 0.0000 63.2464 1,338.70
09/30/97 Charge 0.05 (50.00) 21.166476 (2.3622) 60.8842 1,288.70
09/30/97 Contract Fee (2.93) 21.166476 (0.1384) 60.7459 1,285.78
09/30/97 Remaining Value 21.166476 0.0000 60.7459 1,285.78
JPM Quality Bond
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.107693 98.9345 98.9345 1,000.00
09/30/97 Value 10.877551 0.0000 98.9345 1,076.17
09/30/97 Charge 0.05 (50.00) 10.877551 (4.5966) 94.3379 1,026.17
09/30/97 Contract Fee (1.50) 10.877551 (0.1384) 94.1996 1,024.66
09/30/97 Remaining Value 10.877551 0.0000 94.1996 1,024.66
JPM Small Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.601053 94.3303 94.3303 1,000.00
09/30/97 Value 13.775226 0.0000 94.3303 1,299.42
09/30/97 Charge 0.05 (50.00) 13.775226 (3.6297) 90.7005 1,249.42
09/30/97 Contract Fee (1.91) 13.775226 (0.1384) 90.5622 1,247.51
09/30/97 Remaining Value 13.775226 0.0000 90.5622 1,247.51
Large Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.434763 95.8335 95.8335 1,000.00
09/30/97 Value 14.621557 0.0000 95.8335 1,401.24
09/30/97 Charge 0.05 (50.00) 14.621557 (3.4196) 92.4139 1,351.24
09/30/97 Contract Fee (2.02) 14.621557 (0.1384) 92.2756 1,349.21
09/30/97 Remaining Value 14.621557 0.0000 92.2756 1,349.21
JPM Large Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.098491 99.0247 99.0247 1,000.00
09/30/97 Value 14.200213 0.0000 99.0247 1,406.17
09/30/97 Charge 0.05 (50.00) 14.200213 (3.5211) 95.5036 1,356.17
09/30/97 Contract Fee (1.96) 14.200213 (0.1384) 95.3653 1,354.21
09/30/97 Remaining Value 14.200213 0.0000 95.3653 1,354.21
JPM International Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.359859 96.5264 96.5264 1,000.00
09/30/97 Value 12.101316 0.0000 96.5264 1,168.10
09/30/97 Charge 0.05 (50.00) 12.101316 (4.1318) 92.3946 1,118.10
09/30/97 Contract Fee (1.67) 12.101316 (0.1384) 92.2563 1,116.42
09/30/97 Remaining Value 12.101316 0.0000 92.2563 1,116.42
Lord Abbett Bond Debenture
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.837855 92.2692 92.2692 1,000.00
09/30/97 Value 12.656085 0.0000 92.2692 1,167.77
09/30/97 Charge 0.05 (50.00) 12.656085 (3.9507) 88.3185 1,117.77
09/30/97 Contract Fee (1.75) 12.656085 (0.1384) 88.1802 1,116.02
09/30/97 Remaining Value 12.656085 0.0000 88.1802 1,116.02
GAIMCO Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.131477 98.7023 98.7023 1,000.00
09/30/97 Value 10.553104 0.0000 98.7023 1,041.62
09/30/97 Charge 0.05 (50.00) 10.553104 (4.7379) 93.9643 991.62
09/30/97 Contract Fee (1.46) 10.553104 (0.1384) 93.8260 990.16
09/30/97 Remaining Value 10.553104 0.0000 93.8260 990.16
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (Missouri)
Standard One Year Return
As of 9/30/97
Sub-Account Purchase Total Value Total
Amount Units Held Return
<S> <C> <C> <C>
VKM Quality Income 1,000.00 1,024.25 2.43%
VKM High Yield 1,000.00 1,059.61 5.96%
Lord Abbett Growth & Income 1,000.00 1,266.88 26.69%
VKM Money Market 1,000.00 989.45 -1.05%
VKM Stock Index 1,000.00 1,324.24 32.42%
VKM Growth & Income 1,000.00 1,285.78 28.58%
JPM Quality Bond 1,000.00 1,024.66 2.47%
JPM Small Capital Stock 1,000.00 1,247.51 24.75%
JPM Large Capital Stock 1,000.00 1,349.21 34.92%
JPM Select Equity 1,000.00 1,354.21 35.42%
JPM International Equity 1,000.00 1,166.42 11.64%
Lord Abbett Bond Debenture 1,000.00 1,166.02 11.60%
GAIMCO Money Market 1,000.00 990.16 -0.98%
</TABLE>
For illustrative purposes, the above returns assume that the annual contract
maintenance charge is prorated among the sub-accounts based on the ratio of each
sub-account's account value to the total contract value.
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (Missouri)
Non-Standard Inception to Date Return Data
As of 09/30/97
VKM Quality Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
12/11/89 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/90 Contract Fee 10.642864 0.0000 100.0000 1,064.29
12/11/91 Contract Fee 11.793541 0.0000 100.0000 1,179.35
12/11/92 Contract Fee 12.690512 0.0000 100.0000 1,269.05
12/11/93 Contract Fee 13.997342 0.0000 100.0000 1,399.73
12/11/94 Contract Fee 13.179662 0.0000 100.0000 1,317.97
12/11/95 Contract Fee 15.200779 0.0000 100.0000 1,520.08
12/11/96 Contract Fee 15.540342 0.0000 100.0000 1,554.03
09/30/97 Value 16.290615 0.0000 100.0000 1,629.06
09/30/97 Charge 0.05 16.290615 0.0000 100.0000 1,629.06
09/30/97 Remaining Value 16.290615 0.0000 100.0000 1,629.06
VKM High Yield
Date Transaction Type Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
12/11/89 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/90 Contract Fee 10.038196 0.0000 100.0000 1,003.82
12/11/91 Contract Fee 12.639788 0.0000 100.0000 1,263.98
12/11/92 Contract Fee 14.896607 0.0000 100.0000 1,489.66
12/11/93 Contract Fee 17.930469 0.0000 100.0000 1,793.05
12/11/94 Contract Fee 16.825188 0.0000 100.0000 1,682.52
12/11/95 Contract Fee 19.405032 0.0000 100.0000 1,940.50
12/11/96 Contract Fee 21.273774 0.0000 100.0000 2,127.38
09/30/97 Value 23.069578 0.0000 100.0000 2,306.96
09/30/97 Charge 0.05 23.069578 0.0000 100.0000 2,306.96
09/30/97 Remaining Value 23.069578 0.0000 100.0000 2,306.96
Lord Abbett Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
12/11/89 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/90 Contract Fee 9.991916 0.0000 100.0000 999.19
12/11/91 Contract Fee 11.635826 0.0000 100.0000 1,163.58
12/11/92 Contract Fee 14.232895 0.0000 100.0000 1,423.29
12/11/93 Contract Fee 16.227131 0.0000 100.0000 1,622.71
12/11/94 Contract Fee 16.145116 0.0000 100.0000 1,614.51
12/11/95 Contract Fee 21.265128 0.0000 100.0000 2,126.51
12/11/96 Contract Fee 25.168559 0.0000 100.0000 2,516.86
09/30/97 Value 30.940092 0.0000 100.0000 3,094.01
09/30/97 Charge 0.05 30.940092 0.0000 100.0000 3,094.01
09/30/97 Remaining Value 30.940092 0.0000 100.0000 3,094.01
VKM Stock Index
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
11/01/91 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/91 Contract Fee 9.641255 0.0000 100.0000 964.13
12/11/92 Contract Fee 11.042649 0.0000 100.0000 1,104.26
12/11/93 Contract Fee 11.858110 0.0000 100.0000 1,185.81
12/11/94 Contract Fee 11.401457 0.0000 100.0000 1,140.15
12/11/95 Contract Fee 15.871130 0.0000 100.0000 1,587.11
12/11/96 Contract Fee 19.034668 0.0000 100.0000 1,903.47
09/30/97 Value 24.342237 0.0000 100.0000 2,434.22
09/30/97 Charge 0.05 24.342237 0.0000 100.0000 2,434.22
09/30/97 Remaining Value 24.342237 0.0000 100.0000 2,434.22
VKM Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/91 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/91 Contract Fee 10.188527 0.0000 100.0000 1,018.85
12/11/92 Contract Fee 10.449186 0.0000 100.0000 1,044.92
12/11/93 Contract Fee 10.617015 0.0000 100.0000 1,061.70
12/11/94 Contract Fee 10.871571 0.0000 100.0000 1,087.16
12/11/95 Contract Fee 11.397944 0.0000 100.0000 1,139.79
12/11/96 Contract Fee 11.851727 0.0000 100.0000 1,185.17
09/30/97 Value 12.244078 0.0000 100.0000 1,224.41
09/30/97 Charge 0.05 12.244078 0.0000 100.0000 1,224.41
09/30/97 Remaining Value 12.244078 0.0000 100.0000 1,224.41
VKM Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
05/01/92 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/92 Contract Fee 10.352054 0.0000 100.0000 1,035.21
12/11/93 Contract Fee 11.795195 0.0000 100.0000 1,179.52
12/11/94 Contract Fee 10.773452 0.0000 100.0000 1,077.35
12/11/95 Contract Fee 14.498752 0.0000 100.0000 1,449.88
12/11/96 Contract Fee 16.954792 0.0000 100.0000 1,695.48
09/30/97 Value 21.166476 0.0000 100.0000 2,116.65
09/30/97 Charge 0.05 21.166476 0.0000 100.0000 2,116.65
09/30/97 Remaining Value 21.166476 0.0000 100.0000 2,116.65
JPM Quality Bond
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 9.897228 101.0384 101.0384 1,000.00
12/11/96 Contract Fee 10.364657 0.0000 101.0384 1,047.23
09/30/97 Value 10.877551 0.0000 101.0384 1,099.05
09/30/97 Charge 0.05 10.877551 0.0000 101.0384 1,099.05
09/30/97 Remaining Value 10.877551 0.0000 101.0384 1,099.05
JPM Small Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.512560 95.1243 95.1243 1,000.00
12/11/96 Contract Fee 11.086421 0.0000 95.1243 1,054.59
09/30/97 Value 13.775226 0.0000 95.1243 1,310.36
09/30/97 Charge 0.05 13.775226 0.0000 95.1243 1,310.36
09/30/97 Remaining Value 13.775226 0.0000 95.1243 1,310.36
JPM Large Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.003025 99.9698 99.9698 1,000.00
12/11/96 Contract Fee 11.353003 0.0000 99.9698 1,134.96
09/30/97 Value 14.621557 0.0000 99.9698 1,461.71
09/30/97 Charge 0.05 14.621557 0.0000 99.9698 1,461.71
09/30/97 Remaining Value 14.621557 0.0000 99.9698 1,461.71
JPM Select Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.083890 99.1681 99.1681 1,000.00
12/11/96 Contract Fee 10.779321 0.0000 99.1681 1,068.96
09/30/97 Value 14.200213 0.0000 99.1681 1,408.21
09/30/97 Charge 0.05 14.200213 0.0000 99.1681 1,408.21
09/30/97 Remaining Value 14.200213 0.0000 99.1681 1,408.21
JPM International Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.214899 97.8962 97.8962 1,000.00
12/11/96 Contract Fee 10.726728 0.0000 97.8962 1,050.11
09/30/97 Value 12.101316 0.0000 97.8962 1,184.67
09/30/97 Charge 0.05 12.101316 0.0000 97.8962 1,184.67
09/30/97 Remaining Value 12.101316 0.0000 97.8962 1,184.67
Lord Abbett Bond Debenture
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
04/30/96 Purchase 1,000.00 10.097690 99.0326 99.0326 1,000.00
12/11/96 Contract Fee 11.194096 0.0000 99.0326 1,108.58
09/30/97 Value 12.656085 0.0000 99.0326 1,253.36
09/30/97 Charge 0.05 12.656085 0.0000 99.0326 1,253.36
09/30/97 Remaining Value 12.656085 0.0000 99.0326 1,253.36
GAIMCO Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
06/03/96 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
12/11/96 Contract Fee 10.210737 0.0000 100.0000 1,021.07
09/30/97 Value 10.553104 0.0000 100.0000 1,055.31
09/30/97 Charge 0.05 10.553104 0.0000 100.0000 1,055.31
09/30/97 Remaining Value 10.553104 0.0000 100.0000 1,055.31
MVA Balanced
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 10.478753 0.0000 100.0000 1,047.88
09/30/97 Charge 0.05 10.478753 0.0000 100.0000 1,047.88
09/30/97 Remaining Value 10.478753 0.0000 100.0000 1,047.88
MVA Small Cap Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 11.156281 0.0000 100.0000 1,115.63
09/30/97 Charge 0.05 11.156281 0.0000 100.0000 1,115.63
09/30/97 Remaining Value 11.156281 0.0000 100.0000 1,115.63
MVA Equity Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 10.870351 0.0000 100.0000 1,087.04
09/30/97 Charge 0.05 10.870351 0.0000 100.0000 1,087.04
09/30/97 Remaining Value 10.870351 0.0000 100.0000 1,087.04
MVA Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
07/01/97 Purchase 1,000.00 10.000000 100.0000 100.0000 1,000.00
09/30/97 Value 10.741146 0.0000 100.0000 1,074.11
09/30/97 Charge 0.05 10.741146 0.0000 100.0000 1,074.11
09/30/97 Remaining Value 10.741146 0.0000 100.0000 1,074.11
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Separate Account One (Missouri)
Non-Standard Inception to Date Return
Average Annual Total Return
As of 9/30/97
Sub-Account Purchase Total Value Total Inception Portfolio
Amount Units Held Return Date Return
<S> <C> <C> <C> <C> <C>
VKM Quality Income 1,000.00 1,629.06 6.45% 12/11/89 7.85%
VKM High Yield 1,000.00 2,306.96 11.30% 12/11/89 12.70%
Lord Abbett Growth & Income 1,000.00 3,094.01 15.56% 12/11/89 16.96%
VKM Stock Index 1,000.00 2,434.22 16.22% 11/01/91 17.62%
VKM Money Market 1,000.00 1,224.41 3.29% 07/01/91 4.69%
VKM Growth & Income 1,000.00 2,116.65 14.84% 05/01/92 16.24%
JPM Quality Bond 1,000.00 1,099.05 6.88% 04/30/96 8.28%
JPM Small Capital Stock 1,000.00 1,310.36 20.98% 04/30/96 22.38%
JPM Large Capital Stock 1,000.00 1,461.71 30.67% 04/30/96 32.07%
JPM Select Equity 1,000.00 1,408.21 27.28% 04/30/96 28.68%
JPM International Equity 1,000.00 1,184.67 12.68% 04/30/96 14.08%
Lord Abbett Bond Debenture 1,000.00 1,253.36 17.25% 04/30/96 18.65%
GAIMCO Money Market 1,000.00 1,055.31 4.14% 06/03/96 5.54%
MVA Balanced 1,000.00 1,047.88 20.63% 07/01/97 22.03%
MVA Small Cap Equity 1,000.00 1,115.63 55.10% 07/01/97 56.50%
MVA Equity Income 1,000.00 1,087.04 39.76% 07/01/97 41.16%
MVA Growth & Income 1,000.00 1,074.11 33.21% 07/01/97 34.61%
</TABLE>
For illustrative purposes, the above returns assume that the annual contract
maintenance charge is prorated among the sub-accounts based on the ratio of each
sub-account's account value to the total contract value.
<TABLE>
<CAPTION>
Cova Variable Annuity Separate Account One (Missouri)
Non-Standard Inception to Date Return
Total Return
As of 9/30/97
Sub-Account Purchase Total Value Total
Amount Units Held Return
<S> <C> <C> <C>
VKM Quality Income 1,000.00 1,629.06 62.91%
VKM High Yield 1,000.00 2,306.96 130.70%
Lord Abbett Growth & Income 1,000.00 3,094.01 209.40%
VKM Stock Index 1,000.00 2,434.22 143.42%
VKM Money Market 1,000.00 1,224.41 22.44%
VKM Growth & Income 1,000.00 2,116.65 111.66%
JPM Quality Bond 1,000.00 1,099.05 9.91%
JPM Small Capital Stock 1,000.00 1,310.36 31.04%
JPM Large Capital Stock 1,000.00 1,461.71 46.17%
JPM Select Equity 1,000.00 1,408.21 40.82%
JPM International Equity 1,000.00 1,184.67 18.47%
Lord Abbett Bond Debenture 1,000.00 1,253.36 25.34%
GAIMCO Money Market 1,000.00 1,055.31 5.53%
MVA Balanced 1,000.00 1,047.88 4.79%
MVA Small Cap Equity 1,000.00 1,115.63 11.56%
MVA Equity Income 1,000.00 1,087.04 8.70%
MVA Growth & Income 1,000.00 1,074.11 7.41%
</TABLE>
For illustrative purposes, the above returns assume that the annual contract
maintenance charge is prorated among the sub-accounts based on the ratio of each
sub-account's account value to the total contract.
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (Missouri)
Non-Standard One Year Return Data
As of 09/30/97
VKM Quality Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 15.132856 66.0814 66.0814 1,000.00
09/30/97 Value 16.290615 0.0000 66.0814 1,076.51
09/30/97 Charge 0.05 16.290615 0.0000 66.0814 1,076.51
09/30/97 Contract Fee 16.290615 0.0000 66.0814 1,076.51
09/30/97 Remaining Value 16.290615 0.0000 66.0814 1,076.51
VKM High Yield
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 20.731096 48.2367 48.2367 1,000.00
09/30/97 Value 23.069578 0.0000 48.2367 1,112.80
09/30/97 Charge 0.05 23.069578 0.0000 48.2367 1,112.80
09/30/97 Contract Fee 23.069578 0.0000 48.2367 1,112.80
09/30/97 Remaining Value 23.069578 0.0000 48.2367 1,112.80
Lord Abbett Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 23.418841 42.7007 42.7007 1,000.00
09/30/97 Value 30.940092 0.0000 42.7007 1,321.16
09/30/97 Charge 0.05 30.940092 0.0000 42.7007 1,321.16
09/30/97 Contract Fee 30.940092 0.0000 42.7007 1,321.16
09/30/97 Remaining Value 30.940092 0.0000 42.7007 1,321.16
VKM Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 11.760162 85.0328 85.0328 1,000.00
09/30/97 Value 12.244078 0.0000 85.0328 1,041.15
09/30/97 Charge 0.05 12.244078 0.0000 85.0328 1,041.15
09/30/97 Contract Fee 12.244078 0.0000 85.0328 1,041.15
09/30/97 Remaining Value 12.244078 0.0000 85.0328 1,041.15
VKM Stock Index
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 17.669922 56.5933 56.5933 1,000.00
09/30/97 Value 24.342237 0.0000 56.5933 1,377.61
09/30/97 Charge 0.05 24.342237 0.0000 56.5933 1,377.61
09/30/97 Contract Fee 24.342237 0.0000 56.5933 1,377.61
09/30/97 Remaining Value 24.342237 0.0000 56.5933 1,377.61
VKM Growth & Income
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 15.811166 63.2464 63.2464 1,000.00
09/30/97 Value 21.166476 0.0000 63.2464 1,338.70
09/30/97 Charge 0.05 21.166476 0.0000 63.2464 1,338.70
09/30/97 Contract Fee 21.166476 0.0000 63.2464 1,338.70
09/30/97 Remaining Value 21.166476 0.0000 63.2464 1,338.70
JPM Quality Bond
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.107693 98.9345 98.9345 1,000.00
09/30/97 Value 10.877551 0.0000 98.9345 1,076.17
09/30/97 Charge 0.05 10.877551 0.0000 98.9345 1,076.17
09/30/97 Contract Fee 10.877551 0.0000 98.9345 1,076.17
09/30/97 Remaining Value 10.877551 0.0000 98.9345 1,076.17
JPM Small Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.601053 94.3303 94.3303 1,000.00
09/30/97 Value 13.775226 0.0000 94.3303 1,299.42
09/30/97 Charge 0.05 13.775226 0.0000 94.3303 1,299.42
09/30/97 Contract Fee 13.775226 0.0000 94.3303 1,299.42
09/30/97 Remaining Value 13.775226 0.0000 94.3303 1,299.42
Large Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.434763 95.8335 95.8335 1,000.00
09/30/97 Value 14.621557 0.0000 95.8335 1,401.24
09/30/97 Charge 0.05 14.621557 0.0000 95.8335 1,401.24
09/30/97 Contract Fee 14.621557 0.0000 95.8335 1,401.24
09/30/97 Remaining Value 14.621557 0.0000 95.8335 1,401.24
JPM Large Capital Stock
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.098491 99.0247 99.0247 1,000.00
09/30/97 Value 14.200213 0.0000 99.0247 1,406.17
09/30/97 Charge 0.05 14.200213 0.0000 99.0247 1,406.17
09/30/97 Contract Fee 14.200213 0.0000 99.0247 1,406.17
09/30/97 Remaining Value 14.200213 0.0000 99.0247 1,406.17
JPM International Equity
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.359859 96.5264 96.5264 1,000.00
09/30/97 Value 12.101316 0.0000 96.5264 1,168.10
09/30/97 Charge .05 12.101316 0.0000 96.5264 1,168.10
09/30/97 Contract Fee 12.101316 0.0000 96.5264 1,168.10
09/30/97 Remaining Value 12.101316 0.0000 96.5264 1,168.10
Lord Abbett Bond Debenture
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.837855 92.2692 92.2692 1,000.00
09/30/97 Value 12.656085 0.0000 92.2692 1,167.77
09/30/97 Charge 0.05 12.656085 0.0000 92.2692 1,167.77
09/30/97 Contract Fee 12.656085 0.0000 92.2692 1,167.77
09/30/97 Remaining Value 12.656085 0.0000 92.2692 1,167.77
GAIMCO Money Market
Date Transaction Rate Amount Unit Value Units This Total Total
Transaction Units Held Value
<S> <C> <C> <C> <C> <C> <C> <C>
09/30/96 Purchase 1,000.00 10.131477 98.7023 98.7023 1,000.00
09/30/97 Value 10.553104 0.0000 98.7023 1,041.62
09/30/97 Charge 0.05 10.553104 0.0000 98.7023 1,041.62
09/30/97 Contract Fee 10.553104 0.0000 98.7023 1,041.62
09/30/97 Remaining Value 10.553104 0.0000 98.7023 1,041.62
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (Missouri)
Non-Standard One Year Return
As of 9/30/97
Sub-Account Purchase Total Value Total Portfolio
Amount Units Held Return Return
<S> <C> <C> <C> <C>
VKM Quality Income 1,000.00 1,076.51 7.65% 9.05%
VKM High Yield 1,000.00 1,112.80 11.28% 12.68%
Lord Abbett Growth & Income 1,000.00 1,321.16 32.12% 33.52%
VKM Money Market 1,000.00 1,041.15 4.11% 5.51%
VKM Stock Index 1,000.00 1,377.61 37.76% 39.16%
VKM Growth & Income 1,000.00 1,338.70 33.87% 35.27%
JPM Quality Bond 1,000.00 1,076.17 7.62% 9.02%
JPM Small Capital Stock 1,000.00 1,299.42 29.94% 31.34%
JPM Large Capital Stock 1,000.00 1,401.24 40.12% 41.52%
JPM Select Equity 1,000.00 1,406.17 40.62% 42.02%
JPM International Equity 1,000.00 1,168.10 16.81% 18.21%
Lord Abbett Bond Debenture 1,000.00 1,167.77 16.78% 18.18%
GAIMCO Money Market 1,000.00 1,041.62 4.16% 5.56%
</TABLE>
For illustrative purposes, the above returns assume that the annual contract
maintenance charge is prorated among the sub-accounts based on the ratio of each
sub-account's account value to the total contract value
