File Nos. 333-34741
811-05200
==============================================================================
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.5 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 36 [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 Bernard J. Spaulding
Blazzard, Grodd & Hasenauer, P.C. Senior Vice President, General
P.O Box 5108 Counsel and Secretary
Westport, CT 06881 Cova Financial Services
Life Insurance Company
(203) 226-7866 One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
It is proposed that this filing will become effective:
__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
EXPLANATORY NOTE
==============================================================================
This Registration Statement contains three Prospectuses (Version A, Version B
and Version C). The three versions are substantially similar except for the
funding options. Different versions of Version A of the Prospectus will
be created -- each one with different funding options available. The
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.
==============================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
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 - Condensed Financial Information
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>
<TABLE>
<CAPTION>
<S> <C> <C>
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 - VERSION A
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 43 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 42 investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios (except as noted). CURRENTLY, IF YOU ARE NOT PARTICIPATING
IN AN ASSET ALLOCATION PROGRAM, YOU CAN ONLY INVEST IN 15 INVESTMENT PORTFOLIOS
AT ANY ONE TIME.
AIM Variable Insurance Funds, Inc.:
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Alliance Variable Products Series Fund, Inc.:
Managed by Alliance Capital
Management L.P.
Premier Growth Portfolio
Real Estate Investment Portfolio
Cova Series Trust:
Managed by J.P. Morgan
Investment Management Inc.
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value Portfolio
General American Capital Company:
Managed by Conning Asset
Management Company
Money Market Fund
Goldman Sachs Variable Insurance Trust:
Managed by Goldman Sachs
Asset Management
Goldman Sachs Growth and Income Fund
Managed by Goldman Sachs
Asset Management International
Goldman Sachs Global Income Fund
Goldman Sachs International Equity Fund
Kemper Variable Series:
Managed by Scudder Kemper
Investments, Inc.
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
Liberty Variable Investment Trust:
Managed by Newport Fund
Management Inc.
Newport Tiger Fund, Variable Series
MFS Variable Insurance Trust:
Managed by Massachusetts
Financial Services Company
MFS Emerging Growth Series
MFS/Foreign & Colonial Emerging
Markets Equity Series (not available)
MFS Global Governments Series
(formerly MFS World Governments)
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
Oppenheimer Variable Account Funds:
Managed by OppenheimerFunds, Inc.
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
(formerly Oppenheimer Growth)
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
(formerly Oppenheimer Growth & Income)
Oppenheimer Strategic Bond Fund/VA
Putnam Variable Trust:
Managed by Putnam Investment
Management, Inc.
Putnam VT Growth and Income Fund Class IA Shares
Putnam VT International Growth Fund Class IA Shares
Putnam VT International New
Opportunities Fund Class IA Shares
Putnam VT New Value Fund Class IA Shares
Putnam VT Vista Fund - Class IA Shares
Templeton Variable Products Series Fund:
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments Fund, Class 1 Shares
Managed by Templeton Asset
Management Ltd.
Templeton Developing Markets Fund, Class 1 Shares
Managed by Templeton Investment
Counsel, Inc.
Templeton International Fund, Class 1 Shares
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 November __, 1999.
The SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page __ of this prospectus. For a free
copy of the SAI, call us at (800)523-1661 or write us at: One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
November __, 1999
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS 3
SUMMARY 4
Fee Table 6
Examples 11
1. THE ANNUITY CONTRACT 14
2. ANNUITY PAYMENTS (THE INCOME PHASE) 14
Annuity Date 14
Annuity Payments 14
Annuity Options 14
3. PURCHASE 15
Purchase Payments 15
Allocation of Purchase Payments 15
Free Look 15
Accumulation Units 15
4. INVESTMENT OPTIONS 16
AIM Variable Insurance Funds, Inc. 16
Alliance Variable Products Series Fund, Inc. 16
Cova Series Trust 16
General American Capital Company 16
Goldman Sachs Variable Insurance Trust 16
Kemper Variable Series 16
Liberty Variable Investment Trust 16
MFS Variable Insurance Trust 17
Oppenheimer Variable Account Funds 17
Putnam Variable Trust 17
Templeton Variable Products Series Fund 17
Transfers 17
Dollar Cost Averaging Program 18
Automatic Rebalancing Program 18
Approved Asset Allocation Programs 18
Voting Rights 18
Substitution 18
5. EXPENSES 19
Insurance Charges 19
Contract Maintenance Charge 19
Withdrawal Charge 19
Reduction or Elimination of the Withdrawal Charge 19
Premium Taxes 20
Transfer Fee 20
Income Taxes 20
Investment Portfolio Expenses 20
6. TAXES 20
Annuity Contracts in General 20
Qualified and Non-Qualified Contracts 20
Withdrawals - Non-Qualified Contracts 21
Withdrawals - Qualified Contracts 21
Withdrawals - Tax-Sheltered Annuities 21
Diversification 21
7. ACCESS TO YOUR MONEY 21
Systematic Withdrawal Program 22
Suspension of Payments or Transfers 22
8. PERFORMANCE 22
9. DEATH BENEFIT 22
Upon Your Death 22
Death of Annuitant 23
10. OTHER INFORMATION 24
Cova 24
Year 2000 24
The Separate Account 24
Distributor 24
Ownership 24
Beneficiary 24
Assignment 24
Financial Statements 24
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION 24
APPENDIX A
Condensed Financial Information A-1
APPENDIX B B-1
APPENDIX C
Performance Information C-1
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 and need an explanation. 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 14
Accumulation Unit 15
Annuitant 14
Annuity Date 14
Annuity Options 14
Annuity Payments 14
Annuity Unit 15
Beneficiary 24
Fixed Account 14
Income Phase 14
Investment Portfolios 16
Joint Owner 24
Non-Qualified 20
Owner 24
Purchase Payment 15
Qualified 20
Tax Deferral 20
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
1. THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by Cova is a contract between
you, the owner, and Cova, an insurance company. The contract provides a means
for investing on a tax-deferred basis. The contract is intended for retirement
savings or other long-term investment purposes and provides for a death benefit
and guaranteed income options.
This contract offers 42 investment portfolios. These portfolios are designed to
offer a potentially better return than the fixed account. However, this is NOT
guaranteed. You can also lose your money.
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.
You can put money in up to 15 of the investment portfolios and the fixed
account. (If you are participating in an asset allocation program, this limit
may not apply.) You can transfer between accounts up to 12 times a year without
charge or tax implications.
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, in part, 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 an
annuity option. 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. HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 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 the investment portfolios which are described herein
and in the prospectuses for the funds. Currently, if you are not participating
in an asset allocation program, you can only invest in 15 investment portfolios
at any one time. The investment objectives and policies of certain of the
investment portfolios are similar to the investment objectives and policies of
other mutual funds that certain of the investment advisers manage. Although the
objectives and policies may be similar, the investment results of the investment
portfolios may be higher or lower than the results of such other mutual funds.
The investment advisers cannot guarantee, and make no representation, that the
investment results of similar funds will be comparable even though the funds
have the same investment advisers.
Depending upon market conditions and the performance of the portfolio(s) you
select, 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.
o Each year Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, Cova currently waives this charge
if the value of your contract is at least $50,000.
o Cova also deducts for its insurance charges which total 1.40% of the
average daily value of your contract allocated to the investment
portfolios.
o If you take your money out, Cova may assess a withdrawal charge which is
equal to 5% of the purchase payment 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.
o When you begin receiving regular income payments from your annuity, Cova
will assess a state premium tax charge, if applicable, which ranges from 0%
- 4% depending upon the state.
o The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
o There are also investment charges which currently range from .205% to 1.66%
of the average daily value of the investment portfolio depending upon the
investment portfolio.
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 of purchase payments in excess of that may
be charged a withdrawal charge, depending on how long your money has been in the
contract. However, Cova will never assess a withdrawal charge on earnings you
withdraw. Earnings are defined as the value in your contract minus the remaining
purchase payments in your contract. Of course, you may also have to pay income
tax and a tax penalty on any money you take out.
8. DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
9. 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 reserve
the right to put your money in the Money Market Fund 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? The 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 income 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:
o 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.
o 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.
o You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
o 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.
10. INQUIRIES:
If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
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 of the investment portfolios.
Owner Transaction Expenses
Withdrawal Charge (see Note 1 below)
5% of purchase payment withdrawn
Transfer Fee (see Note 2 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 3 below)
$30 per contract per year
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>
<CAPTION>
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C> <C>
A I M V.I. Capital Appreciation Fund .62% .05% .67%
A I M V.I. International Equity Fund .75% .16% .91%
A I M V.I. Value Fund .61% .05% .66%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses after Total Annual Portfolio
(expense reimbursement Expenses (after expense
Management for Real Estate reimbursement for Real
Fees Investment Portfolio) Estate Investment Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Portfolio* 1.00% .06% 1.06%
Real Estate Investment Portfolio** .08% .87% .95%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The adviser to the Fund discontinued the expense reimbursement with respect to
the Premier Growth Portfolio effective May 1, 1998.
** The expenses shown with respect to the Real Estate Investment Portfolio are
net of voluntary reimbursements. Expenses have been capped at .95% annually and
the adviser to the Fund intends to continue such reimbursements for the
foreseeable future. The estimated expenses for the Real Estate Investment
Portfolio, before reimbursement, are: .90% management fees and 1.41% for other
expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees certain Portfolios)(1) certain Portfolios)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
<S>
<C> <C> <C>
International Equity Portfolio .80% .28% 1.08%
Large Cap Stock Portfolio .65% .10% .75%
Quality Bond Portfolio .55% .10% .65%
Select Equity Portfolio .68% .18% .86%
Small Cap Stock Portfolio .85% .27% 1.12%
Managed by Lord, Abbett &Co.
Bond Debenture Portfolio .75% .10% .85%
Developing Growth Portfolio .90% .30% 1.20%
Large Cap Research Portfolio 1.00% .30% 1.30%
Lord Abbett Growth and Income Portfolio(2) .65% .07% .72%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Since May 1, 1996, 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%. This reimbursement arrangement for the
Select Equity, Small Cap Stock and International Equity Portfolios was
discontinued effective May 1, 1999. Therefore, the amounts shown above under
"Other Expenses" have been restated to reflect the actual expenses for these
Portfolios for the year ended December 31, 1998. Effective May 1, 1999, Cova
reimburses the Mid-Cap Value, Large Cap Research and Developing Growth Portfolios
for all operating expenses (exclusive of the management fees) in excess of
approximately .30%, (instead of .10% as had been the case prior to May 1, 1999).
This change is reflected above under "Other Expenses" for these three
Portfolios. Absent the expense reimbursement, the percentages shown for
total annual portfolio expenses for the year ended December 31, 1998 would
have been .86% for the Quality Bond Portfolio, .94% for the Large Cap Stock
Portfolio, .93% for the Bond Debenture Portfolio, 1.68% for the Mid-Cap Value
Portfolio, 1.95% for the Large Cap Research Portfolio and 1.70% for the
Developing Growth Portfolio.
(2) Estimated. The Portfolio commenced investment operations on January 8, 1999.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
<S> <C> <C> <C>
Money Market Fund .125% .08% .205%
- -----------------------------------------------------------------------------------------------------------------------------------
- -
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement)* reimbursement)*
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund .75% .15% .90%
Managed by Goldman Sachs Asset Management International
Goldman Sachs Global Income Fund .90% .15% 1.05%
Goldman Sachs International Equity Fund 1.00% .25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The investment advisers to the Goldman Sachs Growth and Income, International
Equity and Global Income Funds have voluntarily agreed to reduce or limit
certain "Other Expenses" of such Funds (excluding management fees, taxes,
interest and brokerage fees and litigation, indemnification and other
extraordinary expenses) to the extent such expenses exceed 0.15%, 0.25% and
0.15% per annum of such Funds' average daily net assets, respectively. The
expenses shown include this reimbursement. If not included, the "Other Expenses"
and "Total Annual Portfolio Expenses" for the Goldman Sachs Growth and Income,
International Equity and Global Income Funds would be 1.94% and 2.69%, 1.97% and
2.97% and 2.40% and 3.30%, respectively. The reductions or limitations may be
discontinued or modified by the investment advisers in their discretion at any
time.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees Small Cap Value Portfolio) Small Cap Value Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
<S> <C> <C> <C>
Kemper Government Securities Portfolio .55% .11% .66%
Kemper Small Cap Growth Portfolio .65% .05% .70%
Kemper Small Cap Value Portfolio .75% .05%* .80%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Pursuant to its agreement with Kemper Variable Series, the investment manager
and the accounting agent have agreed, for the one year period commencing on
May 1, 1999, to limit their respective fees and to reimburse other
operating expenses, in a manner communicated to the Board of the Fund, to the
extent necessary to limit total operating expenses of the Kemper Small Cap Value
Portfolio to .84%. The amounts set forth in the table above reflect actual
expenses for the past fiscal year, which were lower than these expense limits.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
<S> <C> <C> <C>
Newport Tiger Fund, Variable Series .90% .40% 1.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement reimbursement
Fees for certain Series) for certain Series)
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust (1)
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Series .75% .10% .85%
MFS/Foreign & Colonial Emerging
Markets Equity Series (2) 1.25% .25% 1.50%
MFS Global Governments Series (2) .75% .26% 1.01%
MFS Growth With Income Series .75% .13% .88%
MFS High Income Series .75% .28% 1.03%
MFS Research Series .75% .11% .86%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. Expenses do not take into account these
expense reductions, and are therefore higher than the actual expenses of the
series.
(2) MFS has agreed to bear expenses for the Global Governments Series and the
MFS/Foreign & Colonial Emerging Markets Equity Series, subject to reimbursement
by these series, such that each series' "Other Expenses" shall not exceed 0.25%
of the average daily net assets of the series during the current fiscal year.
Absent the expense reimbursement, the Total Annual Portfolio Expenses for the
year ended December 31, 1998, would have been 1.11% for the MFS Global
Governments Series and 3.26% for the MFS/Foreign & Colonial Emerging Markets
Equity Series. The payments made by MFS on behalf of each series under this
arrangement are subject to reimbursement by the series to MFS, which will be
accomplished by the payment of an expense reimbursement fee by the series to MFS
computed and paid monthly at a percentage of the series' average daily net
assets for its then current fiscal year, with a limitation that immediately
after such payment, the series' "Other Expenses" will not exceed the percentage
set forth above for that series. The obligation of MFS to bear a series' "Other
Expenses" pursuant to this arrangement, and the series' obligation to pay the
reimbursement fee to MFS, terminates on the earlier of the date on which
payments made by the series equal the prior payment of such reimbursable
expenses by MFS or December 31, 2004. MFS may, in its discretion, terminate this
arrangement at an earlier date provided that the arrangement will continue for
each series until at least May 1, 2000, unless terminated with the consent of
the board of trustees which oversees the series.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
<S> <C> <C> <C>
Oppenheimer Bond Fund/VA .72% .02% .74%
Oppenheimer Capital Appreciation Fund/VA .72% .03% .75%
Oppenheimer High Income Fund/VA .74% .04% .78%
Oppenheimer Main Street Growth & Income Fund/VA .74% .05% .79%
Oppenheimer Strategic Bond Fund/VA .74% .06% .80%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees one Portfolio) one Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
<S> <C> <C> <C>
Putnam VT Growth and Income Fund - Class IA Shares .46% .04% .50%
Putnam VT International Growth Fund - Class IA Shares .80% .27% 1.07%
Putnam VT International New Opportunities Fund - Class IA Shares* 1.18% .42% 1.60%
Putnam VT New Value Fund - Class IA Shares .70% .11% .81%
Putnam VT Vista Fund - Class IA Shares .65% .12% .77%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The Management Fees and Total Annual Portfolio Expenses reflect an expense
limitation. In the absence of the expense limitation, the Management Fees and
Total Annual Portfolio Expenses would have been 1.20% and 1.62%, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees one Portfolio) one Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund
<S> <C> <C> <C> <C>
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments Fund,
Class 1 Shares * .00% 1.00% 1.00%
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Fund,
Class 1 Shares 1.25% .41% 1.66%
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund,
Class 1 Shares .69% .17% .86%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Figures reflect expenses from the Fund's inception on May 1, 1998 which
have been annualized for the Management Fees and estimated for Other Expenses.
The investment manager agreed in advance to limit management fees and make
certain payments to reduce Fund expenses as necessary so that Total Annual
Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets
in 1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were as follows: 0.60%, 2.27% and 2.87% for the Mutual
Shares Investments Fund.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Examples
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets: (a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract
value to an annuity option.
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation (a) $71.99 (a) $112.73 (a) $160.90 (a) $247.97
(b) $21.99 (b) $ 67.73 (b) $115.90 (b) $247.97
AIM V.I. International Equity (a) $74.40 (a) $119.97 (a) $173.00 (a) $272.25
(b) $24.40 (b) $ 74.97 (b) $128.00 (b) $272.25
AIM V.I. Value (a) $71.89 (a) $112.42 (a) $160.39 (a) $246.95
(b) $21.89 (b) $ 67.42 (b) $115.39 (b) $246.95
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth (a) $75.90 (a) $124.47 (a) $180.49 (a) $287.10
(b) $25.90 (b) $ 79.47 (b) $135.49 (b) $287.10
Real Estate Investment (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
International Equity (a) $76.10 (a) $125.06 (a) $181.48 (a) $289.07
(b) $26.10 (b) $ 80.06 (b) $136.48 (b) $289.07
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
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
Select Equity (a) $73.90 (a) $118.46 (a) $170.49 (a) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
Small Cap Stock (a) $76.50 (a) $126.26 (a) $183.47 (a) $292.98
(b) $26.50 (b) $ 81.26 (b) $138.47 (b) $292.98
- -----------------------------------------------------------------------------------------------------------------------------------
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
Developing Growth (a) $77.30 (a) $128.65 (a) $187.42 (a) $300.75
(b) $27.30 (b) $ 83.65 (b) $142.42 (b) $300.75
Large Cap Research (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Lord Abbett Growth and Income (a) $72.49 (a) $114.24 (a) $163.43 (a) $253.08
(b) $22.49 (b) $ 69.24 (b) $118.43 (b) $253.08
Mid-Cap Value (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
- ------------------------------------------------------------------------------------------------------------------------------------
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund (a) $74.30 (a) $119.67 (a) $172.50 (a) $271.25
(b) $24.30 (b) $ 74.67 (b) $127.50 (b) $271.25
Managed by Goldman Sachs Asset Management International
Goldman Sachs Global Income Fund (a) $75.80 (a) $124.17 (a) $179.99 (a) $286.12
(b) $25.80 (b) $ 79.17 (b) $134.99 (b) $286.12
Goldman Sachs International Equity Fund (a) $77.80 (a) $130.14 (a) $189.89 (a) $305.57
(b) $27.80 (b) $ 85.14 (b) $144.89 (b) $305.57
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities (a) $71.89 (a) $112.42 (a) $160.39 (a) $246.95
(b) $21.89 (b) $ 67.42 (b) $115.39 (b) $246.95
Kemper Small Cap Growth (a) $72.29 (a) $113.63 (a) $162.42 (a) $251.04
(b) $22.29 (b) $ 68.63 (b) $117.42 (b) $251.04
Kemper Small Cap Value (a) $73.70 (a) $117.86 (a) $169.49 (a) $265.23
(b) $23.70 (b) $ 72.86 (b) $124.49 (b) $265.23
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Series (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
MFS/Foreign & Colonial Emerging
Markets Equity Series (a) $80.29 (a) $137.54 (a) $202.11 (a) $329.29
(b) $30.29 (b) $ 92.54 (b) $157.11 (b) $329.29
MFS Global Governments (a) $75.40 (a) $122.97 (a) $178.00 (a) $282.18
(b) $25.40 (b) $ 77.97 (b) $133.00 (b) $282.18
MFS Growth With Income (a) $74.10 (a) $119.07 (a) $171.50 (a) $269.25
(b) $24.10 (b) $ 74.07 (b) $126.50 (b) $269.25
MFS High Income (a) $75.60 (a) $123.57 (a) $179.00 (a) $284.15
(b) $25.60 (b) $ 78.57 (b) $134.00 (b) $284.15
MFS Research (a) $73.90 (a) $118.46 (a) $170.49 (b) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
- ----------------------------------------------------------------------------------------------------------------------------------
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
Oppenheimer Bond Fund/VA (a) $72.69 (a) $114.84 (a) $164.45 (a) $255.12
(b) $22.69 (b) $ 69.84 (b) $119.45 (b) $255.12
Oppenheimer Capital Appreciation Fund/VA (a) $72.80 (a) $115.15 (a) $164.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Oppenheimer High Income Fund/VA (a) $73.10 (a) $116.05 (a) $166.47 (a) $259.18
(b) $23.10 (b) $ 71.05 (b) $121.47 (b) $259.18
Oppenheimer Main Street Growth & Income Fund/VA (a) $73.20 (a) $116.35 (a) $166.97 (a) $260.19
(b) $23.20 (b) $ 71.35 (b) $121.97 (b) $260.19
Oppenheimer Strategic Bond Fund/VA (a) $73.30 (a) $116.65 (a) $167.47 (a) $261.20
(b) $23.30 (b) $ 71.65 (b) $122.47 (b) $261.20
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income - Class IA Shares (a) $70.29 (a) $107.56 (a) $152.24 (a) $230.39
(b) $20.29 (b) $ 62.56 (b) $107.24 (b) $230.39
Putnam VT International Growth - Class IA Shares (a) $76.00 (a) $124.77 (a) $180.99 (a) $288.08
(b) $26.00 (b) $ 79.77 (b) $135.99 (b) $288.08
Putnam VT International New Opportunities - Class IA Shares (a) $81.28 (a) $140.49 (a) $206.96 (a) $338.60
(b) $31.28 (b) $ 95.49 (b) $161.96 (b) $338.60
Putnam VT New Value - Class IA Shares (a) $73.40 (a) $116.96 (a) $167.98 (a) $262.21
(b) $23.40 (b) $ 71.96 (b) $122.98 (b) $262.21
Putnam VT Vista - Class IA Shares (a) $73.00 (a) $115.75 (a) $165.96 (a) $258.16
(b) $23.00 (b) $ 70.75 (b) $120.96 (b) $258.16
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund, Class 1 Shares
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments (a) $75.30 (a) $122.67 (a) $177.50 (a) $281.19
(b) $25.30 (b) $ 77.67 (b) $132.50 (b) $281.19
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets (a) $81.88 (a) $142.26 (a) $209.86 (a) $344.13
(b) $31.88 (b) $ 97.26 (b) $164.86 (b) $344.13
Managed by Templeton Investment Counsel, Inc.
Templeton International (a) $73.90 (a) $118.46 (a) $170.49 (a) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Explanation of Fee Table
1. 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.
2. 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.
3. During the accumulation phase, 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.
4. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
There is an accumulation unit value history (Condensed Financial
Information)contained in Appendix A.
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 an income to you,
in the form of annuity payments, beginning on a designated date that is 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 the
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, in part, 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 rate credited
to the fixed account will not be less than 3% per year. 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 interest and 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 under "Other Information."
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
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.
We ask you to choose your annuity date when you purchase the contract. You can
change it 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
You will receive annuity payments during the income phase. In general, annuity
payments must begin by the annuitant's 85th birthday or 10 years from the date
the contract was issued, whichever is later (this requirement may differ
slightly for special programs). The annuitant is the person whose life we look
to when we make annuity 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:
o fixed account,
o the investment portfolio(s), or
o 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 investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
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).
Annuity Options
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. 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.
You can choose one of the following annuity options or any other annuity option
acceptable to Cova. 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.
3. PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a
non-qualified contract. If you are purchasing 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 $500 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.
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.
Free Look
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 reserve the right to put your purchase
payment in the Money Market Fund for 15 days before we allocate your first
purchase payment to the investment portfolio(s) you have selected. (In some
states, the period may be longer.) In such case, we will refund the greater of
purchase payments (less withdrawals) or contract value. Currently, Cova directly
allocates your purchase payment to the investment portfolios and/or fixed
account you select.
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 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 42 investment portfolios which are listed below. Currently,
if you are not participating in an asset allocation program, you can only invest
in 15 investment portfolios at any one time. 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. Certain portfolios
contained in the fund prospectuses may not be available with your contract. (See
Appendix B which contains a summary of investment objectives for each investment
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
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
Premier Growth Portfolio
Real Estate Investment Portfolio
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. Cova Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
portfolios are available under the contract:
J.P. Morgan Investment Management Inc. is the sub-adviser to the following
portfolios:
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolios:
Bond Debenture Portfolio
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value 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. The following
portfolio is available under the contract:
Money Market Fund
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Goldman Sachs Variable Insurance Trust is a mutual fund with multiple
portfolios. Goldman Sachs Asset Management is the investment adviser for the
Goldman Sachs Growth and Income Fund and Goldman Sachs Asset Management
International is the investment adviser for the Goldman Sachs International
Equity Fund and the Goldman Sachs Global Income Fund. The following portfolios
are available under the contract:
Goldman Sachs Global Income Fund
Goldman Sachs Growth and Income Fund
Goldman Sachs International Equity Fund
KEMPER VARIABLE SERIES
Kemper Variable Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the Kemper Government Securities
Portfolio, the Kemper Small Cap Growth Portfolio and the Kemper Small Cap Value
Portfolio. The following portfolios are available under the contract:
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
LIBERTY VARIABLE INVESTMENT TRUST
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger Fund, Variable Series. The following
portfolio is available under the contract:
Newport Tiger Fund, Variable Series
(a portfolio investing in equity securities of companies located in certain
countries of Asia).
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/Foreign & Colonial Emerging Markets
Equity Series (not available)
MFS Global Governments Series
(formerly MFS World Governments Series)
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Variable Account Funds is a mutual fund with multiple portfolios.
OppenheimerFunds, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
(formerly Oppenheimer Growth Fund)
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
(formerly Oppenheimer Growth & Income Fund)
Oppenheimer Strategic Bond Fund/VA
PUTNAM VARIABLE TRUST
Putnam Variable Trust is a mutual fund with multiple portfolios. Putnam
Investment Management, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Putnam VT Growth and Income Fund - Class IA Shares
Putnam VT International Growth Fund - Class IA Shares
Putnam VT International New Opportunities Fund - Class IA Shares
Putnam VT New Value Fund - Class IA Shares
Putnam VT Vista Fund (a stock portfolio) - Class IA Shares
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Each portfolio has two classes of shares: Class 1 and Class 2. The
portfolios available in connection with your contract are Class 1 shares.
Templeton Asset Management Ltd. is the investment adviser for the Templeton
Developing Markets Fund, Templeton Investment Counsel, Inc. is the investment
adviser for the Templeton International Fund and Franklin Mutual Advisers, LLC
is the investment adviser for the Mutual Shares Investments Fund. The following
portfolios are available under the contract:
Mutual Shares Investments Fund, Class 1 Shares
Templeton Developing Markets Fund, Class 1 Shares
Templeton International Fund, Class 1 Shares
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
Cova may enter into certain arrangements under which it is reimbursed by the
investment portfolios' advisers, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
Transfers
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described below.
Telephone Transfers. You and/or your registered representative on your behalf,
can make transfers by telephone. Telephone transfers will be automatically
permitted unless you tell us otherwise. 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.
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 following
apply to any transfer during the accumulation phase:
1. Your request for transfer must clearly state which investment portfolio(s)
or the fixed account are involved in the transfer.
2. Your request for transfer must clearly state how much the transfer is for.
3. 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.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund 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 Dollar Cost Averaging
Program is available only during the accumulation phase.
Cova reserves the right to modify, terminate or suspend the Dollar Cost
Averaging Program.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program.
There is no additional charge for participating 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. Cova may, from time to time, offer other dollar cost averaging programs
which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to 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.
The Automatic Rebalancing Program is available only during the accumulation
phase. There is no additional charge for participating in the Automatic
Rebalancing Program. 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 have chosen to have your holdings
rebalanced quarterly, on the first day of the next quarter, Cova will 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. Currently, Cova does not charge for participating in an
approved asset allocation program.
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 affected
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 fund 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below), is for 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 cannot be increased.
Cova will not deduct this charge during the accumulation phase 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 (and once
a year during the first year for purposes of payment of charitable remainder
trust administration fees), 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. Withdrawals
for purposes of payment of charitable remainder trust administration fees are
included in the 10% free withdrawal amount. Otherwise, the charge is 5% of each
purchase payment you take out unless the purchase payment was made more than 5
years ago. After Cova has had a purchase payment for 5 years, there is no charge
when you withdraw that purchase payment. Cova does not assess a withdrawal
charge on earnings withdrawn from the contract. Earnings are defined as the
value in your contract minus the remaining purchase payments in your contract.
The withdrawal order for calculating the withdrawal charge is shown below.
o 10% of purchase payments free.
o Remaining purchase payments that are over 5 years old and not subject to a
withdrawal charge.
o Earnings in the contract free.
o Remaining purchase payments that are less than 5 years old and are subject
to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules may
apply to Section 1035 exchanges.
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.
Cova does not assess the withdrawal charge on any payments paid out as annuity
payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
Reduction or Elimination of the Withdrawal Charge
General
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.
Nursing Home Waiver
After you have owned the contract for one year, if you, or your joint owner,
becomes 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 (confinement must begin after the first contract anniversary).
This is called the Nursing Home Waiver. This provision is not available in all
states.
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 an additional discussion regarding taxes in the Statement of Additional
Information.
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 a trust holding the contract as
an agent for a natural person), 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), and
pension and profit-sharing plans, which include 401(k) plans and H.R. 10 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) for life or a period not exceeding life expectancy;
(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 amounts attributable to purchase payments made
under a salary reduction agreement by owners from 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 you are
considered the owner of the shares, 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 without being considered the owner of the shares. 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 shares 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 withdrawal value of the
contract. The withdrawal value of the contract is the value of the contract at
the end of the business day when Cova receives a written request for a
withdrawal:
o less any applicable withdrawal charge,
o less any premium tax, and
o less any contract maintenance charge.
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. If the remaining withdrawal value
would be less than $500 ($1,000 in New Jersey) after you make a partial
withdrawal, the partial withdrawal amount will be the remaining withdrawal
value.
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 "Taxes" and the
discussion in the Statement of Additional Information.
Income taxes, tax penalties and certain restrictions may apply to any withdrawal
you make.
Systematic Withdrawal Program
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 "Expenses."
Income taxes, tax penalties and certain restrictions may apply to Systematic
Withdrawals.
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.
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 and the
investment portfolio expenses. 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, withdrawal charges and
the investment portfolio expenses.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
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.
The Appendix 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 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.
Beginning May 1, 1999, at the time you buy the contract, you will receive Death
Benefit Option A. If you purchased your contract before May 1, 1999, you
received Death Benefit Option C. For these contracts (i.e., contracts purchased
prior to May 1, 1999), effective beginning with your next contract anniversary
on or after July 1, 1999, your death benefit will be automatically enhanced to
Death Benefit Option B.
The death benefits are described below. The amount of death benefit depends on
how old you or your joint owner is. If you have a joint owner, the death benefit
is determined based on the age of the oldest joint owner and the death benefit
is payable on the death of the first joint owner.
DEATH BENEFIT OPTION A:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest 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 greatest contract value on any contract anniversary while the owner, or
a joint owner is living, plus any purchase payments you made subsequent to
that contract anniversary, less any withdrawals (and any withdrawal charges
paid on the withdrawals) subsequent to that contract anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest 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 greatest contract value on any prior contract anniversary on or before
your or your joint owner's 80th birthday, plus any purchase payments you
made subsequent to that contract anniversary, less any withdrawals (and any
withdrawal charges paid on the withdrawals) subsequent to that contract
anniversary.
DEATH BENEFIT OPTION B:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest 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 greatest of the values of your contract resulting from taking the
contract value on any contract anniversary on or after July 1, 1999 while
the owner, or a joint owner is living, plus any purchase payments you made
subsequent to that contract anniversary, less any withdrawals (and any
withdrawal charges paid on the withdrawals) subsequent to that contract
anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest 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 greatest of the values of your contract resulting from taking the
contract value on any prior contract anniversary on or after July 1, 1999
and on or before your or your joint owner's 80th birthday, plus any
purchase payments you made subsequent to that contract anniversary, less
any withdrawals (and any withdrawal charges paid on the withdrawals)
subsequent to that contract anniversary.
DEATH BENEFIT OPTION C:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 greatest of the values resulting from taking the contract value on any
five (5) year contract anniversary prior to the date of your death or the
joint owner's death, plus any purchase payments you made subsequent to that
contract anniversary, less any withdrawals (and any withdrawal charges paid
on the withdrawals) subsequent to that contract anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest 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 greatest of the values resulting from taking the contract value on any
prior five (5) year contract anniversary on or before your or your joint
owner's 80th birthday, plus any purchase payments you made after that
contract anniversary, less any withdrawals (and any withdrawal charges paid
on the withdrawals) made after that contract anniversary.
Check your contract and applicable endorsement for your death benefit.
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.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date Cova receives proof of death. If Cova does not receive
an election during such time, it will make a single sum payment to the
beneficiary at the end of the 60 day period.
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.
On August 26, 1999, it was announced that The Metropolitan Life Insurance
Company would purchase General American Life Insurance Company, the parent
company of Cova. Metropolitan Life is one of the country's oldest and most
financially sound life insurance organizations.
Year 2000
Cova has developed and initiated plans to assure that its computer systems will
function properly in the year 2000 and later years. These efforts have included
receiving assurances from outside service providers that their computer systems
will also function properly in this context. Included within these plans are the
computer systems of the advisers and sub-advisers of the various investment
portfolios underlying the Separate Account.
The total cost of implementing these plans is not expected to have a material
effect on Cova's financial position or results of operations. Cova believes that
it has taken all reasonable steps to address these potential problems. There can
be no guarantee, however, that the steps taken will be adequate to avoid any
adverse impact.
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 Separate Account is divided into
sub-accounts.
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 5.63% of purchase payments but,
under certain circumstances, may be paid up to 6.0% commission. Sometimes, Cova
enters into an agreement with the broker-dealer to pay the broker-dealer
persistency bonuses, in addition to the standard commissions.
Ownership
Owner. You, as the owner of the contract, have all the interest and 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 (this may be a taxable event). The beneficiary becomes
the owner when a death benefit is payable. When this occurs, some ownership
rights may be limited.
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.
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
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
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. 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.
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Sub-Account
<S> <C> <C>
Beginning of Period $11.77 $10.00 * *
End of Period 12.80 11.77
Number of Accum. Units Outstanding 460,824 183,488
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Sub-Account
Beginning of Period $11.39 $10.00 * *
End of Period 11.81 11.39
Number of Accum. Units Outstanding 292,086 204,072
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Sub-Account
Beginning of Period $13.06 $10.00 * *
End of Period 14.84 13.06
Number of Accum. Units Outstanding 1,270,910 521,890
- -----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Sub-Account
Beginning of Period $14.60 $10.00 * *
End of Period 16.40 14.60
Number of Accum. Units Outstanding 1,450,385 667,854
- -----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Sub-Account
Beginning of Period $ 7.99 $10.00 * *
End of Period 8.41 7.99
Number of Accum. Units Outstanding 396,067 191,411
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $13.50 $12.88 $11.29 $10.10
End of Period 13.54 13.50 12.88 11.29
Number of Accum. Units Outstanding 11,212,098 8,184,894 3,945,097 659,663
- -----------------------------------------------------------------------------------------------------------------------------------
Developing Growth Sub-Account
Beginning of Period $11.07 $10.53 $10.00 *
End of Period 12.72 11.07 10.53
Number of Accum. Units Outstanding 1,738,843 1,342,201 148,658
- ------------------------------------------------------------------------------------------------------------------------------------
Large Cap Research Sub-Account
Beginning of Period $11.83 $9.90 $10.00 *
End of Period 13.32 11.83 9.90
Number of Accum. Units Outstanding 1,771,421 1,094,920 124,559
- -----------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Growth and Income Sub Account
(Sub-Account commenced operations during 1999. The value denoted is the initial AUV)
Beginning of Period $35.90
End of Period 39.10
Number of Accum. Units Outstanding 21,288,159
- ----------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Sub-Account
Beginning of Period $10.44 $10.47 $10.00 *
End of Period 11.56 10.44 10.47
Number of Accum. Units Outstanding 2,205,833 1,642,553 194,386
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by J.P. Morgan Investment Management Inc.
International Equity Sub-Account
Beginning of Period $12.89 $11.46 $10.97 $10.21
End of Period 13.53 12.89 11.46 10.97
Number of Accum. Units Outstanding 7,524,017 7,309,325 5,440,592 1,306,892
- -----------------------------------------------------------------------------------------------------------------------------------
Large Cap Stock Sub-Account
Beginning of Period $19.43 $14.89 $11.33 $10.00
End of Period 21.76 19.43 14.89 11.33
Number of Accum. Units Outstanding 9,555,351 4,178,035 1,473,929 1,389,606
- -----------------------------------------------------------------------------------------------------------------------------------
Quality Bond Sub-Account
Beginning of Period $11.91 $11.16 $10.37 $9.90
End of Period 11.58 11.91 11.16 10.37
Number of Accum. Units Outstanding 7,609,203 3,323,343 1,433,081 508,830
- -----------------------------------------------------------------------------------------------------------------------------------
Select Equity Sub-Account
Beginning of Period $16.99 $14.05 $10.84 $10.08
End of Period 18.79 16.99 14.05 10.84
Number of Accum. Units Outstanding 11,657,671 10,544,818 6,903,606 2,044,523
- -----------------------------------------------------------------------------------------------------------------------------------
Small Cap Stock Sub-Account
Beginning of Period $12.58 $13.49 $11.31 $10.51
End of Period 13.25 12.58 13.49 11.31
Number of Accum. Units Outstanding 5,470,094 5,532,610 3,940,243 1,237,405
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
Money Market Sub-Account
Beginning of Period $11.11 $10.67 $10.23 $10.00
End of Period 11.30 11.11 10.67 10.23
Number of Accum. Units Outstanding 3,291,555 1,473,737 311,051 34,964
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Sub-Account
Beginning of Period $ 9.91 $10.00 * *
End of Period 10.87 9.91
Number of Accum. Units Outstanding 574,475 467,675
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by Goldman Sachs Asset Management International
Goldman Sachs Global Income Sub-Account
Beginning of Period $10.78 $10.00 * *
End of Period 10.55 10.78
Number of Accum. Units Outstanding 23,264 18,833
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International Equity Sub-Account
Beginning of Period $11.40 $10.00 * *
End of Period 11.63 11.40
Number of Accum. Units Outstanding 179,215 112,824
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities Sub-Account
Beginning of Period $10.56 $10.00 * *
End of Period 10.49 10.56
Number of Accum. Units Outstanding 151,786 59,712
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Small Cap Growth Sub-Account
Beginning of Period $11.68 $10.00 * *
End of Period 12.08 11.68
Number of Accum. Units Outstanding 115,827 76,492
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Small Cap Value Sub-Account
Beginning of Period $ 8.75 $10.00 * *
End of Period 9.21 8.75
Number of Accum. Units Outstanding 447,154 245,092
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management, Inc.
Newport Tiger Fund, Variable Sub-Account
Beginning of Period $ 9.23 $10.00 * *
End of Period 11.85 9.23
Number of Accum. Units Outstanding 35,478 31,936
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Sub-Account
Beginning of Period $13.23 $10.00 * *
End of Period 14.83 13.23
Number of Accum. Units Outstanding 918,911 539,659
- ---------------------------------------------------------------------------------------------------------------------------------
MFS/Foreign & Colonial Emerging Markets Equity Sub-Account
Beginning of Period $6.57 $10.00 * *
End of Period 7.99 6.57
Number of Accum. Units Outstanding 51,354 73,171
- --------------------------------------------------------------------------------------------------------------------------------
MFS Global Governments Sub-Account
Beginning of Period $10.67 $10.00 * *
End of Period 10.29 10.67
Number of Accum. Units Outstanding 4,832 2,082
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Growth With Income Sub-Account
Beginning of Period $12.07 $10.00 * *
End of Period 12.68 12.07
Number of Accum. Units Outstanding 1,049,025 581,434
- ---------------------------------------------------------------------------------------------------------------------------------
MFS High Income Sub-Account
Beginning of Period $ 9.85 $10.00 * *
End of Period 10.26 9.85
Number of Accum. Units Outstanding 347,989 219,209
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Research Sub-Account
Beginning of Period $12.17 $10.00 * *
End of Period 13.16 12.17
Number of Accum. Units Outstanding 760,925 464,786
- ---------------------------------------------------------------------------------------------------------------------------------
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
Oppenheimer Bond Sub-Account
Beginning of Period $10.53 $10.00 * *
End of Period 10.28 10.53
Number of Accum. Units Outstanding 795,356 401,990
Oppenheimer Capital Appreciation Sub-Account
Beginning of Period $12.23 $10.00 * *
End of Period 14.07 12.23
Number of Accum. Units Outstanding 274,732 97,161
Oppenheimer High Income Sub-Account
Beginning of Period $ 9.89 $10.00 * *
End of Period 10.20 9.89
Number of Accum. Units Outstanding 163,191 78,513
Oppenheimer Main Street Growth & Income Sub-Account
Beginning of Period $10.33 $10.00 * *
End of Period 11.76 10.33
Number of Accum. Units Outstanding 378,965 284,830
Oppenheimer Strategic Bond Sub-Account
Beginning of Period $10.15 $10.00 * *
End of Period 10.09 10.15
Number of Accum. Units Outstanding 225,455 107,869
- ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Sub-Account
Beginning of Period $11.38 $10.00 * *
End of Period 12.50 11.38
Number of Accum. Units Outstanding 1,803,717 1,115,668
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Sub-Account
Beginning of Period $11.71 $10.00 * *
End of Period 13.06 11.71
Number of Accum. Units Outstanding 965,233 530,055
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT International New Opportunities Sub-Account
Beginning of Period $11.40 $10.00 * *
End of Period 13.54 11.40
Number of Accum. Units Outstanding 69,696 52,809
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Sub-Account
Beginning of Period $10.48 $10.00 * *
End of Period 11.90 10.48
Number of Accum. Units Outstanding 62,091 42,091
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Sub-Account
Beginning of Period $11.79 $10.00 * *
End of Period 13.20 11.79
Number of Accum. Units Outstanding 259,037 151,405
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund,
Class 1 Shares
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments Sub-Account
Beginning of Period $ 9.63 $10.00 * *
End of Period 11.01 9.63
Number of Accum. Units Outstanding 191,430 106,035
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Sub-Account
Beginning of Period $ 7.55 $10.00 * *
End of Period 10.74 7.55
Number of Accum. Units Outstanding 224,256 89,960
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by Templeton Investment Counsel, Inc.
Templeton International Sub-Account
Beginning of Period $ 9.14 $10.00 * *
End of Period 10.01 9.14
Number of Accum. Units Outstanding 576,554 164,775
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The Mid-Cap Value, Large Cap Research and Developing Growth Portfolios started
regular investment operations on August 20, 1997. The Lord Abbett Growth and
Income Portfolio commenced regular investment operations on January 8, 1999.
Separate Account inception dates in the other investment portfolios are as
follows: AIM Variable Insurance Funds, Inc., Alliance Variable Products Series
Fund, Inc., Kemper Variable Series, Liberty Variable Investment Trust, MFS
Variable Insurance Trust, Oppenheimer Variable Account Funds and Putnam Variable
Trust - December 31, 1997; General American Capital Company - June 3, 1996;
Goldman Sachs Variable Insurance Trust - January 29, 1998; and Templeton Variable
Products Series Fund - May 1, 1998.
</FN>
</TABLE>
APPENDIX B
PARTICIPATING INVESTMENT PORTFOLIOS
Below are the investment objectives of each investment portfolio available
under the Contract. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
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
Investment Objective: The Fund's investment objective is growth of capital
through investment in common stock, with emphasis on medium- and small-sized
growth companies. The Fund may also investment up to 20% of its total assets
in foreign securities.
AIM V.I. INTERNATIONAL EQUITY FUND
Investment Objective: The Fund's investment objective is to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities whose issuers are considered to have strong earnings momentum.
The Fund seeks to meet this objective by investing at least 70% of its total
assets in marketable equity securities of foreign companies that are listed on a
recognized foreign securities exchange or traded in a foreign over-the-counter
market. The Fund will normally invest in companies located in at least four
countries outside of the United States, emphasizing investment in companies in
the developed countries of Western Europe and the Pacific Basin. The Fund may
invest up to 20% of its total assets in securities of issuers located in
developing countries, i.e., those that are in the initial stages of their
industrial cycles. The Fund may invest up to 20% of its total assets in
securities exchangeable for or convertible into equity securities of foreign
companies.
AIM V.I. VALUE FUND
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in equity securities judged by the
Fund's investment advisor to be undervalued relative to the investment advisor's
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market generally.
Income is a secondary objective. The Fund may also invest in preferred stocks
and debt instruments that have prospects for growth of capital. The Fund also
may invest up to 25% of its total assets in foreign securities.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PREMIER GROWTH PORTFOLIO
Investment Objective: The Portfolio's investment objective is growth of capital
by pursuing aggressive investment policies. The Portfolio invests primarily
in equity securities of U.S. companies. Normally, the Portfolio invests in
about 40-50 companies, with the 25 most highly regarded of these companies
usually constituting approximately 70% of the Portfolio's net assets.
REAL ESTATE INVESTMENT PORTFOLIO
Investment Objective: The Portfolio's investment objective is total return from
long-term growth of capital and income principally through investing in equity
securities of companies that are primarily engaged in or related to the real
estate industry.
COVA SERIES TRUST:
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. Cova Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
portfolios are available under the contract:
PORTFOLIOS MANAGED BY J. P. MORGAN INVESTMENT MANAGEMENT INC.:
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: The International Equity Portfolio seeks to provide a high
total return from a portfolio of equity securities of foreign corporations.
LARGE CAP STOCK PORTFOLIO
Investment Objective: The Large Cap Stock Portfolio seeks to provide long-term
growth of capital and income by investing primarily in dividend-paying common
stock. The Portfolio will typically hold approximately 300 stocks.
QUALITY BOND PORTFOLIO
Investment Objective: The Quality Bond Portfolio seeks to provide a high total
return consistent with moderate risk of capital and maintenance of liquidity by
investing at least 65% of its assets in bonds under normal circumstances.
SELECT EQUITY PORTFOLIO
Investment Objective: The Select Equity Portfolio seeks to provide long-term
growth of capital and income by investing primarily in dividend-paying common
stock. The Portfolio will typically hold between 60 and 90 stocks.
SMALL CAP STOCK PORTFOLIO
Investment Objective: The Small Cap Stock Portfolio seeks to provide a high
total return from a portfolio of equity securities of small companies.
PORTFOLIOS MANAGED BY LORD, ABBETT & CO.:
BOND DEBENTURE PORTFOLIO
Investment Objective: The Bond Debenture Portfolio seeks to provide high current
income and the opportunity for capital appreciation to produce a high total
return through a professionally-managed portfolio consisting primarily of
convertible and discount debt securities, many of which are lower rated.
DEVELOPING GROWTH PORTFOLIO
Investment Objective: The Developing Growth Portfolio seeks long-term growth of
capital through a diversified and actively-managed portfolio consisting of
developing growth companies, many of which are traded over the counter.
LARGE CAP RESEARCH PORTFOLIO
Investment Objective: The Large Cap Research Portfolio seeks growth of capital
and growth of income consistent with reasonable risk. Production of current
income is a secondary consideration. The Portfolio invests primarily in common
stocks, including securities convertible into common stocks.
LORD ABBETT GROWTH AND INCOME PORTFOLIO
Investment Objective: The Lord Abbett Growth and Income Portfolio seeks to
achieve long-term growth of capital and income without excessive fluctuation in
market value. The Portfolio will normally invest in common stocks, including
securities convertible into common stocks, of large, seasoned companies in sound
financial condition, which common stocks are expected to show above-average
price appreciation.
MID-CAP VALUE PORTFOLIO
Investment Objective: The Mid-Cap Value Portfolio seeks capital appreciation
through investments, primarily in equity securities, which are believed to be
undervalued in the marketplace.
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
MONEY MARKET FUND
Investment Objective: The Money Market Fund's investment objective is to provide
investors with current income while preserving capital and maintaining
liquidity. The Fund seeks to achieve this objective by investing primarily in
high-quality, short-term money market instruments. The Fund purchases securities
that meet the quality, maturity, and diversification requirements applicable to
money market funds.
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Variable Insurance Trust is a mutual fund with multiple
portfolios. Goldman Sachs Asset Management is the investment adviser for the
Goldman Sachs Growth and Income Fund and Goldman Sachs Asset Management
International is the investment adviser for the Goldman Sachs International
Equity Fund and the Goldman Sachs Global Income Fund. The following portfolios
are available under the contract:
GOLDMAN SACHS GLOBAL INCOME FUND
Investment Objective: The Fund seeks a high total return, emphasizing current
income, and, to a lesser extent, providing opportunities for capital
appreciation. The Fund invests primarily in a portfolio of high quality
fixed-income securities of U.S. and foreign issuers and enters into
transactions in foreign currencies.
GOLDMAN SACHS GROWTH AND INCOME FUND
Investment Objective: The Fund seeks long-term growth of capital and growth of
income by investing in large capitalization U.S. stocks that are believed to
be undervalued or undiscovered in the marketplace.
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Investment Objective: The Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies organized outside the United States
or whose securities are principally traded outside the United States.
KEMPER VARIABLE SERIES
Kemper Variable Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the Kemper Government Securities
Portfolio, the Kemper Small Cap Growth Portfolio and the Kemper Small Cap Value
Portfolio. The following portfolios are available under the contract:
KEMPER GOVERNMENT SECURITIES PORTFOLIO
Investment Objective: Kemper Government Securities seeks high current return
consistent with preservation of capital. The Portfolio pursues its objective
by investing at least 65% of its total assets in U.S. Government securities
and repurchase agreements of U.S. Government securities.
KEMPER SMALL CAP GROWTH PORTFOLIO
Investment Objective: Kemper Small Cap Growth Portfolio seeks maximum
appreciation of investors' capital. The Portfolio pursues its objective by
investing at least 65% of its total assets in small capitalization stocks
similar in size to those companies comprising the Russell 2000 Index. Many
of these companies would be in the early stages of their life cycle. Equity
securities in which the Portfolio invests consist primarily of common stocks,
but may include convertible securities, including warrants and rights.
KEMPER SMALL CAP VALUE PORTFOLIO
Investment Objective: Kemper Small Cap Value Portfolio seeks long-term capital
appreciation. The Portfolio pursues its investment objective by investing
primarily in a diversified portfolio of the stocks of small U.S. companies,
which are those similar in size to those comprising the Russell 2000 Index and
that the investment manager believes to be undervalued. Under normal market
conditions, the Portfolio invests at least 65% of its assets in small
capitalization stocks similar in size to those comprising the Russell 2000
Index.
LIBERTY VARIABLE INVESTMENT TRUST:
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger Fund, Variable Series. The following
portfolio is available under the contract:
NEWPORT TIGER FUND, VARIABLE SERIES
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund invests primarily in stocks of companies
located in the nine Tiger countries of Asia. The Tigers of Asia are Hong Kong,
Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The People's
Republic of China and the Philippines. The Fund typically invests in stocks of
larger, well-established companies.
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
Investment Objective: The Series' investment objective is long term growth of
capital. The Series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities of emerging growth
companies.
MFS/FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES
Investment Objective: The Series' investment objective is capital appreciation.
The Series invests, under normal market conditions, at least 65% of its total
assets in common stocks and related securities, such as preferred stock,
convertible securities and depositary receipts, of emerging market issuers.
Shares of this Series are not available for purchase by variable annuity or
variable life contract holders whose contracts take effect on or after May 1,
1999.
MFS GLOBAL GOVERNMENTS SERIES
Investment Objective: The Series' investment objective is to provide income
and capital appreciation. The Series invests primarily in U.S. and foreign
government securities. Prior to May 1, 1999, the Series' investment objective
was to seek not only preservation but also growth of capital, together with
moderate current income.
MFS GROWTH WITH INCOME SERIES
Investment Objective: The Series' investment objective is to provide reasonable
current income and long-term growth of capital and income. The Series invests,
under normal market conditions, at least 65% of its total assets in common
stocks and related securities.
MFS HIGH INCOME SERIES
Investment Objective: The Series' investment objective is to provide high
current income by investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve equity features.
The Series invests, under normal market conditions, at least 80% of its total
assets in high yield fixed income securities which generally are lower rated
bonds commonly known as junk bonds. Junk bonds are subject to a substantially
higher degree of risk than higher rated bonds.
MFS RESEARCH SERIES
Investment Objective: The Series' investment objective is long-term growth of
capital and future income. The Series invests, under normal market conditions,
at least 80% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts.
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Variable Account Funds is a mutual fund with multiple portfolios.
OppenheimerFunds, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
OPPENHEIMER BOND FUND/VA
Investment Objective: The Fund's main objective is to seek a high level of
current income. As a secondary objective, the Fund seeks capital appreciation
when consistent with its primary objective. Normally, the Fund invests at least
65% of its total assets in investment-grade debt securities, U.S. Government
securities and money market instruments.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA
(formerly Oppenheimer Growth)
Investment Objective: The Fund seeks capital appreciation by investing in
securities of well-known established companies. The Fund invests mainly in
common stocks of established and well-known U.S. companies.
OPPENHEIMER HIGH INCOME FUND/VA
Investment Objective: The Fund seeks a high level of current income from
investment in high-yield fixed income securities. The Fund invests mainly
in a variety of high-yield fixed-income securities of domestic and foreign
issuers.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
(formerly Oppenheimer Growth & Income)
Investment Objective: The Fund's objective is to seek high total return (which
includes growth in the value of its shares as well as current income) from
equity and debt securities. The Fund invests mainly in common stocks of U.S.
companies, and can also invest in other equity securities such as preferred
stocks and securities convertible into common stocks.
OPPENHEIMER STRATEGIC BOND FUND/VA
Investment Objective: The Fund seeks a high level of current income principally
derived from interest on debt securities and seeks to enhance that income by
writing covered call options on debt securities. The Fund invests mainly in
debt securities of issuers in three market sectors: foreign governments and
companies, U.S. government securities and lower-grade high-yield securities of
U.S. companies.
PUTNAM VARIABLE TRUST:
Putnam Variable Trust is a mutual fund with multiple portfolios. Putnam
Investment Management, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
PUTNAM VT GROWTH AND INCOME FUND, CLASS IA SHARES
Investment Objective: The Fund seeks capital growth and current income. The Fund
invests primarily in "value" stocks, that offer the potential for capital
growth, current income, or both. Value stocks are those that the adviser
believes are currently undervalued compared to their true worth.
PUTNAM VT INTERNATIONAL GROWTH FUND, CLASS IA SHARES
Investment Objective: The Fund seeks capital appreciation. Under normal
conditions, the Fund generally diversifies its investments among a number of
different countries by investing at least 65% of its total assets in at least
three countries other than the United States. The Fund may invest in both growth
and value stocks.
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND, CLASS IA SHARES
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund generally invests at least 65% of its total
assets in at least three countries other than the United States. The Fund
invests mainly in growth stocks, which are stocks issued by companies whose
earnings the adviser believes are likely to grow faster than the economy as a
whole.
PUTNAM VT NEW VALUE FUND, CLASS IA SHARES
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund invests in value stocks, which are common
stocks that the adviser believes are undervalued at the time of purchase and
have the potential for long-term capital appreciation.
PUTNAM VT VISTA FUND, CLASS IA SHARES
Investment Objective: The Fund seeks capital appreciation. The Fund invests
mainly in "growth" stocks that are issued by companies whose earnings the
adviser believes are likely to grow faster than the economy as a whole. The
Fund mainly buys stocks of medium size companies, although the Fund may
invest in companies of any size.
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES:
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Each portfolio has two classes of shares: Class 1 and Class 2. The
portfolios available in connection with your contract are Class 1 shares.
Templeton Asset Management Ltd. is the investment adviser for the Templeton
Developing Markets Fund, Templeton Investment Counsel, Inc. is the investment
adviser for the Templeton International Fund and Franklin Mutual Advisers, LLC
is the investment adviser for the Mutual Shares Investments Fund. The following
portfolios are available under the contract:
MUTUAL SHARES INVESTMENTS FUND
Investment Objective: The Fund's principal goal is capital appreciation. Its
secondary goal is income. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of companies that the
manager believes are available at market prices less than their actual value
based on certain recognized or objective criteria (intrinsic value).
TEMPLETON DEVELOPING MARKETS FUND
Investment Objective: The Fund's investment goal is long-term capital
appreciation. Under normal market conditions, the Fund will invest at least 65%
of its total assets in emerging market equity securities. Emerging market equity
securities generally include equity securities that trade in emerging markets or
are issued by companies that have their principal activities in emerging market
countries.
TEMPLETON INTERNATIONAL FUND
Investment Objective: The Fund's investment goal is long-term capital growth.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of companies located outside the U.S., including
in emerging markets. While there are no set percentage targets, the Fund
generally invests in large- to medium-cap companies with market capitalization
values (share price times the number of common stock shares outstanding) greater
than $1.5 billion, but may invest a small portion in small-cap companies which
have more risk.
<TABLE>
<CAPTION>
APPENDIX C
PERFORMANCE INFORMATION
Future performance will vary and the results shown are not necessarily
representative of future results.
Note: The figures below present investment performance information for the
periods ended June 30, 1999. While these numbers represent the returns as of
that date, they do not represent performance information of the portfolios since
that date. Performance information for the periods after June 30, 1999 may
be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before June 30, 1999. As a
result, performance information is available for the accumulation units
investing in these portfolios.
o Column A presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of each portfolio, and assumes that you make a withdrawal at
the end of the period and therefore the withdrawal charge is reflected.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges and fees and expenses of each portfolio.
o Performance figures shown for sub-accounts in existence for less than one
year are not annualized.
Total Return for the periods ended 6/30/99:
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5 yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance
Funds, Inc.
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C>
Appreciation 12/31/97 9.58% - - 15.01% 14.20% - - 17.96%
AIM V.I. International
Equity 12/31/97 (4.49)% - - 8.77% 0.11% - - 11.79%
AIM V.I. Value 12/31/97 21.54% - - 27.38% 26.16% - - 30.21%
- -----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products
Series Fund, Inc.
Premier Growth 12/31/97 23.94% - - 36.41% 28.57% - - 39.17%
Real Estate Investment 12/31/97 (14.11)% - - (14.27)% (9.52)% - - (10.93)%
- -----------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5 yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Bond Debenture 5/1/96 (4.43)% - - 8.41% 0.17% - - 9.69%
Developing Growth 8/20/97 7.85% - - 11.50% 12.47% - - 13.81%
International Equity 5/1/96 (1.00)% - - 7.99% 3.60% - - 9.28%
Large Cap Research 8/20/97 12.81% - - 14.38% 17.42% - - 16.64%
Large Cap Stock 5/1/96 18.60% - - 26.85% 23.22% - - 27.81%
Lord Abbett Growth and Income 1/8/99 - - - - 3.78% - - - - 8.89%
Mid-Cap Value 8/20/97 (1.47)% - - 5.70% 3.13% - - 8.09%
Quality Bond 5/1/96 (4.11)% - - 3.69% 0.49% - - 5.09%
Select Equity 5/1/96 14.32% - - 20.66% 18.94% - - 21.71%
Small Cap Stock 5/1/96 (10.08)% - - 6.25% (5.49)% - - 7.58%
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market 6/3/96 (0.86)% - - 2.58% 3.75% - - 4.05%
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable
Insurance Trust
Goldman Sachs
Global Income 1/29/98 (2.14)% - - 0.57% 2.46% - - 3.86%
Goldman Sachs Growth
and Income 1/29/98 (3.76)% - - 2.77% 0.84% - - 6.04%
Goldman Sachs
International Equity 1/29/98 (2.86)% - - 8.02% 1.75% - - 11.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Government
Securities 12/31/97 (2.43)% - - 0.11% 2.17% - - 3.23%
Kemper Small Cap Growth 12/31/97 2.78% - - 10.44% 7.39% - - 13.44%
Kemper Small Cap Value 12/31/97 (13.92)% - - (8.58)% (9.33)% - - (5.34)%
- ----------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5 yrs inception
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 12/31/97 57.30% - - 9.01% 61.96% - - 12.02%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging Growth 12/31/97 18.17% - - 27.28% 22.79% - - 30.11%
MFS Foreign & Colonial
Emerging Markets Equity 12/31/97 (12.54)% - - (17.35)% (7.95)% - - (13.96)%
MFS Global Governments 12/31/97 (3.45)% - - (1.21)% 1.15% - - 1.93%
MFS Growth With Income 12/31/97 5.34% - - 14.27% 9.95% - - 17.22%
MFS High Income 12/31/97 (5.89)% - - (1.40)% (1.29)% - - 1.75%
MFS Research 12/31/97 6.82% - - 17.21% 11.43% - - 20.14%
- ------------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5 yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Oppenheimer Bond Fund/VA 12/31/97 (4.99)% - - (1.26)% (0.39)% - - 1.89%
Oppenheimer Capital
Appreciation Fund/VA 12/31/97 16.39% - - 22.77% 21.01% - - 25.64%
Oppenheimer High
Income Fund/VA 12/31/97 (6.60)% - - (1.82)% (2.00)% - - 1.33%
Oppenheimer Main Street
Growth & Income Fund/VA 12/31/97 0.06% - - 8.41% 4.66% - - 11.43%
Oppenheimer Strategic
Bond Fund/VA 12/31/97 (6.24)% - - (2.53)% (1.64)% - - 0.63%
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth and
Income - Class IA Shares 12/31/97 9.91% - - 13.14% 14.53% - - 16.11%
Putnam VT International
Growth - Class IA Shares 12/31/97 5.18% - - 16.62% 9.79% - - 19.55%
Putnam VT International
New Opportunities -
Class IA Shares 12/31/97 12.55% - - 19.54% 17.17% - - 22.44%
Putnam VT New Value -
Class IA Shares 12/31/97 10.77% - - 9.32% 15.38% - - 12.33%
Putnam VT Vista -
Class IA Shares 12/31/97 9.06% - - 17.47% 13.68% - - 20.39%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products
Series Fund, Class 1 Shares
*Mutual Shares Investments 5/1/98 11.16% - - 4.60% 15.78% - - 8.61%
*Templeton Developing
Markets 5/1/98 41.04% - - 2.28% 45.69% - - 6.30%
Templeton International 5/1/98 (0.68)% - - (3.92)% 3.92% - - 0.13%
* Past expense reductions by the manager increased returns.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX C
PERFORMANCE INFORMATION (continued)
PART 2 - HISTORICAL FUND PERFORMANCE
The contracts are relatively new and therefore have a limited performance
history. However, certain portfolios have been in existence for some time and
have an investment performance history. In order to show how the historical
performance of the portfolios affects the contract's accumulation unit values,
the following performance information was developed.
The information is based upon the historical experience of the portfolios and is
for the periods shown. The chart below shows the investment performance of the
portfolios and the accumulation unit performance calculated by assuming that the
contracts were invested in the portfolios for the same periods.
o The performance figures in Column A reflect the fees and expenses paid by
each portfolio.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of each portfolio, and assumes that you make a withdrawal at
the end of the period and therefore the withdrawal charge is reflected.
o Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
o Performance figures shown for portfolios in existence for less than one
year are not annualized.
Total Return for the periods ended 6/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation 5/5/93 15.81% 21.16% 18.88% 9.58% 19.66% 17.38% 14.20% 19.76% 17.48%
AIM V.I.
International Equity 5/5/93 1.52% 12.82% 13.02% (4.49)% 11.32% 11.52% 0.11% 11.42% 11.62%
AIM V.I. Value 5/5/93 27.94% 25.41% 22.63% 21.54% 23.91% 21.13% 26.16% 24.01% 21.23%
- -----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth 6/26/92 30.38% 32.57% 25.64% 23.94% 31.07% 24.14% 28.57% 31.17% 24.24%
Real Estate
Investment 1/9/97 (8.25)% - - 2.34% (14.11)% - - (3.66)% (9.52)% - - 0.94%
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market 10/1/87 5.21% 5.54% 5.53% (0.86)% 4.04% 4.03% 3.75% 4.14% 4.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Goldman Sachs
Global Income 1/12/98 3.91% - - 4.53% (2.14)% - - (1.47)% 2.46% - - 3.13%
Goldman Sachs
Growth and Income 1/12/98 2.26% - - 10.96% (3.76)% - - 4.96% 0.84% - - 9.56%
Goldman Sachs
International Equity 1/12/98 3.18% - - 15.36% (2.86)% - - 9.36% 1.75% - - 13.96%
- ------------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Government
Securities 9/3/87 3.61% 7.41% 7.51% (2.43)% 5.91% 6.01% 2.17% 6.01% 6.11%
Kemper Small
Cap Growth 5/2/94 8.90% 23.95% 22.60% 2.78% 22.45% 21.10% 7.39% 22.55% 21.20%
Kemper Small
Cap Value 5/1/96 (8.04)% - - 4.98% (13.92)% - - (1.02)% (9.33)% - - 3.58%
- -----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 5/1/95 64.19% - - 1.65% 57.30% - - (4.35)% 61.96% - - 0.25%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging
Growth 7/24/95 24.52% - - 26.65% 18.17% - - 20.65% 22.79% _ _ 25.25%
MFS Foreign & Colonial
Emerging Markets
Equity 10/16/97 (6.65)% - - (16.61)% (12.54)% - - (22.61)% (7.95)% -- (18.01)%
MFS Global
Governments 6/14/94 2.58% 4.40% 4.40% (3.45)% 2.90% 2.90% 1.15% 3.00% 3.00%
MFS Growth
With Income 10/9/95 11.50% - - 24.02% 5.34% - - 18.02% 9.95% _ _ 22.62%
MFS High Income 7/26/95 0.10% - - 8.95% (5.89)% - - 2.95% (1.29)% _ _ 7.55%
MFS Research 7/26/95 13.00% - - 22.00% 6.82% - - 16.00% 11.43% _ _ 20.60%
- ------------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99:
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account
Funds
Oppenheimer Bond
Fund/VA 4/3/85 1.02% 7.09% 8.26% (4.99)% 5.59% 6.76% (0.39)% 5.69% 6.86%
Oppenheimer Capital
Appreciation
Fund/VA 4/3/85 22.71% 27.00% 16.98% 16.39% 25.50% 15.48% 21.01% 25.60% 15.58%
Oppenheimer High
Income Fund/VA 4/30/86 (0.62)% 9.79% 12.63% (6.60)% 8.29% 11.13% (2.00)% 8.39% 11.23%
Oppenheimer Main
Street Growth &
Income Fund/VA 7/5/95 6.14% - - 27.57% 0.06% - - 21.57% 4.66% - - 26.17%
Oppenheimer Strategic
Bond Fund/VA 5/3/93 (0.25)% 7.60% 6.25% (6.24)% 6.10% 4.75% (1.64)% 6.20% 4.85%
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth
and Income -
Class IA Shares 2/1/88 16.14% 21.98% 15.93% 9.91% 20.48% 14.43% 14.53% 20.58% 14.53%
Putnam VT International
Growth - Class
IA Shares 1/2/97 11.34% - - 19.20% 5.18% - - 13.20% 9.79% - - 17.80%
Putnam VT International
New Opportunities -
Class IA Shares 1/2/97 18.82% - - 13.82% 12.55% - - 7.82% 17.17% - - 12.42%
Putnam VT New Value -
Class IA Shares 1/2/97 17.01% - - 15.39% 10.77% - - 9.39% 15.38% - - 13.99%
Putnam VT Vista -
Class IA Shares 1/2/97 15.28% - - 22.58% 9.06% - - 16.58% 13.68% - - 21.18%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products
Series Fund
*Mutual Shares Investments,
Class 1 Shares 5/1/98 17.41% - - 10.14% 11.16% - - 4.14% 15.78% - - 8.74%
*Templeton Developing
Markets Fund, Class
1 Shares 3/4/96 47.76% - - (8.10)% 41.04% - - (14.10)% 45.69% - - (9.50)%
Templeton
International Fund,
Class 1 Shares 5/1/92 5.39% 15.27% 14.69% (0.68)% 13.77% 13.19% 3.92% 13.87% 13.29%
* Past expense reductions by the manager increased returns.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please send me, at no charge, the Statement of Additional Information dated
November __, 1999, for the annuity contract issued by Cova.
(Please print or type and fill in all information)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip Code
CL-2096 (11/99) CUST-MO
- ------------------------------
- ------------------------------
- ------------------------------
Cova Financial Services Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
COVA
Cova Financial Services Life Insurance Company
Marketing and Executive Office
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
800-523-1661
Annuity Service Office
P.O. Box 10366
Des Moines, IA 50306-9775
800-343-8496
CL-2095 (5/99) Policy Form Series XL407, CL-407,XL-617,CL-617 21-CSA-MO(5/99)
PART A - VERSION B
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 7 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 6 investment portfolios listed
below. The 6 investment portfolios are part of the Russell Insurance Funds or
General American Capital Company. You can put your money in the fixed account
and/or any of these investment portfolios.
Russell Insurance Funds:
Managed by Frank Russell
Investment Management Company
Aggressive Equity
Core Bond
Multi-Style Equity
Non-U.S.
Real Estate Securities
General American Capital Company:
Managed by Conning Assets
Management Company
Money Market
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 November __, 1999.
The SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page __ of this prospectus. For a free
copy of the SAI, call us at (800) 523-1661 or write us at: One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
November __, 1999
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS 2
SUMMARY 3
FEE TABLE 5
EXAMPLES 6
1. THE ANNUITY CONTRACT 7
2. ANNUITY PAYMENTS (THE INCOME PHASE) 7
Annuity Date 7
Annuity Payments 7
Annuity Options 7
3. PURCHASE 8
Purchase Payments 8
Allocation of Purchase Payments 8
Free Look 8
Accumulation Units 8
4. INVESTMENT OPTIONS 9
Russell Insurance Funds 9
General American Capital Company. 9
Transfers 9
Dollar Cost Averaging Program 9
Automatic Rebalancing Program 10
Approved Asset Allocation Programs 10
Voting Rights 10
Substitution 10
5. EXPENSES 10
Insurance Charges 11
Contract Maintenance Charge 11
Withdrawal Charge 11
Reduction or Elimination of the
Withdrawal Charge 11
Premium Taxes 12
Transfer Fee 12
Income Taxes 12
Investment Portfolio Expenses 12
6. TAXES 12
Annuity Contracts in General 12
Qualified and Non-Qualified Contracts 12
Withdrawals - Non-Qualified Contracts 12
Withdrawals - Qualified Contracts 13
Withdrawals - Tax-Sheltered Annuities 13
Diversification 13
7. ACCESS TO YOUR MONEY 13
Systematic Withdrawal Program 13
Suspension of Payments or Transfers 14
8. PERFORMANCE 14
9. DEATH BENEFIT 14
Upon Your Death 14
Death of Annuitant 15
10. OTHER INFORMATION 16
Cova 16
Year 2000 16
The Separate Account 16
Distributor 16
Ownership 16
Beneficiary 16
Assignment 16
Financial Statements 16
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION 16
APPENDIX A
Condensed Financial Information A-1
APPENDIX B
Performance Information B-1
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 and need an explanation. 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 7
Accumulation Unit 8
Annuitant 7
Annuity Date 7
Annuity Options 7
Annuity Payments 7
Annuity Unit 8
Beneficiary 16
Fixed Account 7
Income Phase 7
Investment Portfolios 9
Joint Owner 16
Non-Qualified 12
Owner 16
Purchase Payment 8
Qualified 12
Tax Deferral 12
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
1. THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by Cova is a contract between
you, the owner, and Cova, an insurance company. The contract provides a means
for investing on a tax-deferred basis. The contract is intended for retirement
savings or other long-term investment purposes and provides for a death benefit
and guaranteed income options.
This contract offers 6 investment portfolios. These portfolios are designed to
offer a potentially better return than the fixed account. However, this is NOT
guaranteed. You can also lose your money.
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.
You can put money into any or all of the investment portfolios and the fixed
account. You can transfer between accounts up to 12 times a year without charge
or tax implications.
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, in part, 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 an
annuity option. 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. HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 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 the following investment portfolios which are
described in the prospectuses for the funds. The investment objectives and
policies of certain of the investment portfolios are similar to the investment
objectives and policies of other mutual funds that certain of the investment
advisers manage. Although the objectives and policies may be similar, the
investment results of the investment portfolios may be higher or lower than the
results of such other mutual funds. The investment advisers cannot guarantee,
and make no representation, that the investment results of similar funds will be
comparable even though the funds have the same investment advisers.
Managed by Frank Russell
Investment Management Company
Aggressive Equity
Core Bond
Multi-Style Equity
Non-U.S.
Real Estate Securities
Managed by Conning Asset
Management Company
Money Market
Depending upon market conditions and the performance of the portfolio(s) you
select, 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.
o Each year Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, Cova currently waives this charge
if the value of your contract is at least $50,000.
o Cova also deducts for its insurance charges which total 1.40% of the
average daily value of your contract allocated to the investment
portfolios.
o If you take your money out, Cova may assess a withdrawal charge which is
equal to 5% of the purchase payment 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.
o When you begin receiving regular income payments from your annuity, Cova
will assess a state premium tax charge, if applicable, which ranges from 0%
- 4% depending upon the state.
o The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
o There are also investment charges which currently range from .205% to 1.30%
of the average daily value of the investment portfolio depending upon the
investment portfolio.
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 of purchase payments in excess of that may
be charged a withdrawal charge, depending on how long your money has been in the
contract. However, Cova will never assess a withdrawal charge on earnings you
withdraw. Earnings are defined as the value in your contract minus the remaining
purchase payments in your contract. Of course, you may also have to pay income
tax and a tax penalty on any money you take out.
8. DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
9. 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 reserve
the right to put your money in the Money Market Fund of General American Capital
Company during the free-look period and will refund the greater of your original
payment (less any withdrawals) or the value of your contract.
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 income 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:
o 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.
o 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.
o You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
o 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.
10. INQUIRIES:
If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
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 of the investment portfolios.
Owner Transaction Expenses
Withdrawal Charge (see Note 1 below)
5% of purchase payment withdrawn
Transfer Fee (see Note 2 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 3 below)
$30 per contract per year
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 1.40%
ANNUAL EXPENSES
<TABLE>
<CAPTION>
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Other Expenses Total Annual
Management Fees (after expense Portfolio
(after fee waiver) reimbursement) Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds*
Managed by Frank Russell
Investment Management Company
<S> <C> <C> <C>
Aggressive Equity .51% .74% 1.25%
Core Bond .12% .68% .80%
Multi-Style Equity .49% .43% .92%
Non-U.S. 0% 1.30% 1.30%
Real Estate Securities .85% .30% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset
Management Company
Money Market .125% .08% .205%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*The manager of Russell Insurance Funds, Frank Russell Investment
Management Company, has contractually agreed to waive, at least until
April 30, 2000, a portion of the management fee, up to the full amount
of that fee, equal to the amount by which the Fund's total operating
expenses exceed the amounts set forth above under "Total Annual Portfolio
Expenses" and to reimburse the Fund for all remaining expenses, after fee
waivers which exceed the amount set forth above for each Fund under "Total
Annual Portfolio Expenses". Absent such waiver and reimbursement, the management
fees and total operating expenses would be .78% and 1.21% for the Multi-Style
Equity Fund; .95% and 1.67% for the Aggressive Equity Fund; .95% and 2.37% for
the Non-U.S. Fund; .60% and 1.28% for the Core Bond Fund and ___% and ___% for
the Real Estate Securities Fund.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Examples
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets: (a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract value to an annuity option.
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
Managed by Frank Russell
Investment Management Company
<S> <C> <C> <C> <C>
Aggressive Equity (a)$ 77.80 (a) $130.14 (a) $189.89 (a) $305.57
(b)$ 27.80 (b) $ 85.14 (b) $144.89 (b) $305.57
Core Bond (a)$ 73.30 (a) $116.65 (a) $167.47 (a) $261.20
(b)$ 23.30 (b) $ 71.65 (b) $122.47 (b) $261.20
Multi-Style Equity (a)$ 74.50 (a) $120.27 (a) $173.50 (a) $273.25
(b)$ 24.50 (b) $ 75.27 (b) $128.50 (b) $273.25
Non-U.S. (a)$ 78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b)$ 28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Real Estate Securities (a)$ 76.80 (a) $127.16 (a) $184.95 (a) $295.90
(b)$ 26.80 (b) $ 82.16 (b) $139.95 (b) $295.90
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset
Management Company
Money Market (a)$ 67.31 (a) $ 98.54 (a) $137.02 (a) $199.08
(b)$ 17.31 (b) $ 53.54 (b) $ 92.02 (b) $199.08
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Explanation of Fee Table
1. 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.
2. 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.
3. During the accumulation phase, 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.
4. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
There is an accumulation unit value history (condensed financial information)
contained in Appendix A.
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 an income to you,
in the form of annuity payments, beginning on a designated date that is 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 6
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, in part, 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 rate credited
to the fixed account will not be less than 3% per year. 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 under
"Other Information."
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
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.
We ask you to choose your annuity date when you purchase the contract. You can
change it 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
You will receive annuity payments during the income phase. In general, annuity
payments must begin by the annuitant's 85th birthday or 10 years from the date
the contract was issued, whichever is later (this requirement may differ
slightly for special programs). The annuitant is the person whose life we look
to when we make annuity 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:
o fixed account,
o the investment portfolio(s), or
o 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 investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
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).
Annuity Options
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. 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.
You can choose one of the following annuity options or any annuity option
acceptable to Cova. 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%, 662/3% or 50% of the
amount that we would have paid if both were alive.
3. PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a
non-qualified contract. If you are purchasing 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 purchase payment we accept is $1 million
without our prior approval. You can make additional purchase payments of $500 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.
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.
Free Look
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 reserve the right to put your purchase
payment in the Money Market Fund for 15 days before we allocate your first
purchase payment to the investment portfolio(s) you have selected. (In some
states, the period may be longer.) In such case, we will refund the greater of
purchase payments (less withdrawals) or contract value. Currently, Cova directly
allocates your purchase payment to the investment portfolios and/or fixed
account you select.
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 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 Multi-Style Equity Fund. When the New
York Stock Exchange closes on that Monday, we determine that the value of an
accumulation unit for the Multi-Style Equity Fund 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 Multi-Style Equity Fund.
4. INVESTMENT OPTIONS
The Contract offers 6 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.
Russell Insurance Funds
Russell Insurance Funds is managed by Frank Russell Investment Management
Company. Russell Insurance Funds is a mutual fund with five portfolios, each
with its own investment objective. The following portfolios are available under
the contract:
Aggressive Equity Fund
Core Bond Fund
Multi-Style Equity Fund
Non-U.S. Fund
Real Estate Securities Fund
General American Capital Company
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
Cova may enter into certain arrangements under which it is reimbursed by the
investment portfolios' advisers, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
Transfers
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described below.
Telephone Transfers. You and/or your registered representative on your behalf,
can make transfers by telephone. Telephone transfers will be automatically
permitted unless you tell us otherwise. 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.
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 following
apply to any transfer during the accumulation phase:
1. Your request for transfer must clearly state which investment portfolio(s)
or the fixed account are involved in the transfer.
2. Your request for transfer must clearly state how much the transfer is for.
3. 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.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund 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 Dollar Cost Averaging
Program is available only during the accumulation phase.
Cova reserves the right to modify, terminate or suspend the Dollar Cost
Averaging Program.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program. There is no additional charge for participating
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.
Cova may, from time to time, offer other dollar cost averaging programs which
may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to 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.
The Automatic Rebalancing Program is available only during the accumulation
phase. There is no additional charge for participating in the Automatic
Rebalancing Program. 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 Core Bond Fund and 60% to be in the
Multi-Style Equity Fund. Over the next 21/2 months the bond market does very
well while the stock market performs poorly. At the end of the first quarter,
the Core Bond Fund now represents 50% of your holdings because of its
increase in value. If you have chosen to have your holdings rebalanced
quarterly, on the first day of the next quarter, Cova will sell some of your
units in the Core Bond Fund to bring its value back to 40% and use the money
to buy more units in the Multi-Style Equity Fund 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. Currently, Cova does not charge for participating in an
approved asset allocation program.
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 affected
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 fund expenses have been deducted. This charge is for 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below), is for 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 cannot be increased.
Cova will not deduct this charge during the accumulation phase, 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 (and once
a year during the first year for purposes of payment of charitable remainder
trust administration fees), 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. Withdrawals
for purposes of charitable remainder trust administration fees are included in
the 10% free withdrawal amount. Otherwise, the charge is 5% of each purchase
payment you take out, unless the payment was made more than 5 years ago. After
Cova has had a purchase payment for 5 years, there is no charge when you
withdraw that purchase payment. Cova does not assess a withdrawal charge on
earnings withdrawn from the contract. Earnings are defined as the value in your
contract minus the remaining purchase payments in your contract. The withdrawal
order for calculating the withdrawal charge is shown below.
o 10% of purchase payments free.
o Remaining purchase payments that are over 5 years old and not subject to a
withdrawal charge.
o Earnings in the contract free.
o Remaining purchase payments that are less than 5 years old and not subject
to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules may
apply to Section 1035 exchanges.
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.
Cova does not assess the withdrawal charge on any payments paid out as annuity
payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
Reduction or Elimination of the Withdrawal Charge
General
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.
Nursing Home Waiver
After you have owned the contract for one year, if you, or your joint owner,
become 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 (confinement must begin after the first contract anniversary).
This is called the Nursing Home Waiver. This provision is not available in all
states.
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 an additional discussion regarding taxes in the Statement of Additional
Information.
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 a trust holding the contract as
an agent for a natural person), 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), and
pension and profit-sharing plans, which include 401(k) plans and H.R. 10 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) for life or a period not exceeding life expectancy;
(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 amounts attributable to purchase payments
under a salary reduction agreement made by owners from 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 you are
considered the owner of the shares, 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 without being considered the owner of the shares. 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 shares 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 withdrawal value of the
contract. The withdrawal value of the contract is the value of the contract at
the end of the business day when Cova receives a written request for a
withdrawal:
o less any applicable withdrawal charge,
o less any premium tax, and
o less any contract maintenance charge.
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. If the remaining withdrawal value
would be less than $500 ($1,000 in New Jersey) after you make a partial
withdrawal, the partial withdrawal amount will be the remaining withdrawal
value.
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 "Taxes" and the
discussion in the Statement of Additional Information.
Income taxes, tax penalties and certain restrictions may apply to any withdrawal
you make.
Systematic Withdrawal Program
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 "Expenses."
Income taxes, tax penalties and certain restrictions may apply to Systematic
Withdrawals.
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.
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 and the
expenses of the investment portfolio. 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, withdrawal charges and
the expenses of the investment portfolio.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios, performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
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.
The Appendix 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 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.
Beginning May 1, 1999, at the time you buy the contract, you will receive Death
Benefit Option A. If you purchased your contract before May 1, 1999, you
received Death Benefit Option C. For these contracts (i.e., contracts purchased
prior to May 1, 1999), effective beginning with your next contract anniversary
on or after July 1, 1999, your death benefit will automatically be enhanced to
Death Benefit Option B.
The death benefits are described below. The amount of death benefit depends on
how old you or your joint owner is. If you have a joint owner, the death benefit
is determined based on the age of the oldest joint owner and the death benefit
is payable on the death of the first joint owner.
DEATH BENEFIT OPTION A:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total 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 greatest contract value on any contract anniversary while the owner, or
a joint owner is living, plus any purchase payments you made subsequent to
that contract anniversary, less any withdrawals (and any withdrawal charges
paid on the withdrawals) subsequent to that contract anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments, less 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 greatest contract value on any prior contract anniversary on or before
your or your joint owner's 80th birthday, plus any purchase payments you
made subsequent to that contract anniversary, less any withdrawals (and any
withdrawal charges paid on the withdrawals) subsequent to that contract
anniversary.
DEATH BENEFIT OPTION B:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest 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 greatest of the values of your contract resulting from taking the
contract value on any contract anniversary on or after July 1, 1999 while
the owner, or a joint owner is living, plus any purchase payments you made
subsequent to that contract anniversary, less any withdrawals (and any
withdrawal charges paid on the withdrawals) subsequent to that contract
anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest 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 greatest of the values of your contract resulting from taking the
contract value on any prior contract anniversary on or after July 1, 1999
and on or before your or your joint owner's 80th birthday, plus any
purchase payments you made subsequent to that contract anniversary, less
any withdrawals (and any withdrawal charges paid on the withdrawals)
subsequent to that contract anniversary.
DEATH BENEFIT OPTION C:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 greatest of the values resulting from taking the contract value on any
five (5) year contract anniversary prior to the date of your death or the
joint owner's death, plus any purchase payments you made subsequent to that
contract anniversary, less any withdrawals (and any withdrawal charges paid
on the withdrawals) subsequent to that contract anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest 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 greatest of the values resulting from taking the contract value on any
prior five (5) year contract anniversary on or before your or the joint
owner's 80th birthday, plus any purchase payments you made after that
contract anniversary, less any withdrawals (and any withdrawal charges paid
on the withdrawals) made after that contract anniversary.
Check your contract and applicable endorsement for your death benefit.
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.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date Cova receives proof of death. If Cova does not receive
an election during such time, it will make a single sum payment to the
beneficiary at the end of the 60 day period.
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.
On August 26, 1999, it was announced that The Metropolitan Life Insurance
Company would purchase General American Life Insurance Company, the parent
company of Cova. Metropolitan Life is one of the country's oldest and most
financially sound life insurance organizations.
Year 2000
Cova has developed and initiated plans to assure that its computer systems will
function properly in the year 2000 and later years. These efforts have included
receiving assurances from outside service providers that their computer systems
will also function properly in this context. Included within these plans are the
computer systems of the advisers and sub-advisers of the various investment
portfolios underlying the Separate Account.
The total cost of implementing these plans is not expected to have a
material effect on Cova's financial position or results of operations. Cova
believes that it has taken all reasonable steps to address these potential
problems. There can be no guarantee, however, that the steps taken will be
adequate to avoid any adverse impact.
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 Separate Account is divided into
sub-accounts.
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 5.75% 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.
Ownership
Owner. You as the owner of the contract, have all the interest and 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 (this may be a taxable event). 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.
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
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
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. 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.
Year or Year or Year or
Period Period Period
Period Ended Ended Ended Ended
6/30/99 12/31/98 12/31/97 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
Aggressive Equity Sub-Account
Beginning of Period $9.96 $10.00 * *
End of Period 9.99 9.96
Number of Accum. Units
Outstanding 744,069 536,278
- ------------------------------------------------------------------------------------------------------------------------------------
Core Bond Sub-Account
Beginning of Period $10.59 $10.00 * *
End of Period 10.40 10.59
Number of Accum. Units
Outstanding 2,235,884 1,609,851
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Style Equity Sub-Account
<S> <C>
Beginning of Period $12.69 $10.00 * *
End of Period 14.14 12.69
Number of Accum. Units
Outstanding 3,133,906 2,328,430
- ------------------------------------------------------------------------------------------------------------------------------------
Non-U.S. Sub-Account
Beginning of Period $11.14 $10.00 * *
End of Period 11.84 11.14
Number of Accum. Units
Outstanding 1,276,329 925,792
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market Sub-Account
Beginning of Period $11.11 $10.67 $10.23 $10.00
End of Period 11.30 11.11 10.67 10.23
Number of Accum. Units
Outstanding 3,291,555 1,473,737 311,051 34,964
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The accumulation unit values shown above for the beginning of the period for
the Multi-Style Equity, Aggressive Equity, Non-U.S., Core Bond and Money Market
sub-accounts reflect the dates these investment portfolios were first offered
for sale through the Separate Account (December 31, 1997 for the Multi-Style
Equity, Aggressive Equity, Non-U.S. and Core Bond sub-accounts and June 3, 1996
for the Money Market sub-account.)
</FN>
</TABLE>
APPENDIX B
PERFORMANCE INFORMATION
Future performance will vary and the results shown are not necessarily
representative of future results.
Note: The figures below present investment performance information for the
periods ended June 30, 1999. While these numbers represent the returns as of
that date, they do not represent performance information of the portfolios since
that date. Performance information for the periods after June 30, 1999 may
be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before June 30, 1999. As a
result, performance information is available for the accumulation unit values
investing in these portfolios.
o Column A 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.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of the portfolio.
<TABLE>
<CAPTION>
Total Return for the periods ended 6/30/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date since since
Portfolio in Portfolio 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
<S> <C> <C> <C> <C> <C> <C>
Aggressive Equity 12/31/97 (10.57)% (3.20)% (5.97)% (0.04)%
Core Bond 12/31/97 (3.78)% (0.47)% 0.82% 2.66%
Multi-Style Equity 12/31/97 13.68% 23.17% 18.29% 26.04%
Non-U.S. 12/31/97 1.13% 8.96% 5.74% 11.97%
General American
Capital Company
Money Market 6/3/96 (0.86)% 2.58% 3.75% 4.05%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Appendix - Performance Information (continued)
PART 2 - HISTORICAL FUND PERFORMANCE
The contracts are relatively new and therefore have no meaningful performance
history. However, the portfolios of Russell Insurance Funds and the Money Market
Fund of General American Capital Company have been in existence for some time
and have an investment performance history. In order to show how the historical
performance of the portfolios affects the contract's accumulation unit values,
the following performance was developed. The information is based upon the
historical experience of the portfolios and is for the periods shown.
The chart below shows the investment performance of the portfolios and the
accumulation unit performance calculated by assuming that the contracts were
invested in the portfolios for the same periods.
o The performance figures in Column A reflect the fees and expenses paid by
each portfolio.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of each portfolio, and assumes that you make a withdrawal at
the end of the period and therefore the withdrawal charge is reflected.
o Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
Total Return for the periods ended 6/30/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and
Column A portfolio expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Equity 1/2/97 (4.64)% - - 13.76% (10.57)% - - 7.76% (5.97)% - - 12.36%
Core Bond 1/2/97 2.24% - - 6.34% (3.78)% - - 0.34% 0.82% - - 4.94%
Multi-Style Equity 1/2/97 19.96% - - 28.18% 13.68% - - 22.18% 18.29% - - 26.78%
Non-U.S. 1/2/97 7.23% - - 8.05% 1.13% - - 2.05% 5.74% - - 6.65%
- ------------------------------------------------------------------------------------------------------------------------------------
General American
Capital Company
Money Market 10/1/87 5.21% 5.54% 5.53% (0.86)% 4.04% 4.03% 3.75% 4.14% 4.13%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
- ------------------------------
- ------------------------------
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
November __, 1999, for the annuity contract issued by Cova.
(Please print or type and fill in all information)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip Code
CL-2093 (11/99) RUSS-MO
COVA
Cova Financial Services Life Insurance Company
Marketing and Executive Office
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
800-523-1661
Annuity Service Office
P.O. Box 10366
Des Moines, IA 50306
800-343-8496
CL-2092 (5/99) Policy Form Series XL407, CL-407,XL-617,CL-617 21-RUSS-PROS(5/99)
PART A - VERSION C
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 51 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 50 investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios (except as noted). CURRENTLY, IF YOU ARE NOT PARTICIPATING
IN AN ASSET ALLOCATION PROGRAM, YOU CAN ONLY INVEST IN 15 INVESTMENT PORTFOLIOS
AT ANY ONE TIME.
AIM Variable Insurance Funds, Inc.:
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Alliance Variable Products Series Fund, Inc.:
Managed by Alliance Capital
Management L.P.
Premier Growth Portfolio
Real Estate Investment Portfolio
American Century Variable Portfolios, Inc.
Managed by American Century Investment
Management, Inc.
VP Income & Growth Fund
VP International Fund
VP Value Fund
Cova Series Trust:
Managed by J.P. Morgan
Investment Management Inc.
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value Portfolio
Dreyfus Stock Index Fund
Managed by The Dreyfus Corporation
(Index Fund Manager: Mellon Equity Associates)
Dreyfus Variable Investment Fund
Managed by The Dreyfus Corporation
Dreyfus VIF - Capital Appreciation Portfolio
Dreyfus VIF - Disciplined Stock Portfolio
General American Capital Company:
Managed by Conning Asset
Management Company
Money Market Fund
Goldman Sachs Variable Insurance Trust:
Managed by Goldman Sachs
Asset Management
Goldman Sachs Growth and Income Fund
Managed by Goldman Sachs
Asset Management International
Goldman Sachs Global Income Fund
Goldman Sachs International Equity Fund
INVESCO Variable Investment Funds, Inc.
Managed by INVESCO Funds Group, Inc.
INVESCO VIF - Dynamics Fund
INVESCO VIF - High Yield Fund
Kemper Variable Series:
Managed by Scudder Kemper
Investments, Inc.
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
Scudder Variable Life Investment Fund
Managed by Scudder Kemper Investments, Inc.
International Portfolio
Liberty Variable Investment Trust:
Managed by Newport Fund
Management Inc.
Newport Tiger Fund, Variable Series
MFS Variable Insurance Trust:
Managed by Massachusetts
Financial Services Company
MFS Emerging Growth Series
MFS Global Governments Series
(formerly MFS World Governments)
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
PIMCO Variable Insurance Trust
Managed by Pacific Investment
Management Company
PIMCO High Yield Bond Portfolio
PIMCO Low Duration Bond Portfolio
PIMCO StocksPLUS Growth and
Income Portfolio
PIMCO Total Return Bond Portfolio
Putnam Variable Trust:
Managed by Putnam Investment
Management, Inc.
Putnam VT Growth and Income Fund Class IA Shares
Putnam VT International Growth Fund Class IA Shares
Putnam VT International New
Opportunities Fund Class IA Shares
Putnam VT New Value Fund Class IA Shares
Putnam VT Vista Fund - Class IA Shares
Templeton Variable Products Series Fund:
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund, Class 1 Shares
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments Fund, Class 1 Shares
Managed by Templeton Asset
Management Ltd.
Templeton Developing Markets Fund, Class 1 Shares
Managed by Templeton Investment
Counsel, Inc.
Templeton International Fund, Class 1 Shares
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 November ___,
1999. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of the prospectus. The SEC maintains
a Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding companies that file electronically
with the SEC. The Table of Contents of the SAI is on Page __ of this prospectus.
For a free copy of the SAI, call us at (800)523-1661 or write us at: One Tower
Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
November ___, 1999
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS 3
SUMMARY 4
Fee Table 6
Examples 11
1. THE ANNUITY CONTRACT 14
2. ANNUITY PAYMENTS (THE INCOME PHASE) 14
Annuity Date 14
Annuity Payments 14
Annuity Options 14
3. PURCHASE 15
Purchase Payments 15
Allocation of Purchase Payments 15
Free Look 15
Accumulation Units 15
4. INVESTMENT OPTIONS 16
AIM Variable Insurance Funds, Inc. 16
Alliance Variable Products Series Fund, Inc. 16
American Century Variable Portfolios, Inc.
Cova Series Trust 16
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
General American Capital Company 16
Goldman Sachs Variable Insurance Trust 16
INVESCO Variable Investment Funds, Inc.
Kemper Variable Series 16
Scudder Variable Life Investment Fund
Liberty Variable Investment Trust 16
MFS Variable Insurance Trust 17
PIMCO Variable Insurance Trust
Putnam Variable Trust 17
Templeton Variable Products Series Fund 17
Transfers 17
Dollar Cost Averaging Program 18
Automatic Rebalancing Program 18
Approved Asset Allocation Programs 18
Voting Rights 18
Substitution 18
5. EXPENSES 19
Insurance Charges 19
Contract Maintenance Charge 19
Withdrawal Charge 19
Reduction or Elimination of the Withdrawal Charge 19
Premium Taxes 20
Transfer Fee 20
Income Taxes 20
Investment Portfolio Expenses 20
6. TAXES 20
Annuity Contracts in General 20
Qualified and Non-Qualified Contracts 20
Withdrawals - Non-Qualified Contracts 21
Withdrawals - Qualified Contracts 21
Withdrawals - Tax-Sheltered Annuities 21
Diversification 21
7. ACCESS TO YOUR MONEY 21
Systematic Withdrawal Program 22
Suspension of Payments or Transfers 22
8. PERFORMANCE 22
9. DEATH BENEFIT 22
Upon Your Death 22
Death of Annuitant 23
10. OTHER INFORMATION 24
Cova 24
Year 2000 24
The Separate Account 24
Distributor 24
Ownership 24
Beneficiary 24
Assignment 24
Financial Statements 24
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION 24
APPENDIX A
Condensed Financial Information A-1
APPENDIX B B-1
APPENDIX C
Performance Information C-1
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 and need an explanation. 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 14
Accumulation Unit 15
Annuitant 14
Annuity Date 14
Annuity Options 14
Annuity Payments 14
Annuity Unit 15
Beneficiary 24
Fixed Account 14
Income Phase 14
Investment Portfolios 16
Joint Owner 24
Non-Qualified 20
Owner 24
Purchase Payment 15
Qualified 20
Tax Deferral 20
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
1. THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by Cova is a contract between
you, the owner, and Cova, an insurance company. The contract provides a means
for investing on a tax-deferred basis. The contract is intended for retirement
savings or other long-term investment purposes and provides for a death benefit
and guaranteed income options.
This contract offers 50 investment portfolios. These portfolios are designed to
offer a potentially better return than the fixed account. However, this is NOT
guaranteed. You can also lose your money.
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.
You can put money in up to 15 of the investment portfolios and the fixed
account. (If you are participating in an asset allocation program, this limit
may not apply.) You can transfer between accounts up to 12 times a year without
charge or tax implications.
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, in part, 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 an
annuity option. 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. HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 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 the investment portfolios which are described herein
and in the prospectuses for the funds. Currently, if you are not participating
in an asset allocation program, you can only invest in 15 investment portfolios
at any one time. The investment objectives and policies of certain of the
investment portfolios are similar to the investment objectives and policies of
other mutual funds that certain of the investment advisers manage. Although the
objectives and policies may be similar, the investment results of the investment
portfolios may be higher or lower than the results of such other mutual funds.
The investment advisers cannot guarantee, and make no representation, that the
investment results of similar funds will be comparable even though the funds
have the same investment advisers.
Depending upon market conditions and the performance of the portfolio(s) you
select, 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.
o Each year Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, Cova currently waives this charge
if the value of your contract is at least $50,000.
o Cova also deducts for its insurance charges which total 1.40% of the
average daily value of your contract allocated to the investment
portfolios.
o If you take your money out, Cova may assess a withdrawal charge which is
equal to 5% of the purchase payment 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.
o When you begin receiving regular income payments from your annuity, Cova
will assess a state premium tax charge, if applicable, which ranges from 0%
- 4% depending upon the state.
o The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
o There are also investment charges which currently range from .205% to 1.66%
of the average daily value of the investment portfolio depending upon the
investment portfolio.
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 of purchase payments in excess of that may
be charged a withdrawal charge, depending on how long your money has been in the
contract. However, Cova will never assess a withdrawal charge on earnings you
withdraw. Earnings are defined as the value in your contract minus the remaining
purchase payments in your contract. Of course, you may also have to pay income
tax and a tax penalty on any money you take out.
8. DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
9. 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 reserve
the right to put your money in the Money Market Fund 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? The 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 income 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:
o 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.
o 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.
o You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
o 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.
10. INQUIRIES:
If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
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 of the investment portfolios.
Owner Transaction Expenses
Withdrawal Charge (see Note 1 below)
5% of purchase payment withdrawn
Transfer Fee (see Note 2 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 3 below)
$30 per contract per year
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>
<CAPTION>
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C> <C>
A I M V.I. Capital Appreciation Fund .62% .05% .67%
A I M V.I. International Equity Fund .75% .16% .91%
A I M V.I. Value Fund .61% .05% .66%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses after Total Annual Portfolio
(expense reimbursement Expenses (after expense
Management for Real Estate reimbursement for Real
Fees Investment Portfolio) Estate Investment Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Portfolio* 1.00% .06% 1.06%
Real Estate Investment Portfolio** .08% .87% .95%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The adviser to the Fund discontinued the expense reimbursement with respect to
the Premier Growth Portfolio effective May 1, 1998.
** The expenses shown with respect to the Real Estate Investment Portfolio are
net of voluntary reimbursements. Expenses have been capped at .95% annually and
the adviser to the Fund intends to continue such reimbursements for the
foreseeable future. The estimated expenses for the Real Estate Investment
Portfolio, before reimbursement, are: .90% management fees and 1.41% for other
expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.
Managed by American Century Investment Management, Inc.
<S> <C> <C> <C>
VP Income & Growth Fund .70% .0% .70%
VP International Fund 1.37% .0% 1.37%
VP Value Fund 1.00% .0% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees certain Portfolios)(1) certain Portfolios)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
<S> <C> <C> <C>
International Equity Portfolio .80% .28% 1.08%
Large Cap Stock Portfolio .65% .10% .75%
Quality Bond Portfolio .55% .10% .65%
Select Equity Portfolio .68% .18% .86%
Small Cap Stock Portfolio .85% .27% 1.12%
Managed by Lord, Abbett &Co.
Bond Debenture Portfolio .75% .10% .85%
Developing Growth Portfolio .90% .30% 1.20%
Large Cap Research Portfolio 1.00% .30% 1.30%
Lord Abbett Growth and Income Portfolio(2) .65% .07% .72%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Since May 1, 1996, 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%. This reimbursement arrangement for the
Select Equity, Small Cap Stock and International Equity Portfolios was
discontinued effective May 1, 1999. Therefore, the amounts shown above under
"Other Expenses" have been restated to reflect the actual expenses for these
Portfolios for the year ended December 31, 1998. Effective May 1, 1999, Cova
reimburses the Mid-Cap Value, Large Cap Research and Developing Growth
Portfolios for all operating expenses (exclusive of the management fees)
in excess of approximately .30% (instead of .10% as had been the case prior to
May 1, 1999). This change is reflected above under "Other Expenses" for these
three Portfolios. Absent the expense reimbursement, the percentages shown
for total annual portfolio expenses for the year ended December 31, 1998
would have been .86% for the Quality Bond Portfolio, .94% for the Large Cap
Stock Portfolio, .93% for the Bond Debenture Portfolio, 1.68% for the Mid-Cap
Value Portfolio, 1.95% for the Large Cap Research Portfolio and 1.70% for
the Developing Growth Portfolio.
(2) Estimated. The Portfolio commenced investment operations on January 8, 1999.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Stock Index Fund .25% .01% .26%
Managed by The Dreyfus Corporation
(Index Fund Manager: Mellon Equity Associates)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund
Managed by The Dreyfus Corporation
<S> <C> <C> <C>
Dreyfus VIF - Capital Appreciation Portfolio .75% .06% .81%
Dreyfus VIF - Disciplined Stock Portfolio .75% .13% .88%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
<S> <C> <C> <C>
Money Market Fund .125% .08% .205%
- -----------------------------------------------------------------------------------------------------------------------------------
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement)* reimbursement)*
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund .75% .15% .90%
Managed by Goldman Sachs Asset Management International
Goldman Sachs Global Income Fund .90% .15% 1.05%
Goldman Sachs International Equity Fund 1.00% .25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The investment advisers to the Goldman Sachs Growth and Income, International
Equity and Global Income Funds have voluntarily agreed to reduce or limit
certain "Other Expenses" of such Funds (excluding management fees, taxes,
interest and brokerage fees and litigation, indemnification and other
extraordinary expenses) to the extent such expenses exceed 0.15%, 0.25% and
0.15% per annum of such Funds' average daily net assets, respectively. The
expenses shown include this reimbursement. If not included, the "Other Expenses"
and "Total Annual Portfolio Expenses" for the Goldman Sachs Growth and Income,
International Equity and Global Income Funds would be 1.94% and 2.69%, 1.97% and
2.97% and 2.40% and 3.30%, respectively. The reductions or limitations may be
discontinued or modified by the investment advisers in their discretion at any
time.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc.
Managed by INVESCO Funds Group, Inc.
<S> <C> <C> <C>
INVESCO VIF - Dynamics Fund .60% .85% 1.45%
INVESCO VIF - High Yield Fund .60% .47% 1.07%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees Small Cap Value Portfolio) Small Cap Value Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
<S> <C> <C> <C>
Kemper Government Securities Portfolio .55% .11% .66%
Kemper Small Cap Growth Portfolio .65% .05% .70%
Kemper Small Cap Value Portfolio .75% .05%* .80%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Pursuant to its agreement with Kemper Variable Series, the investment manager
and the accounting agent have agreed, for the one year period commencing on May
1, 1999, to limit their respective fees and to reimburse other operating
expenses, in a manner communicated to the Board of the Fund, to the extent
necessary to limit total operating expenses of the Kemper Small Cap Value
Portfolio to .84%. The amounts set forth in the table above reflect actual
expenses for the past fiscal year, which were lower than these expense limits.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund
Managed by Scudder Kemper Investments, Inc.
<S> <C> <C> <C>
International Portfolio .862% .184% 1.046%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
<S> <C> <C> <C>
Newport Tiger Fund, Variable Series .90% .40% 1.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement reimbursement
Fees for certain Series) for certain Series)
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust (1)
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Series .75% .10% .85%
MFS Global Governments Series (2) .75% .26% 1.01%
MFS Growth With Income Series .75% .13% .88%
MFS High Income Series .75% .28% 1.03%
MFS Research Series .75% .11% .86%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. Expenses do not take into account these
expense reductions, and are therefore higher than the actual expenses of the
series.
(2) MFS has agreed to bear expenses for the Global Governments Series subject
to reimbursement by this series, such that the series' "Other Expenses" shall
not exceed 0.25% of the average daily net assets of the series during the
current fiscal year. Absent the expense reimbursement, the Total Annual
Portfolio Expenses for the year ended December 31, 1998, would have been
1.11% for the MFS Global Governments Series. The payments made by MFS on
behalf of the series under this arrangement are subject to reimbursement by
the series to MFS, which will be accomplished by the payment of an expense
reimbursement fee by the series to MFS computed and paid monthly at a
percentage of the series' average daily net assets for its then current
fiscal year, with a limitation that immediately after such payment, the
series' "Other Expenses" will not exceed the percentage set forth above for this
series. The obligation of MFS to bear the series' "Other Expenses" pursuant to
this arrangement, and the series' obligation to pay the reimbursement fee to
MFS, terminates on the earlier of the date on which payments made by
this series equal the prior payment of such reimbursable expenses by MFS
or December 31, 2004. MFS may, in its discretion, terminate this arrangement at
an earlier date provided that the arrangement will continue for this series
until at least May 1, 2000, unless terminated with the consent of the board
of trustees which oversees this series.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Management Fees Other Expenses Portfolio Expenses*
- ------------------------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
Managed by Pacific Investment Management Company
PIMCO High Yield Bond Portfolio .50% .25% .75%
PIMCO Low Duration Bond Portfolio .40% .25%** .65%
PIMCO StocksPLUS Growth and Income Portfolio .40% .25% .65%
PIMCO Total Return Bond Portfolio .40% .25% .65%
- ------------------------------------------------------------------------------------------------------------------------------------
* PIMCO, the investment adviser, has agreed to reduce its administrative fee, subject to potential future reimbursements, to the
extent that total Portfolio operating expenses would exceed, due to organizational expenses and the payment by each Portfolio of its
pro rata portion of the Trust's Trustees' fees, 0.65% with respect to the Low Duration Bond, StocksPLUS Growth and Income and Total
Return Bond Portfolios and 0.75% with respect to the High Yield Bond Portfolio.
**Other Expenses are based on estimates for the current fiscal year.
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees one Portfolio) one Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
<S> <C> <C> <C>
Putnam VT Growth and Income Fund - Class IA Shares .46% .04% .50%
Putnam VT International Growth Fund - Class IA Shares .80% .27% 1.07%
Putnam VT International New Opportunities Fund - Class IA Shares* 1.18% .42% 1.60%
Putnam VT New Value Fund - Class IA Shares .70% .11% .81%
Putnam VT Vista Fund - Class IA Shares .65% .12% .77%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The Management Fees and Total Annual Portfolio Expenses reflect an expense
limitation. In the absence of the expense limitation, the Management Fees and
Total Annual Portfolio Expenses would have been 1.20% and 1.62%, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees one Portfolio) one Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Templeton Variable Products Series Fund
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund,
Class 1 Shares* .15% .85% 1.00%
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments Fund,
Class 1 Shares * .00% 1.00% 1.00%
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Fund,
Class 1 Shares 1.25% .41% 1.66%
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund,
Class 1 Shares .69% .17% .86%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Figures reflect expenses from the Fund's inception on May 1, 1998, which
have been annualized for the Management Fees and estimated for Other Expenses.
The investment manager agreed in advance to limit management fees and
make certain payments to reduce Fund expenses as necessary so that Total
Annual Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets
in 1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were as follows: 0.75%, 1.00% and 1.75% for the Franklin
Small Cap Investments Fund and 0.60%, 2.27% and 2.87% for the Mutual Shares
Investments Fund.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Examples
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets: (a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract
value to an annuity option.
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation (a) $71.99 (a) $112.73 (a) $160.90 (a) $247.97
(b) $21.99 (b) $ 67.73 (b) $115.90 (b) $247.97
AIM V.I. International Equity (a) $74.40 (a) $119.97 (a) $173.00 (a) $272.25
(b) $24.40 (b) $ 74.97 (b) $128.00 (b) $272.25
AIM V.I. Value (a) $71.89 (a) $112.42 (a) $160.39 (a) $246.95
(b) $21.89 (b) $ 67.42 (b) $115.39 (b) $246.95
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth (a) $75.90 (a) $124.47 (a) $180.49 (a) $287.10
(b) $25.90 (b) $ 79.47 (b) $135.49 (b) $287.10
Real Estate Investment (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
- -----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.
Managed by American Century Investment Management, Inc.
VP Income & Growth (a) $72.29 (a) $113.63
(b) $22.29 (b) $ 68.63
VP International (a) $78.99 (a) $133.70
(b) $28.99 (b) $ 88.70
VP Value (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
International Equity (a) $76.10 (a) $125.06 (a) $181.48 (a) $289.07
(b) $26.10 (b) $ 80.06 (b) $136.48 (b) $289.07
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
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
Select Equity (a) $73.90 (a) $118.46 (a) $170.49 (a) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
Small Cap Stock (a) $76.50 (a) $126.26 (a) $183.47 (a) $292.98
(b) $26.50 (b) $ 81.26 (b) $138.47 (b) $292.98
- -----------------------------------------------------------------------------------------------------------------------------------
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
Developing Growth (a) $77.30 (a) $128.65 (a) $187.42 (a) $300.75
(b) $27.30 (b) $ 83.65 (b) $142.42 (b) $300.75
Large Cap Research (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Lord Abbett Growth and Income (a) $72.49 (a) $114.24 (a) $163.43 (a) $253.08
(b) $22.49 (b) $ 69.24 (b) $118.43 (b) $253.08
Mid-Cap Value (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
- ------------------------------------------------------------------------------------------------------------------------------------
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund
Managed by The Dreyfus Corporation (Index Fund
Manager: Mellon Equity Associates) (a) $67.87 (a) $100.23
(b) $17.87 (b) $ 55.23
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund
Managed by The Dreyfus Corporation
Dreyfus VIF - Capital Appreciation (a) $73.40 (a) $116.96
(b) $23.40 (b) $ 71.96
Dreyfus VIF - Disciplined Stock (a) $74.10 (a) $119.07
(b) $24.10 (b) $ 74.07
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund (a) $74.30 (a) $119.67 (a) $172.50 (a) $271.25
(b) $24.30 (b) $ 74.67 (b) $127.50 (b) $271.25
Managed by Goldman Sachs Asset Management International
Goldman Sachs Global Income Fund (a) $75.80 (a) $124.17 (a) $179.99 (a) $286.12
(b) $25.80 (b) $ 79.17 (b) $134.99 (b) $286.12
Goldman Sachs International Equity Fund (a) $77.80 (a) $130.14 (a) $189.89 (a) $305.57
(b) $27.80 (b) $ 85.14 (b) $144.89 (b) $305.57
- -----------------------------------------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc.
Managed by INVESCO Funds Group, Inc.
INVESCO VIF - Dynamics (a) $79.79 (a) $136.07
(b) $29.79 (b) $ 91.07
INVESCO VIF - High Yield (a) $76.00 (a) $124.77
(b) $26.00 (b) $ 79.77
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities (a) $71.89 (a) $112.42 (a) $160.39 (a) $246.95
(b) $21.89 (b) $ 67.42 (b) $115.39 (b) $246.95
Kemper Small Cap Growth (a) $72.29 (a) $113.63 (a) $162.42 (a) $251.04
(b) $22.29 (b) $ 68.63 (b) $117.42 (b) $251.04
Kemper Small Cap Value (a) $73.70 (a) $117.86 (a) $169.49 (a) $265.23
(b) $23.70 (b) $ 72.86 (b) $124.49 (b) $265.23
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund
Managed by Scudder Kemper Investments, Inc.
International (a) $75.76 (a) $124.05
(b) $25.76 (b) $ 79.05
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Series (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
MFS Global Governments (a) $75.40 (a) $122.97 (a) $178.00 (a) $282.18
(b) $25.40 (b) $ 77.97 (b) $133.00 (b) $282.18
MFS Growth With Income (a) $74.10 (a) $119.07 (a) $171.50 (a) $269.25
(b) $24.10 (b) $ 74.07 (b) $126.50 (b) $269.25
MFS High Income (a) $75.60 (a) $123.57 (a) $179.00 (a) $284.15
(b) $25.60 (b) $ 78.57 (b) $134.00 (b) $284.15
MFS Research (a) $73.90 (a) $118.46 (a) $170.49 (b) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
- -----------------------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
Managed by Pacific Investment Management Company
PIMCO High Yield Bond (a) $72.80 (a) $115.15
(b) $22.80 (b) $ 70.15
PIMCO Low Duration Bond (a) $71.79 (a) $112.12
(b) $21.79 (b) $ 67.12
PIMCO StocksPLUS Growth and Income (a) $71.79 (a) $112.12
(b) $21.79 (b) $ 67.12
PIMCO Total Return Bond (a) $71.79 (a) $112.12
(b) $21.79 (b) $ 67.12
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income - Class IA Shares (a) $70.29 (a) $107.56 (a) $152.24 (a) $230.39
(b) $20.29 (b) $ 62.56 (b) $107.24 (b) $230.39
Putnam VT International Growth - Class IA Shares (a) $76.00 (a) $124.77 (a) $180.99 (a) $288.08
(b) $26.00 (b) $ 79.77 (b) $135.99 (b) $288.08
Putnam VT International New Opportunities - Class IA Shares (a) $81.28 (a) $140.49 (a) $206.96 (a) $338.60
(b) $31.28 (b) $ 95.49 (b) $161.96 (b) $338.60
Putnam VT New Value - Class IA Shares (a) $73.40 (a) $116.96 (a) $167.98 (a) $262.21
(b) $23.40 (b) $ 71.96 (b) $122.98 (b) $262.21
Putnam VT Vista - Class IA Shares (a) $73.00 (a) $115.75 (a) $165.96 (a) $258.16
(b) $23.00 (b) $ 70.75 (b) $120.96 (b) $258.16
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund, Class 1 Shares
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments (a) $75.30 (a) $122.67 (a) $177.50 (a) $281.19
(b) $25.30 (b) $ 77.67 (b) $132.50 (b) $281.19
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets (a) $81.88 (a) $142.26 (a) $209.86 (a) $344.13
(b) $31.88 (b) $ 97.26 (b) $164.86 (b) $344.13
Managed by Templeton Investment Counsel, Inc.
Templeton International (a) $73.90 (a) $118.46 (a) $170.49 (a) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Explanation of Fee Table
1. 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.
2. 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.
3. During the accumulation phase, 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.
4. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
There is an accumulation unit value history (Condensed Financial
Information)contained in Appendix A.
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 an income to you,
in the form of annuity payments, beginning on a designated date that is 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 the
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, in part, 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 rate credited
to the fixed account will not be less than 3% per year. 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 interest and 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 under "Other Information."
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
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.
We ask you to choose your annuity date when you purchase the contract. You can
change it 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
You will receive annuity payments during the income phase. In general, annuity
payments must begin by the annuitant's 85th birthday or 10 years from the date
the contract was issued, whichever is later (this requirement may differ
slightly for special programs). The annuitant is the person whose life we look
to when we make annuity 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:
o fixed account,
o the investment portfolio(s), or
o 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 investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
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).
Annuity Options
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. 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.
You can choose one of the following annuity options or any other annuity option
acceptable to Cova. 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.
3. PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a
non-qualified contract. If you are purchasing 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 $500 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.
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.
Free Look
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 reserve the right to put your purchase
payment in the Money Market Fund for 15 days before we allocate your first
purchase payment to the investment portfolio(s) you have selected. (In some
states, the period may be longer.) In such case, we will refund the greater of
purchase payments (less withdrawals) or contract value. Currently, Cova directly
allocates your purchase payment to the investment portfolios and/or fixed
account you select.
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 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 50 investment portfolios which are listed below. Currently,
if you are not participating in an asset allocation program, you can only invest
in 15 investment portfolios at any one time. 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. Certain portfolios
contained in the fund prospectuses may not be available with your contract. (See
Appendix B which contains a summary of investment objectives for each investment
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
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
Premier Growth Portfolio
Real Estate Investment Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Investment Management, Inc. is the investment adviser
to each portfolio. The following portfolios are available under the
contract:
VP Income & Growth Fund
VP International Fund
VP Value Fund
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. Cova Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
portfolios are available under the contract:
J.P. Morgan Investment Management Inc. is the sub-adviser to the following
portfolios:
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolios:
Bond Debenture Portfolio
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value Portfolio
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund
manager and provide day-to-day management of the Fund's investments.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is a mutual fund with multiple portfolios.
The Dreyfus Corporation serves as the investment adviser. The following
portfolios are available under the contract:
Dreyfus VIF - Capital Appreciation Portfolio
Dreyfus VIF - Disciplined Stock 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. The following
portfolio is available under the contract:
Money Market Fund
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Goldman Sachs Variable Insurance Trust is a mutual fund with multiple
portfolios. Goldman Sachs Asset Management is the investment adviser for the
Goldman Sachs Growth and Income Fund and Goldman Sachs Asset Management
International is the investment adviser for the Goldman Sachs International
Equity Fund and the Goldman Sachs Global Income Fund. The following portfolios
are available under the contract:
Goldman Sachs Global Income Fund
Goldman Sachs Growth and Income Fund
Goldman Sachs International Equity Fund
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
portfolios are available under the contract:
INVESCO VIF - Dynamics Fund
INVESCO VIF - High Yield Fund
KEMPER VARIABLE SERIES
Kemper Variable Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the Kemper Government Securities
Portfolio, the Kemper Small Cap Growth Portfolio and the Kemper Small Cap Value
Portfolio. The following portfolios are available under the contract:
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
SCUDDER VARIABLE LIFE INVESTMENT FUND
Scudder Variable Life Investment Fund is a mutual fund with multiple portfolios.
Scudder Kemper Investments, Inc. is the investment adviser to each portfolio.
The following portfolio is available under the contract:
International Portfolio
LIBERTY VARIABLE INVESTMENT TRUST
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger Fund, Variable Series. The following
portfolio is available under the contract:
Newport Tiger Fund, Variable Series
(a portfolio investing in equity securities of companies located in certain
countries of Asia).
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 Global Governments Series
(formerly MFS World Governments Series)
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
PIMCO VARIABLE INSURANCE TRUST
PIMCO Variable Insurance Trust is a mutual fund with multiple portfolios.
Pacific Investment Management Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PIMCO High Yield Bond Portfolio
PIMCO Low Duration Bond Portfolio
PIMCO StocksPLUS Growth and Income Portfolio
PIMCO Total Return Bond Portfolio
PUTNAM VARIABLE TRUST
Putnam Variable Trust is a mutual fund with multiple portfolios. Putnam
Investment Management, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Putnam VT Growth and Income Fund - Class IA Shares
Putnam VT International Growth Fund - Class IA Shares
Putnam VT International New Opportunities Fund - Class IA Shares
Putnam VT New Value Fund - Class IA Shares
Putnam VT Vista Fund (a stock portfolio) - Class IA Shares
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Each portfolio has two classes of shares: Class 1 and Class 2. The
portfolios available in connection with your contract are Class 1 shares.
Franklin Advisers, Inc. is the investment adviser for the Franklin Small Cap
Investments Fund, Templeton Asset Management Ltd. is the investment adviser
for the Templeton Developing Markets Fund, Templeton Investment Counsel, Inc.
is the investment adviser for the Templeton International Fund and Franklin
Mutual Advisers, LLC is the investment adviser for the Mutual Shares
Investments Fund. The following portfolios are available under the contract:
Franklin Small Cap Investments Fund, Class 1 Shares
Mutual Shares Investments Fund, Class 1 Shares
Templeton Developing Markets Fund, Class 1 Shares
Templeton International Fund, Class 1 Shares
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
Cova may enter into certain arrangements under which it is reimbursed by the
investment portfolios' advisers, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
Transfers
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described below.
Telephone Transfers. You and/or your registered representative on your behalf,
can make transfers by telephone. Telephone transfers will be automatically
permitted unless you tell us otherwise. 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.
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 following
apply to any transfer during the accumulation phase:
1. Your request for transfer must clearly state which investment portfolio(s)
or the fixed account are involved in the transfer.
2. Your request for transfer must clearly state how much the transfer is for.
3. 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.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund 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 Dollar Cost Averaging
Program is available only during the accumulation phase.
Cova reserves the right to modify, terminate or suspend the Dollar Cost
Averaging Program.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program.
There is no additional charge for participating 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. Cova may, from time to time, offer other dollar cost averaging programs
which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to 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.
The Automatic Rebalancing Program is available only during the accumulation
phase. There is no additional charge for participating in the Automatic
Rebalancing Program. 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 have chosen to have your holdings
rebalanced quarterly, on the first day of the next quarter, Cova will 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. Currently, Cova does not charge for participating in an
approved asset allocation program.
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 affected
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 fund 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below), is for 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 cannot be increased.
Cova will not deduct this charge during the accumulation phase 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 (and once
a year during the first year for purposes of payment of charitable remainder
trust administration fees), 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. Withdrawals
for purposes of payment of charitable remainder trust administration fees are
included in the 10% free withdrawal amount. Otherwise, the charge is 5% of each
purchase payment you take out unless the purchase payment was made more than 5
years ago. After Cova has had a purchase payment for 5 years, there is no charge
when you withdraw that purchase payment. Cova does not assess a withdrawal
charge on earnings withdrawn from the contract. Earnings are defined as the
value in your contract minus the remaining purchase payments in your contract.
The withdrawal order for calculating the withdrawal charge is shown below.
o 10% of purchase payments free.
o Remaining purchase payments that are over 5 years old and not subject to a
withdrawal charge.
o Earnings in the contract free.
o Remaining purchase payments that are less than 5 years old and are subject
to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules may
apply to Section 1035 exchanges.
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.
Cova does not assess the withdrawal charge on any payments paid out as annuity
payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
Reduction or Elimination of the Withdrawal Charge
General
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.
Nursing Home Waiver
After you have owned the contract for one year, if you, or your joint owner,
becomes 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 (confinement must begin after the first contract anniversary).
This is called the Nursing Home Waiver. This provision is not available in all
states.
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 an additional discussion regarding taxes in the Statement of Additional
Information.
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 a trust holding the contract as
an agent for a natural person), 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), and
pension and profit-sharing plans, which include 401(k) plans and H.R. 10 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) for life or a period not exceeding life expectancy;
(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 amounts attributable to purchase payments made
under a salary reduction agreement by owners from 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 you are
considered the owner of the shares, 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 without being considered the owner of the shares. 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 shares 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 withdrawal value of the
contract. The withdrawal value of the contract is the value of the contract at
the end of the business day when Cova receives a written request for a
withdrawal:
o less any applicable withdrawal charge,
o less any premium tax, and
o less any contract maintenance charge.
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. If the remaining withdrawal value
would be less than $500 ($1,000 in New Jersey) after you make a partial
withdrawal, the partial withdrawal amount will be the remaining withdrawal
value.
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 "Taxes" and the
discussion in the Statement of Additional Information.
Income taxes, tax penalties and certain restrictions may apply to any withdrawal
you make.
Systematic Withdrawal Program
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 "Expenses."
Income taxes, tax penalties and certain restrictions may apply to Systematic
Withdrawals.
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.
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 and the
investment portfolio expenses. 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, withdrawal charges and
the investment portfolio expenses.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
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.
The Appendix 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 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 death benefit is described below. The amount of death benefit depends on
how old you or your joint owner is. If you have a joint owner, the death benefit
is determined based on the age of the oldest joint owner and the death benefit
is payable on the death of the first joint owner.
DEATH BENEFIT:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest 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 greatest contract value on any contract anniversary while the owner, or
a joint owner is living, plus any purchase payments you made subsequent to
that contract anniversary, less any withdrawals (and any withdrawal charges
paid on the withdrawals) subsequent to that contract anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest 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 greatest contract value on any prior contract anniversary on or before
your or your joint owner's 80th birthday, plus any purchase payments you
made subsequent to that contract anniversary, less any withdrawals (and any
withdrawal charges paid on the withdrawals) subsequent to that contract
anniversary.
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.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date Cova receives proof of death. If Cova does not receive
an election during such time, it will make a single sum payment to the
beneficiary at the end of the 60 day period.
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.
On August 26, 1999, it was announced that The Metropolitan Life Insurance
Company would purchase General American Life Insurance Company, the parent
company of Cova. Metropolitan Life is one of the country's oldest and most
financially sound life insurance organizations.
Year 2000
Cova has developed and initiated plans to assure that its computer systems will
function properly in the year 2000 and later years. These efforts have included
receiving assurances from outside service providers that their computer systems
will also function properly in this context. Included within these plans are the
computer systems of the advisers and sub-advisers of the various investment
portfolios underlying the Separate Account.
The total cost of implementing these plans is not expected to have a material
effect on Cova's financial position or results of operations. Cova believes
that it has taken all reasonable steps to address these potential problems.
There can be no guarantee, however, that the steps taken will be adequate
to avoid any adverse impact.
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 Separate Account is divided into
sub-accounts.
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 5.63% of purchase payments but,
under certain circumstances, may be paid up to 6.0%. Sometimes, Cova
enters into an agreement with the broker-dealer to pay the broker-dealer
persistency bonuses, in addition to the standard commissions.
Ownership
Owner. You, as the owner of the contract, have all the interest and 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 (this may be a taxable event). The beneficiary becomes
the owner when a death benefit is payable. When this occurs, some ownership
rights may be limited.
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.
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
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
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. 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.
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Sub-Account
<S> <C> <C>
Beginning of Period $11.77 $10.00 * *
End of Period 12.80 11.77
Number of Accum. Units Outstanding 460,824 183,488
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Sub-Account
Beginning of Period $11.39 $10.00 * *
End of Period 11.81 11.39
Number of Accum. Units Outstanding 292,086 204,072
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Sub-Account
Beginning of Period $13.06 $10.00 * *
End of Period 14.84 13.06
Number of Accum. Units Outstanding 1,270,910 521,890
- -----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Sub-Account
Beginning of Period $14.60 $10.00 * *
End of Period 16.40 14.60
Number of Accum. Units Outstanding 1,450,385 667,854
- -----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Sub-Account
Beginning of Period $ 7.99 $10.00 * *
End of Period 8.41 7.99
Number of Accum. Units Outstanding 396,067 191,411
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $13.50 $12.88 $11.29 $10.10
End of Period 13.54 13.50 12.88 11.29
Number of Accum. Units Outstanding 11,212,098 8,184,894 3,945,097 659,663
- -----------------------------------------------------------------------------------------------------------------------------------
Developing Growth Sub-Account
Beginning of Period $11.07 $10.53 $10.00 *
End of Period 12.72 11.07 10.53
Number of Accum. Units Outstanding 1,738,843 1,342,201 148,658
- ------------------------------------------------------------------------------------------------------------------------------------
Large Cap Research Sub-Account
Beginning of Period $11.83 $9.90 $10.00 *
End of Period 13.32 11.83 9.90
Number of Accum. Units Outstanding 1,771,421 1,094,920 124,559
- -----------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Growth and Income Sub Account
(Sub-Account commenced operations during 1999. The value denoted is the initial AUV)
Beginning of Period $35.90
End of Period 39.10
Number of Accum. Units Outstanding 21,288,159
- ----------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Sub-Account
Beginning of Period $10.44 $10.47 $10.00 *
End of Period 11.56 10.44 10.47
Number of Accum. Units Outstanding 2,205,833 1,642,553 194,386
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by J.P. Morgan Investment Management Inc.
International Equity Sub-Account
Beginning of Period $12.89 $11.46 $10.97 $10.21
End of Period 13.53 12.89 11.46 10.97
Number of Accum. Units Outstanding 7,524,017 7,309,325 5,440,592 1,306,892
- -----------------------------------------------------------------------------------------------------------------------------------
Large Cap Stock Sub-Account
Beginning of Period $19.43 $14.89 $11.33 $10.00
End of Period 21.76 19.43 14.89 11.33
Number of Accum. Units Outstanding 9,555,351 4,178,035 1,473,929 1,389,606
- -----------------------------------------------------------------------------------------------------------------------------------
Quality Bond Sub-Account
Beginning of Period $11.91 $11.16 $10.37 $9.90
End of Period 11.58 11.91 11.16 10.37
Number of Accum. Units Outstanding 7,609,203 3,323,343 1,433,081 508,830
- -----------------------------------------------------------------------------------------------------------------------------------
Select Equity Sub-Account
Beginning of Period $16.99 $14.05 $10.84 $10.08
End of Period 18.79 16.99 14.05 10.84
Number of Accum. Units Outstanding 11,657,671 10,544,818 6,903,606 2,044,523
- -----------------------------------------------------------------------------------------------------------------------------------
Small Cap Stock Sub-Account
Beginning of Period $12.58 $13.49 $11.31 $10.51
End of Period 13.25 12.58 13.49 11.31
Number of Accum. Units Outstanding 5,470,094 5,532,610 3,940,243 1,237,405
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
Money Market Sub-Account
Beginning of Period $11.11 $10.67 $10.23 $10.00
End of Period 11.30 11.11 10.67 10.23
Number of Accum. Units Outstanding 3,291,555 1,473,737 311,051 34,964
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Sub-Account
Beginning of Period $ 9.91 $10.00 * *
End of Period 10.87 9.91
Number of Accum. Units Outstanding 574,475 467,675
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by Goldman Sachs Asset Management International
Goldman Sachs Global Income Sub-Account
Beginning of Period $10.78 $10.00 * *
End of Period 10.55 10.78
Number of Accum. Units Outstanding 23,264 18,833
- ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International Equity Sub-Account
Beginning of Period $11.40 $10.00 * *
End of Period 11.63 11.40
Number of Accum. Units Outstanding 179,215 112,824
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities Sub-Account
Beginning of Period $10.56 $10.00 * *
End of Period 10.49 10.56
Number of Accum. Units Outstanding 151,786 59,712
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Small Cap Growth Sub-Account
Beginning of Period $11.68 $10.00 * *
End of Period 12.08 11.68
Number of Accum. Units Outstanding 115,827 76,492
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Small Cap Value Sub-Account
Beginning of Period $ 8.75 $10.00 * *
End of Period 9.21 8.75
Number of Accum. Units Outstanding 447,154 245,092
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management, Inc.
Newport Tiger Fund, Variable Sub-Account
Beginning of Period $ 9.23 $10.00 * *
End of Period 11.85 9.23
Number of Accum. Units Outstanding 35,478 31,936
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Sub-Account
Beginning of Period $13.23 $10.00 * *
End of Period 14.83 13.23
Number of Accum. Units Outstanding 918,911 539,659
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Global Governments Sub-Account
Beginning of Period $10.67 $10.00 * *
End of Period 10.29 10.67
Number of Accum. Units Outstanding 4,832 2,082
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Growth With Income Sub-Account
Beginning of Period $12.07 $10.00 * *
End of Period 12.68 12.07
Number of Accum. Units Outstanding 1,049,025 581,434
- ---------------------------------------------------------------------------------------------------------------------------------
MFS High Income Sub-Account
Beginning of Period $ 9.85 $10.00 * *
End of Period 10.26 9.85
Number of Accum. Units Outstanding 347,989 219,209
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Research Sub-Account
Beginning of Period $12.17 $10.00 * *
End of Period 13.16 12.17
Number of Accum. Units Outstanding 760,925 464,786
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Sub-Account
Beginning of Period $11.38 $10.00 * *
End of Period 12.50 11.38
Number of Accum. Units Outstanding 1,803,717 1,115,668
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Sub-Account
Beginning of Period $11.71 $10.00 * *
End of Period 13.06 11.71
Number of Accum. Units Outstanding 965,233 530,055
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT International New Opportunities Sub-Account
Beginning of Period $11.40 $10.00 * *
End of Period 13.54 11.40
Number of Accum. Units Outstanding 69,696 52,809
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Sub-Account
Beginning of Period $10.48 $10.00 * *
End of Period 11.90 10.48
Number of Accum. Units Outstanding 62,091 42,091
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Sub-Account
Beginning of Period $11.79 $10.00 * *
End of Period 13.20 11.79
Number of Accum. Units Outstanding 259,037 151,405
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Period Ended Year or Period Year or Period Year or Period
6/30/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund,
Class 1 Shares
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Sub-Account (Sub-Account commenced operations during
1999. The value denoted is the initial AUV.)
Beginning of Period $10.00
End of Period 12.11
Number of Accum. Units Outstanding 15,066
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Investments Sub-Account
Beginning of Period $ 9.63 $10.00 * *
End of Period 11.01 9.63
Number of Accum. Units Outstanding 191,430 106,035
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Sub-Account
Beginning of Period $ 7.55 $10.00 * *
End of Period 10.74 7.55
Number of Accum. Units Outstanding 224,256 89,960
- -----------------------------------------------------------------------------------------------------------------------------------
Managed by Templeton Investment Counsel, Inc.
Templeton International Sub-Account
Beginning of Period $ 9.14 $10.00 * *
End of Period 10.01 9.14
Number of Accum. Units Outstanding 576,554 164,775
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The Mid-Cap Value, Large Cap Research and Developing Growth Portfolios started
regular investment operations on August 20, 1997. The Lord Abbett Growth and
Income Portfolio commenced regular investment operations on January 8, 1999.
Separate Account inception dates in the other investment portfolios are as
follows: AIM Variable Insurance Funds, Inc., Alliance Variable Products Series
Fund, Inc., Kemper Variable Series, Liberty Variable Investment Trust, MFS
Variable Insurance Trust, Oppenheimer Variable Account Funds and Putnam Variable
Trust - December 31, 1997; General American Capital Company - June 3, 1996;
Goldman Sachs Variable Insurance Trust - January 29, 1998; and Templeton Variable
Products Series Fund - May 1, 1998 (except March 1, 1999 for the Franklin Small
Cap Investments Fund).
</FN>
</TABLE>
APPENDIX B
PARTICIPATING INVESTMENT PORTFOLIOS
Below are the investment objectives of each investment portfolio available
under the Contract. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
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
Investment Objective: The Fund's investment objective is growth of capital
through investment in common stock, with emphasis on medium- and small-sized
growth companies. The Fund may also investment up to 20% of its total assets
in foreign securities.
AIM V.I. INTERNATIONAL EQUITY FUND
Investment Objective: The Fund's investment objective is to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities whose issuers are considered to have strong earnings momentum.
The Fund seeks to meet this objective by investing at least 70% of its total
assets in marketable equity securities of foreign companies that are listed on a
recognized foreign securities exchange or traded in a foreign over-the-counter
market. The Fund will normally invest in companies located in at least four
countries outside of the United States, emphasizing investment in companies in
the developed countries of Western Europe and the Pacific Basin. The Fund may
invest up to 20% of its total assets in securities of issuers located in
developing countries, i.e., those that are in the initial stages of their
industrial cycles. The Fund may invest up to 20% of its total assets in
securities exchangeable for or convertible into equity securities of foreign
companies.
AIM V.I. VALUE FUND
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in equity securities judged by the
Fund's investment advisor to be undervalued relative to the investment advisor's
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market generally.
Income is a secondary objective. The Fund may also invest in preferred stocks
and debt instruments that have prospects for growth of capital. The Fund also
may invest up to 25% of its total assets in foreign securities.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PREMIER GROWTH PORTFOLIO
Investment Objective: The Portfolio's investment objective is growth of capital
by pursuing aggressive investment policies. The Portfolio invests primarily
in equity securities of U.S. companies. Normally, the Portfolio invests in
about 40-50 companies, with the 25 most highly regarded of these companies
usually constituting approximately 70% of the Portfolio's net assets.
REAL ESTATE INVESTMENT PORTFOLIO
Investment Objective: The Portfolio's investment objective is total return from
long-term growth of capital and income principally through investing in equity
securities of companies that are primarily engaged in or related to the real
estate industry.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.:
American Century Investment Management, Inc. is the investment
adviser to each portfolio. The following portfolios are available under
the contract:
VP INCOME & GROWTH FUND
Investment Objective: The Fund seeks dividend growth, current income and capital
appreciation by investing in common stocks.
VP INTERNATIONAL FUND
Investment Objective: The Fund seeks capital growth by investing in stocks
of companies that the adviser believes will increase in value over time.
VP VALUE FUND
Investment Objective: The Fund seeks long-term capital growth by investing
primarily in common stocks. Income is a secondary objective.
COVA SERIES TRUST:
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. Cova Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
portfolios are available under the contract:
PORTFOLIOS MANAGED BY J. P. MORGAN INVESTMENT MANAGEMENT INC.:
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: The International Equity Portfolio seeks to provide a high
total return from a portfolio of equity securities of foreign corporations.
LARGE CAP STOCK PORTFOLIO
Investment Objective: The Large Cap Stock Portfolio seeks to provide long-term
growth of capital and income by investing primarily in dividend-paying common
stock. The Portfolio will typically hold approximately 300 stocks.
QUALITY BOND PORTFOLIO
Investment Objective: The Quality Bond Portfolio seeks to provide a high total
return consistent with moderate risk of capital and maintenance of liquidity by
investing at least 65% of its assets in bonds under normal circumstances.
SELECT EQUITY PORTFOLIO
Investment Objective: The Select Equity Portfolio seeks to provide long-term
growth of capital and income by investing primarily in dividend-paying common
stock. The Portfolio will typically hold between 60 and 90 stocks.
SMALL CAP STOCK PORTFOLIO
Investment Objective: The Small Cap Stock Portfolio seeks to provide a high
total return from a portfolio of equity securities of small companies.
PORTFOLIOS MANAGED BY LORD, ABBETT & CO.:
BOND DEBENTURE PORTFOLIO
Investment Objective: The Bond Debenture Portfolio seeks to provide high current
income and the opportunity for capital appreciation to produce a high total
return through a professionally-managed portfolio consisting primarily of
convertible and discount debt securities, many of which are lower rated.
DEVELOPING GROWTH PORTFOLIO
Investment Objective: The Developing Growth Portfolio seeks long-term growth of
capital through a diversified and actively-managed portfolio consisting of
developing growth companies, many of which are traded over the counter.
LARGE CAP RESEARCH PORTFOLIO
Investment Objective: The Large Cap Research Portfolio seeks growth of capital
and growth of income consistent with reasonable risk. Production of current
income is a secondary consideration. The Portfolio invests primarily in common
stocks, including securities convertible into common stocks.
LORD ABBETT GROWTH AND INCOME PORTFOLIO
Investment Objective: The Lord Abbett Growth and Income Portfolio seeks to
achieve long-term growth of capital and income without excessive fluctuation in
market value. The Portfolio will normally invest in common stocks, including
securities convertible into common stocks, of large, seasoned companies in sound
financial condition, which common stocks are expected to show above-average
price appreciation.
MID-CAP VALUE PORTFOLIO
Investment Objective: The Mid-Cap Value Portfolio seeks capital appreciation
through investments, primarily in equity securities, which are believed to be
undervalued in the marketplace.
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund
manager and provide day-to-day management of the Fund's investments.
Investment Objective: The Fund seeks to match the total return of the S&P 500.
To pursue this goal, the Fund generally invests in all 500 stocks in the S&P
500 in proportion to their weighting in the index.
DREYFUS VARIABLE INVESTMENT FUND:
The Dreyfus Variable Investment Fund is a mutual fund with multiple
portfolios. The Dreyfus Corporation serves as the investment adviser. The
following portfolios are available under the contract:
CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio seeks long-term capital growth consistent
with the preservation of capital; current income is a secondary goal. To pursue
these goals, the Portfolio invests in common stocks focusing on "blue chip"
companies with total market values of more than $5 billion at the time of
purchase. These established companies have demonstrated sustained patterns
of profitability, strong balance sheets, an expanding global presence and the
potential to achieve predictable, above-average earnings growth.
DISCIPLINED STOCK PORTFOLIO
Investment Objective: The Portfolio seeks investment returns (consisting of
capital appreciation and income) that are greater than the total return
performance of stocks represented by the Standard & Poor's 500 Composite
Stock Price Index (S&P 500). To pursue this goal, the Portfolio invests in
a blended portfolio of growth and value stocks chosen through a disciplined
investment process. Consistency of returns and stability of the Portfolio's
share price compared to the S&P 500 are primary goals of the process.
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
MONEY MARKET FUND
Investment Objective: The Money Market Fund's investment objective is to provide
investors with current income while preserving capital and maintaining
liquidity. The Fund seeks to achieve this objective by investing primarily in
high-quality, short-term money market instruments. The Fund purchases securities
that meet the quality, maturity, and diversification requirements applicable to
money market funds.
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Variable Insurance Trust is a mutual fund with multiple
portfolios. Goldman Sachs Asset Management is the investment adviser for the
Goldman Sachs Growth and Income Fund and Goldman Sachs Asset Management
International is the investment adviser for the Goldman Sachs International
Equity Fund and the Goldman Sachs Global Income Fund. The following portfolios
are available under the contract:
GOLDMAN SACHS GLOBAL INCOME FUND
Investment Objective: The Fund seeks a high total return, emphasizing current
income, and, to a lesser extent, providing opportunities for capital
appreciation. The Fund invests primarily in a portfolio of high quality
fixed-income securities of U.S. and foreign issuers and enters into
transactions in foreign currencies.
GOLDMAN SACHS GROWTH AND INCOME FUND
Investment Objective: The Fund seeks long-term growth of capital and growth of
income by investing in large capitalization U.S. stocks that are believed to
be undervalued or undiscovered in the marketplace.
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Investment Objective: The Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies organized outside the United States
or whose securities are principally traded outside the United States.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
portfolios are available under the contract:
INVESCO VIF - DYNAMICS FUND
Investment Objective: The Fund tries to buy securities that will increase in
value over the long term. It is aggressively managed. Because its strategy
includes many short-term factors - including current information about a
company, investor interest, price movements of a company's securities and
general market and monetary conditions - securities in its portfolio usually
are bought and sold relatively frequently. The Fund invests in a variety of
securities that the adviser believes present opportunities for capital growth -
primarily common stocks of companies traded on U.S. securities exchanges, as
well as over-the-counter. The Fund also may invest in preferred stocks (which
generally pay higher dividends than common stocks) and debt instruments that
are convertible into common stocks, as well as in securities of foreign
companies.
INVESCO VIF - HIGH YIELD FUND
Investment Objective: The Fund seeks to provide a high level of current income,
with growth of capital as a secondary objective. It invests substantially all of
its assets in lower-rated debt securities, commonly called "junk bonds," and
preferred stock, including securities issued by foreign companies. These debt
securities are highly sensitive to changes in interest rates; in general, as
interest rates rise, the value of these securities will decline. Because the
debt securities held by the Fund tend to be lower rated, they are more
susceptible to the impact of overall fluctuations in the economy than other,
higher-rated debt securities. Although these securities carry with them higher
risks, they generally provide higher yields - and therefore higher income - than
higher-rated debt securities.
KEMPER VARIABLE SERIES
Kemper Variable Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the Kemper Government Securities
Portfolio, the Kemper Small Cap Growth Portfolio and the Kemper Small Cap Value
Portfolio. The following portfolios are available under the contract:
KEMPER GOVERNMENT SECURITIES PORTFOLIO
Investment Objective: Kemper Government Securities seeks high current return
consistent with preservation of capital. The Portfolio pursues its objective
by investing at least 65% of its total assets in U.S. Government securities
and repurchase agreements of U.S. Government securities.
KEMPER SMALL CAP GROWTH PORTFOLIO
Investment Objective: Kemper Small Cap Growth Portfolio seeks maximum
appreciation of investors' capital. The Portfolio pursues its objective by
investing at least 65% of its total assets in small capitalization stocks
similar in size to those companies comprising the Russell 2000 Index. Many
of these companies would be in the early stages of their life cycle. Equity
securities in which the Portfolio invests consist primarily of common stocks,
but may include convertible securities, including warrants and rights.
KEMPER SMALL CAP VALUE PORTFOLIO
Investment Objective: Kemper Small Cap Value Portfolio seeks long-term capital
appreciation. The Portfolio pursues its investment objective by investing
primarily in a diversified portfolio of the stocks of small U.S. companies,
which are those similar in size to those comprising the Russell 2000 Index and
that the investment manager believes to be undervalued. Under normal market
conditions, the Portfolio invests at least 65% of its assets in small
capitalization stocks similar in size to those comprising the Russell 2000
Index.
SCUDDER VARIABLE LIFE INVESTMENT FUND:
The Scudder Variable Life Investment Fund is a mutual fund with multiple
portfolios. Scudder Kemper Investments, Inc. is the investment adviser to each
portfolio. The following portfolio is available under the contract:
INTERNATIONAL PORTFOLIO
Investment Objective: The International Portfolio seeks long-term growth of
capital primarily through diversified holdings of marketable foreign equity
investments.
LIBERTY VARIABLE INVESTMENT TRUST:
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger Fund, Variable Series. The following
portfolio is available under the contract:
NEWPORT TIGER FUND, VARIABLE SERIES
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund invests primarily in stocks of companies
located in the nine Tiger countries of Asia. The Tigers of Asia are Hong Kong,
Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The People's
Republic of China and the Philippines. The Fund typically invests in stocks of
larger, well-established companies.
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
Investment Objective: The Series' investment objective is long term growth of
capital. The Series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities of emerging growth
companies.
MFS GLOBAL GOVERNMENTS SERIES
Investment Objective: The Series' investment objective is to provide income
and capital appreciation. The Series invests primarily in U.S. and foreign
government securities. Prior to May 1, 1999, the Series' investment objective
was to seek not only preservation but also growth of capital, together with
moderate current income.
MFS GROWTH WITH INCOME SERIES
Investment Objective: The Series' investment objective is to provide reasonable
current income and long-term growth of capital and income. The Series invests,
under normal market conditions, at least 65% of its total assets in common
stocks and related securities.
MFS HIGH INCOME SERIES
Investment Objective: The Series' investment objective is to provide high
current income by investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve equity features.
The Series invests, under normal market conditions, at least 80% of its total
assets in high yield fixed income securities which generally are lower rated
bonds commonly known as junk bonds. Junk bonds are subject to a substantially
higher degree of risk than higher rated bonds.
MFS RESEARCH SERIES
Investment Objective: The Series' investment objective is long-term growth of
capital and future income. The Series invests, under normal market conditions,
at least 80% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts.
PIMCO VARIABLE INSURANCE TRUST:
PIMCO Variable Insurance Trust is a mutual fund with multiple portfolios.
Pacific Investment Management Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PIMCO HIGH YIELD BOND PORTFOLIO
Investment Objective: The High Yield Bond Portfolio seeks to maximize total
return, consistent with preservation of capital and prudent investment
management. The High Yield Bond Portfolio invests under normal circumstances at
least 65% of its assets in a diversified portfolio of high yield bonds rated at
least B by Moody's or S&P, or, if unrated, determined by the adviser to be of
comparable quality.
PIMCO LOW DURATION BOND PORTFOLIO
Investment Objective: The Low Duration Bond Portfolio seeks to maximize total
return, consistent with preservation of capital and prudent investment
management. The Low Duration Bond Portfolio invests under normal circumstances
at least 65% of its assets in a diversified portfolio of fixed income
instruments of varying maturities.
PIMCO STOCKSPLUS GROWTH AND INCOME PORTFOLIO
Investment Objective: The StocksPLUS Growth and Income Portfolio seeks to
achieve a total return which exceeds the total return performance of the S&P
500. The StocksPLUS Growth and Income Portfolio invests in common stocks,
options, futures, options on futures and swaps. Under normal market conditions,
the Portfolio invests substantially all of its assets in S&P 500 derivatives,
backed by a portfolio of fixed income instruments.
PIMCO TOTAL RETURN BOND PORTFOLIO
Investment Objective: The PIMCO Total Return Bond Portfolio seeks to maximize
total return, consistent with preservation of capital and prudent investment
management. The Total Return Bond Portfolio invests under normal circumstances
at least 65% of its assets in a diversified portfolio of fixed income
instruments of varying maturities.
PUTNAM VARIABLE TRUST:
Putnam Variable Trust is a mutual fund with multiple portfolios. Putnam
Investment Management, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
PUTNAM VT GROWTH AND INCOME FUND, CLASS IA SHARES
Investment Objective: The Fund seeks capital growth and current income. The Fund
invests primarily in "value" stocks, that offer the potential for capital
growth, current income, or both. Value stocks are those that the adviser
believes are currently undervalued compared to their true worth.
PUTNAM VT INTERNATIONAL GROWTH FUND, CLASS IA SHARES
Investment Objective: The Fund seeks capital appreciation. Under normal
conditions, the Fund generally diversifies its investments among a number of
different countries by investing at least 65% of its total assets in at least
three countries other than the United States. The Fund may invest in both growth
and value stocks.
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND, CLASS IA SHARES
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund generally invests at least 65% of its total
assets in at least three countries other than the United States. The Fund
invests mainly in growth stocks, which are stocks issued by companies whose
earnings the adviser believes are likely to grow faster than the economy as a
whole.
PUTNAM VT NEW VALUE FUND, CLASS IA SHARES
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund invests in value stocks, which are common
stocks that the adviser believes are undervalued at the time of purchase and
have the potential for long-term capital appreciation.
PUTNAM VT VISTA FUND, CLASS IA SHARES
Investment Objective: The Fund seeks capital appreciation. The Fund invests
mainly in "growth" stocks that are issued by companies whose earnings the
adviser believes are likely to grow faster than the economy as a whole. The
Fund mainly buys stocks of medium size companies, although the Fund may
invest in companies of any size.
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES:
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Each portfolio has two classes of shares: Class 1 and Class 2. The
portfolios available in connection with your contract are Class 1 shares.
Franklin Advisers, Inc. is the investment adviser for the Franklin Small Cap
Investments Fund, Templeton Asset Management Ltd. is the investment adviser for
the Templeton Developing Markets Fund, Templeton Investment Counsel, Inc. is the
investment adviser for the Templeton International Fund and Franklin Mutual
Advisers, LLC is the investment adviser for the Mutual Shares Investments Fund.
The following portfolios are available under the contract:
FRANKLIN SMALL CAP INVESTMENTS FUND
Investment Objective: The Fund's investment goal is long-term capital growth.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of U.S. small capitalization (small cap) growth
companies. Small cap companies are generally those with market cap values (share
price times the number of common stocks outstanding) of less than $1.5 billion,
at the time of purchase.
MUTUAL SHARES INVESTMENTS FUND
Investment Objective: The Fund's principal goal is capital appreciation. Its
secondary goal is income. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of companies that the
manager believes are available at market prices less than their actual value
based on certain recognized or objective criteria (intrinsic value).
TEMPLETON DEVELOPING MARKETS FUND
Investment Objective: The Fund's investment goal is long-term capital
appreciation. Under normal market conditions, the Fund will invest at least 65%
of its total assets in emerging market equity securities. Emerging market equity
securities generally include equity securities that trade in emerging markets or
are issued by companies that have their principal activities in emerging market
countries.
TEMPLETON INTERNATIONAL FUND
Investment Objective: The Fund's investment goal is long-term capital growth.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of companies located outside the U.S., including
in emerging markets. While there are no set percentage targets, the Fund
generally invests in large- to medium-cap companies with market capitalization
values (share price times the number of common stock shares outstanding) greater
than $1.5 billion, but may invest a small portion in small-cap companies which
have more risk.
<TABLE>
<CAPTION>
APPENDIX C
PERFORMANCE INFORMATION
Future performance will vary and the results shown are not necessarily
representative of future results.
Note: The figures below present investment performance information for the
periods ended June 30, 1999. While these numbers represent the returns as of
that date, they do not represent performance information of the portfolios since
that date. Performance information for the periods after June 30, 1999 may
be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before June 30, 1999. As a
result, performance information is available for the accumulation units
investing in these portfolios.
o Column A presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of each portfolio, and assumes that you make a withdrawal at
the end of the period and therefore the withdrawal charge is reflected.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges and fees and expenses of each portfolio.
o Performance figures shown for sub-accounts in existence for less than one
year are not annualized.
Total Return for the periods ended 6/30/99:
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance
Funds, Inc.
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C>
Appreciation 12/31/97 9.58% - - 15.01% 14.20% - - 17.96%
AIM V.I. International
Equity 12/31/97 (4.49)% - - 8.77% 0.11% - - 11.79%
AIM V.I. Value 12/31/97 21.54% - - 27.38% 26.16% - - 30.21%
- -----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products
Series Fund, Inc.
Premier Growth 12/31/97 23.94% - - 36.41% 28.57% - - 39.17%
Real Estate Investment 12/31/97 (14.11)% - - (14.27)% (9.52)% - - (10.93)%
- -----------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Bond Debenture 5/1/96 (4.43)% - - 8.41% 0.17% - - 9.69%
Developing Growth 8/20/97 7.85% - - 11.50% 12.47% - - 13.81%
International Equity 5/1/96 (1.00)% - - 7.99% 3.60% - - 9.28%
Large Cap Research 8/20/97 12.81% - - 14.38% 17.42% - - 16.64%
Large Cap Stock 5/1/96 18.60% - - 26.85% 23.22% - - 27.81%
Lord Abbett Growth and Income 1/8/99 - - - - 3.78% - - - - 8.89%
Mid-Cap Value 8/20/97 (1.47)% - - 5.70% 3.13% - - 8.09%
Quality Bond 5/1/96 (4.11)% - - 3.69% 0.49% - - 5.09%
Select Equity 5/1/96 14.32% - - 20.66% 18.94% - - 21.71%
Small Cap Stock 5/1/96 (10.08)% - - 6.25% (5.49)% - - 7.58%
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market 6/3/96 (0.86)% - - 2.58% 3.75% - - 4.05%
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable
Insurance Trust
Goldman Sachs
Global Income 1/29/98 (2.14)% - - 0.57% 2.46% - - 3.86%
Goldman Sachs Growth
and Income 1/29/98 (3.76)% - - 2.77% 0.84% - - 6.04%
Goldman Sachs
International Equity 1/29/98 (2.86)% - - 8.02% 1.75% - - 11.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Government
Securities 12/31/97 (2.43)% - - 0.11% 2.17% - - 3.23%
Kemper Small Cap Growth 12/31/97 2.78% - - 10.44% 7.39% - - 13.44%
Kemper Small Cap Value 12/31/97 (13.92)% - - (8.58)% (9.33)% - - (5.34)%
- ----------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5yrs inception
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 12/31/97 57.30% - - 9.01% 61.96% - - 12.02%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging Growth 12/31/97 18.17% - - 27.28% 22.79% - - 30.11%
MFS Global Governments 12/31/97 (3.45)% - - (1.21)% 1.15% - - 1.93%
MFS Growth With Income 12/31/97 5.34% - - 14.27% 9.95% - - 17.22%
MFS High Income 12/31/97 (5.89)% - - (1.40)% (1.29)% - - 1.75%
MFS Research 12/31/97 6.82% - - 17.21% 11.43% - - 20.14%
- ------------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and portfolio
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr 5 yrs inception 1 yr 5yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth and
Income - Class IA Shares 12/31/97 9.91% - - 13.14% 14.53% - - 16.11%
Putnam VT International
Growth - Class IA Shares 12/31/97 5.18% - - 16.62% 9.79% - - 19.55%
Putnam VT International
New Opportunities -
Class IA Shares 12/31/97 12.55% - - 19.54% 17.17% - - 22.44%
Putnam VT New Value -
Class IA Shares 12/31/97 10.77% - - 9.32% 15.38% - - 12.33%
Putnam VT Vista -
Class IA Shares 12/31/97 9.06% - - 17.47% 13.68% - - 20.39%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products
Series Fund, Class 1 Shares
*Franklin Small Cap Investments 3/1/99 - - - - 15.98% - - - - 21.10%
*Mutual Shares Investments 5/1/98 11.16% - - 4.60% 15.78% - - 8.61%
*Templeton Developing
Markets 5/1/98 41.04% - - 2.28% 45.69% - - 6.30%
Templeton International 5/1/98 (0.68)% - - (3.92)% 3.92% - - 0.13%
*Past expense reductions by the manager increased returns.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX C
PERFORMANCE INFORMATION (continued)
PART 2 - HISTORICAL FUND PERFORMANCE
The contracts are relatively new and therefore have a limited performance
history. However, certain portfolios have been in existence for some time and
have an investment performance history. In order to show how the historical
performance of the portfolios affects the contract's accumulation unit values,
the following performance information was developed.
The information is based upon the historical experience of the portfolios and is
for the periods shown. The chart below shows the investment performance of the
portfolios and the accumulation unit performance calculated by assuming that the
contracts were invested in the portfolios for the same periods.
o The performance figures in Column A reflect the fees and expenses paid by
each portfolio.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of each portfolio, and assumes that you make a withdrawal at
the end of the period and therefore the withdrawal charge is reflected.
o Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
o Performance figures shown for portfolios in existence for less than one
year are not annualized.
Total Return for the periods ended 6/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation 5/5/93 15.81% 21.16% 18.88% 9.58% 19.66% 17.38% 14.20% 19.76% 17.48%
AIM V.I.
International Equity 5/5/93 1.52% 12.82% 13.02% (4.49)% 11.32% 11.52% 0.11% 11.42% 11.62%
AIM V.I. Value 5/5/93 27.94% 25.41% 22.63% 21.54% 23.91% 21.13% 26.16% 24.01% 21.23%
- -----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth 6/26/92 30.38% 32.57% 25.64% 23.94% 31.07% 24.14% 28.57% 31.17% 24.24%
Real Estate
Investment 1/9/97 (8.25)% - - 2.34% (14.11)% - - (3.66)% (9.52)% - - 0.94%
- ------------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.
VP Income & Growth 10/30/97 18.54% - - 27.61% 12.54% - - 21.61% 17.14% - - 26.21%
VP International 5/1/94 1.74% 13.53% 12.59% (4.26)% 12.03% 11.09% 0.34% 12.13% 11.19%
VP Value 5/1/96 11.98% - - 17.79% 5.98% - - 11.79% 10.58% - - 16.39%
- -----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 9/29/89 22.36% 27.36% 17.57% 16.36% 25.86% 16.07% 20.96% 25.96% 16.17%
- -----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund
Dreyfus VIF - Capital
Appreciation 4/5/93 15.86% 26.10% 21.12% 9.86% 24.60% 19.62% 14.46% 24.70% 19.72%
Dreyfus VIF -
Disciplined Stock 5/1/96 18.85% - - 28.12% 12.85% - - 22.12% 17.45% - - 26.72%
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market 10/1/87 5.21% 5.54% 5.53% (0.86)% 4.04% 4.03% 3.75% 4.14% 4.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Goldman Sachs
Global Income 1/12/98 3.91% - - 4.53% (2.14)% - - (1.47)% 2.46% - - 3.13%
Goldman Sachs
Growth and Income 1/12/98 2.26% - - 10.96% (3.76)% - - 4.96% 0.84% - - 9.56%
Goldman Sachs
International Equity 1/12/98 3.18% - - 15.36% (2.86)% - - 9.36% 1.75% - - 13.96%
- ------------------------------------------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc.
INVESCO VIF - Dynamics 8/25/97 21.92% - - 23.84% 15.92% - - 17.84% 20.52% - - 22.44%
INVESCO VIF - High Yield 5/27/94 1.73% 12.18% 11.92% (4.27)% 10.68% 10.42% 0.33% 10.78% 10.52%
- ------------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Government
Securities 9/3/87 3.61% 7.41% 7.51% (2.43)% 5.91% 6.01% 2.17% 6.01% 6.11%
Kemper Small
Cap Growth 5/2/94 8.90% 23.95% 22.60% 2.78% 22.45% 21.10% 7.39% 22.55% 21.20%
Kemper Small
Cap Value 5/1/96 (8.04)% - - 4.98% (13.92)% - - (1.02)% (9.33)% - - 3.58%
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund
International 5/1/87 7.99% 12.28% 11.61% 1.99% 10.78% 10.11% 6.59% 10.88% 10.21%
- -----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 5/1/95 64.19% - - 1.65% 57.30% - - (4.35)% 61.96% - - 0.25%
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging
Growth 7/24/95 24.52% - - 26.65% 18.17% - - 20.65% 22.79% _ _ 25.25%
MFS Global
Governments 6/14/94 2.58% 4.40% 4.40% (3.45)% 2.90% 2.90% 1.15% 3.00% 3.00%
MFS Growth
With Income 10/9/95 11.50% - - 24.02% 5.34% - - 18.02% 9.95% _ _ 22.62%
MFS High Income 7/26/95 0.10% - - 8.95% (5.89)% - - 2.95% (1.29)% _ _ 7.55%
MFS Research 7/26/95 13.00% - - 22.00% 6.82% - - 16.00% 11.43% _ _ 20.60%
- ------------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 6/30/99:
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
PIMCO High Yield Bond 4/30/98 2.28% - - 2.83% (3.72)% - - (3.17)% 0.88% - - 1.43%
PIMCO Low Duration
Bond 2/16/99 - - - - 1.28% - - - - (4.34)% - - - - 0.76%
PIMCO StocksPLUS
Growth and Income 12/31/97 23.86% - - 28.16% 17.86% - - 22.16% 22.46% - - 26.76%
PIMCO Total Return
Bond 12/31/97 3.55% - - 4.42% (2.45)% - - (1.58)% 2.15% - - 3.02%
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth
and Income -
Class IA Shares 2/1/88 16.14% 21.98% 15.93% 9.91% 20.48% 14.43% 14.53% 20.58% 14.53%
Putnam VT International
Growth - Class
IA Shares 1/2/97 11.34% - - 19.20% 5.18% - - 13.20% 9.79% - - 17.80%
Putnam VT International
New Opportunities -
Class IA Shares 1/2/97 18.82% - - 13.82% 12.55% - - 7.82% 17.17% - - 12.42%
Putnam VT New Value -
Class IA Shares 1/2/97 17.01% - - 15.39% 10.77% - - 9.39% 15.38% - - 13.99%
Putnam VT Vista -
Class IA Shares 1/2/97 15.28% - - 22.58% 9.06% - - 16.58% 13.68% - - 21.18%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products
Series Fund
*Franklin Small Cap Investments,
Class 1 Shares 5/1/98 15.12% - - 8.36% 9.12% - - 2.36% 13.72% - - 6.96%
*Mutual Shares Investments,
Class 1 Shares 5/1/98 17.41% - - 10.14% 11.16% - - 4.14% 15.78% - - 8.74%
*Templeton Developing
Markets Fund, Class
1 Shares 3/4/96 47.76% - - (8.10)% 41.04% - - (14.10)% 45.69% - - (9.50)%
Templeton
International Fund,
Class 1 Shares 5/1/92 5.39% 15.27% 14.69% (0.68)% 13.77% 13.19% 3.92% 13.87% 13.29%
- -----------------------------------------------------------------------------------------------------------------------------------
*Past expense reductions by the manager increased returns.
</TABLE>
Please send me, at no charge, the Statement of Additional Information dated
November __, 1999, for the annuity contract issued by Cova.
(Please print or type and fill in all information)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip Code
CL-2096 (11/99) NAVI-MO
- ------------------------------
- ------------------------------
- ------------------------------
Cova Financial Services Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
COVA
Cova Financial Services Life Insurance Company
Marketing and Executive Office
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
800-523-1661
Annuity Service Office
P.O. Box 10366
Des Moines, IA 50306-9775
800-343-8496
CL-2095 (5/99) Policy Form Series XL407, CL-407,XL-617,CL-617 21-CSA-MO(5/99)
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 NOVEMBER __, 1999 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 NOVEMBER __, 1999.
TABLE OF CONTENTS
Page
COMPANY .................................................................... 3
EXPERTS .................................................................... 3
LEGAL OPINIONS............................................................... 3
DISTRIBUTION................................................................. 3
Reduction or Elimination of the Withdrawal Charge................... 4
CALCULATION OF PERFORMANCE INFORMATION....................................... 4
Total Return........................................................ 4
Historical Unit Values.............................................. 6
Reporting Agencies.................................................. 7
FEDERAL TAX STATUS........................................................... 7
General ........................................................... 7
Diversification..................................................... 8
Multiple Contracts................................................. 10
Contracts Owned by Other than Natural Persons...................... 10
Tax Treatment of Assignments or Transfer of Ownership.............. 10
Income Tax Withholding............................................. 11
Tax Treatment of Withdrawals - Non-Qualified Contracts............. 11
Qualified Plans.................................................... 12
Tax Treatment of Withdrawals - Qualified Contracts................. 14
Tax-Sheltered Annuities - Withdrawal Limitations................... 16
ANNUITY PROVISIONS.......................................................... 16
Variable Annuity................................................... 16
Fixed Annuity...................................................... 17
Annuity Unit Value................................................. 17
Net Investment Factor.............................................. 17
Mortality and Expense Guarantee.................................... 18
FINANCIAL STATEMENTS........................................................ 18
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 $300 billion
of life insurance in force and approximately $24 billion in assets. It provides
life and health insurance, retirement plans, and related financial services to
individuals and groups.
On August 26, 1999, it was announced that The Metropolitan Life Insurance
Company would purchase General American Life Insurance Company, the parent
company of Cova. Metropolitan Life is one of the country's oldest and most
financially sound life insurance organizations.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1998 and 1997,
and the related consolidated statements of income, shareholder's equity, and
cash flows for each of the years in the three-year period ended December 31,
1998, and the statement of assets and liabilities of the Separate Account as of
December 31, 1998, and the related statement of operations for the year then
ended and the statements of changes in net assets for the two years then ended,
have been included herein in reliance upon the reports of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
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.
CALCULATION OF 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 Charges 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
Where:
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.
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
contract maintenance charge and withdrawal charge. The deduction of any contract
maintenance charge and withdrawal charge would reduce any percentage increase or
make greater any percentage decrease.
You 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 your total return may be in any future period.
The Contracts are relatively new and therefore have no meaningful performance
history. However, the Separate Account and certain Portfolios have been in
existence for sometime and consequently have an investment performance history.
In order to show how the historical investment performance of the Separate
Account and the Portfolios affect accumulation unit values, performance
information was developed. The information is based upon the historical
experience of the Separate Account and the Portfolios and is for the periods
shown. The prospectus contains performance information.
Future performance of the Portfolios will vary and the 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 for a Portfolio 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.
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.
FEDERAL 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 Internal Revenue Code of 1986, as amended (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. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
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 or Transfer of Ownership
An assignment, pledge or transfer of ownership of a Contract may be a taxable
event. Owners should therefore consult competent tax advisers should they wish
to assign, pledge or transfer ownership of 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); or d) hardship withdrawals. 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.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
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. 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.
b. 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 taxable 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.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-
employed individuals, 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 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 (Pension and Profit-Sharing Plans),
403(b) (Tax-Sheltered Annuities) and 408 and 408A (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 year; 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.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
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 rollovers and transfers between certain Qualified 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 Value
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
Statement of Assets and Liabilities
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Assets:
Investments:
Cova Series Trust (Trust):
<S> <C> <C> <C>
Lord Abbett Growth and Income Portfolio 35,202,359 shares at a net asset value of $23.682058 per share $ 833,664
Bond Debenture Portfolio 12,156,766 shares at a net asset value of $12.503713 per share 152,005
Developing Growth Portfolio 1,700,728 shares at a net asset value of $13.012586 per share 22,131
Large Cap Research Portfolio 1,740,666 shares at a net asset value of $13.570827 per share 23,622
Mid-Cap Value Portfolio 2,161,052 shares at a net asset value of $11.802264 per share 25,505
Quality Bond Portfolio 8,184,020 shares at a net asset value of $10.786856 per share 88,280
Small Cap Stock Portfolio 5,706,529 shares at a net asset value of $12.704940 per share 72,501
Large Cap Stock Portfolio 10,193,410 shares at a net asset value of $20.430631 per share 208,258
Select Equity Portfolio 12,243,396 shares at a net asset value of $17.903279 per share 219,197
International Equity Portfolio 7,496,974 shares at a net asset value of $13.590555 per share 101,888
Balanced Portfolio 555,666 shares at a net asset value of $12.232340 per share 6,797
Small Cap Equity Portfolio 162,151 shares at a net asset value of $10.809598 per share 1,753
Equity Income Portfolio 426,039 shares at a net asset value of $12.929518 per share 5,509
Growth and Income Portfolio 947,523 shares at a net asset value of $13.660017 per share 12,943
General American Capital Company (GACC):
Money Market Fund 1,894,282 shares at a net asset value of $19.715236 per share 37,346
Russell Insurance Funds (Russell):
Multi-Style Equity Fund 2,664,475 shares at a net asset value of $16.63 per share 44,310
Aggressive Equity Fund 581,570 shares at a net asset value of $12.79 per share 7,438
Non-US Fund 1,289,035 shares at a net asset value of $11.73 per share 15,120
Core Bond Fund 2,298,149 shares at a net asset value of $10.12 per share 23,257
AIM Variable Insurance Funds, Inc. (AIM):
AIM V.I. Value Fund 627,948 shares at a net asset value of $30.04 per share 18,864
AIM V.I. Capital Appreciation Fund 213,756 shares at a net asset value of $27.60 per share 5,900
AIM V.I. International Equity Fund 168,414 shares at a net asset value of $20.49 per share 3,451
Alliance Variable Products Series Fund, Inc. (Alliance):
Premier Growth Portfolio 687,662 shares at a net asset value of $34.58 per share 23,779
Real Estate Investment Portfolio 336,131 shares at a net asset value of $9.91 per share 3,331
Liberty Variable Investment Trust (Liberty):
Newport Tiger Fund, Variable Series 207,111 shares at a net asset value of $2.03 per share 420
Goldman Sachs Variable Insurance Trust (Goldman Sachs):
Growth and Income Fund 540,946 shares at a net asset value of $11.54 per share 6,243
International Equity Fund 170,401 shares at a net asset value of $12.23 per share 2,084
Global Income Fund 24,137 shares at a net asset value of $10.17 per share 246
Kemper Variable Series (Kemper):
Kemper Dreman High Return Equity Portfolio 149,458 shares at a net asset value of $1.064610 per share 159
Kemper Small Cap Growth Portfolio 680,960 shares at a net asset value of $2.054050 per share 1,399
Kemper Small Cap Value Portfolio 3,682,790 shares at a net asset value of $1.118560 per share 4,119
Kemper Government Securities Portfolio 1,385,250 shares at a net asset value of $1.149070 per share 1,592
MFS Variable Insurance Trust (MFS):
MFS Bond Series 15,094 shares at a net asset value of $10.97 per share 166
MFS Research Series 488,888 shares at a net asset value of $20.48 per share 10,012
MFS Growth with Income Series 629,375 shares at a net asset value of $21.14 per share 13,305
MFS Emerging Growth Series 562,463 shares at a net asset value of $24.22 per share 13,623
MFS/Foreign & Colonial Emerging Markets Equity Series 56,804 shares at a net asset value of $7.22 per share 410
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Assets, continued:
Investments, continued:
<S> <C> <C> <C>
MFS High Income Series 315,197 shares at a net asset value of $11.33 per share $ 3,571
MFS Global Governments Series 4,977 shares at a net asset value of $9.99 per share 50
Oppenheimer Variable Account Funds (Oppenheimer):
Oppenheimer Capital Appreciation Fund 94,858 shares at a net asset value of $40.75 per share 3,865
Oppenheimer Main Street Growth & Income Fund 192,040 shares at a net asset value of $23.20 per share 4,455
Oppenheimer High Income Fund 155,986 shares at a net asset value of $10.67 per share 1,664
Oppenheimer Bond Fund 711,217 shares at a net asset value of $11.50 per share 8,179
Oppenheimer Strategic Bond Fund 470,237 shares at a net asset value of $4.84 per share 2,276
Putnam Variable Trust (Putnam)
Putnam VT Growth and Income Fund 772,856 shares at a net asset value of $29.18 per share 22,552
Putnam VT New Value Fund 54,651 shares at a net asset value of $13.52 per share 739
Putnam VT Vista Fund 205,967 shares at a net asset value of $16.60 per share 3,419
Putnam VT International Growth Fund 830,025 shares at a net asset value of $15.19 per share 12,608
Putnam VT International New Opportunities Fund 68,714 shares at a net asset value of $13.73 per share 943
Templeton Variable Products Series Fund (Templeton):
Templeton Bond Fund 14,030 shares at a net asset value of $10.04 per share 141
Franklin Small Cap Investments Fund 16,988 shares at a net asset value of $10.74 per share 183
Templeton Stock Fund 5,756 shares at a net asset value of $21.28 per share 123
Templeton International Fund 290,890 shares at a net asset value of $19.85 per share 5,774
Templeton Developing Markets Fund 333,036 shares at a net asset value of $7.23 per share 2,408
Mutual Shares Investments Fund 188,855 shares at a net asset value of $11.16 per share 2,108
Franklin Growth Investments Fund 8,078 shares at a net asset value of $13.13 per share 106
Variable Insurance Products Fund, Fund II
and Fund III (Fidelity):
VIP Growth Portfolio 19,601 shares at a net asset value of $45.73 per share 896
VIP II Contrafund Portfolio 36,253 shares at a net asset value of $26.10 per share 946
VIP III Growth Opportunities Portfolio 18,642 shares at a net asset value of $23.64 per share 441
VIP III Growth & Income Portfolio 104,598 shares at a net asset value of $17.10 per share 1,789
VIP Equity-Income Portfolio 32,620 shares at a net asset value of $27.25 per share 889
--------------
Total assets $ 2,090,752
==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Net assets:
Accumulation units:
<S> <C> <C> <C>
Trust Lord Abbett Growth and Income 21,288,159 accumulation units at $39.095065 per unit $ 832,262
Trust Bond Debenture 11,212,098 accumulation units at $13.536168 per unit 151,769
Trust Developing Growth 1,738,843 accumulation units at $12.724192 per unit 22,125
Trust Large Cap Research 1,771,421 accumulation units at $13.320553 per unit 23,596
Trust Mid-Cap Value 2,205,833 accumulation units at $11.560414 per unit 25,500
Trust Quality Bond 7,609,203 accumulation units at $11.582126 per unit 88,131
Trust Small Cap Stock 5,470,094 accumulation units at $13.249386 per unit 72,475
Trust Large Cap Stock 9,555,351 accumulation units at $21.760453 per unit 207,929
Trust Select Equity 11,657,671 accumulation units at $18.786819 per unit 219,011
Trust International Equity 7,524,017 accumulation units at $13.530211 per unit 101,801
Trust Balanced 541,932 accumulation units at $12.542349 per unit 6,797
Trust Small Cap Equity 162,265 accumulation units at $10.802058 per unit 1,753
Trust Equity Income 413,263 accumulation units at $13.329239 per unit 5,509
Trust Growth and Income Equity 939,004 accumulation units at $13.783946 per unit 12,943
GACC Money Market 3,291,555 accumulation units at $11.299196 per unit 37,192
Russell Multi-Style Equity 3,133,906 accumulation units at $14.136244 per unit 44,301
Russell Aggressive Equity 744,069 accumulation units at $9.994595 per unit 7,436
Russell Non-US 1,276,329 accumulation units at $11.843135 per unit 15,115
Russell Core Bond 2,235,884 accumulation units at $10.400162 per unit 23,253
AIM V.I. Value 1,270,910 accumulation units at $14.842562 per unit 18,864
AIM V.I. Capital Appreciation 460,824 accumulation units at $12.802441 per unit 5,900
AIM V.I. International Equity 292,086 accumulation units at $11.814369 per unit 3,451
Alliance Premier Growth 1,450,385 accumulation units at $16.395203 per unit 23,779
Alliance Real Estate Investment 396,067 accumulation units at $8.410331 per unit 3,331
Liberty Newport Tiger Fund, Variable 35,478 accumulation units at $11.850543 per unit 420
Goldman Sachs Growth and Income 574,475 accumulation units at $10.866470 per unit 6,243
Goldman Sachs International Equity 179,215 accumulation units at $11.628506 per unit 2,084
Goldman Sachs Global Income 23,264 accumulation units at $10.551525 per unit 246
Kemper Dreman High Return Equity 14,480 accumulation units at $10.988298 per unit 159
Kemper Small Cap Growth 115,827 accumulation units at $12.075969 per unit 1,399
Kemper Small Cap Value 447,154 accumulation units at $9.212540 per unit 4,119
Kemper Government Securities 151,786 accumulation units at $10.486805 per unit 1,592
MFS Bond 16,089 accumulation units at $10.294147 per unit 166
MFS Research 760,925 accumulation units at $13.158217 per unit 10,012
MFS Growth with Income 1,049,025 accumulation units at $12.683197 per unit 13,305
MFS Emerging Growth 918,911 accumulation units at $14.825001 per unit 13,623
MFS/Foreign & Colonial Emerging Markets Equity 51,354 accumulation units at $7.986146 per unit 410
MFS High Income 347,989 accumulation units at $10.262353 per unit 3,571
MFS Global Governments 4,832 accumulation units at $10.290122 per unit 50
Oppenheimer Capital Appreciation 274,732 accumulation units at $14.069924 per unit 3,865
Oppenheimer Main Street Growth & Income 378,965 accumulation units at $11.756598 per unit 4,455
Oppenheimer High Income 163,191 accumulation units at $10.198942 per unit 1,664
Oppenheimer Bond 795,356 accumulation units at $10.283438 per unit 8,179
Oppenheimer Strategic Bond 225,455 accumulation units at $10.094897 per unit 2,276
Putnam VT Growth and Income 1,803,717 accumulation units at $12.503038 per unit 22,552
Putnam VT New Value 62,091 accumulation units at $11.899961 per unit 739
Putnam VT Vista 259,037 accumulation units at $13.199054 per unit 3,419
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Net assets, continued:
Accumulation units, continued:
<S> <C> <C> <C>
Putnam VT International Growth 965,233 accumulation units at $13.062217 per unit $ 12,608
Putnam VT International New Opportunities 69,696 accumulation units at $13.536626 per unit 943
Templeton Bond 14,375 accumulation units at $9.799254 per unit 141
Franklin Small Cap Investments 15,066 accumulation units at $12.110249 per unit 183
Templeton Stock 11,101 accumulation units at $11.034139 per unit 123
Templeton International 576,554 accumulation units at $10.014948 per unit 5,774
Templeton Developing Markets 224,256 accumulation units at $10.737070 per unit 2,408
Templeton Mutual Shares Investments 191,430 accumulation units at $11.009906 per unit 2,108
Franklin Growth Investments 9,134 accumulation units at $11.612002 per unit 106
Fidelity VIP Growth 60,319 accumulation units at $14.859885 per unit 896
Fidelity VIP II Contrafund 69,304 accumulation units at $13.652825 per unit 946
Fidelity VIP III Growth Opportunities 35,493 accumulation units at $12.416559 per unit 441
Fidelity VIP III Growth & Income 136,787 accumulation units at $13.076025 per unit 1,789
Fidelity VIP Equity-Income 74,740 accumulation units at $11.893156 per unit 889
--------------
2,088,126
Annuity units:
Trust Lord Abbett Growth and Income 47,574 annuity units at $29.477257 per unit 1,402
Trust Bond Debenture 19,186 annuity units at $12.294264 per unit 236
Trust Developing Growth 457 annuity units at $12.042264 per unit 6
Trust Large Cap Research 2,060 annuity units at $12.606668 per unit 26
Trust Mid-Cap Value 453 annuity units at $10.940850 per unit 5
Trust Quality Bond 14,173 annuity units at $10.519505 per unit 149
Trust Small Cap Stock 2,137 annuity units at $12.033800 per unit 26
Trust Large Cap Stock 16,648 annuity units at $19.764009 per unit 329
Trust Select Equity 10,922 annuity units at $17.063207 per unit 186
Trust International Equity 7,039 annuity units at $12.288854 per unit 87
GACC Money Market 14,955 annuity units at $10.317543 per unit 154
Russell Multi-Style 633 annuity units at $13.524650 per unit 9
Russell Aggressive Equity 168 annuity units at $9.562188 per unit 2
Russell Non-US 410 annuity units at $11.330745 per unit 5
Russell Core Bond 373 annuity units at $9.950215 per unit 4
--------------
Total net assets $ 2,090,752
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust
------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money High Stock and and Bond
Income (1) Market (1) Yield (1) Index (1) Income (1) Income (2) Debenture
----------- ------------ ---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 1,404 7 1,324 576 331 - -
----------- ------------ ---------- ----------- ----------- ------------ -----------
Expenses:
Mortality and expense risk 11 2 8 27 14 4,576 908
Administrative fee 1 - 1 3 2 549 109
----------- ------------ ---------- ----------- ----------- ------------ -----------
Total expenses 12 2 9 30 16 5,125 1,017
----------- ------------ ---------- ----------- ----------- ------------ -----------
Net investment income (loss) 1,392 5 1,315 546 315 (5,125) (1,017)
----------- ------------ ---------- ----------- ----------- ------------ -----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares (520) - (955) 18,079 6,587 326 92
Realized gain distributions - - - 9,833 5,025 - -
----------- ------------ ---------- ----------- ----------- ------------ -----------
Net realized gain (loss) (520) - (955) 27,912 11,612 326 92
----------- ------------ ---------- ----------- ----------- ------------ -----------
Change in unrealized appreciation (1,308) - (174) (25,838) (11,521) 72,936 1,109
----------- ------------ ---------- ----------- ----------- ------------ -----------
Net increase (decrease) in net
assets from operations $ (436) 5 186 2,620 406 68,137 184
=========== ============ ========== =========== =========== ============ ===========
(1) Sub-account ceased operations on January 8, 1999.
(2) Sub-account commenced operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust
-----------------------------------------------------------------------------------------
Large Small Large
Developing Cap Mid-Cap Quality Cap Cap Select
Growth Research Value Bond Stock Stock Equity
------------ ----------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - - - - - - -
------------ ----------- ---------- ---------- ---------- ----------- -----------
Expenses:
Mortality and expense risk 112 113 127 516 418 1,132 1,214
Administrative fee 13 14 15 62 50 136 146
------------ ----------- ---------- ---------- ---------- ----------- -----------
Total expenses 125 127 142 578 468 1,268 1,360
------------ ----------- ---------- ---------- ---------- ----------- -----------
Net investment income (loss) (125) (127) (142) (578) (468) (1,268) (1,360)
------------ ----------- ---------- ---------- ---------- ----------- -----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 44 2 1 64 (75) 1,453 130
Realized gain distributions - - - - - - -
------------ ----------- ---------- ---------- ---------- ----------- -----------
Net realized gain (loss) 44 2 1 64 (75) 1,453 130
------------ ----------- ---------- ---------- ---------- ----------- -----------
Change in unrealized appreciation 2,721 2,368 2,664 (1,741) 4,182 17,285 21,683
------------ ----------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease) in net
assets from operations $ 2,640 2,243 2,523 (2,255) 3,639 17,470 20,453
============ =========== ========== ========== ========== =========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust GACC Lord Abbett
------------------------------------------------------------ --------- -------------
Growth
Small and Growth
International Cap Equity Income Money and
Equity Balanced Equity Income Equity Market Income (1)
-------------- ---------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - - - - - - -
-------------- ---------- --------- --------- --------- --------- -------------
Expenses:
Mortality and expense risk 602 28 9 27 62 206 186
Administrative fee 72 4 1 3 8 25 22
-------------- ---------- --------- --------- --------- --------- -------------
Total expenses 674 32 10 30 70 231 208
-------------- ---------- --------- --------- --------- --------- -------------
Net investment income (loss) (674) (32) (10) (30) (70) (231) (208)
-------------- ---------- --------- --------- --------- --------- -------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 390 1 - 3 8 351 145,466
Realized gain distributions - - - - - - -
-------------- ---------- --------- --------- --------- --------- -------------
Net realized gain (loss) 390 1 - 3 8 351 145,466
-------------- ---------- --------- --------- --------- --------- -------------
Change in unrealized appreciation 5,063 387 110 493 1,404 434 (114,453)
-------------- ---------- --------- --------- --------- --------- -------------
Net increase (decrease) in net
assets from operations $ 4,779 356 100 466 1,342 554 30,805
============== ========== ========= ========= ========= ========= =============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Russell AIM
--------------------------------------------- -------------------------------------------
Multi- V.I.
Style Aggressive Core V.I. Capital International
Equity Equity Non-US Bond V.I. Value Appreciation Equity
--------- ---------- ---------- ---------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 99 6 128 463 - - -
--------- ---------- ---------- ---------- ----------- ------------- --------------
Expenses:
Mortality and expense risk 225 38 77 125 70 20 17
Administrative fee 27 5 9 15 8 2 2
--------- ---------- ---------- ---------- ----------- ------------- --------------
Total expenses 252 43 86 140 78 22 19
--------- ---------- ---------- ---------- ----------- ------------- --------------
Net investment income (loss) (153) (37) 42 323 (78) (22) (19)
--------- ---------- ---------- ---------- ----------- ------------- --------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 73 (11) 14 (15) 1 9 94
Realized gain distributions 2,262 10 - 335 - - -
--------- ---------- ---------- ---------- ----------- ------------- --------------
Net realized gain (loss) 2,335 (1) 14 320 1 9 94
--------- ---------- ---------- ---------- ----------- ------------- --------------
Change in unrealized appreciation 1,756 200 751 (1,023) 1,535 422 67
--------- ---------- ---------- ---------- ----------- ------------- --------------
Net increase (decrease) in net
assets from operations $ 3,938 162 807 (380) 1,458 409 142
========= ========== ========== ========== =========== ============= ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Alliance Liberty Goldman Sachs Kemper
------------------------ ----------- ------------------------------------ ---------
Newport Dreman
Real Tiger Growth High
Premier Estate Fund, and International Global Return
Growth Investment Variable Income Equity Income Equity
---------- ------------ ----------- --------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - 137 - - - - 1
---------- ------------ ----------- --------- -------------- --------- ---------
Expenses:
Mortality and expense risk 99 15 2 33 10 1 1
Administrative fee 12 2 - 4 1 - -
---------- ------------ ----------- --------- -------------- --------- ---------
Total expenses 111 17 2 37 11 1 1
---------- ------------ ----------- --------- -------------- --------- ---------
Net investment income (loss) (111) 120 (2) (37) (11) (1) -
---------- ------------ ----------- --------- -------------- --------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 4 (7) 99 (1) 61 - -
Realized gain distributions 279 - - - - - 1
---------- ------------ ----------- --------- -------------- --------- ---------
Net realized gain (loss) 283 (7) 99 (1) 61 - 1
---------- ------------ ----------- --------- -------------- --------- ---------
Change in unrealized appreciation 1,553 99 (3) 546 9 (3) 6
---------- ------------ ----------- --------- -------------- --------- ---------
Net increase (decrease) in net
assets from operations $ 1,725 212 94 508 59 (4) 7
========== ============ =========== ========= ============== ========= =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Kemper MFS
----------------------------------- -------------------------------------------
Small Small Growth
Cap Cap Government with Emerging
Growth Value Securities Bond Research Income Growth
--------- --------- ------------- ------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - 33 69 4 16 35 -
--------- --------- ------------- ------ ---------- ---------- ----------
Expenses:
Mortality and expense risk 7 19 7 1 46 61 61
Administrative fee 2 2 1 - 6 7 7
--------- --------- ------------- ------ ---------- ---------- ----------
Total expenses 9 21 8 1 52 68 68
--------- --------- ------------- ------ ---------- ---------- ----------
Net investment income (loss) (9) 12 61 3 (36) (33) (68)
--------- --------- ------------- ------ ---------- ---------- ----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 8 (8) 1 - 6 7 13
Realized gain distributions - - - - 86 42 -
--------- --------- ------------- ------ ---------- ---------- ----------
Net realized gain (loss) 8 (8) 1 - 92 49 13
--------- --------- ------------- ------ ---------- ---------- ----------
Change in unrealized appreciation 66 303 (72) (6) 621 554 1,267
--------- --------- ------------- ------ ---------- ---------- ----------
Net increase (decrease) in net
assets from operations $ 65 307 (10) (3) 677 570 1,212
========= ========= ============= ====== ========== ========== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
MFS Oppenheimer
-------------------------------------- -------------------------------------------------
F&C Main Street
Emerging Growth
Markets High Global Capital and High
Equity Income Governments Appreciation Income Income Bond
---------- -------- -------------- -------------- ------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - 210 3 7 15 72 286
---------- -------- -------------- -------------- ------------- --------- -------
Expenses:
Mortality and expense risk 3 18 - 15 22 7 38
Administrative fee - 2 - 2 3 1 5
---------- -------- -------------- -------------- ------------- --------- -------
Total expenses 3 20 - 17 25 8 43
---------- -------- -------------- -------------- ------------- --------- -------
Net investment income (loss) (3) 190 3 (10) (10) 64 243
---------- -------- -------------- -------------- ------------- --------- -------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares (30) - - 3 3 - (1)
Realized gain distributions - - - 78 26 - 28
---------- -------- -------------- -------------- ------------- --------- -------
Net realized gain (loss) (30) - - 81 29 - 27
---------- -------- -------------- -------------- ------------- --------- -------
Change in unrealized appreciation 114 (94) (4) 289 474 (41) (438)
---------- -------- -------------- -------------- ------------- --------- -------
Net increase (decrease) in net
assets from operations $ 81 96 (1) 360 493 23 (168)
========== ======== ============== ============== ============= ========= =======
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Putnam Templeton
------------------------------------------------------------------------------ -----------
VT
VT Growth VT International
Strategic and VT New International New
Bond Income Value VT Vista Growth Opportunities Bond (3)
---------- ------------ --------- ---------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 84 240 - - - - -
---------- ------------ --------- ---------- ------------- -------------- -----------
Expenses:
Mortality and expense risk 10 107 6 15 57 5 -
Administrative fee 1 13 - 2 7 1 -
---------- ------------ --------- ---------- ------------- -------------- -----------
Total expenses 11 120 6 17 64 6 -
---------- ------------ --------- ---------- ------------- -------------- -----------
Net investment income (loss) 73 120 (6) (17) (64) (6) -
---------- ------------ --------- ---------- ------------- -------------- -----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares - 3 2 2 180 85 -
Realized gain distributions - 1,199 9 - - - -
---------- ------------ --------- ---------- ------------- -------------- -----------
Net realized gain (loss) - 1,202 11 2 180 85 -
---------- ------------ --------- ---------- ------------- -------------- -----------
Change in unrealized appreciation (84) 315 61 329 935 73 (2)
---------- ------------ --------- ---------- ------------- -------------- -----------
Net increase (decrease) in net
assets from operations $ (11) 1,637 66 314 1,051 152 (2)
========== ============ ========= ========== ============= ============== ===========
(3) Sub-account commenced operations on March 1, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Templeton Fidelity
------------------------------------------------------------------------------- ---------
Franklin Franklin
Small Cap Mutual Growth
Investments Developing Shares Investments VIP
(3) Stock (4) International Markets Investments (3) Growth
------------ ---------- ------------- ------------ ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - - 57 13 3 - 1
------------ ---------- ------------- ------------ ----------- ------------- ---------
Expenses:
Mortality and expense risk - - 20 9 9 - 3
Administrative fee - - 2 1 1 - -
------------ ---------- ------------- ------------ ----------- ------------- ---------
Total expenses - - 22 10 10 - 3
------------ ---------- ------------- ------------ ----------- ------------- ---------
Net investment income (loss) - - 35 3 (7) - (2)
------------ ---------- ------------- ------------ ----------- ------------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares - - 12 4 5 3 -
Realized gain distributions - - 198 - - - 32
------------ ---------- ------------- ------------ ----------- ------------- ---------
Net realized gain (loss) - - 210 4 5 3 32
------------ ---------- ------------- ------------ ----------- ------------- ---------
Change in unrealized appreciation 15 4 149 612 216 7 28
------------ ---------- ------------- ------------ ----------- ------------- ---------
Net increase (decrease) in net
assets from operations $ 15 4 394 619 214 10 58
============ ========== ============= ============ =========== ============= =========
(3) Sub-account commenced operations on March 1, 1999.
(4) Sub-account commenced operations on January 19, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Fidelity
-----------------------------------------------------------
VIP III VIP III VIP
VIP II Growth Growth & Equity-
Contrafund Opportunities Income Income Total
------------- ----------------------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Income:
Dividends $ 2 1 7 5 5,639
------------- ------------- ------------- ------------- ------------
Expenses:
Mortality and expense risk 4 2 8 3 11,594
Administrative fee 1 - 1 - 1,391
------------- ------------- ------------- ------------- ------------
Total expenses 5 2 9 3 12,985
------------- ------------- ------------- ------------- ------------
Net investment income (loss) (3) (1) (2) 2 (7,346)
------------- ------------- ------------- ------------- ------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 6 - 2 - 172,074
Realized gain distributions 17 3 13 12 19,488
------------- ------------- ------------- ------------- ------------
Net realized gain (loss) 23 3 15 12 191,562
------------- ------------- ------------- ------------- ------------
Change in unrealized appreciation 44 20 86 60 (10,380)
------------- ------------- ------------- ------------- ------------
Net increase (decrease) in net
assets from operations $ 64 22 99 74 173,836
============= ============= ============= ============= ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust
------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money High Stock and and Bond
Income (1) Market (1) Yield (1) Index (1) Income (1) Income (2) Debenture
----------- ---------- ---------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ 1,392 5 1,315 546 315 (5,125) (1,017)
Net realized gain (loss) (520) - (955) 27,912 11,612 326 92
Change in unrealized appreciation (1,308) - (174) (25,838) (11,521) 72,936 1,109
----------- ---------- ---------- ----------- ------------ ------------- -----------
Net increase (decrease) from
operations (436) 5 186 2,620 406 68,137 184
----------- ---------- ---------- ----------- ------------ ------------- -----------
Contract transactions:
Payments received from contract
owners (1) (34) 2 5 - 13,720 5,052
Transfers between sub-accounts
(including fixed account), net (38,617) (7,817) (28,916) (99,953) (51,641) 784,171 43,813
Transfers for contract benefits and
terminations (36) (45) (72) (259) (76) (32,364) (7,515)
----------- ---------- ---------- ----------- ------------ ------------- -----------
Net increase (decrease) in net
assets from contract
transactions (38,654) (7,896) (28,986) (100,207) (51,717) 765,527 41,350
----------- ---------- ---------- ----------- ------------ ------------- -----------
Net increase (decrease) in net
assets (39,090) (7,891) (28,800) (97,587) (51,311) 833,664 41,534
Net assets at beginning of period 39,090 7,891 28,800 97,587 51,311 - 110,471
----------- ---------- ---------- ----------- ------------ ------------- -----------
Net assets as end of period $ - - - - - 833,664 152,005
=========== ========== ========== =========== ============ ============= ===========
(1) Sub-account ceased operations on January 8, 1999.
(2) Sub-account commenced operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust
------------------------------------------------------------------------------------
Large Small Large
Developing Cap Mid-Cap Quality Cap Cap Select
Growth Research Value Bond Stock Stock Equity
------------ ---------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (125) (127) (142) (578) (468) (1,268) (1,360)
Net realized gain (loss) 44 2 1 64 (75) 1,453 130
Change in unrealized appreciation 2,721 2,368 2,664 (1,741) 4,182 17,285 21,683
------------ ---------- ---------- ---------- -------- ---------- ----------
Net increase (decrease) from
operations 2,640 2,243 2,523 (2,255) 3,639 17,470 20,453
------------ ---------- ---------- ---------- -------- ---------- ----------
Contract transactions:
Payments received from contract
owners 1,618 2,441 2,361 5,127 1,760 9,738 5,661
Transfers between sub-accounts
(including fixed account), net 3,285 6,384 4,011 51,826 (439) 109,627 18,465
Transfers for contract benefits and
terminations (267) (414) (535) (6,056) (2,104) (9,946) (4,692)
------------ ---------- ---------- ---------- -------- ---------- ----------
Net increase (decrease) in net
assets from contract
transactions 4,636 8,411 5,837 50,897 (783) 109,419 19,434
------------ ---------- ---------- ---------- -------- ---------- ----------
Net increase (decrease) in net
assets 7,276 10,654 8,360 48,642 2,856 126,889 39,887
Net assets at beginning of period 14,855 12,968 17,145 39,638 69,645 81,369 179,310
------------ ---------- ---------- ---------- -------- ---------- ----------
Net assets as end of period $ 22,131 23,622 25,505 88,280 72,501 208,258 219,197
============ ========== ========== ========== ======== ========== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust GACC Lord Abbett
------------------------------------------------------------ ---------- -----------
Growth
Small and Growth
International Cap Equity Income Money and
Equity Balanced Equity Income Equity Market Income (1)
-------------- ---------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (674) (32) (10) (30) (70) (231) (208)
Net realized gain (loss) 390 1 - 3 8 351 145,466
Change in unrealized appreciation 5,063 387 110 493 1,404 434 (114,453)
-------------- ---------- --------- --------- --------- ---------- -----------
Net increase (decrease) from
operations 4,779 356 100 466 1,342 554 30,805
-------------- ---------- --------- --------- --------- ---------- -----------
Contract transactions:
Payments received from contract
owners 1,445 1,261 159 857 1,739 2,860 672
Transfers between sub-accounts
(including fixed account), net 3,846 1,890 193 801 2,238 22,967 (699,899)
Transfers for contract benefits and
terminations (2,427) (82) (26) (78) (199) (5,499) (781)
-------------- ---------- --------- --------- --------- ---------- -----------
Net increase (decrease) in net
assets from contract
transactions 2,864 3,069 326 1,580 3,778 20,328 (700,008)
-------------- ---------- --------- --------- --------- ---------- -----------
Net increase (decrease) in net
assets 7,643 3,425 426 2,046 5,120 20,882 (669,203)
Net assets at beginning of period 94,245 3,372 1,327 3,463 7,823 16,464 669,203
-------------- ---------- --------- --------- --------- ---------- -----------
Net assets as end of period $ 101,888 6,797 1,753 5,509 12,943 37,346 -
============== ========== ========= ========= ========= ========== ===========
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Russell AIM
----------------------------------------------- -----------------------------------------
Multi- V.I.
Style Aggressive Core V.I. Capital International
Equity Equity Non-US Bond V.I. Value Appreciation Equity
---------- ----------- --------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (153) (37) 42 323 (78) (22) (19)
Net realized gain (loss) 2,335 (1) 14 320 1 9 94
Change in unrealized appreciation 1,756 200 751 (1,023) 1,535 422 67
---------- ----------- --------- ---------- ----------- ------------- -------------
Net increase (decrease) from
operations 3,938 162 807 (380) 1,458 409 142
---------- ----------- --------- ---------- ----------- ------------- -------------
Contract transactions:
Payments received from contract
owners 6,122 1,120 1,740 2,046 4,927 2,053 280
Transfers between sub-accounts
(including fixed account), net 5,037 858 2,381 4,721 6,016 1,310 745
Transfers for contract benefits and
terminations (346) (45) (124) (180) (353) (32) (41)
---------- ----------- --------- ---------- ----------- ------------- -------------
Net increase (decrease) in net
assets from contract
transactions 10,813 1,933 3,997 6,587 10,590 3,331 984
---------- ----------- --------- ---------- ----------- ------------- -------------
Net increase (decrease) in net
assets 14,751 2,095 4,804 6,207 12,048 3,740 1,126
Net assets at beginning of period 29,559 5,343 10,316 17,050 6,816 2,160 2,325
---------- ----------- --------- ---------- ----------- ------------- -------------
Net assets as end of period $ 44,310 7,438 15,120 23,257 18,864 5,900 3,451
========== =========== ========= ========== =========== ============= =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Alliance Liberty Goldman Sachs Kemper
------------------------- ---------- ------------------------------------- -----------
Newport Dreman
Real Tiger Growth High
Premier Estate Fund, and International Global Return
Growth Investment Variable Income Equity Income Equity
---------- ------------- ---------- --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (111) 120 (2) (37) (11) (1) -
Net realized gain (loss) 283 (7) 99 (1) 61 - 1
Change in unrealized appreciation 1,553 99 (3) 546 9 (3) 6
---------- ------------- ---------- --------- ------------- --------- -----------
Net increase (decrease) from
operations 1,725 212 94 508 59 (4) 7
---------- ------------- ---------- --------- ------------- --------- -----------
Contract transactions:
Payments received from contract
owners 8,928 1,311 39 441 387 10 15
Transfers between sub-accounts
(including fixed account), net 3,616 314 (2) 736 380 38 40
Transfers for contract benefits and
terminations (238) (35) (6) (76) (29) (1) -
---------- ------------- ---------- --------- ------------- --------- -----------
Net increase (decrease) in net
assets from contract
transactions 12,306 1,590 31 1,101 738 47 55
---------- ------------- ---------- --------- ------------- --------- -----------
Net increase (decrease) in net
assets 14,031 1,802 125 1,609 797 43 62
Net assets at beginning of period 9,748 1,529 295 4,634 1,287 203 97
---------- ------------- ---------- --------- ------------- --------- -----------
Net assets as end of period $ 23,779 3,331 420 6,243 2,084 246 159
========== ============= ========== ========= ============= ========= ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Kemper MFS
----------------------------------- ----------------------------------------------
Small Small Growth
Cap Cap Government with Emerging
Growth Value Securities Bond Research Income Growth
--------- --------- ------------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (9) 12 61 3 (36) (33) (68)
Net realized gain (loss) 8 (8) 1 - 92 49 13
Change in unrealized appreciation 66 303 (72) (6) 621 554 1,267
--------- --------- ------------- -------- ----------- --------- -----------
Net increase (decrease) from
operations 65 307 (10) (3) 677 570 1,212
--------- --------- ------------- -------- ----------- --------- -----------
Contract transactions:
Payments received from contract
owners 310 1,488 654 2 1,926 3,779 3,843
Transfers between sub-accounts
(including fixed account), net 142 220 323 (7) 1,820 2,163 1,600
Transfers for contract benefits and
terminations (11) (41) (5) - (69) (223) (174)
--------- --------- ------------- -------- ----------- --------- -----------
Net increase (decrease) in net
assets from contract
transactions 441 1,667 972 (5) 3,677 5,719 5,269
--------- --------- ------------- -------- ----------- --------- -----------
Net increase (decrease) in net
assets 506 1,974 962 (8) 4,354 6,289 6,481
Net assets at beginning of period 893 2,145 630 174 5,658 7,016 7,142
--------- --------- ------------- -------- ----------- --------- -----------
Net assets as end of period $ 1,399 4,119 1,592 166 10,012 13,305 13,623
========= ========= ============= ======== =========== ========= ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
MFS Oppenheimer
------------------------------------- ---------------------------------------------------
F&C Main Street
Emerging Growth
Markets High Global Capital and High
Equity Income Governments Appreciation Income Income Bond
--------- --------- -------------- ------------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (3) 190 3 (10) (10) 64 243
Net realized gain (loss) (30) - - 81 29 - 27
Change in unrealized appreciation 114 (94) (4) 289 474 (41) (438)
--------- --------- -------------- ------------- ------------ ---------- ---------
Net increase (decrease) from
operations 81 96 (1) 360 493 23 (168)
--------- --------- -------------- ------------- ------------ ---------- ---------
Contract transactions:
Payments received from contract
owners 1 723 5 1,203 492 546 2,534
Transfers between sub-accounts
(including fixed account), net (140) 649 24 1,139 548 326 1,692
Transfers for contract benefits and
terminations (13) (55) - (26) (19) (8) (113)
--------- --------- -------------- ------------- ------------ ---------- ---------
Net increase (decrease) in net
assets from contract
transactions (152) 1,317 29 2,316 1,021 864 4,113
--------- --------- -------------- ------------- ------------ ---------- ---------
Net increase (decrease) in net
assets (71) 1,413 28 2,676 1,514 887 3,945
Net assets at beginning of period 481 2,158 22 1,189 2,941 777 4,234
--------- --------- -------------- ------------- ------------ ---------- ---------
Net assets as end of period $ 410 3,571 50 3,865 4,455 1,664 8,179
========= ========= ============== ============= ============ ========== =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Putnam Templeton
------------------------------------------------------------------------------ -----------
VT
VT Growth VT International
Strategic and VT New International New
Bond Income Value VT Vista Growth Opportunities Bond (3)
--------- ------------ --------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ 73 120 (6) (17) (64) (6) -
Net realized gain (loss) - 1,202 11 2 180 85 -
Change in unrealized appreciation (84) 315 61 329 935 73 (2)
--------- ------------ --------- ------------ ------------- -------------- -----------
Net increase (decrease) from
operations (11) 1,637 66 314 1,051 152 (2)
--------- ------------ --------- ------------ ------------- -------------- -----------
Contract transactions:
Payments received from contract
owners 551 5,178 80 877 4,025 129 10
Transfers between sub-accounts
(including fixed account), net 653 3,311 166 481 1,443 83 133
Transfers for contract benefits and
terminations (12) (273) (14) (38) (117) (23) -
--------- ------------ --------- ------------ ------------- -------------- -----------
Net increase (decrease) in net
assets from contract
transactions 1,192 8,216 232 1,320 5,351 189 143
--------- ------------ --------- ------------ ------------- -------------- -----------
Net increase (decrease) in net
assets 1,181 9,853 298 1,634 6,402 341 141
Net assets at beginning of period 1,095 12,699 441 1,785 6,206 602 -
--------- ------------ --------- ------------ ------------- -------------- -----------
Net assets as end of period $ 2,276 22,552 739 3,419 12,608 943 141
========= ============ ========= ============ ============= ============== ===========
(3) Sub-account commenced operations on March 1, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Templeton Fidelity
------------------------------------------------------------------------------ --------
Franklin Franklin
Small Cap Mutual Growth
Investments Developing Shares Investments VIP
(3) Stock (4) International Markets Investments (3) Growth
------------ ---------- ------------- ------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ - - 35 3 (7) - (2)
Net realized gain (loss) - - 210 4 5 3 32
Change in unrealized appreciation 15 4 149 612 216 7 28
------------ ---------- ------------- ------------- ------------ ------------ --------
Net increase (decrease) from
operations 15 4 394 619 214 10 58
------------ ---------- ------------- ------------- ------------ ------------ --------
Contract transactions:
Payments received from contract
owners 16 67 2,701 943 427 44 312
Transfers between sub-accounts
(including fixed account), net 152 52 1,216 188 457 163 441
Transfers for contract benefits and
terminations - - (44) (21) (11) (111) (3)
------------ ---------- ------------- ------------- ------------ ------------ --------
Net increase (decrease) in net
assets from contract
transactions 168 119 3,873 1,110 873 96 750
------------ ---------- ------------- ------------- ------------ ------------ --------
Net increase (decrease) in net
assets 183 123 4,267 1,729 1,087 106 808
Net assets at beginning of period - - 1,507 679 1,021 - 88
------------ ---------- ------------- ------------- ------------ ------------ --------
Net assets as end of period $ 183 123 5,774 2,408 2,108 106 896
============ ========== ============= ============= ============ ============ ========
(3) Sub-account commenced operations on March 1, 1999.
(4) Sub-account commenced operations on January 19, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Six months ended June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Fidelity
-------------------------------------------------------------
VIP III VIP III VIP
VIP II Growth Growth & Equity-
Contrafund Opportunities Income Income Total
------------- --------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (3) (1) (2) 2 (7,346)
Net realized gain (loss) 23 3 15 12 191,562
Change in unrealized appreciation 44 20 86 60 (10,380)
------------- --------------- ------------- ------------- ------------
Net increase (decrease) from
operations 64 22 99 74 173,836
------------- --------------- ------------- ------------- ------------
Contract transactions:
Payments received from contract
owners 185 80 208 121 119,322
Transfers between sub-accounts
(including fixed account), net 349 228 652 444 173,536
Transfers for contract benefits and
terminations (52) (1) (22) (6) (76,484)
------------- --------------- ------------- ------------- ------------
Net increase (decrease) in net
assets from contract
transactions 482 307 838 559 216,374
------------- --------------- ------------- ------------- ------------
Net increase (decrease) in net
assets 546 329 937 633 390,210
Net assets at beginning of period 400 112 852 256 1,700,542
------------- --------------- ------------- ------------- ------------
Net assets as end of period $ 946 441 1,789 889 2,090,752
============= =============== ============= ============= ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust
----------------------------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income Debenture Growth
---------- ---------- --------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,737 583 923 (803) (390) 1,149 (99)
Net realized gain (loss) 455 - 135 21,907 7,127 899 (10)
Change in unrealized appreciation 6 - (668) 838 634 1,565 883
---------- ---------- --------- ---------- ------------ ----------- ------------
Net increase (decrease) from
operations 2,198 583 390 21,942 7,371 3,613 774
---------- ---------- --------- ---------- ------------ ----------- ------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - (112)
Payments received from contract
owners 21 6 55 69 39 21,396 6,348
Transfers between sub-accounts
(including fixed account), net (3,399) (10,098) (1,392) 3,960 1,244 38,789 6,481
Transfers for contract benefits and
terminations (8,833) (4,210) (3,514) (17,021) (3,490) (4,147) (201)
---------- ---------- --------- ---------- ------------ ----------- ------------
Net increase (decrease) in net
assets from contract
transactions (12,211) (14,302) (4,851) (12,992) (2,207) 56,038 12,516
---------- ---------- --------- ---------- ------------ ----------- ------------
Net increase (decrease) in net
assets (10,013) (13,719) (4,461) 8,950 5,164 59,651 13,290
Net assets at beginning of period 49,103 21,610 33,261 88,637 46,147 50,820 1,565
---------- ---------- --------- ---------- ------------ ----------- ------------
Net assets as end of period $ 39,090 7,891 28,800 97,587 51,311 110,471 14,855
========== ========== ========= ========== ============ =========== ============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust
---------------------------------------------------------------------------------------
Large Small Large
Cap Mid-Cap Quality Cap Cap Select International
Research Value Bond Stock Stock Equity Equity
---------- --------- ---------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (66) (109) 192 (791) (530) (1,491) 307
Net realized gain (loss) 5 (3) 36 2,068 412 8,442 328
Change in unrealized appreciation 1,278 120 1,412 (6,177) 13,680 20,065 7,969
---------- --------- ---------- --------- ---------- ---------- --------------
Net increase (decrease) from
operations 1,217 8 1,640 (4,900) 13,562 27,016 8,604
---------- --------- ---------- --------- ---------- ---------- --------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions (102) (107) - - - - -
Payments received from contract
owners 6,104 7,924 9,698 8,193 18,801 21,003 8,143
Transfers between sub-accounts
(including fixed account), net 4,750 7,602 14,372 15,607 29,039 38,783 18,076
Transfers for contract benefits and
terminations (234) (317) (2,058) (2,424) (2,022) (4,555) (2,949)
---------- --------- ---------- --------- ---------- ---------- --------------
Net increase (decrease) in net
assets from contract
transactions 10,518 15,102 22,012 21,376 45,818 55,231 23,270
---------- --------- ---------- --------- ---------- ---------- --------------
Net increase (decrease) in net
assets 11,735 15,110 23,652 16,476 59,380 82,247 31,874
Net assets at beginning of period 1,233 2,035 15,986 53,169 21,989 97,063 62,371
---------- --------- ---------- --------- ---------- ---------- --------------
Net assets as end of period $ 12,968 17,145 39,638 69,645 81,369 179,310 94,245
========== ========= ========== ========= ========== ========== ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Trust GACC Lord Abbett Russell
----------------------------------------------- ----------- ------------- ----------
Growth
Small and Growth Multi-
Cap Equity Income Money and Style
Balanced Equity Income Equity Market Income Equity
---------- --------- ----------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 23 (10) 11 (30) (161) 1,761 (129)
Net realized gain (loss) 40 11 80 167 436 33,820 40
Change in unrealized appreciation 173 39 49 548 185 26,592 3,199
---------- --------- ----------- ---------- ----------- ------------- ----------
Net increase (decrease) from
operations 236 40 140 685 460 62,173 3,110
---------- --------- ----------- ---------- ----------- ------------- ----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,408 442 1,820 3,014 35,352 55,721 21,870
Transfers between sub-accounts
(including fixed account), net 1,373 588 988 2,913 (19,753) 102,796 4,748
Transfers for contract benefits and
terminations (46) (15) (42) (98) (2,913) (38,987) (169)
---------- --------- ----------- ---------- ----------- ------------- ----------
Net increase (decrease) in net
assets from contract
transactions 2,735 1,015 2,766 5,829 12,686 119,530 26,449
---------- --------- ----------- ---------- ----------- ------------- ----------
Net increase (decrease) in net
assets 2,971 1,055 2,906 6,514 13,146 181,703 29,559
Net assets at beginning of period 401 272 557 1,309 3,318 487,500 -
---------- --------- ----------- ---------- ----------- ------------- ----------
Net assets as end of period $ 3,372 1,327 3,463 7,823 16,464 669,203 29,559
========== ========= =========== ========== =========== ============= ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Russell AIM Alliance
---------------------------------- ------------------------------------------ ----------
V.I.
Aggressive Core V.I. Capital International Premier
Equity Non-US Bond V.I. Value Appreciation Equity Growth
---------- ---------- --------- ---------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (31) (54) 178 (8) (11) (1) (45)
Net realized gain (loss) (18) 5 7 250 50 (3) (4)
Change in unrealized appreciation 75 412 268 668 164 81 1,522
---------- ---------- --------- ---------- -------------- -------------- ----------
Net increase (decrease) from
operations 26 363 453 910 203 77 1,473
---------- ---------- --------- ---------- -------------- -------------- ----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 4,296 8,107 13,098 4,061 1,431 1,648 6,485
Transfers between sub-accounts
(including fixed account), net 1,041 1,920 3,732 2,030 609 609 1,828
Transfers for contract benefits and
terminations (20) (74) (233) (185) (83) (9) (38)
---------- ---------- --------- ---------- -------------- -------------- ----------
Net increase (decrease) in net
assets from contract
transactions 5,317 9,953 16,597 5,906 1,957 2,248 8,275
---------- ---------- --------- ---------- -------------- -------------- ----------
Net increase (decrease) in net
assets 5,343 10,316 17,050 6,816 2,160 2,325 9,748
Net assets at beginning of period - - - - - - -
---------- ---------- --------- ---------- -------------- -------------- ----------
Net assets as end of period $ 5,343 10,316 17,050 6,816 2,160 2,325 9,748
========== ========== ========= ========== ============== ============== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Alliance Liberty Goldman Sachs Kemper
----------- ---------- --------------------------------------- ------------------------
Newport Dreman
Real Tiger Growth High Small
Estate Fund, and International Global Return Cap
Investment Variable Income Equity Income Equity Growth
----------- ---------- ---------- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1 4 12 (7) 6 - (5)
Net realized gain (loss) 3 (30) (12) 10 3 - (3)
Change in unrealized appreciation (170) 54 (207) 56 (1) 1 107
----------- ---------- ---------- -------------- ---------- ----------- -----------
Net increase (decrease) from
operations (166) 28 (207) 59 8 1 99
----------- ---------- ---------- -------------- ---------- ----------- -----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,193 159 3,067 979 125 - 630
Transfers between sub-accounts
(including fixed account), net 514 108 1,826 255 84 96 162
Transfers for contract benefits and
terminations (12) - (52) (6) (14) - 2
----------- ---------- ---------- -------------- ---------- ----------- -----------
Net increase (decrease) in net
assets from contract
transactions 1,695 267 4,841 1,228 195 96 794
----------- ---------- ---------- -------------- ---------- ----------- -----------
Net increase (decrease) in net
assets 1,529 295 4,634 1,287 203 97 893
Net assets at beginning of period - - - - - - -
----------- ---------- ---------- -------------- ---------- ----------- -----------
Net assets as end of period $ 1,529 295 4,634 1,287 203 97 893
=========== ========== ========== ============== ========== =========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Kemper MFS
------------------------ ----------------------------------------------------------
F&C
Small Growth Emerging
Cap Government with Emerging Markets
Value Securities Bond Research Income Growth Equity
--------- ------------- -------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (13) - - (28) (38) (37) 3
Net realized gain (loss) 8 - - 16 - (2) (97)
Change in unrealized appreciation (155) 9 1 481 574 985 (94)
--------- ------------- -------- ---------- --------- ----------- -----------
Net increase (decrease) from
operations (160) 9 1 469 536 946 (188)
--------- ------------- -------- ---------- --------- ----------- -----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,656 503 3 3,760 4,624 5,018 421
Transfers between sub-accounts
(including fixed account), net 670 120 170 1,530 1,901 1,216 252
Transfers for contract benefits and
terminations (21) (2) - (101) (45) (38) (4)
--------- ------------- -------- ---------- --------- ----------- -----------
Net increase (decrease) in net
assets from contract
transactions 2,305 621 173 5,189 6,480 6,196 669
--------- ------------- -------- ---------- --------- ----------- -----------
Net increase (decrease) in net
assets 2,145 630 174 5,658 7,016 7,142 481
Net assets at beginning of period - - - - - - -
--------- ------------- -------- ---------- --------- ----------- -----------
Net assets as end of period $ 2,145 630 174 5,658 7,016 7,142 481
========= ============= ======== ========== ========= =========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
MFS Oppenheimer
-------------------------- --------------------------------------------------------------
Main Street
Growth
High Global Capital and High Strategic
Income Governments Appreciation Income Income Bond Bond
--------- -------------- -------------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 5 - (6) (19) (1) (19) (3)
Net realized gain (loss) 3 - 7 2 3 5 2
Change in unrealized appreciation (34) 1 134 (28) (15) 95 3
--------- -------------- -------------- ------------ -------- -------- ----------
Net increase (decrease) from
operations (26) 1 135 (45) (13) 81 2
--------- -------------- -------------- ------------ -------- -------- ----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,634 4 838 2,140 517 3,298 725
Transfers between sub-accounts
(including fixed account), net 570 17 220 859 281 889 371
Transfers for contract benefits and
terminations (20) - (4) (13) (8) (34) (3)
--------- -------------- -------------- ------------ -------- -------- ----------
Net increase (decrease) in net
assets from contract
transactions 2,184 21 1,054 2,986 790 4,153 1,093
--------- -------------- -------------- ------------ -------- -------- ----------
Net increase (decrease) in net
assets 2,158 22 1,189 2,941 777 4,234 1,095
Net assets at beginning of period - - - - - - -
--------- -------------- -------------- ------------ -------- -------- ----------
Net assets as end of period $ 2,158 22 1,189 2,941 777 4,234 1,095
========= ============== ============== ============ ======== ======== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Putnam Templeton
------------------------------------------------------------ -----------------------------
VT
VT Growth VT International
and VT New International New Developing
Income Value VT Vista Growth Opportunities International Markets
----------- -------- --------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (46) 2 (9) (17) (4) (6) (3)
Net realized gain (loss) 192 2 (1) (39) 24 8 (4)
Change in unrealized appreciation 660 6 173 353 40 48 44
----------- -------- --------- ------------ -------------- -------------- -------------
Net increase (decrease) from
operations 806 10 163 297 60 50 37
----------- -------- --------- ------------ -------------- -------------- -------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 8,705 173 1,241 4,444 423 1,261 509
Transfers between sub-accounts
(including fixed account), net 3,257 259 385 1,511 127 201 139
Transfers for contract benefits and
terminations (69) (1) (4) (46) (8) (5) (6)
----------- -------- --------- ------------ -------------- -------------- -------------
Net increase (decrease) in net
assets from contract
transactions 11,893 431 1,622 5,909 542 1,457 642
----------- -------- --------- ------------ -------------- -------------- -------------
Net increase (decrease) in net
assets 12,699 441 1,785 6,206 602 1,507 679
Net assets at beginning of period - - - - - - -
----------- -------- --------- ------------ -------------- -------------- -------------
Net assets as end of period $ 12,699 441 1,785 6,206 602 1,507 679
=========== ======== ========= ============ ============== ============== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Templeton Fidelity
------------ --------------------------------------------------------------
Mutual VIP III VIP III VIP
Shares VIP VIP II Growth Growth & Equity-
Investments Growth Contrafund Opportunities Income Income Total
------------ -------- ----------- --------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (5) - (2) - (5) (1) 1,864
Net realized gain (loss) - (3) (2) (2) (5) (3) 76,767
Change in unrealized appreciation 32 12 48 13 94 17 78,917
------------ -------- ----------- --------------- ----------- ---------- ------------
Net increase (decrease) from
operations 27 9 44 11 84 13 157,548
------------ -------- ----------- --------------- ----------- ---------- ------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - (321)
Payments received from contract
owners 584 86 330 114 435 195 316,347
Transfers between sub-accounts
(including fixed account), net 415 (5) 24 (13) 333 51 288,031
Transfers for contract benefits and
terminations (5) (2) 2 - - (3) (99,409)
------------ -------- ----------- --------------- ----------- ---------- ------------
Net increase (decrease) in net
assets from contract
transactions 994 79 356 101 768 243 504,648
------------ -------- ----------- --------------- ----------- ---------- ------------
Net increase (decrease) in net
assets 1,021 88 400 112 852 256 662,196
Net assets at beginning of period - - - - - - 1,038,346
------------ -------- ----------- --------------- ----------- ---------- ------------
Net assets as end of period $ 1,021 88 400 112 852 256 1,700,542
============ ======== =========== =============== =========== ========== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(1) ORGANIZATION
Cova Variable Annuity Account One (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by Cova Financial Life Services Insurance
Company (Cova) and exists in accordance with the regulations of the
Missouri Department of Insurance. The Separate Account is a funding
vehicle for variable annuity contracts issued by Cova.
<TABLE>
<CAPTION>
The Separate Account is divided into sub-accounts with the assets of each
sub-account invested in corresponding portfolios of the following
investment companies. Each investment company is a diversified, open-end,
management investment company registered under the Investment Company Act
of 1940 as amended. The sub-accounts available for investment may vary
between variable annuity contracts offered for sale by Cova.
<S> <C>
Cova Series Trust (Trust) 14 portfolios
General American Capital Company (GACC) 1 portfolio
Russell Insurance Funds (Russell) 4 portfolios
AIM Variable Insurance Funds, Inc. (AIM) 3 portfolios
Alliance Variable Products Series Fund, Inc. (Alliance) 2 portfolios
Liberty Variable Investment Trust (Liberty) 1 portfolio
Goldman Sachs Variable Insurance Trust (Goldman Sachs) 3 portfolios
Investors Fund Series (Kemper) 4 portfolios
MFS Variable Insurance Trust (MFS) 7 portfolios
Oppenheimer Variable Account Funds (Oppenheimer) 5 portfolios
Putnam Variable Trust (Putnam) 5 portfolios
Templeton Variable Products Series Fund (Templeton) 7 portfolios
Variable Insurance Products Fund, Fund II and Fund III (Fidelity) 5 portfolios
</TABLE>
On January 8, 1999, the five sub-accounts investing in the Cova Series
Trust portfolios managed by Van Kampen American Capital Advisory Corp.,
Quality Income, Money Market, High Yield, Stock Index and VKAC Growth and
Income portfolios, ceased operations and their assets were transferred to
five existing sub-accounts. In addition, the Lord Abbett Growth and
Income sub-account ceased operations and its assets were transferred to
the Trust Lord Abbett Growth and Income sub-account which commenced
operations on January 8, 1999. The asset transfers were in accordance
with a substitution order issued by the Securities and Exchange
Commission.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the sale
of portfolio shares owned by the sub-accounts. Income from dividends
and gains from realized capital gain distributions are recorded on
the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in additional
shares of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment income
and realized capital gains are deemed to pass through to the
Separate Account. As a result, GACC does not distribute dividends
and realized capital gains. During December of each year, the
accumulated net investment income and realized capital gains of the
GACC Money Market Fund are allocated to the Separate Account by
increasing the cost basis and recognizing a gain in the Separate
Account.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the federal
income tax return of Cova which is taxed as a Life Insurance Company
under the provisions of the Internal Revenue Code (IRC). Under
current IRC provisions, Cova believes it will be treated as the
owner of the Separate Account assets for federal income tax purposes
and does not expect to incur federal income taxes on the earnings of
the Separate Account to the extent the earnings are credited to the
variable annuity contracts. Based on this, no charge has been made
to the Separate Account for federal income taxes. A charge may be
made in future years for any federal income taxes that would be
attributable to the variable annuity contracts.
(D) ANNUITY RESERVES
Annuity reserves are computed for contracts in the payout stage
according to the 1983a Mortality Table. The assumed investment
return is 3%. The mortality risk is borne by Cova and may result in
additional transfers to the Separate Account. Conversely, if
reserves exceed amounts required, transfers may be made from the
Separate Account to Cova.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of each Separate Account
sub-account equivalent to an annual rate of 1.25% for the assumption of
mortality and expense risks and 0.15% for administrative expenses. 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 fee in the event of the death of
the contract owner. The administrative fees cover the cost of
establishing and maintaining the variable annuity contracts and the
Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at the
time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee 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 the contract value exceeds $5,000, the contract
owner may make one withdrawal each contract year of up to 10% of the
aggregate purchase payments (on deposit for more than one year) without
incurring a surrender fee. During the six months ending June 30, 1999,
surrender fees of $406 thousand were deducted.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the Separate Account sub-accounts
and the fixed rate account 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 the available
sub-accounts and the fixed rate account. 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, may be deducted from the contract
value. Transfers made in a dollar cost averaging program are not subject
to the transfer fee.
During the six months ending June 30, 1999, contract maintenance and
transfer fees of $308 thousand were deducted.
Currently, Cova advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes at the time annuity
payments begin. Cova reserves the right to deduct premium taxes when
incurred.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(5) COST BASIS OF INVESTMENTS
The cost basis of each sub-account's investment follows:
<S> <C> <C> <C>
Trust Lord Abbett Growth and Income $ 760,728 Kemper Small Cap Value $ 3,971
Trust Bond Debenture 147,373 Kemper Government Securities 1,655
Trust Developing Growth 18,520 MFS Bond 171
Trust Large Cap Research 19,970 MFS Research 8,910
Trust Mid-Cap Value 22,681 MFS Growth with Income 12,177
Trust Quality Bond 88,423 MFS Emerging Growth 11,371
Trust Small Cap Stock 67,973 MFS/F&C Emerging Markets Equity 390
Trust Large Cap Stock 174,438 MFS High Income 3,699
Trust Select Equity 163,929 MFS Global Governments 53
Trust International Equity 87,547 Oppenheimer Capital Appreciation 3,442
Trust Balanced 6,237 Oppenheimer Main Street Growth & Income 4,009
Trust Small Cap Equity 1,609 Oppenheimer High Income 1,720
Trust Equity Income 4,946 Oppenheimer Bond 8,522
Trust Growth and Income Equity 10,973 Oppenheimer Strategic Bond 2,357
GACC Money Market 36,681 Putnam VT Growth and Income 21,577
Russell Multi-Style Equity 39,355 Putnam VT New Value 672
Russell Aggressive Equity 7,163 Putnam VT Vista 2,917
Russell Non-US 13,957 Putnam VT International Growth 11,320
Russell Core Bond 24,012 Putnam VT International New Opportunities 830
AIM V.I. Value 16,661 Templeton Bond 143
AIM V.I. Capital Appreciation 5,314 Franklin Small Cap Investments 168
AIM V.I. International Equity 3,303 Templeton Stock 119
Alliance Premier Growth 20,704 Templeton International 5,577
Alliance Real Estate Investment 3,402 Templeton Developing Markets 1,752
Liberty Newport Tiger Fund, Variable 369 Templeton Mutual Shares Investments 1,860
Goldman Sachs Growth and Income 5,904 Franklin Growth Investments 99
Goldman Sachs International Equity 2,019 Fidelity VIP Growth 856
Goldman Sachs Global Income 250 Fidelity VIP II Contrafund 854
Kemper Dreman High Return Equity 152 Fidelity VIP III Growth Opportunities 408
Kemper Small Cap Growth 1,226 Fidelity VIP III Growth & Income 1,609
Fidelity VIP Equity-Income 812
--------------
$ 1,869,839
==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
Accumulation Unit Value
Commenced --------------------------------------------------------
Operations 6/30/99 12/31/98 12/31/97 12/31/96
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1/8/99 $ 39.095065
Trust Bond Debenture 5/1/96 13.536168 13.496500 12.881792 11.294930
Trust Developing Growth 8/20/97 12.724192 11.067854 10.527554
Trust Large Cap Research 8/20/97 13.320553 11.825550 9.899560
Trust Mid-Cap Value 8/20/97 11.560414 10.437949 10.467957
Trust Quality Bond 5/1/96 11.582126 11.914489 11.155126 10.368764
Trust Small Cap Stock 5/1/96 13.249386 12.582860 13.491466 11.308419
Trust Large Cap Stock 5/1/96 21.760453 19.428499 14.889462 11.334979
Trust Select Equity 5/1/96 18.786819 16.987204 14.053502 10.838053
Trust International Equity 5/1/96 13.530211 12.889315 11.462435 10.967004
Trust Balanced 7/1/97 12.542349 11.767845 10.531920
Trust Small Cap Equity 7/1/97 10.802058 10.238676 10.418047
Trust Equity Income 7/1/97 13.329239 12.068849 11.194166
Trust Growth and Income Equity 7/1/97 13.783946 12.188331 10.756082
GACC Money Market 6/3/96 11.299196 11.109943 10.667011 10.233546
Russell Multi-Style Equity 12/31/97 14.136244 12.694810 10.000000
Russell Aggressive Equity 12/31/97 9.994595 9.963254 10.000000
Russell Non-US 12/31/97 11.843135 11.142092 10.000000
Russell Core Bond 12/31/97 10.400162 10.591175 10.000000
AIM V.I. Value 12/31/97 14.842562 13.060203 10.000000
AIM V.I. Capital Appreciation 12/31/97 12.802441 11.770729 10.000000
AIM V.I. International Equity 12/31/97 11.814369 11.391449 10.000000
Alliance Premier Growth 12/31/97 16.395203 14.595485 10.000000
Alliance Real Estate Investment 12/31/97 8.410331 7.988435 10.000000
Liberty Newport Tiger Fund, Variable 12/31/97 11.850543 9.228765 10.000000
Goldman Sachs Growth and Income 1/29/98 10.866470 9.908613
Goldman Sachs International Equity 1/29/98 11.628506 11.402925
Goldman Sachs Global Income 1/29/98 10.551525 10.781765
Kemper Dreman High Return Equity 5/15/98 10.988298 10.487302
Kemper Small Cap Growth 12/31/97 12.075969 11.676086 10.000000
Kemper Small Cap Value 12/31/97 9.212540 8.753222 10.000000
Kemper Government Securities 12/31/97 10.486805 10.556498 10.000000
MFS Bond 5/15/98 10.294147 10.491811
MFS Research 12/31/97 13.158217 12.172796 10.000000
MFS Growth with Income 12/31/97 12.683197 12.066568 10.000000
MFS Emerging Growth 12/31/97 14.825001 13.233235 10.000000
MFS/F&C Emerging Markets Equity 12/31/97 7.986146 6.571830 10.000000
MFS High Income 12/31/97 10.262353 9.845193 10.000000
MFS Global Governments 12/31/97 10.290122 10.669943 10.000000
Oppenheimer Capital Appreciation 12/31/97 14.069924 12.232731 10.000000
Oppenheimer Main Street Growth & Income 12/31/97 11.756598 10.326519 10.000000
Oppenheimer High Income 12/31/97 10.198942 9.893828 10.000000
Oppenheimer Bond 12/31/97 10.283438 10.533011 10.000000
Oppenheimer Strategic Bond 12/31/97 10.094897 10.151332 10.000000
Putnam VT Growth and Income 12/31/97 12.503038 11.382650 10.000000
Putnam VT New Value 12/31/97 11.899961 10.483517 10.000000
Putnam VT Vista 12/31/97 13.199054 11.785702 10.000000
Putnam VT International Growth 12/31/97 13.062217 11.707003 10.000000
Putnam VT International New Opportunities 12/31/97 13.536626 11.402252 10.000000
Templeton Bond 3/1/99 9.799254
Franklin Small Cap Investments 3/1/99 12.110249
Templeton Stock 1/19/99 11.034139
Templeton International 5/1/98 10.014948 9.144522
Templeton Developing Markets 5/1/98 10.737070 7.552448
Templeton Mutual Shares Investments 5/1/98 11.009906 9.630622
Franklin Growth Investments 3/1/99 11.612002
Fidelity VIP Growth 2/17/98 14.859885 13.077878
Fidelity VIP II Contrafund 2/17/98 13.652825 12.357373
Fidelity VIP III Growth Opportunities 2/17/98 12.416559 11.742360
Fidelity VIP III Growth & Income 2/17/98 13.076025 12.202502
Fidelity VIP Equity-Income 2/17/98 11.893156 10.626607
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED
Net Assets (in thousands)
Commenced ------------------------------------------------
Operations 6/30/99 12/31/98 12/31/97 12/31/96
---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1/8/99 $ 833,664
Trust Bond Debenture 5/1/96 152,005 110,471 50,820 7,451
Trust Developing Growth 8/20/97 22,131 14,855 1,565
Trust Large Cap Research 8/20/97 23,622 12,968 1,233
Trust Mid-Cap Value 8/20/97 25,505 17,145 2,035
Trust Quality Bond 5/1/96 88,280 39,638 15,986 5,276
Trust Small Cap Stock 5/1/96 72,501 69,645 53,169 13,993
Trust Large Cap Stock 5/1/96 208,258 81,369 21,989 15,751
Trust Select Equity 5/1/96 219,197 179,310 97,063 22,159
Trust International Equity 5/1/96 101,888 94,245 62,371 14,333
Trust Balanced 7/1/97 6,797 3,372 401
Trust Small Cap Equity 7/1/97 1,753 1,327 272
Trust Equity Income 7/1/97 5,509 3,463 557
Trust Growth and Income Equity 7/1/97 12,943 7,823 1,309
GACC Money Market 6/3/96 37,346 16,464 3,318 358
Russell Multi-Style Equity 12/31/97 44,310 29,559
Russell Aggressive Equity 12/31/97 7,438 5,343
Russell Non-US 12/31/97 15,120 10,316
Russell Core Bond 12/31/97 23,257 17,050
AIM V.I. Value 12/31/97 18,864 6,816
AIM V.I. Capital Appreciation 12/31/97 5,900 2,160
AIM V.I. International Equity 12/31/97 3,451 2,325
Alliance Premier Growth 12/31/97 23,779 9,748
Alliance Real Estate Investment 12/31/97 3,331 1,529
Liberty Newport Tiger Fund, Variable 12/31/97 420 295
Goldman Sachs Growth and Income 1/29/98 6,243 4,634
Goldman Sachs International Equity 1/29/98 2,084 1,287
Goldman Sachs Global Income 1/29/98 246 203
Kemper Dreman High Return Equity 5/15/98 159 97
Kemper Small Cap Growth 12/31/97 1,399 893
Kemper Small Cap Value 12/31/97 4,119 2,145
Kemper Government Securities 12/31/97 1,592 630
MFS Bond 5/15/98 166 174
MFS Research 12/31/97 10,012 5,658
MFS Growth with Income 12/31/97 13,305 7,016
MFS Emerging Growth 12/31/97 13,623 7,142
MFS/F&C Emerging Markets Equity 12/31/97 410 481
MFS High Income 12/31/97 3,571 2,158
MFS Global Governments 12/31/97 50 22
Oppenheimer Capital Appreciation 12/31/97 3,865 1,189
Oppenheimer Main Street Growth & Income 12/31/97 4,455 2,941
Oppenheimer High Income 12/31/97 1,664 777
Oppenheimer Bond 12/31/97 8,179 4,234
Oppenheimer Strategic Bond 12/31/97 2,276 1,095
Putnam VT Growth and Income 12/31/97 22,552 12,699
Putnam VT New Value 12/31/97 739 441
Putnam VT Vista 12/31/97 3,419 1,785
Putnam VT International Growth 12/31/97 12,608 6,206
Putnam VT International New Opportunities 12/31/97 943 602
Templeton Bond 3/1/99 141
Franklin Small Cap Investments 3/1/99 183
Templeton Stock 1/19/99 123
Templeton International 5/1/98 5,774 1,507
Templeton Developing Markets 5/1/98 2,408 679
Templeton Mutual Shares Investments 5/1/98 2,108 1,021
Franklin Growth Investments 3/1/99 106
Fidelity VIP Growth 2/17/98 896 88
Fidelity VIP II Contrafund 2/17/98 946 400
Fidelity VIP III Growth Opportunities 2/17/98 441 112
Fidelity VIP III Growth & Income 2/17/98 1,789 852
Fidelity VIP Equity-Income 2/17/98 889 256
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED:
Total Return*
Commenced --------------------------------------------------------
Operations 1999 1998 1997 1996
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1/8/99 8.89%
Trust Bond Debenture 5/1/96 0.29% 4.77% 14.05% 11.86%
Trust Developing Growth 8/20/97 14.97% 5.13% 5.28%
Trust Large Cap Research 8/20/97 12.64% 19.46% -1.00%
Trust Mid-Cap Value 8/20/97 10.75% -0.29% 4.68%
Trust Quality Bond 5/1/96 -2.79% 6.81% 7.58% 4.76%
Trust Small Cap Stock 5/1/96 5.30% -6.74% 19.31% 7.57%
Trust Large Cap Stock 5/1/96 12.00% 30.49% 31.36% 13.32%
Trust Select Equity 5/1/96 10.59% 20.88% 29.67% 7.48%
Trust International Equity 5/1/96 4.97% 12.45% 4.52% 7.36%
Trust Balanced 7/1/97 6.58% 11.74% 5.32%
Trust Small Cap Equity 7/1/97 5.50% -1.72% 4.18%
Trust Equity Income 7/1/97 10.44% 7.81% 11.94%
Trust Growth and Income Equity 7/1/97 13.09% 13.32% 7.56%
GACC Money Market 6/3/96 1.70% 4.15% 4.24% 2.34%
Russell Multi-Style Equity 12/31/97 11.35% 26.95%
Russell Aggressive Equity 12/31/97 0.31% -0.37%
Russell Non-US 12/31/97 6.29% 11.42%
Russell Core Bond 12/31/97 -1.80% 5.91%
AIM V.I. Value 12/31/97 13.65% 30.60%
AIM V.I. Capital Appreciation 12/31/97 8.77% 17.71%
AIM V.I. International Equity 12/31/97 3.71% 13.91%
Alliance Premier Growth 12/31/97 12.33% 45.96%
Alliance Real Estate Investment 12/31/97 5.28% -20.12%
Liberty Newport Tiger Fund, Variable 12/31/97 28.41% -7.71%
Goldman Sachs Growth and Income 1/29/98 9.67% -0.91%
Goldman Sachs International Equity 1/29/98 1.98% 14.03%
Goldman Sachs Global Income 1/29/98 -2.14% 7.82%
Kemper Dreman High Return Equity 5/15/98 4.78% 4.87%
Kemper Small Cap Growth 12/31/97 3.42% 16.76%
Kemper Small Cap Value 12/31/97 5.25% -12.47%
Kemper Government Securities 12/31/97 -0.66% 5.57%
MFS Bond 5/15/98 -1.88% 4.92%
MFS Research 12/31/97 8.10% 21.73%
MFS Growth with Income 12/31/97 5.11% 20.67%
MFS Emerging Growth 12/31/97 12.03% 32.33%
MFS/F&C Emerging Markets Equity 12/31/97 21.52% -34.28%
MFS High Income 12/31/97 4.24% -1.55%
MFS Global Governments 12/31/97 -3.56% 6.70%
Oppenheimer Capital Appreciation 12/31/97 15.02% 22.33%
Oppenheimer Main Street Growth & Income 12/31/97 13.85% 3.27%
Oppenheimer High Income 12/31/97 3.08% -1.06%
Oppenheimer Bond 12/31/97 -2.37% 5.33%
Oppenheimer Strategic Bond 12/31/97 -0.56% 1.51%
Putnam VT Growth and Income 12/31/97 9.84% 13.83%
Putnam VT New Value 12/31/97 13.51% 4.83%
Putnam VT Vista 12/31/97 11.99% 17.86%
Putnam VT International Growth 12/31/97 11.58% 17.07%
Putnam VT International New Opportunities 12/31/97 18.72% 14.02%
Templeton Bond 3/1/99 -2.01%
Franklin Small Cap Investments 3/1/99 21.10%
Templeton Stock 1/19/99 10.34%
Templeton International 5/1/98 9.52% -8.55%
Templeton Developing Markets 5/1/98 42.17% -24.48%
Templeton Mutual Shares Investments 5/1/98 14.32% -3.69%
Franklin Growth Investments 3/1/99 16.12%
Fidelity VIP Growth 2/17/98 13.63% 30.78%
Fidelity VIP II Contrafund 2/17/98 10.48% 23.57%
Fidelity VIP III Growth Opportunities 2/17/98 5.74% 17.42%
Fidelity VIP III Growth & Income 2/17/98 7.16% 22.03%
Fidelity VIP Equity-Income 2/17/98 11.92% 6.27%
* The total return for sub-accounts that commenced operations during the period is not annualized.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED:
Separate Account Expenses
As a % of Average Net Assets**
Commenced -----------------------------------------------
Operations 1999 1998 1997 1996
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1/8/99 1.40%
Trust Bond Debenture 5/1/96 1.40% 1.40% 1.40% 1.40%
Trust Developing Growth 8/20/97 1.40% 1.40% 1.40%
Trust Large Cap Research 8/20/97 1.40% 1.40% 1.40%
Trust Mid-Cap Value 8/20/97 1.40% 1.40% 1.40%
Trust Quality Bond 5/1/96 1.40% 1.40% 1.40% 1.40%
Trust Small Cap Stock 5/1/96 1.40% 1.40% 1.40% 1.40%
Trust Large Cap Stock 5/1/96 1.40% 1.40% 1.40% 1.40%
Trust Select Equity 5/1/96 1.40% 1.40% 1.40% 1.40%
Trust International Equity 5/1/96 1.40% 1.40% 1.40% 1.40%
Trust Balanced 7/1/97 1.40% 1.40% 1.40%
Trust Small Cap Equity 7/1/97 1.40% 1.40% 1.40%
Trust Equity Income 7/1/97 1.40% 1.40% 1.40%
Trust Growth and Income Equity 7/1/97 1.40% 1.40% 1.40%
GACC Money Market 6/3/96 1.40% 1.40% 1.40% 1.40%
Russell Multi-Style Equity 12/31/97 1.40% 1.40%
Russell Aggressive Equity 12/31/97 1.40% 1.40%
Russell Non-US 12/31/97 1.40% 1.40%
Russell Core Bond 12/31/97 1.40% 1.40%
AIM V.I. Value 12/31/97 1.40% 1.40%
AIM V.I. Capital Appreciation 12/31/97 1.40% 1.40%
AIM V.I. International Equity 12/31/97 1.40% 1.40%
Alliance Premier Growth 12/31/97 1.40% 1.40%
Alliance Real Estate Investment 12/31/97 1.40% 1.40%
Liberty Newport Tiger Fund, Variable 12/31/97 1.40% 1.40%
Goldman Sachs Growth and Income 1/29/98 1.40% 1.40%
Goldman Sachs International Equity 1/29/98 1.40% 1.40%
Goldman Sachs Global Income 1/29/98 1.40% 1.40%
Kemper Dreman High Return Equity 5/15/98 1.40% 1.40%
Kemper Small Cap Growth 12/31/97 1.40% 1.40%
Kemper Small Cap Value 12/31/97 1.40% 1.40%
Kemper Government Securities 12/31/97 1.40% 1.40%
MFS Bond 5/15/98 1.40% 1.40%
MFS Research 12/31/97 1.40% 1.40%
MFS Growth with Income 12/31/97 1.40% 1.40%
MFS Emerging Growth 12/31/97 1.40% 1.40%
MFS/F&C Emerging Markets Equity 12/31/97 1.40% 1.40%
MFS High Income 12/31/97 1.40% 1.40%
MFS Global Governments 12/31/97 1.40% 1.40%
Oppenheimer Capital Appreciation 12/31/97 1.40% 1.40%
Oppenheimer Main Street Growth & Income 12/31/97 1.40% 1.40%
Oppenheimer High Income 12/31/97 1.40% 1.40%
Oppenheimer Bond 12/31/97 1.40% 1.40%
Oppenheimer Strategic Bond 12/31/97 1.40% 1.40%
Putnam VT Growth and Income 12/31/97 1.40% 1.40%
Putnam VT New Value 12/31/97 1.40% 1.40%
Putnam VT Vista 12/31/97 1.40% 1.40%
Putnam VT International Growth 12/31/97 1.40% 1.40%
Putnam VT International New Opportunities 12/31/97 1.40% 1.40%
Templeton Bond 3/1/99 1.40%
Franklin Small Cap Investments 3/1/99 1.40%
Templeton Stock 1/19/99 1.40%
Templeton International 5/1/98 1.40% 1.40%
Templeton Developing Markets 5/1/98 1.40% 1.40%
Templeton Mutual Shares Investments 5/1/98 1.40% 1.40%
Franklin Growth Investments 3/1/99 1.40%
Fidelity VIP Growth 2/17/98 1.40% 1.40%
Fidelity VIP II Contrafund 2/17/98 1.40% 1.40%
Fidelity VIP III Growth Opportunities 2/17/98 1.40% 1.40%
Fidelity VIP III Growth & Income 2/17/98 1.40% 1.40%
Fidelity VIP Equity-Income 2/17/98 1.40% 1.40%
** The expense ratio for sub-accounts that commenced operations during the period is annualized.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The realized gain (loss) on the sale of fund shares and the change in
unrealized appreciation for each sub-account during the six months ending
June 30, 1999 and the year ending December 31, 1998 follows:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Trust Quality Income 1999 $ 38,668 $ 39,188 $ (520)
1998 13,031 12,576 455
Trust Money Market 1999 7,897 7,897 -
1998 14,519 14,519 -
Trust High Yield 1999 28,995 29,950 (955)
1998 6,314 6,179 135
Trust Stock Index 1999 100,241 82,162 18,079
1998 23,196 17,093 6,103
Trust VKAC Growth and Income 1999 51,735 45,148 6,587
1998 6,244 4,804 1,440
Trust Lord Abbett Growth and Income 1999 11,982 11,656 326
1998
Trust Bond Debenture 1999 2,993 2,901 92
1998 9,489 9,470 19
Trust Developing Growth 1999 377 333 44
1998 138 152 (14)
Trust Large Cap Research 1999 20 18 2
1998 161 156 5
Trust Mid-Cap Value 1999 206 205 1
1998 82 85 (3)
Trust Quality Bond 1999 8,166 8,102 64
1998 1,335 1,299 36
Trust Small Cap Stock 1999 3,891 3,966 (75)
1998 3,113 3,238 (125)
Trust Large Cap Stock 1999 18,950 17,497 1,453
1998 147 131 16
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Trust Select Equity 1999 $ 613 $ 483 $ 130
1998 1,485 1,275 210
Trust International Equity 1999 3,571 3,181 390
1998 4,919 4,609 310
Trust Balanced 1999 26 25 1
1998 30 31 (1)
Trust Small Cap Equity 1999 87 87 -
1998 39 42 (3)
Trust Equity Income 1999 66 63 3
1998 75 75 -
Trust Growth and Income Equity 1999 98 90 8
1998 211 204 7
GACC Money Market 1999 27,684 27,333 351
1998 37,059 36,623 436
Lord Abbett Growth and Income 1999 700,973 555,507 145,466
1998 12,298 10,217 2,081
Russell Multi-Style Equity 1999 1,041 968 73
1998 62 61 1
Russell Aggressive Equity 1999 377 388 (11)
1998 203 247 (44)
Russell Non-US 1999 298 284 14
1998 92 90 2
Russell Core Bond 1999 865 880 (15)
1998 523 522 1
AIM V.I. Value 1999 3 2 1
1998 253 263 (10)
AIM V.I. Capital Appreciation 1999 115 106 9
1998 72 75 (3)
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
AIM V.I. International Equity 1999 $ 5,979 $ 5,885 $ 94
1998 8,246 8,249 (3)
Alliance Premier Growth 1999 28 24 4
1998 54 58 (4)
Alliance Real Estate Investment 1999 162 169 (7)
1998 28 30 (2)
Liberty Newport Tiger Fund, Variable 1999 1,011 912 99
1998 416 446 (30)
Goldman Sachs Growth and Income 1999 460 461 (1)
1998 126 138 (12)
Goldman Sachs International Equity 1999 1,624 1,563 61
1998 29 29 -
Goldman Sachs Global Income 1999 2 2 -
1998 17 16 1
Kemper Dreman High Return Equity 1999 7 7 -
1998 - - -
Kemper Small Cap Growth 1999 154 146 8
1998 1,008 1,035 (27)
Kemper Small Cap Value 1999 186 194 (8)
1998 21 25 (4)
Kemper Government Securities 1999 115 114 1
1998 17 17 -
MFS Bond 1999 13 13 -
1998 - - -
MFS Research 1999 86 80 6
1998 120 122 (2)
MFS Growth with Income 1999 115 108 7
1998 28 28 -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
-------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
---------- ------------------- ------------------- ----------------
<S> <C> <C> <C> <C>
MFS Emerging Growth 1999 $ 91 $ 78 $ 13
1998 129 140 (11)
MFS/Foreign & Colonial Emerging Markets Equity 1999 265 295 (30)
1998 1,059 1,156 (97)
MFS High Income 1999 53 53 -
1998 61 63 (2)
MFS Global Governments 1999 - - -
1998 - - -
Oppenheimer Capital Appreciation 1999 37 34 3
1998 187 188 (1)
Oppenheimer Main Street Growth & Income 1999 126 123 3
1998 326 363 (37)
Oppenheimer High Income 1999 9 9 -
1998 31 32 (1)
Oppenheimer Bond 1999 33 34 (1)
1998 49 49 -
Oppenheimer Strategic Bond 1999 37 37 -
1998 3 3 -
Putnam VT Growth and Income 1999 103 100 3
1998 294 302 (8)
Putnam VT New Value 1999 34 32 2
1998 3 3 -
Putnam VT Vista 1999 18 16 2
1998 27 28 (1)
Putnam VT International Growth 1999 2,376 2,196 180
1998 4,315 4,354 (39)
Putnam VT International New Opportunities 1999 2,092 2,007 85
1998 2,989 2,965 24
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
----------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Templeton Bond 1999 $ - $ - $ -
1998
Franklin Small Cap Investments 1999 - - -
1998
Templeton Stock 1999 - - -
1998
Templeton International 1999 5,373 5,361 12
1998 6,057 6,049 8
Templeton Developing Markets 1999 514 510 4
1998 357 361 (4)
Templeton Mutual Shares Investments 1999 93 88 5
1998 7 7 -
Franklin Growth Investments 1999 109 106 3
1998
Fidelity VIP Growth 1999 13 13 -
1998 34 37 (3)
Fidelity VIP II Contrafund 1999 58 52 6
1998 17 19 (2)
Fidelity VIP III Growth Opportunities 1999 5 5 -
1998 24 26 (2)
Fidelity VIP III Growth & Income 1999 28 26 2
1998 69 74 (5)
Fidelity VIP Equity-Income 1999 2 2 -
1998 27 30 (3)
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
----------- ------------------- ----------------------- ---------------
<S> <C> <C> <C> <C>
Trust Quality Income 1999 $ - $ 1,308 $ (1,308)
1998 1,308 1,302 6
Trust Money Market 1999 - - -
1998 - - -
Trust High Yield 1999 - 174 (174)
1998 174 842 (668)
Trust Stock Index 1999 - 25,838 (25,838)
1998 25,838 25,000 838
Trust VKAC Growth and Income 1999 - 11,521 (11,521)
1998 11,521 10,887 634
Trust Lord Abbett Growth and Income 1999 72,936 - 72,936
1998
Trust Bond Debenture 1999 4,632 3,523 1,109
1998 3,523 1,958 1,565
Trust Developing Growth 1999 3,611 890 2,721
1998 890 7 883
Trust Large Cap Research 1999 3,652 1,284 2,368
1998 1,284 6 1,278
Trust Mid-Cap Value 1999 2,824 160 2,664
1998 160 40 120
Trust Quality Bond 1999 (143) 1,598 (1,741)
1998 1,598 186 1,412
Trust Small Cap Stock 1999 4,528 346 4,182
1998 346 6,523 (6,177)
Trust Large Cap Stock 1999 33,820 16,535 17,285
1998 16,535 2,855 13,680
Trust Select Equity 1999 55,268 33,585 21,683
1998 33,585 13,520 20,065
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
----------- ------------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Trust International Equity 1999 $ 14,341 $ 9,278 $ 5,063
1998 9,278 1,309 7,969
Trust Balanced 1999 560 173 387
1998 173 - 173
Trust Small Cap Equity 1999 144 34 110
1998 34 (5) 39
Trust Equity Income 1999 563 70 493
1998 70 21 49
Trust Growth and Income Equity 1999 1,970 566 1,404
1998 566 18 548
GACC Money Market 1999 665 231 434
1998 231 46 185
Lord Abbett Growth and Income 1999 - 114,453 (114,453)
1998 114,453 87,861 26,592
Russell Multi-Style Equity 1999 4,955 3,199 1,756
1998 3,199 - 3,199
Russell Aggressive Equity 1999 275 75 200
1998 75 - 75
Russell Non-US 1999 1,163 412 751
1998 412 - 412
Russell Core Bond 1999 (755) 268 (1,023)
1998 268 - 268
AIM V.I. Value 1999 2,203 668 1,535
1998 668 - 668
AIM V.I. Capital Appreciation 1999 586 164 422
1998 164 - 164
AIM V.I. International Equity 1999 148 81 67
1998 81 - 81
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
----------- ------------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Alliance Premier Growth 1999 $ 3,075 $ 1,522 $ 1,553
1998 1,522 - 1,522
Alliance Real Estate Investment 1999 (71) (170) 99
1998 (170) - (170)
Liberty Newport Tiger Fund, Variable 1999 51 54 (3)
1998 54 - 54
Goldman Sachs Growth and Income 1999 339 (207) 546
1998 (207) - (207)
Goldman Sachs International Equity 1999 65 56 9
1998 56 - 56
Goldman Sachs Global Income 1999 (4) (1) (3)
1998 (1) - (1)
Kemper Dreman High Return Equity 1999 7 1 6
1998 1 - 1
Kemper Small Cap Growth 1999 173 107 66
1998 107 - 107
Kemper Small Cap Value 1999 148 (155) 303
1998 (155) - (155)
Kemper Government Securities 1999 (63) 9 (72)
1998 9 - 9
MFS Bond 1999 (5) 1 (6)
1998 1 - 1
MFS Research 1999 1,102 481 621
1998 481 - 481
MFS Growth with Income 1999 1,128 574 554
1998 574 - 574
MFS Emerging Growth 1999 2,252 985 1,267
1998 985 - 985
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
-----------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
---------- ------------------- ---------------------- ------------
<S> <C> <C> <C> <C>
MFS/Foreign & Colonial Emerging Markets Equity 1999 $ 20 $ (94) $ 114
1998 (94) - (94)
MFS High Income 1999 (128) (34) (94)
1998 (34) - (34)
MFS Global Governments 1999 (3) 1 (4)
1998 1 - 1
Oppenheimer Capital Appreciation 1999 423 134 289
1998 134 - 134
Oppenheimer Main Street Growth & Income 1999 446 (28) 474
1998 (28) - (28)
Oppenheimer High Income 1999 (56) (15) (41)
1998 (15) - (15)
Oppenheimer Bond 1999 (343) 95 (438)
1998 95 - 95
Oppenheimer Strategic Bond 1999 (81) 3 (84)
1998 3 - 3
Putnam VT Growth and Income 1999 975 660 315
1998 660 - 660
Putnam VT New Value 1999 67 6 61
1998 6 - 6
Putnam VT Vista 1999 502 173 329
1998 173 - 173
Putnam VT International Growth 1999 1,288 353 935
1998 353 - 353
Putnam VT International New Opportunities 1999 113 40 73
1998 40 - 40
Templeton Bond 1999 (2) - (2)
1998
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
----------- ------------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Franklin Small Cap Investments 1999 $ 15 $ - $ 15
1998
Templeton Stock 1999 4 - 4
1998
Templeton International 1999 197 48 149
1998 48 - 48
Templeton Developing Markets 1999 656 44 612
1998 44 - 44
Templeton Mutual Shares Investments 1999 248 32 216
1998 32 - 32
Franklin Growth Investments 1999 7 - 7
1998
Fidelity VIP Growth 1999 40 12 28
1998 12 - 12
Fidelity VIP II Contrafund 1999 92 48 44
1998 48 - 48
Fidelity VIP III Growth Opportunities 1999 33 13 20
1998 13 - 13
Fidelity VIP III Growth & Income 1999 180 94 86
1998 94 - 94
Fidelity VIP Equity-Income 1999 77 17 60
1998 17 - 17
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS
The change in the number of units for each sub-account follows:
Trust
-------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money High Stock and and Bond
Income (1) Market (1) Yield (1) Index (1) Income (1) Income (2) Debenture
------------ ----------- ----------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 2,931,053 1,742,444 1,409,290 3,547,220 2,198,250 3,945,097
Cova units purchased - - - - - -
Cova units redeemed - - - - - -
Contract units purchased 1,214 491 1,763 2,532 1,131 1,632,919
Contract units transferred, net (196,389) (799,477) (59,692) 159,577 54,353 2,939,109
Contract units redeemed (512,199) (333,892) (146,202) (616,360) (152,515) (332,231)
------------ ----------- ----------- ------------ ----------- -------------
Unit balance at 12/31/98 2,223,679 609,566 1,205,159 3,092,969 2,101,219 8,184,894
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased - - 83 187 - 362,024 353,300
Contract units transferred, net (2,215,623) (606,382) (1,202,292) (3,084,953) (2,098,056) 21,809,666 3,225,732
Contract units redeemed (8,056) (3,184) (2,950) (8,203) (3,163) (883,531) (551,828)
------------ ----------- ----------- ------------ ----------- ------------- -------------
Unit balance at 6/30/99 - - - - - 21,288,159 11,212,098
============ =========== =========== ============ =========== ============= =============
Annuity units:
Unit balance at 12/31/97 8,069 4,562 2,229 4,097 1,803
Contract units purchased - - 798 - 798 272
Contract units redeemed (1,686) (901) (523) (608) (196) (8)
------------ ----------- ----------- ------------ ----------- -------------
Unit balance at 12/31/98 6,383 3,661 2,504 3,489 2,405 264
Contract units purchased - - - - - 318,558 53,582
Contract units transferred, net (6,225) (3,576) (2,444) (3,431) (2,373) 33,239 -
Contract units redeemed (158) (85) (60) (58) (32) (304,223) (34,660)
------------ ----------- ----------- ------------ ----------- ------------- -------------
Unit balance at 6/30/99 - - - - - 47,574 19,186
============ =========== =========== ============ =========== ============= =============
(1) Sub-account ceased operations on January 8, 1999.
(2) Sub-account commenced operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Trust
-------------------------------------------------------------------------------------------
Large Small Large
Developing Cap Mid-Cap Quality Cap Cap Select
Growth Research Value Bond Stock Stock Equity
------------ ---------- ---------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 148,658 124,559 194,386 1,433,081 3,940,243 1,473,929 6,903,606
Cova units purchased - - - - - - -
Cova units redeemed (10,000) (10,000) (10,000) - - - -
Contract units purchased 596,000 569,392 755,701 833,031 619,802 1,118,109 1,382,912
Contract units transferred, net 630,230 437,664 736,868 1,236,444 1,172,828 1,713,122 2,562,725
Contract units redeemed (22,687) (26,695) (34,402) (179,213) (200,263) (127,125) (304,425)
------------ ---------- ---------- ----------- ----------- ------------ -------------
Unit balance at 12/31/98 1,342,201 1,094,920 1,642,553 3,323,343 5,532,610 4,178,035 10,544,818
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 137,240 195,453 229,580 423,915 144,428 473,727 321,134
Contract units transferred, net 282,329 514,607 384,820 4,374,568 (35,535) 5,393,869 1,057,313
Contract units redeemed (22,927) (33,559) (51,120) (512,623) (171,409) (490,280) (265,594)
------------ ---------- ---------- ----------- ----------- ------------ -------------
Unit balance at 6/30/99 1,738,843 1,771,421 2,205,833 7,609,203 5,470,094 9,555,351 11,657,671
============ ========== ========== =========== =========== ============ =============
Annuity units:
Unit balance at 12/31/97 773 3,028 3,237
Contract units purchased 2,090 3,947 1,944 9,187 9,682
Contract units redeemed (266) (109) (162) (1,259) (1,203)
---------- ----------- ----------- ------------ -------------
Unit balance at 12/31/98 1,824 3,838 2,555 10,956 11,716
Contract units purchased 479 452 473 10,335 298 9,187 1,152
Contract units transferred, net - - - - 503 - 731
Contract units redeemed (22) (216) (20) - (1,219) (3,495) (2,677)
------------ ---------- ---------- ----------- ----------- ------------ -------------
Unit balance at 6/30/99 457 2,060 453 14,173 2,137 16,648 10,922
============ ========== ========== =========== =========== ============ =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Trust GACC Lord Abbett
-------------------------------------------------------------- ----------- --------------
Growth
and Growth
International Small Cap Equity Income Money and
Equity Balanced Equity Income Equity Market Income (1)
------------- ---------- ---------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 5,440,592 38,079 26,148 49,725 121,673 311,051 15,788,404
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 651,488 128,875 44,062 157,967 269,879 3,293,174 1,737,150
Contract units transferred, net 1,460,450 124,051 61,306 83,645 260,136 (1,834,605) 3,166,896
Contract units redeemed (243,205) (4,494) (1,880) (4,384) (9,899) (295,883) (1,222,057)
------------- ---------- ---------- ----------- ---------- ----------- --------------
Unit balance at 12/31/98 7,309,325 286,511 129,636 286,953 641,789 1,473,737 19,470,393
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 105,967 106,671 16,166 69,025 139,631 249,643 21,056
Contract units transferred, net 293,985 157,432 19,272 64,054 176,327 2,059,816 (19,468,292)
Contract units redeemed (185,260) (8,682) (2,809) (6,769) (18,743) (491,641) (23,157)
------------- ---------- ---------- ----------- ---------- ----------- --------------
Unit balance at 6/30/99 7,524,017 541,932 162,265 413,263 939,004 3,291,555 -
============= ========== ========== =========== ========== =========== ==============
Annuity units:
Unit balance at 12/31/97 790 26,046
Contract units purchased 2,208 9,003 10,428
Contract units redeemed (173) (128) (3,208)
------------- ----------- --------------
Unit balance at 12/31/98 2,825 8,875 33,266
Contract units purchased 5,248 9,003 -
Contract units transferred, net 559 - (32,829)
Contract units redeemed (1,593) (2,923) (437)
------------- ----------- --------------
Unit balance at 6/30/99 7,039 14,955 -
============= =========== ==============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Russell AIM
------------------------------------------------ ----------------------------------------
Multi- V.I.
Style Aggressive Core V.I. Capital International
Equity Equity Non-US Bond V.I. Value Appreciation Equity
---------- ---------- ----------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10) (10) (10)
Contract units purchased 1,960,886 438,734 773,431 1,318,370 365,254 134,252 148,215
Contract units transferred, net 416,532 107,823 180,088 360,854 177,976 57,235 57,321
Contract units redeemed (48,988) (10,279) (27,727) (69,373) (21,340) (7,999) (1,464)
---------- ---------- ----------- ----------- ----------- -------------- -------------
Unit balance at 12/31/98 2,328,430 536,278 925,792 1,609,851 521,890 183,488 204,072
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 459,491 121,114 153,835 196,197 349,164 170,271 25,082
Contract units transferred, net 373,046 91,647 208,486 448,873 426,420 109,934 66,972
Contract units redeemed (27,061) (4,970) (11,784) (19,037) (26,564) (2,869) (4,040)
---------- ---------- ----------- ----------- ----------- -------------- -------------
Unit balance at 6/30/99 3,133,906 744,069 1,276,329 2,235,884 1,270,910 460,824 292,086
========== ========== =========== =========== =========== ============== =============
Annuity units:
Unit balance at 12/31/97
Contract units purchased
Contract units redeemed
Unit balance at 12/31/98
Contract units purchased 644 171 417 380
Contract units transferred, net - - - -
Contract units redeemed (11) (3) (7) (7)
---------- ---------- ----------- -----------
Unit balance at 6/30/99 633 168 410 373
========== ========== =========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Alliance Liberty Goldman Sachs Kemper
------------------------- ---------- ------------------------------------- -----------
Newport Dreman
Real Tiger Growth High
Premier Estate Fund, and International Global Return
Growth Investment Variable Income Equity Income Equity
----------- ------------ ---------- --------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10) (10) -
Contract units purchased 523,722 136,005 18,873 298,119 89,807 12,114 -
Contract units transferred, net 149,553 58,393 13,289 178,567 23,575 8,062 9,213
Contract units redeemed (5,421) (2,987) (226) (9,011) (558) (1,343) -
----------- ------------ ---------- --------- -------------- ---------- -----------
Unit balance at 12/31/98 667,854 191,411 31,936 467,675 112,824 18,833 9,223
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 567,176 170,719 3,453 42,858 33,817 986 1,434
Contract units transferred, net 230,763 38,420 417 71,460 35,017 3,565 3,823
Contract units redeemed (15,408) (4,483) (328) (7,518) (2,443) (120) -
----------- ------------ ---------- --------- -------------- ---------- -----------
Unit balance at 6/30/99 1,450,385 396,067 35,478 574,475 179,215 23,264 14,480
=========== ============ ========== ========= ============== ========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Kemper MFS
--------------------------------------- -------------------------------------------------
Small Small Growth
Cap Cap Government with Emerging
Growth Value Securities Bond Research Income Growth
----------- ----------- ------------- --------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) - (10) (10) (10)
Contract units purchased 61,682 178,532 48,334 245 337,107 416,517 438,345
Contract units transferred, net 15,201 69,892 11,575 16,283 137,437 171,689 106,215
Contract units redeemed (391) (3,332) (197) - (9,758) (6,772) (4,901)
----------- ----------- ------------- --------- ---------- ------------ ----------
Unit balance at 12/31/98 76,492 245,092 59,712 16,538 464,786 581,434 539,659
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 27,892 181,077 61,882 208 155,007 309,923 277,854
Contract units transferred, net 12,422 25,767 30,663 (657) 146,769 176,912 115,019
Contract units redeemed (979) (4,782) (471) - (5,637) (19,244) (13,621)
----------- ----------- ------------- --------- ---------- ------------ ----------
Unit balance at 6/30/99 115,827 447,154 151,786 16,089 760,925 1,049,025 918,911
=========== =========== ============= ========= ========== ============ ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
MFS Oppenheimer
------------------------------------ -----------------------------------------------------
F&C Main Street
Emerging Growth
Markets High Global Capital and High
Equity Income Governments Appreciation Income Income Bond
---------- --------- ------------- -------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) - (10) (10) (10) (10)
Contract units purchased 45,159 164,144 423 83,004 211,120 51,949 320,045
Contract units transferred, net 28,739 57,879 1,674 19,949 78,591 27,811 86,123
Contract units redeemed (727) (2,814) (25) (5,792) (4,881) (1,247) (4,178)
---------- --------- ------------- -------------- ------------ ----------- ----------
Unit balance at 12/31/98 73,171 219,209 2,082 97,161 284,830 78,513 401,990
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 178 71,665 477 94,245 46,417 53,463 241,959
Contract units transferred, net (20,167) 63,393 2,285 86,953 50,401 32,033 162,246
Contract units redeemed (1,828) (6,278) (12) (3,627) (2,683) (818) (10,839)
---------- --------- ------------- -------------- ------------ ----------- ----------
Unit balance at 6/30/99 51,354 347,989 4,832 274,732 378,965 163,191 795,356
========== ========= ============= ============== ============ =========== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Oppenheimer Putnam Templeton
------------- --------------------------------------------------------------- ------------
VT
VT Growth VT International
Strategic and VT New International New
Bond Income Value VT Vista Growth Opportunities Bond (3)
------------- ----------- --------- ---------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97
Cova units purchased 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10) (10)
Contract units purchased 71,817 820,015 16,925 116,318 394,877 38,270
Contract units transferred, net 36,774 304,805 25,293 36,195 141,372 14,803
Contract units redeemed (722) (9,152) (127) (1,108) (6,194) (264)
------------- ----------- --------- ---------- ------------- --------------
Unit balance at 12/31/98 107,869 1,115,668 42,091 151,405 530,055 52,809
Cova units purchased - - - - - - 10
Cova units redeemed - - - - - - -
Contract units purchased 54,332 438,883 6,929 71,749 327,242 10,520 1,029
Contract units transferred, net 64,411 276,972 14,564 38,892 117,580 8,308 13,336
Contract units redeemed (1,157) (27,806) (1,493) (3,009) (9,644) (1,941) -
------------- ----------- --------- ---------- ------------- -------------- ------------
Unit balance at 6/30/99 225,455 1,803,717 62,091 259,037 965,233 69,696 14,375
============= =========== ========= ========== ============= ============== ============
(3) Sub-account commenced operations on March 1, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Templeton Fidelity
------------------------------------------------------------------------------ ---------
Franklin Franklin
Small Cap Mutual Growth
Investments Developing Shares Investments VIP
(3) Stock (4) International Markets Investments (3) Growth
------------ ---------- -------------- ------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 140,734 72,847 61,499 8,130
Contract units transferred, net 26,597 18,743 45,054 (1,021)
Contract units redeemed (2,556) (1,630) (518) (361)
-------------- ------------- ------------ ---------
Unit balance at 12/31/98 164,775 89,960 106,035 6,748
Cova units purchased 10 10 - - - 10 -
Cova units redeemed - - - - - - -
Contract units purchased 1,500 6,295 289,158 115,838 42,024 3,970 22,483
Contract units transferred, net 13,559 4,797 127,262 21,002 45,382 15,474 31,267
Contract units redeemed (3) (1) (4,641) (2,544) (2,011) (10,320) (179)
------------ ---------- -------------- ------------- ------------ ------------ ---------
Unit balance at 6/30/99 15,066 11,101 576,554 224,256 191,430 9,134 60,319
============ ========== ============== ============= ============ ============ =========
(3) Sub-account commenced operations on March 1, 1999.
(4) Sub-account commenced operations on January 19, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
June 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
The change in the number of units for each sub-account follows:
Fidelity
------------------------------------------------------------
VIP III VIP III VIP
VIP II Growth Growth & Equity-
Contrafund Opportunities Income Income
------------- ---------------------------- -------------
<S> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 30,391 11,440 53,646 20,381
Contract units transferred, net 2,056 (1,406) 30,141 4,635
Contract units redeemed (93) (511) (13,954) (884)
------------- ------------- ------------- -------------
Unit balance at 12/31/98 32,354 9,523 69,833 24,132
Cova units purchased - - - -
Cova units redeemed - - - -
Contract units purchased 14,299 6,773 16,665 11,221
Contract units transferred, net 26,717 19,280 52,155 39,912
Contract units redeemed (4,066) (83) (1,866) (525)
------------- ------------- ------------- -------------
Unit balance at 6/30/99 69,304 35,493 136,787 74,740
============= ============= ============= =============
</TABLE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Contract Owners of Cova Variable Annuity Account One, Board of
Directors and Shareholder of Cova Financial Services Life Insurance
Company:
We have audited the accompanying statements of assets and liabilities of
the Quality Income, Money Market, High Yield, Stock Index, Growth and
Income, Bond Debenture, Developing Growth, Large Cap Research, Mid-Cap
Value, Quality Bond, Small Cap Stock, Large Cap Stock, Select Equity,
International Equity, Balanced, Small Cap Equity, Equity Income, and Growth
and Income Equity sub-accounts (investment options within the Cova Series
Trust); the Growth and Income sub-account (investment option within the
Lord Abbett Series Fund, Inc.); the Money Market sub-account (investment
option within the General American Capital Company); the Multi-Style
Equity, Aggressive Equity, Non-US, and Core Bond sub-accounts (investment
options within the Russell Insurance Funds); the AIM V.I. Value, AIM V.I.
Capital Appreciation, and AIM V.I. International Equity sub-accounts
(investment options within the AIM Variable Insurance Funds, Inc.); the
Premier Growth and Real Estate Investment sub-accounts (investment option
within the Alliance Variable Products Series Fund, Inc.); Newport Tiger
sub-account (investment option within the Liberty Variable Investment
Trust); the Growth and Income, International Equity, and Global Income
sub-accounts (investment options within the Goldman Sachs Variable
Insurance Trust); the Kemper-Dreman High Return Equity, Kemper Small Cap
Growth, Kemper Small Cap Value, and Kemper Government Securities
sub-accounts (investment options within the Investors Fund Series); the MFS
Bond, MFS Research, MFS Growth with Income, MFS Emerging Growth, MFS /
Foreign & Colonial Emerging Markets Equity, MFS High Income, and MFS World
Government sub-accounts (investment options within the MFS Variable
Insurance Trust); the Oppenheimer Growth, Oppenheimer Growth & Income,
Oppenheimer High Income, Oppenheimer Bond, and Oppenheimer Strategic Bond
sub-accounts (investment options within the Oppenheimer Variable Account
Funds); the Putnam Growth and Income, Putnam New Value, Putnam Vista,
Putnam International Growth, and Putnam International New Opportunities
sub-accounts (investment options within the Putnam Variable Trust); the
Templeton International, Templeton Developing Markets, and Mutual Shares
Investments sub-accounts (investment options within the Templeton Variable
Products Series Fund); and the Growth, Contrafund, Growth Opportunities,
Growth & Income, and Equity-Income sub-accounts (investment options within
the Variable Insurance Products Fund, Fund II, and Fund III) of Cova
Variable Annuity Account One of Cova Financial Services Life Insurance
Company (the Separate Account), as of December 31, 1998, and the related
statement of operations for the year then ended and the statements of
changes in net assets for the two years then ended. These financial
statements are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these 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. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with transfer agents. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the sub-accounts of
Cova Variable Annuity Account One of Cova Financial Services Life Insurance
Company as of December 31, 1998, and the results of their operations and
the changes in their net assets for each of the years presented, in
conformity with generally accepted accounting principles.
Chicago, Illinois
March 1, 1999
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Assets:
Investments:
Cova Series Trust (Trust):
Quality Income Portfolio - 3,558,351 shares at a net asset value of $10.99 per share (cost: $37,784) $ 39,092
Money Market Portfolio - 7,890,611 shares at a net asset value of $1.00 per share (cost: 7,891
$7,891)
High Yield Portfolio - 2,687,415 shares at a net asset value of $10.72 per share (cost: 28,801
$28,627)
Stock Index Portfolio - 4,387,719 shares at a net asset value of $22.24 per share (cost: 97,591
$71,753)
VKAC Growth and Income Portfolio - 2,881,569 shares at a net asset value of $17.81 per share (cost: 51,313
$39,792)
Bond Debenture Portfolio - 8,923,056 shares at a net asset value of $12.38 per share (cost: $106,952) 110,475
Developing Growth Portfolio - 1,321,613 shares at a net asset value of $11.24 per share (cost: $13,966) 14,856
Large Cap Research Portfolio - 1,083,984 shares at a net asset value of $11.96 per share (cost: $11,685) 12,969
Mid-Cap Value Portfolio - 1,620,159 shares at a net asset value of $10.58 per share (cost: $16,986) 17,146
Quality Bond Portfolio - 3,597,178 shares at a net asset value of $11.02 per share (cost: 39,640
$38,042)
Small Cap Stock Portfolio - 5,812,593 shares at a net asset value of $11.98 per share (cost: $69,302) 69,648
Large Cap Stock Portfolio - 4,491,961 shares at a net asset value of $18.12 per share (cost: $64,837) 81,372
Select Equity Portfolio - 11,154,141 shares at a net asset value of $16.08 per share (cost: $145,732) 179,317
International Equity Portfolio - 7,330,424 shares at a net asset value of $12.86 per share (cost: 94,249
$84,971)
Balanced Portfolio - 295,831 shares at a net asset value of $11.40 per share (cost: 3,372
$3,199)
Small Cap Equity Portfolio - 130,453 shares at a net asset value of $10.17 per share 1,327
(cost: $1,293)
Equity Income Portfolio - 297,898 shares at a net asset value of $11.63 per share (cost: 3,463
$3,393)
Growth and Income Equity Portfolio - 652,151 shares at a net asset value of $12.00 per share (cost: 7,823
$7,257)
Lord Abbett Series Fund, Inc. (Lord Abbett):
Growth and Income Portfolio - 32,409,746 shares at a net asset value of $20.65 per share (cost: 669,229
$554,776)
General American Capital Company (GACC):
Money Market Portfolio - 855,290 shares at a net asset value of $19.25 per share (cost: 16,465
$16,234)
Russell Insurance Funds (Russell):
Multi-Style Equity Fund - 1,845,200 shares at a net asset value of $16.02 per share 29,560
(cost: $26,361)
Aggressive Equity Fund - 420,730 shares at a net asset value of $12.70 per share (cost: 5,343
$5,268)
Non-US Fund - 930,176 shares at a net asset value of $11.09 per share (cost: $9,904) 10,316
Core Bond Fund - 1,596,523 shares at a net asset value of $10.68 per share (cost: $16,783) 17,051
AIM Variable Insurance Funds, Inc. (AIM):
AIM V.I. Value Fund - 259,667 shares at a net asset value of $26.25 per share (cost: 6,816
$6,148)
AIM V.I. Capital Appreciation Fund - 85,709 shares at a net asset value of $25.20 per share (cost: 2,160
$1,996)
AIM V.I. International Equity Fund - 118,489 shares at a net asset value of $19.62 per share (cost: 2,325
$2,244)
Alliance Variable Products Series Fund, Inc. (Alliance):
Premier Growth Portfolio - 314,149 shares at a net asset value of $31.03 per share (cost: 9,748
$8,226)
Real Estate Investment Portfolio - 156,353 shares at a net asset value of $9.78 per share (cost: $1,699) 1,529
Liberty Variable Investment Trust (Liberty):
Newport Tiger Fund, Variable Series - 187,736 shares at a net asset value of $1.57 per share (cost: 295
$241)
Goldman Sachs Variable Insurance Trust (Goldman Sachs):
Growth and Income Fund - 443,463 shares at a net asset value of $10.45 per share (cost: 4,634
$4,841)
International Equity Fund - 108,025 shares at a net asset value of $11.91 per share 1,287
(cost: $1,231)
Global Income Fund - 19,676 shares at a net asset value of $10.32 per share (cost: $204) 203
Investors Fund Series (Kemper):
Kemper Dreman High Return Equity Portfolio - 94,043 shares at a net asset value of $1.03 per share 97
(cost: $96)
Kemper Small Cap Growth Portfolio - 452,858 shares at a net asset value of $1.97 per share (cost: $786) 893
Kemper Small Cap Value Portfolio - 2,013,651 shares at a net asset value of $1.07 per share (cost: 2,145
$2,300)
Kemper Government Securities Portfolio - 521,770 shares at a net asset value of $1.21 per share (cost: 630
$621)
MFS Variable Insurance Trust (MFS):
MFS Bond Series - 15,247 shares at a net asset value of $11.38 per share (cost: $173) 174
MFS Research Series - 297,006 shares at a net asset value of $19.05 per share (cost: 5,658
$5,177)
MFS Growth with Income Series - 348,890 shares at a net asset value of $20.11 per share (cost: $6,442) 7,016
MFS Emerging Growth Series - 332,636 shares at a net asset value of $21.47 per share (cost: $6,157) 7,142
MFS / Foreign & Colonial Emerging Markets Equity Series - 81,505 shares at a net asset value of $5.90 per
share
(cost: $575) 481
MFS High Income Series - 187,184 shares at a net asset value of $11.53 per share (cost: 2,158
$2,192)
MFS World Governments Series - 2,042 shares at a net asset value of $10.88 per share (cost: $21) 22
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Assets, continued:
Investments, continued:
Oppenheimer Variable Account Funds (Oppenheimer):
Oppenheimer Growth Fund - 32,413 shares at a net asset value of $36.67 per share (cost: $ 1,189
$1,055)
Oppenheimer Growth & Income Fund - 143,624 shares at a net asset value of $20.48 per share (cost: 2,941
$2,969)
Oppenheimer High Income Fund - 70,492 shares at a net asset value of $11.02 per share (cost: $792) 777
Oppenheimer Bond Fund - 343,696 shares at a net asset value of $12.32 per share (cost: 4,234
$4,139)
Oppenheimer Strategic Bond Fund - 213,879 shares at a net asset value of $5.12 per share (cost: $1,092) 1,095
Putnam Variable Trust (Putnam):
Putnam Growth and Income Fund - 441,423 shares at a net asset value of $28.77 per share (cost: $12,040) 12,700
Putnam New Value Fund - 36,681 shares at a net asset value of $12.03 per share (cost: 441
$435)
Putnam Vista Fund - 121,228 shares at a net asset value of $14.72 per share (cost: $1,612) 1,785
Putnam International Growth Fund - 458,993 shares at a net asset value of $13.52 per share (cost: 6,206
$5,853)
Putnam International New Opportunities Fund - 52,407 shares at a net asset value of $11.49 per share 602
(cost: $562)
Templeton Variable Products Series Fund (Templeton):
Templeton International Fund - 72,830 shares at a net asset value of $20.69 per share (cost: $1,459) 1,507
Templeton Developing Markets Fund - 132,446 shares at a net asset value of $5.13 per share (cost: $635) 679
Mutual Shares Investments Fund - 105,064 shares at a net asset value of $9.72 per share (cost: $989) 1,021
Variable Insurance Products Fund, Fund II and Fund III (Fidelity):
Growth Portfolio - 1,967 shares at a net asset value of $44.87 per share (cost: $76) 88
Contrafund Portfolio - 16,359 shares at a net asset value of $24.44 per share (cost: $352) 400
Growth Opportunities Portfolio - 4,888 shares at a net asset value of $22.88 per share 112
(cost: $99)
Growth & Income Portfolio - 52,766 shares at a net asset value of $16.15 per share (cost: 852
$758)
Equity-Income Portfolio - 10,089 shares at a net asset value of $25.42 per share (cost: 256
$239)
----------
Total assets $ 1,700,607
==========
Liabilities:
Trust Quality Income $ 2
Trust High Yield 1
Trust Stock Index 4
Trust VKAC Growth and Income 2
Trust Bond Debenture 4
Trust Developing Growth 1
Trust Large Cap Research 1
Trust Mid-Cap Value 1
Trust Quality Bond 2
Trust Small Cap Stock 3
Trust Large Cap Stock 3
Trust Select Equity 7
Trust International Equity 4
Lord Abbett Growth and Income 26
GACC Money Market 1
Russell Multi-Style Equity 1
Russell Core Bond 1
Putnam Growth and Income 1
----------
Total liabilities $ 65
==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Net assets:
Accumulation units:
Trust Quality Income - 2,223,679 accumulation units at $17.539854 per unit $ 39,004
Trust Money Market - 609,566 accumulation units at $12.882171 per unit 7,853
Trust High Yield - 1,205,159 accumulation units at $23.857965 per unit 28,754
Trust Stock Index - 3,092,969 accumulation units at $31.522392 per unit 97,498
Trust VKAC Growth and Income - 2,101,219 accumulation units at $24.396666 per unit 51,263
Trust Bond Debenture - 8,184,894 accumulation units at $13.496500 per unit 110,468
Trust Developing Growth - 1,342,201 accumulation units at $11.067854 per unit 14,855
Trust Large Cap Research - 1,094,920 accumulation units at $11.825550 per unit 12,947
Trust Mid-Cap Value - 1,642,553 accumulation units at $10.437949 per unit 17,145
Trust Quality Bond - 3,323,343 accumulation units at $11.914489 per unit 39,596
Trust Small Cap Stock - 5,532,610 accumulation units at $12.582860 per unit 69,616
Trust Large Cap Stock - 4,178,035 accumulation units at $19.428499 per unit 81,173
Trust Select Equity - 10,544,818 accumulation units at $16.987204 per unit 179,127
Trust International Equity - 7,309,325 accumulation units at $12.889315 per unit 94,212
Trust Balanced - 286,511 accumulation units at $11.767845 per unit 3,372
Trust Small Cap Equity - 129,636 accumulation units at $10.238676 per unit 1,327
Trust Equity Income - 286,953 accumulation units at $12.068849 per unit 3,463
Trust Growth and Income Equity - 641,789 accumulation units at $12.188331 per unit 7,823
Lord Abbett Growth and Income - 19,470,393 accumulation units at $34.325425 per unit 668,329
GACC Money Market - 1,473,737 accumulation units at $11.109943 per unit 16,373
Russell Multi-Style Equity - 2,328,430 accumulation units at $12.694810 per unit 29,559
Russell Aggressive Equity - 536,278 accumulation units at $9.963254 per unit 5,343
Russell Non-US - 925,792 accumulation units at $11.142092 per unit 10,316
Russell Core Bond - 1,609,851 accumulation units at $10.591175 per unit 17,050
AIM Value - 521,890 accumulation units at $13.060203 per unit 6,816
AIM Capital Appreciation - 183,488 accumulation units at $11.770729 per unit 2,160
AIM International Equity - 204,072 accumulation units at $11.391449 per unit 2,325
Alliance Premier Growth - 667,854 accumulation units at $14.595485 per unit 9,748
Alliance Real Estate Investment - 191,411 accumulation units at $7.988435 per unit 1,529
Liberty Newport Tiger - 31,936 accumulation units at $9.228765 per unit 295
Goldman Sachs Growth and Income - 467,675 accumulation units at $9.908613 per unit 4,634
Goldman Sachs International Equity - 112,824 accumulation units at $11.402925 per unit 1,287
Goldman Sachs Global Income - 18,833 accumulation units at $10.781765 per unit 203
Kemper Dreman High Return Equity - 9,223 accumulation units at $10.487302 per unit 97
Kemper Small Cap Growth - 76,492 accumulation units at $11.676086 per unit 893
Kemper Small Cap Value - 245,092 accumulation units at $8.753222 per unit 2,145
Kemper Government Securities - 59,712 accumulation units at $10.556498 per unit 630
MFS Bond - 16,538 accumulation units at $10.491811 per unit 174
MFS Research - 464,786 accumulation units at $12.172796 per unit 5,658
MFS Growth with Income - 581,434 accumulation units at $12.066568 per unit 7,016
MFS Emerging Growth - 539,659 accumulation units at $13.233235 per unit 7,142
MFS / F&C Emerging Markets Equity - 73,171 accumulation units at $6.571830 per unit 481
MFS High Income - 219,209 accumulation units at $9.845193 per unit 2,158
MFS World Governments - 2,082 accumulation units at $10.669943 per unit 22
Oppenheimer Growth - 97,161 accumulation units at $12.232731 per unit 1,189
Oppenheimer Growth & Income - 284,830 accumulation units at $10.326519 per unit 2,941
Oppenheimer High Income - 78,513 accumulation units at $9.893828 per unit 777
Oppenheimer Bond - 401,990 accumulation units at $10.533011 per unit 4,234
Oppenheimer Strategic Bond - 107,869 accumulation units at $10.151332 per unit 1,095
Putnam Growth and Income - 1,115,668 accumulation units at $11.382650 per unit 12,699
Putnam New Value - 42,091 accumulation units at $10.483517 per unit 441
Putnam Vista - 151,405 accumulation units at $11.785702 per unit 1,785
Putnam International Growth - 530,055 accumulation units at $11.707003 per unit 6,206
Putnam International New Opportunities - 52,809 accumulation units at $11.402252 per unit 602
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Net assets, continued:
Accumulation units, continued:
Templeton International - 164,775 accumulation units at $9.144522 per unit $ 1,507
Templeton Developing Markets - 89,960 accumulation units at $7.552448 per unit 679
Templeton Mutual Shares Investments - 106,035 accumulation units at $9.630622 per unit 1,021
Fidelity VIP Growth - 6,748 accumulation units at $13.077878 per unit 88
Fidelity VIP II Contrafund - 32,354 accumulation units at $12.357373 per unit 400
Fidelity VIP III Growth Opportunities - 9,523 accumulation units at $11.742360 per unit 112
Fidelity VIP III Growth & Income - 69,833 accumulation units at $12.202502 per unit 852
Fidelity VIP Equity-Income - 24,132 accumulation units at $10.626607 per unit 256
Annuitization units:
Trust Quality Income - 6,383 annuity units at $13.420183 per unit 86
Trust Money Market - 3,661 annuity units at $10.319723 per unit 38
Trust High Yield - 2,504 annuity units at $18.254328 per unit 46
Trust Stock Index - 3,489 annuity units at $25.505004 per unit 89
Trust VKAC Growth and Income - 2,405 annuity units at $20.029452 per unit 48
Trust Bond Debenture - 264 annuity units at $12.439290 per unit 3
Trust Large Cap Research - 1,824 annuity units at $11.357085 per unit 21
Trust Quality Bond - 3,838 annuity units at $10.981198 per unit 42
Trust Small Cap Stock - 2,555 annuity units at $11.597212 per unit 29
Trust Large Cap Stock - 10,956 annuity units at $17.906619 per unit 196
Trust Select Equity - 11,716 annuity units at $15.656564 per unit 183
Trust International Equity - 2,825 annuity units at $11.879669 per unit 33
Lord Abbett Growth and Income - 33,266 annuity units at $26.263244 per unit 874
GACC Money Market - 8,875 annuity units at $10.294566 per unit 91
----------
Total net assets $ 1,700,542
==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Trust
-----------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income Debenture Growth
------------------------- -------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 2,356 784 1,365 468 306 2,261 --
------- -------- ------- -------- -------- ----------- ------------
Expenses:
Mortality and expense risk fee 553 179 394 1,135 621 993 89
Administrative fee 66 22 48 136 75 119 10
------- -------- ------- -------- -------- ----------- ------------
Total expenses 619 201 442 1,271 696 1,112 99
------- -------- ------- -------- -------- ----------- ------------
Net investment
income (loss) 1,737 583 923 (803) (390) 1,149 (99)
------- -------- ------- -------- -------- ----------- ------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 455 -- 135 6,103 1,440 19 (14)
Realized gain distributions -- -- -- 15,804 5,687 880 4
------- -------- ------- -------- -------- ----------- ------------
Net realized gain (loss) 455 -- 135 21,907 7,127 899 (10)
------- -------- ------- -------- -------- ----------- ------------
Change in unrealized
appreciation during the year 6 -- (668) 838 634 1,565 883
------- -------- ------- -------- -------- ----------- ------------
Net increase (decrease)
in net assets from
operations $ 2,198 583 390 21,942 7,371 3,613 774
======= ======== ======= ======== ======== =========== ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Trust
--------------------------------------------------------------------
Small Large
Large Cap Mid-Cap Quality Cap Cap Select
Research Value Bond Stock Stock Equity
--------------- --------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 15 13 557 86 120 413
--------------- -------- ------- -------- -------- --------
Expenses:
Mortality and expense risk fee 72 109 326 783 580 1,700
Administrative fee 9 13 39 94 70 204
--------------- --------- ------- -------- -------- --------
Total expenses 81 122 365 877 650 1,904
--------------- --------- ------- -------- -------- --------
Net investment
income (loss) (66) (109) 192 (791) (530) (1,491)
--------------- --------- ------- -------- -------- --------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 5 (3) 36 (125) 16 210
Realized gain distributions -- -- -- 2,193 396 8,232
--------------- --------- ------- -------- -------- --------
Net realized gain (loss) 5 (3) 36 2,068 412 8,442
--------------- --------- ------- -------- -------- --------
Change in unrealized
appreciation during the year 1,278 120 1,412 (6,177) 13,680 20,065
--------------- --------- ------- -------- -------- --------
Net increase (decrease)
in net assets from
operations $ 1,217 8 1,640 (4,900) 13,562 27,016
=============== ========= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Trust
--------------------------------------------------------
Growth
Small and
International Cap Equity Income
Equity Balanced Equity Income Equity
------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ 1,435 46 - 37 29
------------- ---------- ------- -------- --------
Expenses:
Mortality and expense risk fee 1,007 20 9 23 53
Administrative fee 121 3 1 3 6
------------- ---------- ------- -------- --------
Total expenses 1,128 23 10 26 59
------------- ---------- ------- -------- --------
Net investment
income (loss) 307 23 (10) 11 (30)
------------- ---------- ------- -------- --------
Net realized gain (loss)
on investments:
Realized gain (loss) on
sale of fund shares 310 (1) (3) - 7
Realized gain distributions 18 41 14 80 160
------------- ---------- ------- -------- --------
Net realized gain (loss) 328 40 11 80 167
------------- ---------- ------- -------- --------
Change in unrealized
appreciation during the year 7,969 173 39 49 548
------------- ---------- ------- -------- --------
Net increase (decrease)
in net assets from
operations $ 8,604 236 40 140 685
============= ========== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Lord Abbett
------------
Growth GACC Russell
----------- ----------------------------------------------
and Money Multi-Style Aggressive Core
Income Market Equity Equity Non-US Bond
-------- ----------- ----------- ------------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 9,871 -- 54 2 10 294
-------- ----------- ----------- ------------ ---------- -------
Expenses:
Mortality and expense risk fee 7,241 144 164 30 57 103
Administrative fee 869 17 19 3 7 13
-------- ----------- ----------- ------------ ---------- -------
Total expenses 8,110 161 183 33 64 116
-------- ----------- ----------- ------------ ---------- -------
Net investment
income (loss) 1,761 (161) (129) (31) (54) 178
-------- ----------- ----------- ------------ ---------- -------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 2,081 436 1 (44) 2 1
Realized gain distributions 31,739 -- 39 26 3 6
-------- ----------- ----------- ------------ ---------- -------
Net realized gain (loss) 33,820 436 40 (18) 5 7
-------- ----------- ----------- ------------ ---------- -------
Change in unrealized
appreciation during the year 26,592 185 3,199 75 412 268
-------- ----------- ----------- ------------ ---------- -------
Net increase (decrease)
in net assets from
operations $ 62,173 460 3,110 26 363 453
======== =========== =========== ============ ========== =======
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
AIM Alliance
--------------------------------------- -------------------------
Capital International Premier Real Estate
Value Appreciation Equity Growth Investment
------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ 29 3 18 3 11
--------- ------------- ------------- ----------- -----------
Expenses:
Mortality and expense risk fee 33 12 17 43 9
Administrative fee 4 2 2 5 1
--------- ------------- ------------- ----------- -----------
Total expenses 37 14 19 48 10
--------- ------------- ------------- ----------- -----------
Net investment
income (loss) (8) (11) (1) (45) 1
--------- ------------- ------------- ----------- -----------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (10) (3) (3) (4) (2)
Realized gain distributions 260 53 -- -- 5
--------- ------------- ------------- ----------- -----------
Net realized gain (loss) 250 50 (3) (4) 3
--------- ------------- ------------- ----------- -----------
Change in unrealized
appreciation during the year 668 164 81 1,522 (170)
--------- ------------- ------------- ----------- -----------
Net increase (decrease)
in net assets from
operations $ 910 203 77 1,473 (166)
========= ============= ============= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Goldman Sachs
------------------------------------
Liberty
--------- Growth
Newport and International Global
Tiger Income Equity Income
--------- ------------ ------------- -------
<S> <C> <C> <C> <C>
Income -
dividends $ 6 41 -- 7
--------- ------------ ------------- -------
Expenses:
Mortality and expense risk fee 2 26 6 1
Administrative fee -- 3 1 --
--------- ------------ ------------- -------
Total expenses 2 29 7 1
--------- ------------ ------------- -------
Net investment
income (loss) 4 12 (7) 6
--------- ------------ ------------- -------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (30) (12) -- 1
Realized gain distributions -- -- 10 2
--------- ------------ ------------- -------
Net realized gain (loss) (30) (12) 10 3
--------- ------------ ------------- -------
Change in unrealized
appreciation during the year 54 (207) 56 (1)
--------- ------------ ------------- -------
Net increase (decrease)
in net assets from
operations $ 28 (207) 59 8
========= ============ ============= =======
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
MFS
----------------------------
Kemper
---------------------------------------------------- Growth
Dreman High Small Cap Small Cap Government with
Return Equity Growth Value Securities Bond Research Income
-------------------------- ---------- ------------ ------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ -- -- -- 2 -- 1 --
-------------- ---------- ---------- ------------ ------- ------------------
Expenses:
Mortality and expense risk fee -- 4 12 2 -- 26 34
Administrative fee -- 1 1 -- -- 3 4
-------------- ---------- ---------- ------------ ------- ------------------
Total expenses -- 5 13 2 -- 29 38
-------------- ---------- ---------- ------------ ------- ------------------
Net investment
income (loss) -- (5) (13) -- -- (28) (38)
-------------- ---------- ---------- ------------ ------- ------------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares -- (27) (4) -- -- (2) --
Realized gain distributions -- 24 12 -- -- 18 --
-------------- ---------- ---------- ------------ ------- ------------------
Net realized gain (loss) -- (3) 8 -- -- 16 --
-------------- ---------- ---------- ------------ ------- ------------------
Change in unrealized
appreciation during the year 1 107 (155) 9 1 481 574
-------------- ---------- ---------- ------------ ------- ------------------
Net increase (decrease)
in net assets from
operations $ 1 99 (160) 9 1 469 536
============== ========== ========== ============ ======= ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
MFS
--------------------------------------------------
F&C
Emerging
Emerging Markets High World
Growth Equity Income Governments
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Income -
dividends $ -- 8 16 --
---------- ---------- ---------- --------------
Expenses:
Mortality and expense risk fee 33 4 10 --
Administrative fee 4 1 1 --
---------- ---------- ---------- --------------
Total expenses 37 5 11 --
---------- ---------- ---------- --------------
Net investment
income (loss) (37) 3 5 --
---------- ---------- ---------- --------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (11) (97) (2) --
Realized gain distributions 9 -- 5 --
---------- ---------- ---------- --------------
Net realized gain (loss) (2) (97) 3 --
---------- ---------- ---------- --------------
Change in unrealized
appreciation during the year 985 (94) (34) 1
---------- ---------- ---------- --------------
Net increase (decrease)
in net assets from
operations $ 946 (188) (26) 1
========== ========== ========== ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
OPPENHEIMER
-----------------------------------------------------
GROWTH
AND HIGH STRATEGIC
GROWTH INCOME INCOME BOND BOND
---------- ---------- ----------- ----- --------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ 1 2 4 5 3
---------- ---------- ----------- ----- --------
Expenses:
Mortality and expense risk fee 6 19 5 22 5
Administrative fee 1 2 -- 2 1
---------- ---------- ----------- ----- --------
Total expenses 7 21 5 24 6
---------- ---------- ----------- ----- --------
Net investment
income (loss) (6) (19) (1) (19) (3)
---------- ---------- ----------- ----- --------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (1) (37) (1) -- --
Realized gain distributions 8 39 4 5 2
---------- -------- ----------- ----- --------
Net realized gain (loss) 7 2 3 5 2
---------- ---------- ----------- ----- --------
Change in unrealized
appreciation during the year 134 (28) (15) 95 3
---------- ---------- ----------- ----- --------
Net increase (decrease)
in net assets from
operations $ 135 (45) (13) 81 2
========== ========== =========== ===== ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Putnam
---------------------------------------------------------------------
Growth International
and New International New
Income Value Vista Growth Opportunities
---------- ---------- ---------- -------------- -----------------
<S> <C> <C> <C>
Income -
dividends $ 30 5 -- 20 --
---------- ---------- ---------- -------------- -----------------
Expenses:
Mortality and expense risk fee 68 3 8 33 4
Administrative fee 8 -- 1 4 --
---------- ---------- ---------- -------------- -----------------
Total expenses 76 3 9 37 4
---------- ---------- ---------- -------------- -----------------
Net investment
income (loss) (46) 2 (9) (17) (4)
---------- ---------- ---------- -------------- -----------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (8) -- (1) (39) 24
Realized gain distributions 200 2 -- -- --
---------- ---------- ---------- -------------- -----------------
Net realized gain (loss) 192 2 (1) (39) 24
---------- ---------- ---------- -------------- -----------------
Change in unrealized
appreciation during the year 660 6 173 353 40
---------- ---------- ---------- -------------- -----------------
Net increase (decrease)
in net assets from
operations $ 806 10 163 297 60
========== ========== ========== ============== =================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Templeton Fidelity
----------------------------------------- ------------------------
Mutual
Developing Shares
International Markets Investments Growth Contrafund
------------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ -- -- -- -- --
------------- ------------ ------------ -------- -----------
Expenses:
Mortality and expense risk fee 5 2 4 -- 2
Administrative fee 1 1 1 -- --
------------- ------------ ------------ -------- -----------
Total expenses 6 3 5 -- 2
------------- ------------ ------------ -------- -----------
Net investment
income (loss) (6) (3) (5) -- (2)
------------- ------------ ------------ -------- -----------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 8 (4) -- (3) (2)
Realized gain distributions -- -- -- -- --
------------- ------------ ------------ -------- -----------
Net realized gain (loss) 8 (4) -- (3) (2)
------------- ------------ ------------ -------- -----------
Change in unrealized
appreciation during the year 48 44 32 12 48
------------- ------------ ------------ -------- -----------
Net increase (decrease)
in net assets from
operations $ 50 37 27 9 44
============= ============ ============ ======== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Fidelity
------------------------------------
Growth Growth & Equity-
Opportunities Income Income Total
-------------- ---------- --------------------
<S> <C> <C> <C> <C>
Income -
dividends $ -- -- -- 20,737
-------------- ---------- -------- ---------
Expenses:
Mortality and expense risk fee -- 4 1 16,850
Administrative fee -- 1 -- 2,023
-------------- ---------- -------- ---------
Total expenses -- 5 1 18,873
-------------- ---------- -------- ---------
Net investment
income (loss) -- (5) (1) 1,864
-------------- ---------- -------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (2) (5) (3) 10,787
Realized gain distributions -- -- -- 65,980
-------------- ---------- -------- ---------
Net realized gain (loss) (2) (5) (3) 76,767
-------------- ---------- -------- ---------
Change in unrealized
appreciation during the year 13 94 17 78,917
-------------- ---------- -------- ---------
Net increase (decrease)
in net assets from
operations $ 11 84 13 157,548
============== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Trust
----------------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income Debenture Growth
-------- -------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 1,737 583 923 (803) (390) 1,149 (99)
Net realized gain (loss) 455 -- 135 21,907 7,127 899 (10)
Change in unrealized
appreciation during
the year 6 -- (668) 838 634 1,565 883
-------- -------- --------- -------- --------- --------- -----------
Net increase (decrease)
in net assets from
operations 2,198 583 390 21,942 7,371 3,613 774
-------- -------- --------- -------- --------- --------- -----------
Contract transactions:
Cova payments -- -- -- -- -- -- --
Cova transfers -- -- -- -- -- -- (112)
Payments received from contract
owners 21 6 55 69 39 21,396 6,348
Transfers between sub-accounts
(including fixed account), net (3,399) (10,098) (1,392) 3,960 1,244 38,789 6,481
Transfers for contract benefits
and terminations (8,833) (4,210) (3,514) (17,021) (3,490) (4,147) (201)
-------- -------- --------- -------- --------- --------- -----------
Net increase (decrease) in
net assets from
contract transactions (12,211) (14,302) (4,851) (12,992) (2,207) 56,038 12,516
-------- -------- --------- -------- --------- --------- -----------
Net increase (decrease)
in net assets (10,013) (13,719) (4,461) 8,950 5,164 59,651 13,290
Net assets at beginning of period 49,103 21,610 33,261 88,637 46,147 50,820 1,565
-------- -------- --------- -------- --------- --------- -----------
Net assets at end of period $ 39,090 7,891 28,800 97,587 51,311 110,471 14,855
======== ======== ========= ======== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Trust
----------------------------------------------------------------------------
Small Large
Large Cap Mid-Cap Quality Cap Cap Select
Research Value Bond Stock Stock Equity
------------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (66) (109) 192 (791) (530) (1,491)
Net realized gain (loss) 5 (3) 36 2,068 412 8,442
Change in unrealized
appreciation during
the year 1,278 120 1,412 (6,177) 13,680 20,065
------------- ----------- ---------- ---------- ---------- -----------
Net increase (decrease)
in net assets from
operations 1,217 8 1,640 (4,900) 13,562 27,016
------------- ----------- ---------- ---------- ---------- -----------
Contract transactions:
Cova payments -- -- -- -- -- --
Cova transfers (102) (107) -- -- -- --
Payments received from contract
owners 6,104 7,924 9,698 8,193 18,801 21,003
Transfers between sub-accounts
(including fixed account), net 4,750 7,602 14,372 15,607 29,039 38,783
Transfers for contract benefits
and terminations (234) (317) (2,058) (2,424) (2,022) (4,555)
------------- ----------- ---------- ---------- ---------- -----------
Net increase (decrease) in
net assets from
contract transactions 10,518 15,102 22,012 21,376 45,818 55,231
------------- ----------- ---------- ---------- ---------- -----------
Net increase (decrease)
in net assets 11,735 15,110 23,652 16,476 59,380 82,247
Net assets at beginning of period 1,233 2,035 15,986 53,169 21,989 97,063
------------- ----------- ---------- ---------- ---------- -----------
Net assets at end of period $ 12,968 17,145 39,638 69,645 81,369 179,310
============= =========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
-----------------------------------------------------------------
Growth
Small and
International Cap Equity Income
Equity Balanced Equity Income Equity
--------------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 307 23 (10) 11 (30)
Net realized gain (loss) 328 40 11 80 167
Change in unrealized
appreciation during
the year 7,969 173 39 49 548
--------------- ----------- --------- --------- ---------
Net increase (decrease)
in net assets from
operations 8,604 236 40 140 685
--------------- ----------- --------- --------- ---------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 8,143 1,408 442 1,820 3,014
Transfers between sub-accounts
(including fixed account), net 18,076 1,373 588 988 2,913
Transfers for contract benefits
and terminations (2,949) (46) (15) (42) (98)
--------------- ----------- --------- --------- ---------
Net increase (decrease) in
net assets from
contract transactions 23,270 2,735 1,015 2,766 5,829
--------------- ----------- --------- ---------------------
Net increase (decrease)
in net assets 31,874 2,971 1,055 2,906 6,514
Net assets at beginning of period 62,371 401 272 557 1,309
--------------- ----------- --------- --------- ---------
Net assets at end of period $ 94,245 3,372 1,327 3,463 7,823
=============== =========== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Lord Abbett
----------------
GACC Russell
Growth ---------- -------------------------------------------------
and Money Multi-Style Aggressive Core
Income Market Equity Equity Non-US Bond
---------------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,761 (161) (129) (31) (54) 178
Realized gain (loss) 33,820 436 40 (18) 5 7
Change in unrealized
appreciation during
the year 26,592 185 3,199 75 412 268
---------------- ---------- ----------- ---------- --------- ----------
Net increase (decrease)
in net assets from
operations 62,173 460 3,110 26 363 453
---------------- ---------- ----------- ---------- --------- ----------
Contract transactions:
Cova payments -- -- -- -- -- --
Cova transfers -- -- -- -- -- --
Payments received from contract
owners 55,721 35,352 21,870 4,296 8,107 13,098
Transfers between sub-accounts
(including fixed account), net 102,796 (19,753) 4,748 1,041 1,920 3,732
Transfers for contract benefits
and terminations (38,987) (2,913) (169) (20) (74) (233)
---------------- ---------- ----------- ---------- --------- ----------
Net increase (decrease) in
net assets from
contract transactions 119,530 12,686 26,449 5,317 9,953 16,597
---------------- ---------- ----------- ---------- --------- ----------
Net increase (decrease)
in net assets 181,703 13,146 29,559 5,343 10,316 17,050
Net assets at beginning of period 487,500 3,318 -- -- -- --
---------------- ---------- ----------- ---------- --------- ----------
Net assets at end of period $ 669,203 16,464 29,559 5,343 10,316 17,050
================ ========== =========== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
AIM Alliance
------------------------------------------------- ------------------------------
Capital International Premier Real Estate
Value Appreciation Equity Growth Investment
---------- ---------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (8) (11) (1) (45) 1
Realized gain (loss) 250 50 (3) (4) 3
Change in unrealized
appreciation during
the year 668 164 81 1,522 (170)
---------- ---------------- ---------------- -------------- --------------
Net increase (decrease)
in net assets from
operations 910 203 77 1,473 (166)
---------- ---------------- ---------------- -------------- --------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 4,061 1,431 1,648 6,485 1,193
Transfers between sub-accounts
(including fixed account), net 2,030 609 609 1,828 514
Transfers for contract benefits
and terminations (185) (83) (9) (38) (12)
---------- ---------------- ---------------- -------------- --------------
Net increase (decrease) in
net assets from
contract transactions 5,906 1,957 2,248 8,275 1,695
---------- ------------- ---------------- -------------- --------------
Net increase (decrease)
in net assets 6,816 2,160 2,325 9,748 1,529
Net assets at beginning of period -- -- -- -- --
---------- ---------------- ---------------- -------------- --------------
Net assets at end of period $ 6,816 2,160 2,325 9,748 1,529
========== ================ ================ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Goldman Sachs
-----------------------------------------
Liberty Growth
---------------
Newport and International Global
Tiger Income Equity Income
--------------- ----------------------------- ----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 4 12 (7) 6
Realized gain (loss) (30) (12) 10 3
Change in unrealized
appreciation during
the year 54 (207) 56 (1)
--------------- ----------- ---------------- ----------
Net increase (decrease)
in net assets from
operations 28 (207) 59 8
--------------- ----------- ---------------- ----------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- --
Payments received from contract
owners 159 3,067 979 125
Transfers between sub-accounts
(including fixed account), net 108 1,826 255 84
Transfers for contract benefits
and terminations -- (52) (6) (14)
--------------- ----------- ---------------- ----------
Net increase (decrease) in
net assets from
contract transactions 267 4,841 1,228 195
--------------- ----------- ---------------- ----------
Net increase (decrease)
in net assets 295 4,634 1,287 203
Net assets at beginning of period -- -- -- --
--------------- ----------- ---------------- ----------
Net assets at end of period $ 295 4,634 1,287 203
=============== =========== ================ ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
MFS
-----------------------
Kemper
-------------- ---------------------------------------
Dreman High Small Cap Small Cap Government
Return Equity Growth Value Securities Bond Research
-------------- ------------ ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ -- (5) (13) -- -- (28)
Realized gain (loss) -- (3) 8 -- -- 16
Change in unrealized
appreciation during
the year 1 107 (155) 9 1 481
-------------- ------------ ------------ ----------- --------- ------------
Net increase (decrease)
in net assets from
operations 1 99 (160) 9 1 469
-------------- ------------ ------------ ----------- --------- ------------
Contract transactions:
Cova payments -- -- -- -- -- --
Cova transfers -- -- -- -- -- --
Payments received from contract
owners -- 630 1,656 503 3 3,760
Transfers between sub-accounts
(including fixed account), net 96 162 670 120 170 1,530
Transfers for contract benefits
and terminations -- 2 (21) (2) -- (101)
-------------- ------------ ------------ ----------- --------- ------------
Net increase (decrease) in
net assets from
contract transactions 96 794 2,305 621 173 5,189
-------------- ------------ ------------ ----------- --------- ------------
Net increase (decrease)
in net assets 97 893 2,145 630 174 5,658
Net assets at beginning of period -- -- -- -- -- --
-------------- ------------ ------------ ----------- --------- ------------
Net assets at end of period $ 97 893 2,145 630 174 5,658
============== ============ ============ =========== ========= ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
MFS
-------------------------------------------------------------------------
F&C
Growth Emerging
with Emerging Markets High World
Income Growth Equity Income Governments
----------------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (38) (37) 3 5 --
Realized gain (loss) -- (2) (97) 3 --
Change in unrealized
appreciation during
the year 574 985 (94) (34) 1
-------- ------------ ------------ ------------ -----------------
Net increase (decrease)
in net assets from
operations 536 946 (188) (26) 1
-------- ------------ ------------ ------------ -----------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 4,624 5,018 421 1,634 4
Transfers between sub-accounts
(including fixed account), net 1,901 1,216 252 570 17
Transfers for contract benefits
and terminations (45) (38) (4) (20) --
-------- ------------ ------------ ------------ -----------------
Net increase (decrease) in
net assets from
contract transactions 6,480 6,196 669 2,184 21
-------- ------------ ------------ ------------ -----------------
Net increase (decrease)
in net assets 7,016 7,142 481 2,158 22
Net assets at beginning of period -- -- -- -- --
-------- ------------ ------------ ------------ -----------------
Net assets at end of period $ 7,016 7,142 481 2,158 22
======== ============ ============ ============ =================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
OPPENHEIMER
--------------------------------------------------------------------
GROWTH
AND HIGH STRATEGIC
GROWTH INCOME INCOME BOND BOND
------------- ------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (6) (19) (1) (19) (3)
Realized gain (loss) 7 2 3 5 2
Change in unrealized
appreciation during
the year 134 (28) (15) 95 3
------------- ------------ ------------ --------- -------------
Net increase (decrease)
in net assets from
operations 135 (45) (13) 81 2
------------- ------------ ------------ --------- -------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 838 2,140 517 3,298 725
Transfers between sub-accounts
(including fixed account), net 220 859 281 889 371
Transfers for contract benefits
and terminations (4) (13) (8) (34) (3)
------------- ------------ ------------ --------- -------------
Net increase (decrease) in
net assets from
contract transactions 1,054 2,986 790 4,153 1,093
------------- ------------ ------------ --------- -------------
Net increase (decrease)
in net assets 1,189 2,941 777 4,234 1,095
Net assets at beginning of period -- -- -- -- --
------------- ------------ ------------ --------- -------------
Net assets at end of period $ 1,189 2,941 777 4,234 1,095
============= ============ ============ ========= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Putnam
---------------------------------------------------------------------------
Growth International
and New International New
Income Value Vista Growth Opportunities
------------- ------------ ---------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (46) 2 (9) (17) (4)
Net realized gain (loss) 192 2 (1) (39) 24
Change in unrealized
appreciation during
the year 660 6 173 353 40
------------- ------------ ---------- --------------- ------------------
Net increase (decrease)
in net assets from
operations 806 10 163 297 60
------------- ------------ ---------- --------------- ------------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 8,705 173 1,241 4,444 423
Transfers between sub-accounts
(including fixed account), net 3,257 259 385 1,511 127
Transfers for contract benefits
and terminations (69) (1) (4) (46) (8)
------------- ------------ ---------- --------------- ------------------
Net increase (decrease) in
net assets from
contract transactions 11,893 431 1,622 5,909 542
------------- ------------ ---------- --------------- ------------------
Net increase (decrease)
in net assets 12,699 441 1,785 6,206 602
Net assets at beginning of period -- -- -- -- --
------------- ------------ ---------- --------------- ------------------
Net assets at end of period $ 12,699 441 1,785 6,206 602
============= ============ ========== =============== ==================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Templeton Fidelity
-------------------------------------------- ----------------------
Mutual
Developing Shares
International Markets Investments Growth Contrafund
------------- ------------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (6) (3) (5) -- (2)
Net realized gain (loss) 8 (4) -- (3) (2)
Change in unrealized
appreciation during
the year 48 44 32 12 48
------------- ------------- -------------- -------- -------------
Net increase (decrease)
in net assets from
operations 50 37 27 9 44
------------- ------------- -------------- -------- -------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 1,261 509 584 86 330
Transfers between sub-accounts
(including fixed account), net 201 139 415 (5) 24
Transfers for contract benefits
and terminations (5) (6) (5) (2) 2
------------- ------------- -------------- -------- -------------
Net increase (decrease) in
net assets from
contract transactions 1,457 642 994 79 356
------------- ------------- -------------- -------- -------------
Net increase (decrease)
in net assets 1,507 679 1,021 88 400
Net assets at beginning of period -- -- -- -- --
------------- ------------- -------------- -------- -------------
Net assets at end of period $ 1,507 679 1,021 88 400
============= ============= ============== ======== =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Fidelity
----------------------------------------------
Growth Growth & Equity-
Opportunities Income Income Total
---------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ -- (5) (1) 1,864
Net realized gain (loss) (2) (5) (3) 76,767
Change in unrealized
appreciation during
the year 13 94 17 78,917
---------------- ------------ ------------- -------------
Net increase (decrease)
in net assets from
operations 11 84 13 157,548
---------------- ------------ ------------- -------------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- (321)
Payments received from contract
owners 114 435 195 316,347
Transfers between sub-accounts
(including fixed account), net (13) 333 51 288,031
Transfers for contract benefits
and terminations -- -- (3) (99,409)
---------------- ------------ ------------- -------------
Net increase (decrease) in
net assets from
contract transactions 101 768 243 504,648
---------------- ------------ ------------- -------------
Net increase (decrease)
in net assets 112 852 256 662,196
Net assets at beginning of period -- -- -- 1,038,346
---------------- ------------ ------------- -------------
Net assets at end of period $ 112 852 256 1,700,542
================ ============ ============= =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1997
(In thousands of dollars)
Trust
-------------------------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income Debenture Growth
---------- ----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income
(loss) $ 2,586 1,851 2,603 (73) (22) 1,266 (2)
Net realized gain (loss) 503 -- 835 15,992 1,404 35 --
Change in unrealized
appreciation during
the year 367 -- 351 4,729 6,685 1,687 7
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net increase (decrease)
in net assets
from operations 3,456 1,851 3,789 20,648 8,067 2,988 5
---------- ----------- ----------- ----------- ----------- ---------- -----------
Contract transactions:
Cova payments -- -- -- -- -- -- 100
Cova transfers -- -- -- -- -- -- --
Payments received from
contract owners 504 45,236 795 2,638 2,541 8,751 503
Transfers between sub-
accounts (including fixed
account), net 3,092 (48,066) (11,222) (9,170) 5,116 32,608 959
Transfers for contract
benefits and terminations (9,775) (8,119) (2,972) (14,588) (1,993) (978) (2)
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net increase
(decrease) in net
assets from contract
transactions (6,179) (10,949) (13,399) (21,120) 5,664 40,381 1,560
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net increase
(decrease) in net
assets (2,723) (9,098) (9,610) (472) 13,731 43,369 1,565
Net assets at beginning of period 51,826 30,708 42,871 89,109 32,416 7,451 --
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net assets at end of period $ 49,103 21,610 33,261 88,637 46,147 50,820 1,565
========== =========== =========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1997
(In thousands of dollars)
TRUST
--------------------------------------------------------------------------------------
Small Large
Large Cap Mid-Cap Quality Cap Cap Select International
Research Value Bond Stock Stock Equity Equity
---------- --------- ---------- --------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income
(loss) $ 1 -- 439 (260) (59) (342) (18)
Net realized gain (loss) -- -- 116 135 2,865 331 51
Change in unrealized
appreciation during
the year 6 40 156 5,990 1,324 12,310 513
--------- --------- ---------- --------- ----------- ---------- ---------------
Net increase (decrease)
in net assets
from operations 7 40 711 5,865 4,130 12,299 546
--------- --------- ---------- --------- ----------- ---------- ---------------
Contract transactions:
Cova payments 100 100 -- -- -- -- --
Cova transfers -- -- (2,144) -- (15,455) -- --
Payments received from
contract owners 359 463 2,671 9,550 7,691 19,507 11,213
Transfers between sub-
accounts (including fixed
account), net 769 1,460 10,203 24,982 10,293 44,654 37,503
Transfers for contract
benefits and terminations (2) (28) (731) (1,221) (421) (1,556) (1,224)
--------- --------- ---------- --------- ----------- ---------- ---------------
Net increase
(decrease) in net
assets from contract
transactions 1,226 1,995 9,999 33,311 2,108 62,605 47,492
--------- --------- ---------- --------- ----------- ---------- ---------------
Net increase
(decrease) in net
assets 1,233 2,035 10,710 39,176 6,238 74,904 48,038
Net assets at beginning of period -- -- 5,276 13,993 15,751 22,159 14,333
--------- --------- ---------- --------- ----------- ---------- ---------------
Net assets at end of period $ 1,233 2,035 15,986 53,169 21,989 97,063 62,371
========= ========= ========== ========= =========== ========== ===============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1997
(In thousands of dollars)
Trust
---------------------------------------------
Growth Lord Abbett
---------------------
Small and GACC
Growth ----------
Cap Equity Income and Global Money
Balanced Equity Income Equity Income Equity Market Total
-------------------- --------- ----------- --------- ------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income
(loss) $ 4 (1) 2 (1) 2,366 (9) (24) 10,307
Net realized gain (loss) 4 2 7 11 31,083 (36) 55 53,393
Change in unrealized
appreciation during
the year -- (5) 21 18 41,372 (1) 40 75,610
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net increase (decrease)
in net assets
from operations 8 (4) 30 28 74,821 (46) 71 139,310
-------- ---------- --------- ----------- --------- ------- -------- -------------
Contract transactions:
Cova payments 1 1 1 1 -- -- -- 304
Cova transfers (1) (1) (1) (1) -- -- -- (17,603)
Payments received from
contract owners 184 116 219 679 47,264 5 5,197 166,086
Transfers between sub-
accounts (including fixed
account), net 235 160 309 646 94,311 (2,228) (1,996) 194,618
Transfers for contract
benefits and terminations (26) -- (1) (44) (23,254) (114) (312) (67,361)
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net increase
(decrease) in net
assets from contract
transactions 393 276 527 1,281 118,321 (2,337) 2,889 276,044
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net increase
(decrease) in net
assets 401 272 557 1,309 193,142 (2,383) 2,960 415,354
Net assets at beginning of period -- -- -- -- 294,358 2,383 358 622,992
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net assets at end of period $ 401 272 557 1,309 487,500 -- 3,318 1,038,346
======== ========== ========= =========== ========= ======= ======== =============
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(1) ORGANIZATION
Cova Variable Annuity Account One (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by Cova Financial Services Life Insurance
Company (Cova) and exists in accordance with the regulations of the
Missouri Department of Insurance. The Separate Account is a funding
vehicle for variable annuity contracts issued by Cova.
<TABLE>
<CAPTION>
The Separate Account is divided into sub-accounts with the assets of
each sub-account invested in the corresponding portfolios of the
following investment companies:
<S> <C>
Cova Series Trust (Trust) 18 portfolios
Lord Abbett Series Fund, Inc. (Lord Abbett) 1 portfolio
General American Capital Company (GACC) 1 portfolio
Russell Insurance Funds (Russell) 4 portfolios
AIM Variable Insurance Funds, Inc. (AIM) 3 portfolios
Alliance Variable Products Series Fund, Inc. (Alliance) 2 portfolios
Liberty Variable Investment Trust (Liberty) 1 portfolio
Goldman Sachs Variable Insurance Trust (Goldman Sachs) 3 portfolios
Investors Fund Series (Kemper) 4 portfolios
MFS Variable Insurance Trust (MFS) 7 portfolios
Oppenheimer Variable Account Funds (Oppenheimer) 5 portfolios
Putnam Variable Trust (Putnam) 5 portfolios
Templeton Variable Products Series Fund (Templeton) 3 portfolios
Variable Insurance Products Fund, Fund II, and Fund III (Fidelity) 5 portfolios
</TABLE>
Each investment company is a diversified, open-end, management
investment company registered under the Investment Company Act of 1940
as amended. Not all sub-accounts are available for investment depending
upon the terms of the variable annuity contracts offered for sale by
Cova.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the
sale of portfolio shares owned by the sub-accounts. Income from
dividends and gains from realized gain distributions are recorded
on the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in
additional shares of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment
income and realized capital gains are deemed to pass through to
the Separate Account. As a result, GACC does not distribute
dividends and realized gains. During December of each year, the
accumulated net investment income and realized capital gains of
the GACC Money Market 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
The operations of the Separate Account are included in the federal
income tax return of Cova, which is taxed as a Life Insurance
Company under the provisions of the Internal Revenue Code (IRC).
Under current IRC provisions, Cova believes it will be treated as
the owner of the Separate Account assets for federal income tax
purposes and does not expect to incur federal income taxes on the
earnings of the Separate Account to the extent the earnings are
credited to the variable annuity contracts. Based on this, no
charge is being made currently to the Separate Account for federal
income taxes. A charge may be made in future years for any federal
income taxes that would be attributable to the contracts.
(D) ANNUITY RESERVES
Annuity reserves are computed for contracts in the payout stage
according to the 1983a Mortality Table. The assumed investment
return is 3%. The mortality risk is borne by Cova and may result
in additional transfers to the Separate Account. Conversely, if
reserves exceed amounts required, transfers may be made from the
Separate Account to Cova. The charges were not material in 1998.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of the Separate Account
equivalent to an annual rate of 1.25% for the assumption of mortality
and expense risks and 0.15% for administrative expenses. 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 fee in the event of the death of the
contract owner. The administrative fees cover the cost of establishing
and maintaining the variable annuity contracts and the Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at
the time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee 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 the contract value exceeds $5,000, the contract
owner may make one withdrawal each contract year of up to 10% of the
aggregate purchase payments (on deposit for more than one year) without
incurring a surrender fee. In 1998, surrender fees of $436 thousand were
deducted from the contract values in the Separate Account.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their policy
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the sub-accounts and the fixed
rate account 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 the available
sub-accounts of the Separate Account and the fixed rate account offered
by 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 amount
transferred, may be deducted from the contract account value. Transfers
made in the Dollar Cost Averaging program are not subject to the
transfer fee.
In 1998, contract maintenance and transfer fees of $478 thousand were
deducted from the contract values in the 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. Cova reserves the right to deduct
premium taxes when incurred.
(5) SUBSEQUENT EVENT
On January 8, 1999, the five sub-accounts investing in the Trust
portfolios managed by Van Kampen American Capital Advisory Corp. (VKAC)
- Quality Income, Money Market, High Yield, Stock Index, and VKAC Growth
and Income portfolios - ceased operations and their assets were
transferred to one new and four existing sub-accounts in accordance with
the substitution order issued by the Securities and Exchange Commission.
On January 8, 1999, the Lord Abbett Growth and Income sub-account ceased
operations and its assets were transferred to the Trust Lord Abbett
Growth and Income sub-account which commenced operations on January 8,
1999. The Trust Lord Abbett Growth and Income sub-account invests in the
Trust Lord Abbett Growth and Income Portfolio which commenced operations
on January 8, 1999. The Trust Lord Abbett Growth and Income Portfolio is
managed by Lord Abbett who also manages the Lord Abbett Growth and
Income Portfolio.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
COMMENCED ACCUMULATION UNIT VALUE
-----------------------------------------------------------------
operations 1998 1997 1996 1995 1994
-------------- ------------ ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Trust Quality Income* 12/11/89 $ 17.539854 16.716329 15.540273 15.331971 13.170448
Trust Money Market* 06/28/91 12.882171 12.375226 11.879722 11.425133 10.896621
Trust High Yield* 12/11/89 23.857965 23.571992 21.422784 19.522535 16.977032
Trust Stock Index* 10/31/91 31.522392 24.963514 19.036956 15.773906 11.679303
Trust VKAC Growth and Income* 05/02/92 24.396666 20.978325 17.008151 14.608904 11.195845
Trust Bond Debenture 05/01/96 13.496500 12.881792 11.294930 -- --
Trust Developing Growth 08/20/97 11.067854 10.527554 -- -- --
Trust Large Cap Research 08/20/97 11.825550 9.899560 -- -- --
Trust Mid-Cap Value 08/20/97 10.437949 10.467957 -- -- --
Trust Quality Bond 05/01/96 11.914489 11.155126 10.368764 -- --
Trust Small Cap Stock 05/01/96 12.582860 13.491466 11.308419 -- --
Trust Large Cap Stock 05/01/96 19.428499 14.889462 11.334979 -- --
Trust Select Equity 05/01/96 16.987204 14.053502 10.838053 -- --
Trust International Equity 05/01/96 12.889315 11.462435 10.967004 -- --
Trust Balanced 07/01/97 11.767845 10.531920 -- -- --
Trust Small Cap Equity 07/01/97 10.238676 10.418047 -- -- --
Trust Equity Income 07/01/97 12.068849 11.194166 -- -- --
Trust Growth and Income Equity 07/01/97 12.188331 10.756082 -- -- --
Lord Abbett Growth and Income* 12/11/89 34.325425 30.837057 25.089525 21.306277 16.642028
GACC Money Market 06/03/96 11.109943 10.667011 10.233546 -- --
Russell Multi-Style Equity 12/31/97 12.694810 10.000000 -- -- --
Russell Aggressive Equity 12/31/97 9.963254 10.000000 -- -- --
Russell Non-US 12/31/97 11.142092 10.000000 -- -- --
Russell Core Bond 12/31/97 10.591175 10.000000 -- -- --
AIM Value 12/31/97 13.060203 10.000000 -- -- --
AIM Capital Appreciation 12/31/97 11.770729 10.000000 -- -- --
AIM International Equity 12/31/97 11.391449 10.000000 -- -- --
Alliance Premier Growth 12/31/97 14.595485 10.000000 -- -- --
Alliance Real Estate Investment 12/31/97 7.988435 10.000000 -- -- --
Liberty Newport Tiger 12/31/97 9.228765 10.000000 -- -- --
Goldman Sachs Growth and Income 01/29/98 9.908613 -- -- -- --
Goldman Sachs International Equity 01/29/98 11.402925 -- -- -- --
Goldman Sachs Global Income 01/29/98 10.781765 -- -- -- --
Kemper Dreman High Return Equity 05/15/98 10.487302 -- -- -- --
Kemper Small Cap Growth 12/31/97 11.676086 10.000000 -- -- --
Kemper Small Cap Value 12/31/97 8.753222 10.000000 -- -- --
Kemper Government Securities 12/31/97 10.556498 10.000000 -- -- --
MFS Bond 05/15/98 10.491811 -- -- -- --
MFS Research 12/31/97 12.172796 10.000000 -- -- --
MFS Growth with Income 12/31/97 12.066568 10.000000 -- -- --
MFS Emerging Growth 12/31/97 13.233235 10.000000 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 6.571830 10.000000 -- -- --
MFS High Income 12/31/97 9.845193 10.000000 -- -- --
MFS World Governments 12/31/97 10.669943 10.000000 -- -- --
Oppenheimer Growth 12/31/97 12.232731 10.000000 -- -- --
Oppenheimer Growth & Income 12/31/97 10.326519 10.000000 -- -- --
Oppenheimer High Income 12/31/97 9.893828 10.000000 -- -- --
Oppenheimer Bond 12/31/97 10.533011 10.000000 -- -- --
Oppenheimer Strategic Bond 12/31/97 10.151332 10.000000 -- -- --
Putnam Growth and Income 12/31/97 11.382650 10.000000 -- -- --
Putnam New Value 12/31/97 10.483517 10.000000 -- -- --
Putnam Vista 12/31/97 11.785702 10.000000 -- -- --
Putnam International Growth 12/31/97 11.707003 10.000000 -- -- --
Putnam International New Opportunities 12/31/97 11.402252 10.000000 -- -- --
Templeton International 05/01/98 9.144522 -- -- -- --
Templeton Developing Markets 05/01/98 7.552448 -- -- -- --
Templeton Mutual Shares Investments 05/01/98 9.630622 -- -- -- --
Fidelity VIP Growth 02/17/98 13.077878 -- -- -- --
Fidelity VIP II Contrafund 02/17/98 12.357373 -- -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 11.742360 -- -- -- --
Fidelity VIP III Growth & Income 02/17/98 12.202502 -- -- -- --
Fidelity VIP Equity-Income 02/17/98 10.626607 -- -- -- --
============ =========== =========== =========== ==============
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
NET ASSETS (IN 000'S)
-------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* $ 39,090 49,103 51,826 41,253 33,933
Trust Money Market* 7,891 21,610 30,708 34,128 75,878
Trust High Yield* 28,800 33,261 42,871 36,512 19,653
Trust Stock Index* 97,587 88,637 89,109 85,762 36,807
Trust VKAC Growth and Income* 51,311 46,147 32,416 19,617 10,941
Trust Bond Debenture 110,471 50,820 7,451 -- --
Trust Developing Growth 14,855 1,565 -- -- --
Trust Large Cap Research 12,968 1,233 -- -- --
Trust Mid-Cap Value 17,145 2,035 -- -- --
Trust Quality Bond 39,638 15,986 5,276 -- --
Trust Small Cap Stock 69,645 53,169 13,993 -- --
Trust Large Cap Stock 81,369 21,989 15,751 -- --
Trust Select Equity 179,310 97,063 22,159 -- --
Trust International Equity 94,245 62,371 14,333 -- --
Trust Balanced 3,372 401 -- -- --
Trust Small Cap Equity 1,327 272 -- -- --
Trust Equity Income 3,463 557 -- -- --
Trust Growth and Income Equity 7,823 1,309 -- -- --
Lord Abbett Growth and Income* 669,203 487,500 294,358 190,630 114,416
GACC Money Market 16,464 3,318 358 -- --
Russell Multi-Style Equity 29,559 -- -- -- --
Russell Aggressive Equity 5,343 -- -- -- --
Russell Non-US 10,316 -- -- -- --
Russell Core Bond 17,050 -- -- -- --
AIM Value 6,816 -- -- -- --
AIM Capital Appreciation 2,160 -- -- -- --
AIM International Equity 2,325 -- -- -- --
Alliance Premier Growth 9,748 -- -- -- --
Alliance Real Estate Investment 1,529 -- -- -- --
Liberty Newport Tiger 295 -- -- -- --
Goldman Sachs Growth and Income 4,634 -- -- -- --
Goldman Sachs International Equity 1,287 -- -- -- --
Goldman Sachs Global Income 203 -- -- -- --
Kemper Dreman High Return Equity 97 -- -- -- --
Kemper Small Cap Growth 893 -- -- -- --
Kemper Small Cap Value 2,145 -- -- -- --
Kemper Government Securities 630 -- -- -- --
MFS Bond 174 -- -- -- --
MFS Research 5,658 -- -- -- --
MFS Growth with Income 7,016 -- -- -- --
MFS Emerging Growth 7,142 -- -- -- --
MFS / F&C Emerging Markets Equity 481 -- -- -- --
MFS High Income 2,158 -- -- -- --
MFS World Governments 22 -- -- -- --
Oppenheimer Growth 1,189 -- -- -- --
Oppenheimer Growth & Income 2,941 -- -- -- --
Oppenheimer High Income 777 -- -- -- --
Oppenheimer Bond 4,234 -- -- -- --
Oppenheimer Strategic Bond 1,095 -- -- -- --
Putnam Growth and Income 12,699 -- -- -- --
Putnam New Value 441 -- -- -- --
Putnam Vista 1,785 -- -- -- --
Putnam International Growth 6,206 -- -- -- --
Putnam International New Opportunities 602 -- -- -- --
Templeton International 1,507 -- -- -- --
Templeton Developing Markets 679 -- -- -- --
Templeton Mutual Shares Investments 1,021 -- -- -- --
Fidelity VIP Growth 88 -- -- -- --
Fidelity VIP II Contrafund 400 -- -- -- --
Fidelity VIP III Growth Opportunities 112 -- -- -- --
Fidelity VIP III Growth & Income 852 -- -- -- --
Fidelity VIP Equity-Income 256 -- -- -- --
=========== =========== =========== =========== ===========
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
TOTAL RETURN**
--------------------------------------------------------
1998 1997 1996 1995 1994
--------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 4.93 % 7.57 1.36 16.41 (5.70)
Trust Money Market* 4.10 4.17 3.98 4.85 2.70
Trust High Yield* 1.21 10.03 9.73 14.99 (5.79)
Trust Stock Index* 26.27 31.13 20.69 35.06 (1.58)
Trust VKAC Growth and Income* 16.30 23.34 16.42 30.49 (6.07)
Trust Bond Debenture 4.77 14.05 11.86 -- --
Trust Developing Growth 5.13 5.28 -- -- --
Trust Large Cap Research 19.46 (1.00) -- -- --
Trust Mid-Cap Value (0.29) 4.68 -- -- --
Trust Quality Bond 6.81 7.58 4.76 -- --
Trust Small Cap Stock (6.74) 19.31 7.57 -- --
Trust Large Cap Stock 30.49 31.36 13.32 -- --
Trust Select Equity 20.88 29.67 7.48 -- --
Trust International Equity 12.45 4.52 7.36 -- --
Trust Balanced 11.74 5.32 -- -- --
Trust Small Cap Equity (1.72) 4.18 -- -- --
Trust Equity Income 7.81 11.94 -- -- --
Trust Growth and Income Equity 13.32 7.56 -- -- --
Lord Abbett Growth and Income* 11.31 22.91 17.76 28.03 1.32
GACC Money Market 4.15 4.24 2.34 -- --
Russell Multi-Style Equity 26.95 -- -- -- --
Russell Aggressive Equity (0.37) -- -- -- --
Russell Non-US 11.42 -- -- -- --
Russell Core Bond 5.91 -- -- -- --
AIM Value 30.60 -- -- -- --
AIM Capital Appreciation 17.71 -- -- -- --
AIM International Equity 13.91 -- -- -- --
Alliance Premier Growth 45.96 -- -- -- --
Alliance Real Estate Investment (20.12) -- -- -- --
Liberty Newport Tiger (7.71) -- -- -- --
Goldman Sachs Growth and Income (0.91) -- -- -- --
Goldman Sachs International Equity 14.03 -- -- -- --
Goldman Sachs Global Income 7.82 -- -- -- --
Kemper Dreman High Return Equity 4.87 -- -- -- --
Kemper Small Cap Growth 16.76 -- -- -- --
Kemper Small Cap Value (12.47) -- -- -- --
Kemper Government Securities 5.57 -- -- -- --
MFS Bond 4.92 -- -- -- --
MFS Research 21.73 -- -- -- --
MFS Growth with Income 20.67 -- -- -- --
MFS Emerging Growth 32.33 -- -- -- --
MFS / F&C Emerging Markets Equity (34.28) -- -- -- --
MFS High Income (1.55) -- -- -- --
MFS World Governments 6.70 -- -- -- --
Oppenheimer Growth 22.33 -- -- -- --
Oppenheimer Growth & Income 3.27 -- -- -- --
Oppenheimer High Income (1.06) -- -- -- --
Oppenheimer Bond 5.33 -- -- -- --
Oppenheimer Strategic Bond 1.51 -- -- -- --
Putnam Growth and Income 13.83 -- -- -- --
Putnam New Value 4.83 -- -- -- --
Putnam Vista 17.86 -- -- -- --
Putnam International Growth 17.07 -- -- -- --
Putnam International New Opportunities 14.02 -- -- -- --
Templeton International (8.55) -- -- -- --
Templeton Developing Markets (24.48) -- -- -- --
Templeton Mutual Shares Investments (3.69) -- -- -- --
Fidelity VIP Growth 30.78 -- -- -- --
Fidelity VIP II Contrafund 23.57 -- -- -- --
Fidelity VIP III Growth Opportunities 17.42 -- -- -- --
Fidelity VIP III Growth & Income 22.03 -- -- -- --
Fidelity VIP Equity-Income 6.27 -- -- -- --
========= ========== ========== ========== =========
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
SEPARATE ACCOUNT EXPENSES
TO AVERAGE NET ASSETS**
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 1.40 1.40 1.40 1.40 1.40
Trust Money Market* 1.40 1.40 1.40 1.40 1.40
Trust High Yield* 1.40 1.40 1.40 1.40 1.40
Trust Stock Index* 1.40 1.40 1.40 1.40 1.40
Trust VKAC Growth and Income* 1.40 1.40 1.40 1.40 1.40
Trust Bond Debenture 1.40 1.40 1.40 -- --
Trust Developing Growth 1.40 1.40 -- -- --
Trust Large Cap Research 1.40 1.40 -- -- --
Trust Mid-Cap Value 1.40 1.40 -- -- --
Trust Quality Bond 1.40 1.40 1.40 -- --
Trust Small Cap Stock 1.40 1.40 1.40 -- --
Trust Large Cap Stock 1.40 1.40 1.40 -- --
Trust Select Equity 1.40 1.40 1.40 -- --
Trust International Equity 1.40 1.40 1.40 -- --
Trust Balanced 1.40 1.40 -- -- --
Trust Small Cap Equity 1.40 1.40 -- -- --
Trust Equity Income 1.40 1.40 -- -- --
Trust Growth and Income Equity 1.40 1.40 -- -- --
Lord Abbett Growth and Income* 1.40 1.40 1.40 1.40 1.40
GACC Money Market 1.40 1.40 1.40 -- --
Russell Multi-Style Equity 1.40 -- -- -- --
Russell Aggressive Equity 1.40 -- -- -- --
Russell Non-US 1.40 -- -- -- --
Russell Core Bond 1.40 -- -- -- --
AIM Value 1.40 -- -- -- --
AIM Capital Appreciation 1.40 -- -- -- --
AIM International Equity 1.40 -- -- -- --
Alliance Premier Growth 1.40 -- -- -- --
Alliance Real Estate Investment 1.40 -- -- -- --
Liberty Newport Tiger 1.40 -- -- -- --
Goldman Sachs Growth and Income 1.40 -- -- -- --
Goldman Sachs International Equity 1.40 -- -- -- --
Goldman Sachs Global Income 1.40 -- -- -- --
Kemper Dreman High Return Equity 1.40 -- -- -- --
Kemper Small Cap Growth 1.40 -- -- -- --
Kemper Small Cap Value 1.40 -- -- -- --
Kemper Government Securities 1.40 -- -- -- --
MFS Bond 1.40 -- -- -- --
MFS Research 1.40 -- -- -- --
MFS Growth with Income 1.40 -- -- -- --
MFS Emerging Growth 1.40 -- -- -- --
MFS / F&C Emerging Markets Equity 1.40 -- -- -- --
MFS High Income 1.40 -- -- -- --
MFS World Governments 1.40 -- -- -- --
Oppenheimer Growth 1.40 -- -- -- --
Oppenheimer Growth & Income 1.40 -- -- -- --
Oppenheimer High Income 1.40 -- -- -- --
Oppenheimer Bond 1.40 -- -- -- --
Oppenheimer Strategic Bond 1.40 -- -- -- --
Putnam Growth and Income 1.40 -- -- -- --
Putnam New Value 1.40 -- -- -- --
Putnam Vista 1.40 -- -- -- --
Putnam International Growth 1.40 -- -- -- --
Putnam International New Opportunities 1.40 -- -- -- --
Templeton International 1.40 -- -- -- --
Templeton Developing Markets 1.40 -- -- -- --
Templeton Mutual Shares Investments 1.40 -- -- -- --
Fidelity VIP Growth 1.40 -- -- -- --
Fidelity VIP II Contrafund 1.40 -- -- -- --
Fidelity VIP III Growth Opportunities 1.40 -- -- -- --
Fidelity VIP III Growth & Income 1.40 -- -- -- --
Fidelity VIP Equity-Income 1.40 -- -- -- --
======== ======== ======== ======== ========
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The table below summarizes the realized gain (loss) on the sale of fund
shares and the change in unrealized appreciation for each sub-account
during the year.
1998 1997
-------------- -------------
(in thousands of dollars)
<S> <C> <C>
Realized gain (loss) on sale of fund shares:
Trust Quality Income:
Aggregate proceeds from sales of fund shares $ 13,031 33,851
Aggregate cost of fund shares redeemed 12,576 33,348
-------------- -------------
Realized gain (loss) $ 455 503
============== =============
Trust Money Market:
Aggregate proceeds from sales of fund shares $ 14,519 63,852
Aggregate cost of fund shares redeemed 14,519 63,852
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Trust High Yield:
Aggregate proceeds from sales of fund shares $ 6,314 27,472
Aggregate cost of fund shares redeemed 6,179 26,637
-------------- -------------
Realized gain (loss) $ 135 835
============== =============
Trust Stock Index:
Aggregate proceeds from sales of fund shares $ 23,196 55,951
Aggregate cost of fund shares redeemed 17,093 40,242
-------------- -------------
Realized gain (loss) $ 6,103 15,709
============== =============
Trust VKAC Growth and Income:
Aggregate proceeds from sales of fund shares $ 6,244 4,135
Aggregate cost of fund shares redeemed 4,804 3,229
-------------- -------------
Realized gain (loss) $ 1,440 906
============== =============
Trust Bond Debenture:
Aggregate proceeds from sales of fund shares $ 9,489 646
Aggregate cost of fund shares redeemed 9,470 619
-------------- -------------
Realized gain (loss) $ 19 27
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Trust Developing Growth:
Aggregate proceeds from sales of fund shares $ 138 --
Aggregate cost of fund shares redeemed 152 --
-------------- -------------
Realized gain (loss) $ (14) --
============== =============
Trust Large Cap Research:
Aggregate proceeds from sales of fund shares $ 161 1
Aggregate cost of fund shares redeemed 156 1
-------------- -------------
Realized gain (loss) $ 5 --
============== =============
Trust Mid-Cap Value:
Aggregate proceeds from sales of fund shares $ 82 --
Aggregate cost of fund shares redeemed 85 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
Trust Quality Bond:
Aggregate proceeds from sales of fund shares $ 1,335 3,837
Aggregate cost of fund shares redeemed 1,299 3,786
-------------- -------------
Realized gain (loss) $ 36 51
============== =============
Trust Small Cap Stock:
Aggregate proceeds from sales of fund shares $ 3,113 513
Aggregate cost of fund shares redeemed 3,238 467
-------------- -------------
Realized gain (loss) $ (125) 46
============== =============
Trust Large Cap Stock:
Aggregate proceeds from sales of fund shares $ 147 7,686
Aggregate cost of fund shares redeemed 131 6,018
-------------- -------------
Realized gain (loss) $ 16 1,668
============== =============
Trust Select Equity:
Aggregate proceeds from sales of fund shares $ 1,485 305
Aggregate cost of fund shares redeemed 1,275 275
-------------- -------------
Realized gain (loss) $ 210 30
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Trust International Equity:
Aggregate proceeds from sales of fund shares $ 4,919 616
Aggregate cost of fund shares redeemed 4,609 601
-------------- -------------
Realized gain (loss) $ 310 15
============== =============
Trust Balanced:
Aggregate proceeds from sales of fund shares $ 30 38
Aggregate cost of fund shares redeemed 31 37
-------------- -------------
Realized gain (loss) $ (1) 1
============== =============
Trust Small Cap Equity:
Aggregate proceeds from sales of fund shares $ 39 2
Aggregate cost of fund shares redeemed 42 2
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
Trust Equity Income:
Aggregate proceeds from sales of fund shares $ 75 3
Aggregate cost of fund shares redeemed 75 3
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Trust Growth and Income Equity:
Aggregate proceeds from sales of fund shares $ 211 34
Aggregate cost of fund shares redeemed 204 33
-------------- -------------
Realized gain (loss) $ 7 1
============== =============
Lord Abbett Growth and Income:
Aggregate proceeds from sales of fund shares $ 12,298 3,701
Aggregate cost of fund shares redeemed 10,217 2,859
-------------- -------------
Realized gain (loss) $ 2,081 842
============== =============
GACC Money Market:
Aggregate proceeds from sales of fund shares $ 37,059 2,883
Aggregate cost of fund shares redeemed 36,623 2,828
-------------- -------------
Realized gain (loss) $ 436 55
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Russell Multi-Style Equity:
Aggregate proceeds from sales of fund shares $ 62 --
Aggregate cost of fund shares redeemed 61 --
-------------- -------------
Realized gain (loss) $ 1 --
============== =============
Russell Aggressive Equity:
Aggregate proceeds from sales of fund shares $ 203 --
Aggregate cost of fund shares redeemed 247 --
-------------- -------------
Realized gain (loss) $ (44) --
============== =============
Russell Non-US:
Aggregate proceeds from sales of fund shares $ 92 --
Aggregate cost of fund shares redeemed 90 --
-------------- -------------
Realized gain (loss) $ 2 --
============== =============
Russell Core Bond:
Aggregate proceeds from sales of fund shares $ 523 --
Aggregate cost of fund shares redeemed 522 --
-------------- -------------
Realized gain (loss) $ 1 --
============== =============
AIM Value:
Aggregate proceeds from sales of fund shares $ 253 --
Aggregate cost of fund shares redeemed 263 --
-------------- -------------
Realized gain (loss) $ (10) --
============== =============
AIM Capital Appreciation:
Aggregate proceeds from sales of fund shares $ 72 --
Aggregate cost of fund shares redeemed 75 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
AIM International Equity:
Aggregate proceeds from sales of fund shares $ 8,246 --
Aggregate cost of fund shares redeemed 8,249 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Alliance Premier Growth:
Aggregate proceeds from sales of fund shares $ 54 --
Aggregate cost of fund shares redeemed 58 --
-------------- -------------
Realized gain (loss) $ (4) --
============== =============
Alliance Real Estate:
Aggregate proceeds from sales of fund shares $ 28 --
Aggregate cost of fund shares redeemed 30 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
Liberty Newport Tiger:
Aggregate proceeds from sales of fund shares $ 416 --
Aggregate cost of fund shares redeemed 446 --
-------------- -------------
Realized gain (loss) $ (30) --
============== =============
Goldman Sachs Growth and Income:
Aggregate proceeds from sales of fund shares $ 126 --
Aggregate cost of fund shares redeemed 138 --
-------------- -------------
Realized gain (loss) $ (12) --
============== =============
Goldman Sachs International:
Aggregate proceeds from sales of fund shares $ 29 --
Aggregate cost of fund shares redeemed 29 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Goldman Sachs Global Income:
Aggregate proceeds from sales of fund shares $ 17 --
Aggregate cost of fund shares redeemed 16 --
-------------- -------------
Realized gain (loss) $ 1 --
============== =============
Kemper Dreman High Return Equity:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Kemper Small Cap Growth:
Aggregate proceeds from sales of fund shares $ 1,008 --
Aggregate cost of fund shares redeemed 1,035 --
-------------- -------------
Realized gain (loss) $ (27) --
============== =============
Kemper Small Cap Value:
Aggregate proceeds from sales of fund shares $ 21 --
Aggregate cost of fund shares redeemed 25 --
-------------- -------------
Realized gain (loss) $ (4) --
============== =============
Kemper Government Securities:
Aggregate proceeds from sales of fund shares $ 17 --
Aggregate cost of fund shares redeemed 17 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
MFS Bond:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
MFS Research:
Aggregate proceeds from sales of fund shares $ 120 --
Aggregate cost of fund shares redeemed 122 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
MFS Growth with Income:
Aggregate proceeds from sales of fund shares $ 28 --
Aggregate cost of fund shares redeemed 28 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
MFS Emerging Growth:
Aggregate proceeds from sales of fund shares $ 129 --
Aggregate cost of fund shares redeemed 140 --
-------------- -------------
Realized gain (loss) $ (11) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued: MFS / F&C
Emerging Markets Equity:
Aggregate proceeds from sales of fund shares $ 1,059 --
Aggregate cost of fund shares redeemed 1,156 --
-------------- -------------
Realized gain (loss) $ (97) --
============== =============
MFS High Income:
Aggregate proceeds from sales of fund shares $ 61 --
Aggregate cost of fund shares redeemed 63 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
MFS World Governments:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Oppenheimer Growth:
Aggregate proceeds from sales of fund shares $ 187 --
Aggregate cost of fund shares redeemed 188 --
-------------- -------------
Realized gain (loss) $ (1) --
============== =============
Oppenheimer Growth & Income:
Aggregate proceeds from sales of fund shares $ 326 --
Aggregate cost of fund shares redeemed 363 --
-------------- -------------
Realized gain (loss) $ (37) --
============== =============
Oppenheimer High Income:
Aggregate proceeds from sales of fund shares $ 31 --
Aggregate cost of fund shares redeemed 32 --
-------------- -------------
Realized gain (loss) $ (1) --
============== =============
Oppenheimer Bond:
Aggregate proceeds from sales of fund shares $ 49 --
Aggregate cost of fund shares redeemed 49 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Oppenheimer Strategic Bond:
Aggregate proceeds from sales of fund shares $ 3 --
Aggregate cost of fund shares redeemed 3 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Putnam Growth and Income:
Aggregate proceeds from sales of fund shares $ 294 --
Aggregate cost of fund shares redeemed 302 --
-------------- -------------
Realized gain (loss) $ (8) --
============== =============
Putnam New Value:
Aggregate proceeds from sales of fund shares $ 3 --
Aggregate cost of fund shares redeemed 3 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Putnam Vista:
Aggregate proceeds from sales of fund shares $ 27 --
Aggregate cost of fund shares redeemed 28 --
-------------- -------------
Realized gain (loss) $ (1) --
============== =============
Putnam International Growth:
Aggregate proceeds from sales of fund shares $ 4,315 --
Aggregate cost of fund shares redeemed 4,354 --
-------------- -------------
Realized gain (loss) $ (39) --
============== =============
Putnam International New Opportunities:
Aggregate proceeds from sales of fund shares $ 2,989 --
Aggregate cost of fund shares redeemed 2,965 --
-------------- -------------
Realized gain (loss) $ 24 --
============== =============
Templeton International:
Aggregate proceeds from sales of fund shares $ 6,057 --
Aggregate cost of fund shares redeemed 6,049 --
-------------- -------------
Realized gain (loss) $ 8 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Templeton Developing Markets:
Aggregate proceeds from sales of fund shares $ 357 --
Aggregate cost of fund shares redeemed 361 --
-------------- -------------
Realized gain (loss) $ (4) --
============== =============
Templeton Mutual Shares Investments:
Aggregate proceeds from sales of fund shares $ 7 --
Aggregate cost of fund shares redeemed 7 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Fidelity Growth:
Aggregate proceeds from sales of fund shares $ 34 --
Aggregate cost of fund shares redeemed 37 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
Fidelity Contrafund:
Aggregate proceeds from sales of fund shares $ 17 --
Aggregate cost of fund shares redeemed 19 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
Fidelity Growth Opportunities:
Aggregate proceeds from sales of fund shares $ 24 --
Aggregate cost of fund shares redeemed 26 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
Fidelity Growth & Income:
Aggregate proceeds from sales of fund shares $ 69 --
Aggregate cost of fund shares redeemed 74 --
-------------- -------------
Realized gain (loss) $ (5) --
============== =============
Fidelity Equity-Income:
Aggregate proceeds from sales of fund shares $ 27 --
Aggregate cost of fund shares redeemed 30 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation):
Trust Quality Income:
Appreciation (Depreciation), end of period $ 1,308 1,302
Appreciation (Depreciation), beginning of period 1,302 935
-------------- -------------
Unrealized appreciation (depreciation) $ 6 367
============== =============
Trust Money Market:
Appreciation (Depreciation), end of period $ -- --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ -- --
============== =============
Trust High Yield:
Appreciation (Depreciation), end of period $ 174 842
Appreciation (Depreciation), beginning of period 842 491
-------------- -------------
Unrealized appreciation (depreciation) $ (668) 351
============== =============
Trust Stock Index:
Appreciation (Depreciation), end of period $ 25,838 25,000
Appreciation (Depreciation), beginning of period 25,000 20,271
-------------- -------------
Unrealized appreciation (depreciation) $ 838 4,729
============== =============
Trust VKAC Growth & Income:
Appreciation (Depreciation), end of period $ 11,521 10,887
Appreciation (Depreciation), beginning of period 10,887 4,202
-------------- -------------
Unrealized appreciation (depreciation) $ 634 6,685
============== =============
Trust Bond Debenture:
Appreciation (Depreciation), end of period $ 3,523 1,958
Appreciation (Depreciation), beginning of period 1,958 271
-------------- -------------
Unrealized appreciation (depreciation) $ 1,565 1,687
============== =============
Trust Developing Growth:
Appreciation (Depreciation), end of period $ 890 7
Appreciation (Depreciation), beginning of period 7 --
-------------- -------------
Unrealized appreciation (depreciation) $ 883 7
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Trust Large Cap Research:
Appreciation (Depreciation), end of period $ 1,284 6
Appreciation (Depreciation), beginning of period 6 --
-------------- -------------
Unrealized appreciation (depreciation) $ 1,278 6
============== =============
Trust Mid-Cap Value:
Appreciation (Depreciation), end of period $ 160 40
Appreciation (Depreciation), beginning of period 40 --
-------------- -------------
Unrealized appreciation (depreciation) $ 120 40
============== =============
Trust Quality Bond:
Appreciation (Depreciation), end of period $ 1,598 186
Appreciation (Depreciation), beginning of period 186 30
-------------- -------------
Unrealized appreciation (depreciation) $ 1,412 156
============== =============
Trust Small Cap Stock:
Appreciation (Depreciation), end of period $ 346 6,523
Appreciation (Depreciation), beginning of period 6,523 533
-------------- -------------
Unrealized appreciation (depreciation) $ (6,177) 5,990
============== =============
Trust Large Cap Stock:
Appreciation (Depreciation), end of period $ 16,535 2,855
Appreciation (Depreciation), beginning of period 2,855 1,531
-------------- -------------
Unrealized appreciation (depreciation) $ 13,680 1,324
============== =============
Trust Select Equity:
Appreciation (Depreciation), end of period $ 33,585 13,520
Appreciation (Depreciation), beginning of period 13,520 1,210
-------------- -------------
Unrealized appreciation (depreciation) $ 20,065 12,310
============== =============
Trust International Equity:
Appreciation (Depreciation), end of period $ 9,278 1,309
Appreciation (Depreciation), beginning of period 1,309 796
-------------- -------------
Unrealized appreciation (depreciation) $ 7,969 513
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Trust Balanced:
Appreciation (Depreciation), end of period $ 173 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 173 --
============== =============
Trust Small Cap Equity:
Appreciation (Depreciation), end of period $ 34 (5)
Appreciation (Depreciation), beginning of period (5) --
-------------- -------------
Unrealized appreciation (depreciation) $ 39 (5)
============== =============
Trust Equity Income:
Appreciation (Depreciation), end of period $ 70 21
Appreciation (Depreciation), beginning of period 21 --
-------------- -------------
Unrealized appreciation (depreciation) $ 49 21
============== =============
Trust Growth and Income Equity:
Appreciation (Depreciation), end of period $ 566 18
Appreciation (Depreciation), beginning of period 18 --
-------------- -------------
Unrealized appreciation (depreciation) $ 548 18
============== =============
Lord Abbett Growth and Income:
Appreciation (Depreciation), end of period $ 114,453 87,861
Appreciation (Depreciation), beginning of period 87,861 46,489
-------------- -------------
Unrealized appreciation (depreciation) $ 26,592 41,372
============== =============
GACC Money Market:
Appreciation (Depreciation), end of period $ 231 46
Appreciation (Depreciation), beginning of period 46 6
-------------- -------------
Unrealized appreciation (depreciation) $ 185 40
============== =============
Russell Multi-Style Equity:
Appreciation (Depreciation), end of period $ 3,199 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 3,199 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Russell Aggressive Equity:
Appreciation (Depreciation), end of period $ 75 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 75 --
============== =============
Russell Non-US:
Appreciation (Depreciation), end of period $ 412 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 412 --
============== =============
Russell Core Bond:
Appreciation (Depreciation), end of period $ 268 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 268 --
============== =============
AIM Value:
Appreciation (Depreciation), end of period $ 668 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 668 --
============== =============
AIM Capital Appreciation:
Appreciation (Depreciation), end of period $ 164 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 164 --
============== =============
AIM International Equity:
Appreciation (Depreciation), end of period $ 81 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 81 --
============== =============
Alliance Premier Growth:
Appreciation (Depreciation), end of period $ 1,522 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1,522 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Alliance Real Estate Investment:
Appreciation (Depreciation), end of period $ (170) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (170) --
============== =============
Liberty Newport Tiger:
Appreciation (Depreciation), end of period $ 54 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 54 --
============== =============
Goldman Sachs Growth and Income:
Appreciation (Depreciation), end of period $ (207) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (207) --
============== =============
Goldman Sachs International:
Appreciation (Depreciation), end of period $ 56 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 56 --
============== =============
Goldman Sachs Global Income:
Appreciation (Depreciation), end of period $ (1) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (1) --
============== =============
Kemper Dreman High Return Equity:
Appreciation (Depreciation), end of period $ 1 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1 --
============== =============
Kemper Small Cap Growth:
Appreciation (Depreciation), end of period $ 107 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 107 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Kemper Small Cap Value:
Appreciation (Depreciation), end of period $ (155) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (155) --
============== =============
Kemper Government Securities:
Appreciation (Depreciation), end of period $ 9 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 9 --
============== =============
MFS Bond:
Appreciation (Depreciation), end of period $ 1 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1 --
============== =============
MFS Research:
Appreciation (Depreciation), end of period $ 481 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 481 --
============== =============
MFS Growth with Income:
Appreciation (Depreciation), end of period $ 574 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 574 --
============== =============
MFS Emerging Growth:
Appreciation (Depreciation), end of period $ 985 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 985 --
============== =============
MFS / F&C Emerging Markets Equity:
Appreciation (Depreciation), end of period $ (94) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (94) --
============== =============
MFS High Income:
Appreciation (Depreciation), end of period $ (34) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (34) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
MFS World Governments:
Appreciation (Depreciation), end of period $ 1 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1 --
============== =============
Oppenheimer Growth:
Appreciation (Depreciation), end of period $ 134 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 134 --
============== =============
Oppenheimer Growth & Income:
Appreciation (Depreciation), end of period $ (28) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (28) --
============== =============
Oppenheimer High Income:
Appreciation (Depreciation), end of period $ (15) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (15) --
============== =============
Oppenheimer Bond:
Appreciation (Depreciation), end of period $ 95 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 95 --
============== =============
Oppenheimer Strategic Bond:
Appreciation (Depreciation), end of period $ 3 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 3 --
============== =============
Putnam Growth and Income:
Appreciation (Depreciation), end of period $ 660 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 660 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Putnam New Value:
Appreciation (Depreciation), end of period $ 6 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 6 --
============== =============
Putnam Vista:
Appreciation (Depreciation), end of period $ 173 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 173 --
============== =============
Putnam International Growth:
Appreciation (Depreciation), end of period $ 353 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 353 --
============== =============
Putnam International New Opportunities:
Appreciation (Depreciation), end of period $ 40 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 40 --
============== =============
Templeton International:
Appreciation (Depreciation), end of period $ 48 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 48 --
============== =============
Templeton Developing Markets:
Appreciation (Depreciation), end of period $ 44 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 44 --
============== =============
Templeton Mutual Shares Investments:
Appreciation (Depreciation), end of period $ 32 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 32 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Fidelity Growth:
Appreciation (Depreciation), end of period $ 12 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 12 --
============== =============
Fidelity Contrafund:
Appreciation (Depreciation), end of period $ 48 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 48 --
============== =============
Fidelity Growth Opportunities:
Appreciation (Depreciation), end of period $ 13 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 13 --
============== =============
Fidelity Growth & Income:
Appreciation (Depreciation), end of period $ 94 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 94 --
============== =============
Fidelity Equity-Income:
Appreciation (Depreciation), end of period $ 17 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 17 --
============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of units is as follows:
TRUST
-------------------------------------------------------------------------------------
VKAC
Quality Money High Stock Growth and Bond
Income Market Yield Index Income Debenture
------------- ------------ ----------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 3,334,960 2,584,926 2,001,184 4,680,855 1,905,896 659,663
Cova units purchased -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- --
Contract units purchased 33,059 3,712,455 36,057 125,947 130,796 715,126
Contract units transferred, net 186,523 (3,871,127) (492,448) (604,754) 262,932 2,650,173
Contract units redeemed (623,489) (683,810) (135,503) (654,828) (101,374) (79,865)
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/97 2,931,053 1,742,444 1,409,290 3,547,220 2,198,250 3,945,097
Cova units purchased -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- --
Contract units purchased 1,214 491 1,763 2,532 1,131 1,632,919
Contract units transferred, net (196,389) (799,477) (59,692) 159,577 54,353 2,939,109
Contract units redeemed (512,199) (333,892) (146,202) (616,360) (152,515) (332,231)
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/98 2,223,679 609,566 1,205,159 3,092,969 2,101,219 8,184,894
============= ============ =========== =========== ================ ===============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- -- --
Units purchased 8,913 4,793 2,641 4,293 1,875 --
Units redeemed (844) (231) (412) (196) (72) --
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/97 8,069 4,562 2,229 4,097 1,803 --
Units purchased -- -- 798 -- 798 272
Units redeemed (1,686) (901) (523) (608) (196) (8)
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/98 6,383 3,661 2,504 3,489 2,405 264
============= ============ =========== =========== ================ ===============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of units is as follows:
Trust
----------------------------------------------------------------------
Developing Large Cap Mid-Cap Quality
Growth Research Value Bond
---------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- 508,830
Cova units purchased 10,000 10,000 10,000 --
Cova units redeemed -- -- -- (205,846)
Contract units purchased 47,968 36,718 45,300 256,670
Contract units transferred, net 91,012 78,115 141,816 940,454
Contract units redeemed (322) (274) (2,730) (67,027)
---------------- ------------- ------------- ------------
Unit balance at 12/31/97 148,658 124,559 194,386 1,433,081
Cova units purchased -- -- -- --
Cova units redeemed (10,000) (10,000) (10,000) --
Contract units purchased 596,000 569,392 755,701 833,031
Contract units transferred, net 630,230 437,664 736,868 1,236,444
Contract units redeemed (22,687) (26,695) (34,402) (179,213)
---------------- ------------- ------------- ------------
Unit balance at 12/31/98 1,342,201 1,094,920 1,642,553 3,323,343
================ ============= ============= ============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
---------------- ------------- ------------- ------------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- 2,090 -- 3,947
Units redeemed -- (266) -- (109)
---------------- ------------- ------------- ------------
Unit balance at 12/31/98 -- 1,824 -- 3,838
================ ============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of units is as follows:
Trust
---------------------------------------------------------------------------
Small Cap Large Cap Select International
Stock Stock Equity Equity
-------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 1,237,405 1,389,606 2,044,523 1,306,892
Cova units purchased -- -- -- --
Cova units redeemed -- (1,132,414) -- --
Contract units purchased 786,201 538,054 1,538,506 974,793
Contract units transferred, net 2,007,064 715,241 3,437,076 3,266,860
Contract units redeemed (90,427) (36,558) (116,499) (107,953)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/97 3,940,243 1,473,929 6,903,606 5,440,592
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased 619,802 1,118,109 1,382,912 651,488
Contract units transferred, net 1,172,828 1,713,122 2,562,725 1,460,450
Contract units redeemed (200,263) (127,125) (304,425) (243,205)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/98 5,532,610 4,178,035 10,544,818 7,309,325
============== ============== ============== ==================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased 804 3,384 3,617 822
Units redeemed (31) (356) (380) (32)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/97 773 3,028 3,237 790
Units purchased 1,944 9,187 9,682 2,208
Units redeemed (162) (1,259) (1,203) (173)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/98 2,555 10,956 11,716 2,825
============== ============== ============== ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
TRUST LORD ABBETT GACC
------------------------------------------------------ --------------- --------------
Growth and Growth
Small Cap Equity Income and Money
Balanced Equity Income Equity Income Market
------------ ------------- ----------- ------------ ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- 11,732,301 34,964
Cova units purchased 100 100 100 100 -- --
Cova units redeemed (100) (100) (100) (100) -- --
Contract units purchased 17,711 10,694 17,814 46,324 1,642,859 509,800
Contract units transferred, net 22,818 15,454 31,967 79,433 3,230,021 (204,185)
Contract units redeemed (2,450) -- (56) (4,084) (816,777) (29,528)
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/97 38,079 26,148 49,725 121,673 15,788,404 311,051
Cova units purchased -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- --
Contract units purchased 128,875 44,062 157,967 269,879 1,737,150 3,293,174
Contract units transferred, net 124,051 61,306 83,645 260,136 3,166,896 (1,834,605)
Contract units redeemed (4,494) (1,880) (4,384) (9,899) (1,222,057) (295,883)
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/98 286,511 129,636 286,953 641,789 19,470,393 1,473,737
============ ============= =========== ============ ================== ==============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- -- --
Units purchased -- -- -- -- 28,068 --
Units redeemed -- -- -- -- (2,022) --
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/97 -- -- -- -- 26,046 --
Units purchased -- -- -- -- 10,428 9,003
Units redeemed -- -- -- -- (3,208) (128)
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/98 -- -- -- -- 33,266 8,875
============ ============= =========== ============ ================== ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
RUSSELL AIM
-------------------------------------------------------------- -------------
Multi-Style Aggressive Core
Equity Equity Non-US Bond Value
--------------- ----------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- --
Cova units purchased -- -- -- -- --
Cova units redeemed -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/97 -- -- -- -- --
Cova units purchased 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10)
Contract units purchased 1,960,886 438,734 773,431 1,318,370 365,254
Contract units transferred, net 416,532 107,823 180,088 360,854 177,976
Contract units redeemed (48,988) (10,279) (27,727) (69,373) (21,340)
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/98 2,328,430 536,278 925,792 1,609,851 521,890
=============== ================= =========== ============= ===========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/97 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/98 -- -- -- -- --
=============== ================= =========== ============= ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
AIM ALLIANCE
------------------------------------- -----------------------------
Capital International Premier Real Estate
Appreciation Equity Growth Investment
---------------- ----------------- ------------ ----------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 134,252 148,215 523,722 136,005
Contract units transferred, net 57,235 57,321 149,553 58,393
Contract units redeemed (7,999) (1,464) (5,421) (2,987)
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/98 183,488 204,072 667,854 191,411
================ ================= ============ ================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/98 -- -- -- --
================ ================= ============ ================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
LIBERTY GOLDMAN SACHS KEMPER
------------ ---------------------------------------------------- ------------------
Growth
Newport and Global Dreman High
Tiger Income International Income Return Equity
----------- ------------------ ------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- --
Cova units purchased -- -- -- -- --
Cova units redeemed -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/97 -- -- -- -- --
Cova units purchased 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) --
Contract units purchased 18,873 298,119 89,807 12,114 --
Contract units transferred, net 13,289 178,567 23,575 8,062 9,213
Contract units redeemed (226) (9,011) (558) (1,343) --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/98 31,936 467,675 112,824 18,833 9,223
=========== ================== ================== =========== ==================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/97 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/98 -- -- -- -- --
=========== ================== ================== =========== ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
KEMPER MFS
------------------------------------------------- -----------------------------
Small Cap Small Cap Government
Growth Value Securities Bond Research
------------- ------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- --
Cova units purchased -- -- -- -- --
Cova units redeemed -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/97 -- -- -- -- --
Cova units purchased 10 10 10 10 10
Cova units redeemed (10) (10) (10) -- (10)
Contract units purchased 61,682 178,532 48,334 245 337,107
Contract units transferred, net 15,201 69,892 11,575 16,283 137,437
Contract units redeemed (391) (3,332) (197) -- (9,758)
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/98 76,492 245,092 59,712 16,538 464,786
============= ============= ================ ========== ============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/97 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/98 -- -- -- -- --
============= ============= ================ ========== ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
MFS
-----------------------------------------------------------
F&C
Growth Emerging
with Emerging Markets High
Income Growth Equity Income
----------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------- -------------- -------------- -----------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 416,517 438,345 45,159 164,144
Contract units transferred, net 171,689 106,215 28,739 57,879
Contract units redeemed (6,772) (4,901) (727) (2,814)
----------- -------------- -------------- -----------
Unit balance at 12/31/98 581,434 539,659 73,171 219,209
=========== ============== ============== ===========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- -------------- -------------- -----------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- -------------- -------------- -----------
Unit balance at 12/31/98 -- -- -- --
=========== ============== ============== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
MFS Oppenheimer Putnam
------------- -------------------------------------------------------------- -------------
Growth Growth
World and High Strategic and
Governments Growth Income Income Bond Bond Income
------------- ---------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- -- -- --
Cova units purchased -- -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- -- --
Contract units purchased -- -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- -- --
------------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/97 -- -- -- -- -- -- --
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed -- (10) (10) (10) (10) (10) (10)
Contract units purchased 423 83,004 211,120 51,949 320,045 71,817 820,015
Contract units transferred, net 1,674 19,949 78,591 27,811 86,123 36,774 304,805
Contract units redeemed (25) (5,792) (4,881) (1,247) (4,178) (722) (9,152)
------------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/98 2,082 97,161 284,830 78,513 401,990 107,869 1,115,668
============= ========== =========== =========== =========== =========== =============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- -- -- --
Units purchased -- -- -- -- -- -- --
Units redeemed -- -- -- -- -- -- --
--------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/97 -- -- -- -- -- -- --
Units purchased -- -- -- -- -- -- --
Units redeemed -- -- -- -- -- -- --
------------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/98 -- -- -- -- -- -- --
============= ========== =========== =========== =========== =========== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
Putnam
----------------------------------------------------------------------
International
New International New
Value Vista Growth Opportunities
----------- ----------- -------------------- ------------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------- ----------- -------------------- ------------------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 16,925 116,318 394,877 38,270
Contract units transferred, net 25,293 36,195 141,372 14,803
Contract units redeemed (127) (1,108) (6,194) (264)
----------- ----------- -------------------- ------------------
Unit balance at 12/31/98 42,091 151,405 530,055 52,809
=========== =========== ==================== ==================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- ----------- -------------------- ------------------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- ----------- -------------------- ------------------
Unit balance at 12/31/98 -- -- -- --
=========== =========== ==================== ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
TEMPLETON FIDELITY
------------------------------------------------------- ----------
Mutual
Developing Shares
International Markets Investments Growth
----------------- -------------- ----------------- ----------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------------- -------------- ----------------- ----------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 140,734 72,847 61,499 8,130
Contract units transferred, net 26,597 18,743 45,054 (1,021)
Contract units redeemed (2,556) (1,630) (518) (361)
----------------- -------------- ----------------- ----------
Unit balance at 12/31/98 164,775 89,960 106,035 6,748
================= ============== ================= ==========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------------- -------------- ----------------- ----------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------------- -------------- ----------------- ----------
Unit balance at 12/31/98 -- -- -- --
================= ============== ================= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
FIDELITY
---------------------------------------------------------------
Growth Growth & Equity-
Contrafund Opportunities Income Income
-------------------------------------------------- ----------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
--------------- ------------------ ------------ ----------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased, net 30,391 11,440 53,646 20,381
Contract units transferred 2,056 (1,406) 30,141 4,635
Contract units redeemed (93) (511) (13,954) (884)
--------------- ------------------ ------------ ----------
Unit balance at 12/31/98 32,354 9,523 69,833 24,132
=============== ================== ============ ==========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
--------------- ------------------ ------------ ----------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
--------------- ------------------ ------------ ----------
Unit balance at 12/31/98 -- -- -- --
=============== ================== ============ ==========
</TABLE>
COVA FINANCIAL SERVICES
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Financial Statements
December 31, 1998, 1997, and 1996
(With Independent Auditors' Report Thereon)
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) (the Company) as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholder's
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. 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, 1998 and 1997, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
March 4, 1999
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets
December 31, 1998 and 1997
ASSETS 1998 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Investments:
Debt securities available-for-sale, at fair value (cost of
$1,375,198 in 1998 and $1,269,362 in 1997) $ 1,371,513 1,280,247
Equity securities, at fair value 9,037 --
Mortgage loans, net of allowance for potential loan loss
of $510 in 1998 and $237 in 1997 312,865 348,206
Policy loans 26,295 24,228
------------- -------------
Total investments 1,719,710 1,652,681
Cash and cash equivalents - interest-bearing 94,770 12,910
Cash - noninterest-bearing 5,008 3,666
Receivable from sale of securities 5,845 1,870
Accrued investment income 21,505 20,602
Deferred policy acquisition costs 131,973 84,326
Present value of future profits 42,230 41,486
Goodwill 18,585 19,717
Deferred tax asset, net 4,786 7,933
Receivable from OakRe 720,904 1,426,261
Due from affiliates 246,198 127,599
Other assets 829 2,184
Separate account assets 1,832,396 1,108,125
------------- -------------
Total assets $ 4,844,739 4,509,360
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets, Continued
December 31, 1998 and 1997
LIABILITIES AND SHAREHOLDER'S EQUITY 1998 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Liabilities:
Policyholder deposits $ 2,643,124 3,098,287
Future policy benefits 54,336 38,361
Payable on return of collateral on loaned securities 25,923 --
Payable on purchase of securities 1,040 7,261
Federal and state income taxes payable 446 1,312
Accounts payable and other liabilities 18,714 21,912
Future purchase price payable to OakRe 6,976 12,173
Guaranty fund assessments 9,700 9,700
Separate account liabilities 1,832,394 1,107,816
------------ -------------
Total liabilities 4,592,653 4,296,822
------------ -------------
Shareholder's equity:
Common stock, $2 par value. (Authorized
5,000,000 shares; issued and outstanding
2,899,466 shares in 1998 and 1997) 5,799 5,799
Additional paid-in capital 220,491 191,491
Retained earnings 26,410 12,516
Accumulated other comprehensive
income - net of tax (614) 2,732
------------ -------------
Total shareholder's equity 252,086 212,538
------------ -------------
Total liabilities and shareholder's equity $ 4,844,739 4,509,360
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Income
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
----------- ----------- ----------
(in thousands)
<S> <C> <C> <C>
Revenues:
Premiums $ 23,875 9,368 3,154
Net investment income 127,812 111,661 70,629
Net realized gains (losses) on sales
of investments (1,600) 563 472
Separate account fees 20,820 12,455 7,205
Other income 5,372 4,950 3,304
----------- ----------- ----------
Total revenues 176,279 138,997 84,764
----------- ----------- ----------
Benefits and expenses:
Interest on policyholder deposits 93,759 81,129 50,100
Current and future policy benefits 25,225 11,496 5,130
Operating and other expenses 27,190 21,758 16,557
Amortization of purchased
intangible assets 3,445 3,668 2,332
Amortization of deferred policy
acquisition costs 9,393 6,307 4,389
----------- ----------- ----------
Total benefits and expenses 159,012 124,358 78,508
----------- ----------- ----------
Income before income taxes 17,267 14,639 6,256
----------- ----------- ----------
Income tax expense (benefit):
Current (1,576) 1,951 1,740
Deferred 4,949 3,710 915
----------- ----------- ----------
Total income tax expense 3,373 5,661 2,655
----------- ----------- ----------
Net income $ 13,894 8,978 3,601
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Common stock, balance at beginning
and end of period $ 5,799 5,799 5,799
----------- ----------- -----------
Additional paid-in capital:
Balance at beginning of period 191,491 166,491 129,586
Capital contribution 29,000 25,000 36,905
----------- ----------- -----------
Balance at end of period 220,491 191,491 166,491
----------- ----------- -----------
Retained earnings (deficit):
Balance at beginning of period 12,516 3,538 (63)
Net income 13,894 8,978 3,601
----------- ----------- -----------
Balance at end of period 26,410 12,516 3,538
----------- ----------- -----------
Accumulated other comprehensive income:
Balance at beginning of period 2,732 (784) 2,764
Change in unrealized appreciation
(depreciation) of debt and equity
securities (14,571) 14,077 (13,915)
Deferred federal income tax impact 1,801 (1,893) 1,910
Change in deferred policy acquisition costs attributable
to unrealized depreciation (appreciation) 6,996 (5,342) 1,561
Change in present value of future profits
attributable to unrealized depreciation (appreciation) 2,428 (3,326) 6,896
----------- ----------- -----------
Balance at end of period (614) 2,732 (784)
----------- ----------- -----------
Total shareholder's equity $ 252,086 212,538 175,044
=========== =========== ===========
Total comprehensive income:
Net income $ 13,894 8,978 3,601
Other comprehensive income (change in net unrealized
appreciation (depreciation) of debt and equity securities) (3,346) 3,516 (3,548)
----------- ----------- -----------
Total comprehensive income $ 10,548 12,494 53
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------- ------------ ------------
(in thousands)
<S> <C> <C> <C>
Reconciliations of net income to net cash provided by
operating activities:
Net income $ 13,894 8,978 3,601
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in future policy benefits 15,975 6,019 680
Increase (decrease) in payables and
accrued liabilities (3,198) (1,194) 2,900
Increase in accrued investment income (903) (5,591) (4,778)
Amortization of intangible assets and 12,838 9,975 6,721
deferred policy acquisition costs
Amortization and accretion of securities
premiums and discounts (1,767) 1,664 2,751
Recapture commissions paid to OakRe (5,197) (4,837) (4,483)
Net realized loss (gain) on sale of investments 1,600 (563) (472)
Interest accumulated on policyholder deposits 93,759 81,129 50,100
Increase (decrease) in current and
deferred federal income taxes 2,281 5,917 (351)
Separate account net income (12) (2,637) (2,008)
Commissions and expenses deferred (50,044) (46,142) (34,803)
Other (3,566) (3,537) (578)
------------- ------------ ------------
Net cash provided by operating activities 75,660 49,181 19,280
------------- ------------ ------------
Cash flows from investing activities:
Cash used in the purchase of investment securities (733,049) (809,814) (715,274)
Proceeds from investment securities sold and matured 642,481 382,783 262,083
Other (1,159) 15,400 (14,166)
------------- ------------ ------------
Net cash used in investing activities $ (91,727) (411,631) (467,357)
------------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
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, 1998, 1997, and 1996
1998 1997 1996
------------- ------------ ------------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Policyholder deposits $ 1,014,075 841,174 446,784
Transfers from OakRe 812,520 637,168 574,010
Transfer to separate accounts (789,872) (450,303) (126,797)
Return of policyholder deposits (889,202) (597,425) (491,025)
Proceeds from security collaterals on securities lending 25,923 -- --
Transfers to RGA (103,175) (120,411) --
Capital contributions received 29,000 25,000 20,000
------------- ------------ ------------
Net cash provided by financing activities 99,269 335,203 422,972
------------- ------------ ------------
Increase (decrease) in cash and
cash equivalents 83,202 (27,247) (25,105)
Cash and cash equivalents at beginning of period 16,576 43,823 62,256
CFLIC contributed cash (note 9) -- -- 6,672
------------- ------------ ------------
Cash and cash equivalents at end of period $ 99,778 16,576 43,823
============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1998, 1997, and 1996
(1) NATURE OF BUSINESS AND ORGANIZATION
NATURE OF THE BUSINESS
Cova Financial Services Life Insurance Company (CFSLIC) and
subsidiaries (the Company) market and service single premium
deferred annuities, immediate annuities, variable annuities, term
life, single premium variable universal life, 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. Single premium whole life insurance policies
provide policy beneficiaries with mortality benefits amounting to
a multiple, which declines with age, of the original premium.
Under the deferred fixed 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.
Under the variable annuity contracts, policyholder deposits are
allocated to various separate account sub-accounts or the general
accounts. A sub-account is valued at the sum of market values of
the securities in its underlying investment portfolio. The
contract value allocated to a sub-account will fluctuate based on
the performance of the sub-accounts. The contract value allocated
to the general accounts is credited with a fixed interest rate for
a specified period. The Company may assess surrender fees against
amounts withdrawn prior to the end of the withdrawal charge
period. Policyholders also may incur certain federal income tax
penalties on withdrawals.
Under the single premium variable life contracts, policyholder
deposits are allocated to various separate account sub-accounts.
The account value allocated to a sub-account will fluctuate based
on the performance of the sub-accounts. The Company guarantees a
minimum death benefit to be paid to the beneficiaries upon the
death of the insured. The Company may assess surrender fees
against amounts withdrawn prior to the end of the surrender charge
period. A deferred premium tax may also be assessed against
amounts withdrawn in the first ten years. Policyholders may also
incur certain federal income tax penalties on withdrawals.
Under the term life insurance policies, policyholders pay a level
premium over a certain period of time to guarantee a death benefit
will be paid to the beneficiaries upon the death of the insured.
This policy has no cash accumulation available to the
policyholder.
Although the Company markets its products through numerous
distributors, including regional brokerage firms, national
brokerage firms, and banks, approximately 89%, 73%, and 66% of the
Company's sales have been through two specific brokerage firms, A.
G. Edwards & Sons, Incorporated and Edward Jones & Company in
1998, 1997, and 1996, respectively.
ORGANIZATION
CFSLIC, formerly Xerox Financial Services Life Insurance Company
(XFSLIC), is a wholly owned subsidiary of Cova Corporation, a
subsidiary of General American Life Insurance Company (GALIC), a
Missouri domiciled life insurance company. When Cova Corporation
purchased CSFLIC from Xerox Financial Services, Inc. (XFSI), a
wholly owned subsidiary of Xerox Corporation, it entered into a
financing reinsurance transaction with OakRe Life Insurance
Company (OakRe), a subsidiary of XFSLIC, to assume the economic
benefits and risks of the existing single premium deferred annuity
deposits (SPDAs) of CFSLIC. Ownership of OakRe was retained by
XFSI subsequent to the sale of XFSLIC 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 by the end of
the year 2000, from 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.
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 ended
December 31, 1998 and 1997.
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 CFLIC 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) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEBT SECURITIES
Investments in all debt 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
securities at December 31, 1998 and 1997 were classified as
available-for-sale. Securities available-for-sale are carried at
fair value, with unrealized holding gains and losses reported as
accumulated other comprehensive income in the shareholder's
equity, net of deferred effects of income tax and related effects
on deferred acquisition costs and present value of future profits.
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 fair 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.
EQUITY SECURITIES
Equity securities represent investments in nonredeemable preferred
stock and common stock warrants. These securities are carried at
fair value, which is determined primarily through published quotes
of trading values. Changes to adjust the carrying value are
reported directly in shareholder's equity. Other-than-temporary
declines below cost are recorded as realized losses.
MORTGAGE LOANS AND POLICY LOANS
Mortgage loans and policy loans are carried at their unpaid
principal balances. An allowance for mortgage loan losses is
established based on an evaluation of the mortgage loan portfolio,
past credit loss experience, and current economic conditions.
Reserves for loans are established when the Company determines
that collection of all amounts due under the contractual terms is
doubtful and are calculated in conformity with Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan -Income
Recognition and Disclosures.
The Company had no impaired loans, and the valuation allowance for
potential losses on mortgage loans was $510,000 and $237,000, at
December 31, 1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency and demand deposits in
banks, U.S. Treasury bills, money market accounts, and commercial
paper with maturities under 90 days, which are not otherwise
restricted.
SEPARATE ACCOUNT ASSETS
Separate accounts contain segregated assets of the Company that
are specifically assigned to variable annuity or life
policyholders in the separate accounts and are not available to
other creditors of the Company. The earnings of separate account
investments are also assigned to the policyholders in the separate
accounts, and are not guaranteed or supported by the other general
investments of the Company. The Company earns mortality and
expense risk fees from the separate account and assesses
withdrawal charges in the event of early withdrawals. Separate
account assets are carried at fair 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. The Company's capital investment in the separate
accounts as of December 31, 1998 and 1997, is presented in note 3.
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 policy 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 are not recognized currently in
income but as an offset to the accumulated other comprehensive
income component of shareholder's 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.
<TABLE>
<CAPTION>
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.
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred policy acquisition costs, beginning of period $ 84,326 49,833 14,468
Commissions and expenses deferred 50,044 46,142 34,803
Amortization (9,393) (6,307) (4,389)
Deferred policy acquisition costs attributable to
unrealized depreciation (appreciation) 6,996 (5,342) 1,561
Effects on deferred policy acquisition costs of CFLIC
consolidation -- -- 3,390
------------ ------------ -------------
Deferred policy acquisition costs, end of period $ 131,973 84,326 49,833
============ ============ =============
</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
The Company established an intangible asset which represents
the present value of future profits (PVFP) 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
pretax rate of 18% (12% net after tax).
In addition, as the Company has the option of retaining its
SPDA policies after they reach their next interest rate reset
date and are recaptured from OakRe, a component of this asset
represents estimates of future profits on recaptured business.
This asset will be amortized in proportion to estimated future
gross profits derived from investment income, realized gains
and losses on sales of securities, unrealized securities
appreciation and depreciation, 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 inception. The amortization and
adjustments resulting from unrealized appreciation and
depreciation are not recognized currently in income but as an
offset to the accumulated other comprehensive income reflected
as a separate component of shareholder's 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, is projected to be 4.8%, 6.2%, 6.9%, 7.3%, and
7.1% for the years ended December 31, 1999 through 2003,
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
reallocation of the net purchased intangible asset between
PVFP, goodwill, and the future payable. This final allocation
and the resulting impact on inception to date amortization was
recorded, in its entirety, in 1996.
<TABLE>
<CAPTION>
The components of PVFP are shown below. The effects on PVFP of
the consolidation of CFLIC (see note 9) with the Company are
presented separately.
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
PVFP - beginning of period $ 41,486 46,389 38,155
Net amortization (1,684) (1,577) (473)
Present value of future profits attributable to unrealized
depreciation (appreciation) 2,428 (3,326) 6,896
Adjustment due to revised push-down purchase accounting
-- -- 698
Effects on present value of future profits of CFLIC
consolidation -- -- 1,113
------------ ------------ -------------
PVFP - end of period $ 42,230 41,486 46,389
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
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 shown below. The effects on goodwill of the
consolidation of CFLIC (see note 9) with the Company are presented separately.
1998 1997 1996
----------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill - beginning of period $ 19,717 20,849 23,358
Amortization (1,132) (1,132) (916)
Adjustment due to revised push-down purchase accounting
-- -- (3,626)
Effects on goodwill of CFLIC consolidation -- -- 2,033
----------- ------------ ------------
Goodwill - end of period $ 18,585 19,717 20,849
=========== ============ ============
</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 3.50% thereafter. On policies that are
recaptured and subsequently exchanged to a variable annuity
policy, the Company will pay a commission to OakRe of 0.50%.
The Company has recorded a future payable that represents the
present value of the anticipated future commission payments
payable to OakRe over the remaining life of the financial
reinsurance agreement discounted at an estimated borrowing
rate of 6.50%. 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 end of
the year 2000.
<TABLE>
<CAPTION>
The components of this future payable are shown below. The effects on the future
payable on the consolidation of CFLIC (see note 9) with the Company are
presented separately.
1998 1997 1996
----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future payable - beginning of period $ 12,173 16,051 23,967
Interest added 629 959 943
Payments to OakRe (5,826) (4,837) (4,483)
Adjustment due to revised push-down purchase
accounting -- -- (5,059)
Effects on goodwill of CFLIC consolidation -- -- 683
----------- ------------ -----------
Future payable - end of period $ 6,976 12,173 16,051
=========== ============ ===========
</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 Company's assets as of the date of
acquisition was revalued based upon fair market values. The
principal effect of the election was to establish a tax asset on
the tax-basis consolidated balance sheet of approximately $37.9
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 Company's policyholder
deposits as of December 31, 1998 was 5.86%.
FUTURE POLICY BENEFITS
Reserves are held for future policy 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.
PREMIUM REVENUE
The Company recognizes premium revenue at the time of issue on
annuity policies that subject it to longevity risks. Amounts
collected on annuity policies not subject to longevity risk are
recorded as increases in the policyholder deposits liability. For
term and single premium variable life products, premiums are
recognized as revenue when due.
OTHER INCOME
Other income consists primarily of policy surrender charges,
servicing fee from OakRe for administrating their policies, and
advisory fees received from GALIC for advisory services rendered
on their individual annuity products.
FEDERAL INCOME TAXES
The Company files a consolidated income tax return with its
subsidiaries. Allocations of federal income taxes are based upon
separate return calculations.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the
consolidated financial statement carrying amount of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. 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 in 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 valuation
- Amortization of deferred policy acquisition costs
- Amortization of present value of future profits
- Recoverability of goodwill
The fair value of the Company's investments is subject to the risk
that interest rates will change and cause a temporary increase or
decrease in the liquidation value of debt securities. To the
extent that fluctuations in interest rates cause the cash flows of
assets and liabilities to change, the Company might have to
liquidate assets prior to their maturity and recognize a gain or
loss. Interest rate exposure for the investment portfolio is
managed through asset/liability management techniques which
attempt to control the risks presented by differences in the
probable cash flows and reinvestment of assets with the timing of
crediting rate changes in the Company's policies and contracts.
Changes in the estimated prepayments of mortgage-backed securities
also may cause retrospective changes in the amortization period of
securities and the related recognition of income.
The amortization of deferred policy 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 PVFP is based on
estimates of long-term future profits from existing policies when
the Company was purchased by GALIC and policies recaptured from
OakRe. 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.
The Company has considered the recoverability of goodwill and has
concluded that no circumstances have occurred which would give
rise to impairment of goodwill at December 31, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, 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 No. 107 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements.
Because of this, and further because the value of a business is
also based upon its anticipated earning power, the aggregate fair
value amounts represented do not present the underlying value of
the Company.
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 value amounts reported in the consolidated
balance sheets for these instruments approximate their fair
values. Short-term debt securities are considered
available-for-sale.
Investment Securities and Mortgage Loans
(Including Mortgage-backed Securities)
Fair values of 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,
certain mortgage-backed securities, and mortgage loans, 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 3 for fair
value disclosures).
Policy Loans
Fair values of policy loans approximate carrying value as the
interest rates on the majority of policy loans are reset
periodically and, therefore, approximate current interest
rates.
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
5 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, 1998 and 1997, the cash
surrender value of policyholder deposits was approximately
$103.2 million and $151.5 million less than their stated
carrying value. Of the contracts permitting surrender,
substantially all 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
Effective in December 1998, the Company entered into a financing
reinsurance agreement with GALIC. The reinsurance agreement
provides that the Company will reinsurance a block of annuity
business issued by GALIC on a 36% coinsurance basis. The Company
recognized income and a corresponding receivable for $1.6 million
related to the reinsurance agreement.
The financing reinsurance agreement entered into with OakRe as a
condition to the purchase of the Company 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.
During 1997, the Company entered into a financing reinsurance
agreement with RGA Reinsurance Company (RGA), an affiliate,
related to certain of the Company's single premium deferred
annuity products. The agreement contains recapture provisions, at
the option of the Company, beginning in 1999 at a rate of 20% per
year. Deposits recorded under the contract were approximately $219
million and $120 million and are reflected as policyholder
deposits in the consolidated balance sheets at December 31, 1998
and 1997, respectively.
RECENTLY ADOPTED ACCOUNTING STANDARDS
On January 1, 1998, SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,
became fully effective. Previously, the Financial Accounting
Standards Board (the FASB) had deferred until that date certain
provisions of SFAS No. 125 pertaining to repurchase agreements,
securities lending, and similar financing transactions. As a
result of adopting the deferred provisions of SFAS No. 125, the
Company has recognized on its December 31, 1998 consolidated
balance sheet cash of approximately $25,923,000 related to
collateral controlled on securities lending transactions and a
corresponding obligation to return such collateral at the
termination of such transactions. Restatement of prior period
financial statements is not permitted.
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income
and its components in the financial statements. SFAS No. 130 is
effective for the fiscal year beginning after December 15, 1997.
Reclassification of financial statements for earlier periods
provided is required for comparative purposes. The Company has
elected to adopt SFAS No. 130 in 1998. The adoption of SFAS No.
130 has no impact on the Company's consolidated net income or
shareholder's equity. The Company's only component of accumulated
other comprehensive income relates to unrealized appreciation and
depreciation on debt and equity securities.
RECENTLY ISSUED ACCOUNTING STANDARD
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued in June 1998. SFAS No. 133 requires all
derivative instruments to be recorded on the balance sheet at
estimated fair value. The Company's present accounting policies
would apply such accounting treatment only to marketable
securities as defined under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and to off-balance
sheet derivative instruments. SFAS No. 133 will broaden the
definition of derivative instruments to include all classes of
financial assets and liabilities. It also will require separate
disclosure of identifiable derivative instruments embedded in
hybrid securities. Change in the fair value of derivative
instruments is to be recorded each period either in current
earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it
is, on the type of hedge transaction.
SFAS No. 133 is effective for the Company beginning January 1,
2000. The Company's management is currently evaluating the impact
of SFAS No. 133; at present, the management does not believe it
will have a material effect on the Company's consolidated
financial position or results of operations.
OTHER
Certain 1997 and 1996 amounts have been reclassified to conform to
the 1998 presentation.
<TABLE>
<CAPTION>
(3) 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's equity. The amortized cost, estimated
fair value, and carrying value of investments at December 31, 1998 and
1997, are as follows:
1998
-----------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
-------------- -------------- --------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 28,288 249 (84) 28,453 28,453
Collateralized mortgage
obligations 303,577 3,067 (1,571) 305,073 305,073
Corporate, state,
municipalities, and
political subdivisions 1,043,333 19,736 (25,082) 1,037,987 1,037,987
-------------- -------------- --------------- --------------- --------------
Total debt securities 1,375,198 23,052 (26,737) 1,371,513 1,371,513
Equity securities 9,037 -- -- 9,037 9,037
Mortgage loans (net) 312,865 17,500 -- 330,365 312,865
Policy loans 26,295 -- -- 26,295 26,295
-------------- -------------- --------------- --------------- --------------
Total investments $ 1,723,395 40,552 (26,737) 1,737,210 1,719,710
============== ============== =============== =============== ==============
Company's beneficial interest
in separate accounts
$ 2 -- -- 2 2
============== ============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
-------------- -------------- --------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 8,067 121 -- 8,188 8,188
Collateralized mortgage
obligations 370,802 4,504 (524) 374,782 374,782
Corporate, state,
municipalities, and
political subdivisions 890,493 14,867 (8,083) 897,277 897,277
-------------- -------------- --------------- --------------- --------------
Total debt securities 1,269,362 19,492 (8,607) 1,280,247 1,280,247
Mortgage loans (net) 348,206 24,346 -- 372,552 348,206
Policy loans 24,228 -- -- 24,228 24,228
-------------- -------------- --------------- --------------- --------------
Total investments $ 1,641,796 43,838 (8,607) 1,677,027 1,652,681
============== ============== =============== =============== ==============
Company's beneficial interest
in separate accounts
$ 300 9 -- 309 309
============== ============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of debt securities at December 31,
1998, 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.
1998
------------------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Less than one year $ 55,653 54,942
Due after one year through five years 504,712 498,469
Due after five years through ten years 390,086 392,828
Due after ten years 121,170 120,201
Mortgage-backed securities 303,577 305,073
-------------- --------------
Total $ 1,375,198 1,371,513
============== ==============
</TABLE>
At December 31, 1998, approximately 89.8% of the Company's debt
securities are investment grade or are nonrated but considered to be of
investment grade. Of the 10.2% noninvestment grade debt securities, 7.4%
are rated as BB, 2.4% are rated as B, and 0.4% are rated C and treated
as impaired.
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 counterparties to these agreements.
Securities loaned at December 31, 1998 had market values totaling
$25,247,750. Cash of $25,923,295 was held as collateral to secure this
agreement.
Income on the Company's security lending program in 1998 was immaterial.
The Company had two impaired debt securities, of which one became
nonincome producing on December 31, 1998. All debt securities were
income producing at December 31, 1997.
<TABLE>
<CAPTION>
The components of investment income, realized capital gains (losses), and
unrealized appreciation (depreciation) are as follows:
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income on debt securities $ 94,876 84,203 53,632
Income on short-term investments 2,720 2,265 2,156
Income on interest rate swaps 71 43 --
Income on policy loans 1,980 1,852 1,454
Interest on mortgage loans 28,650 24,890 13,633
Income on separate account investments 13 2,637 772
Loss on derivatives -- (2,035) (1,640)
Miscellaneous interest 1,644 (258) 1,773
------------ ------------ -------------
Total investment income 129,954 113,597 71,780
Investment expenses (2,142) (1,936) (1,151)
------------ ------------ -------------
Net investment income $ 127,812 111,661 70,629
Net realized capital gains (losses) are as follows:
Debt securities $ (1,600) 537 469
Mortgage loans -- 27 4
Short-term investments -- (1) (1)
------------ ------------ -------------
Net realized gains (losses) on investments $ (1,600) 563 472
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized appreciation (depreciation) are as follows:
Debt securities $ (3,685) 10,885 (3,192)
Effects on deferred acquisition costs
amortization 3,215 (3,781) 1,561
Effects on PVFP amortization (473) (2,901) 425
------------ ------------ -------------
Unrealized appreciation (depreciation)
before income tax (943) 4,203 (1,206)
Unrealized income tax benefit (expense) 329 (1,471) 422
------------ ------------ -------------
Net unrealized appreciation (depreciation)
on investments $ (614) 2,732 (784)
============ ============ =============
</TABLE>
Proceeds from sales, redemptions, and paydowns of investments in debt
securities during 1998 were $486,264,174. Gross gains of $5,102,040 and
gross losses of $6,601,099 were realized on those sales. Included in
these amounts were $1,002,539 of gross gains and $6,011,305 of gross
losses realized on the sale of noninvestment grade securities. Net
realized losses include a 1998 impairment adjustment totaling
approximately $100,000 related to two debt securities held by the
Company.
Proceeds from sales, redemptions, and paydowns of investments in debt
securities during 1997 were $358,658,091. Gross gains of $1,765,242 and
gross losses of $254,493 were realized on those sales. Included in these
amounts were $681,159 of gross gains and $122,480 of gross losses
realized on the sale of noninvestment grade securities. Net realized
gains include a 1997 impairment adjustment totaling approximately
$974,000 related to one debt security held by the Company.
Proceeds from sales, redemptions, and paydowns 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
noninvestment grade securities.
Securities with a carrying value of approximately $6,400,000 at
December 31, 1998 were deposited with government authorities as
required by law.
(4) SECURITIES GREATER THAN 10% OF SHAREHOLDER'S EQUITY
The Company does not have any individual security that exceeds 10% of
shareholder's equity at December 31, 1998 and 1997.
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
A derivative financial instrument, in very general terms, refers to a
security whose value is derived from the value of an underlying asset,
reference rate, or index.
The Company has a variety of reasons to use derivative instruments, such
as to attempt to protect the Company against possible changes in the
market value of its portfolio and to manage the portfolio's effective
yield, maturity, and duration. All of the Company's holdings are marked
to fair value monthly with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when the disposition closes a hedge. In
this instance, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or futures contract.
Summarized below are the specific types of derivative instruments used
by the Company.
INTEREST RATE SWAPS
At December 31, 1998, the Company had two outstanding interest
rate swap agreements which expire at 2002 and 2003. Under the
agreements, the Company receives a fixed rate of 6.63% and 6.70%
on a notional amount of $7 and $8 million, respectively, and pays
a floating rate based on London Interbank Offered Rate (LIBOR).
The estimated fair value of the agreements at December 31, 1998
was a net unrealized gain of approximately $0.6 million which is
recognized in the accompanying consolidated balance sheet.
At December 31, 1997, the Company has one outstanding interest
rate swap agreement which expires in 2002. Under the agreement,
the Company receives a fixed rate of 6.63% on $7.0 million and
pays a floating rate based on LIBOR. At December 31, 1997, the
estimated fair value of the agreement was immaterial.
Under interest rate swaps, the Company agrees with counterparties
to exchange, at specific intervals, the payments between floating
and fixed-rate interest amounts calculated by reference to
notional amounts. Net interest payments are recognized within net
investment income in the consolidated statement of income.
FUTURES
In order to limit exposure to market fluctuations related to
temporary seed money invested within the separate account, the
Company entered into financial futures contracts during 1997 and
1996. No financial futures contracts were held during 1998. The
Company recorded $-0-, $2,035,309, and $1,639,717 of losses from
terminated contracts as a component of net investment income
during 1998, 1997 and 1996, respectively. The Company also
recorded gains of $-0-, $2,636,999, and $2,007,720 as a component
of net investment income from market appreciation on the
underlying hedged securities within the separate account during
1998, 1997, and 1996, respectively.
A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon
price. The Company utilized futures on the S&P 500 index in 1997.
Upon entering into futures contracts, the Company maintains, in a
segregated account with its custodian, securities with a value
equal to an agreed upon portion of the notional obligation under
the futures contracts. During the period the futures contract is
open, payments are received from or made to the broker daily based
upon changes in the value of the contract with the related income
or loss reflected in the consolidated statement of income as a
contra to changes in fair value of the hedged securities.
The Company is exposed to credit related risk in the event of
nonperformance by counterparties to financial instruments but does
not expect any counterparties to fail to meet their obligations.
It is the Company's policy to deal only with highly rated
companies.
<TABLE>
<CAPTION>
(6) COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income $ 13,894 8,978 3,601
------------ ------------ -------------
Other comprehensive income (loss), before tax -
unrealized appreciation (depreciation) of debt and
equity securities arising during period:
Unrealized holding appreciation (depreciation)
of debt and equity securities (12,971) 13,514 (14,387)
Adjustment to deferred acquisition costs
attributable to unrealized
(appreciation) depreciation 6,228 (5,128) 1,614
Adjustment to PVFP attributable to unrealized
(appreciation) depreciation 2,161 (3,193) 7,130
------------ ------------ -------------
Total unrealized appreciation (depreciation)
arising during period (4,582) 5,193 (5,643)
Less reclassification adjustments for realized (gains) losses
included in net income:
Adjustment for (gains) losses included in
net realized gains (losses) on sales
of investments 1,600 (563) (472)
Adjustment for (gains) losses included in
amortization of PVFP (768) 214 53
Adjustment for (gains) losses included in
amortization of deferred acquisition costs (267) 133 234
------------ ------------ -------------
Total reclassification adjustments for (gains)
losses included in net income 565 (216) (185)
------------ ------------ -------------
Other comprehensive income (loss) before related
income tax expense (benefit) (5,147) 5,409 (5,458)
Related income tax expense (benefit) (1,801) 1,893 (1,910)
------------ ------------ -------------
Other comprehensive income (loss), net of tax (3,346) 3,516 (3,548)
------------ ------------ -------------
Comprehensive income $ 10,548 12,494 53
============ ============ =============
</TABLE>
(7) POSTRETIREMENT 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 1998, 1997, and 1996, the Company was allocated a
portion of benefit costs including severance pay, accumulated vacations,
and disability benefits. At December 31, 1998, 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 subsidiaries, CFLIC and 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 $0.2 million of state
income tax recoveries.
<TABLE>
<CAPTION>
Income taxes are recorded in the consolidated statement of income and directly
in certain shareholder's equity accounts. Income tax expense for the years ended
December 31 is allocated as follows:
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Statements of income:
Operating income (excluding realized
investment gains and losses) $ 3,906 5,464 2,493
Realized investment gains (losses) (533) 197 162
------------ ------------ -------------
Income tax expense (benefit)
included in the consolidated
statements of income 3,373 5,661 2,655
Shareholder's equity -
change in deferred federal income
taxes related to unrealized
appreciation (depreciation)
on securities (1,801) 1,893 (1,910)
------------ ------------ -------------
Total income tax expense $ 1,572 7,554 745
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
The actual federal income tax expense differed from the expected tax expense
computed by applying the U.S. federal statutory rate to income before taxes on
income as follows:
1998 1997 1996
------------------ ------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $ 6,043 35.0% $ 5,124 35.0% $ 2,190 35.0%
State income taxes, net (8) -- (33) (0.2) 77 1.2
Amortization of intangible assets 396 2.3 396 2.7 320 5.1
Dividend received deduction - separate
account (3,183) (18.5) -- -- -- --
Other 125 0.7 174 1.2 68 1.1
--------- -------- -------- ---------- --------- ----------
Total $ 3,373 19.5% $ 5,661 38.7% $ 2,655 42.4%
========= ======== ======== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1998 and
1997 follows:
1998 1997
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Policy reserves $ 31,003 25,312
Liability for commissions on recapture 2,896 4,715
Tax basis of intangible assets purchased 5,351 5,791
DAC "Proxy Tax" 20,619 14,594
Other deferred tax assets 2,690 31
----------- ------------
Total deferred tax assets 62,559 50,443
----------- ------------
Deferred tax liabilities:
PVFP 11,013 9,734
Unrealized (depreciation) appreciation on investments (330) 1,472
Deferred policy acquisition costs 46,190 29,514
Other deferred tax liabilities 900 1,790
----------- ------------
Total deferred tax liabilities 57,773 42,510
----------- ------------
Net deferred tax assets $ 4,786 7,933
=========== ============
</TABLE>
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
On December 31, 1997, CLMC and Navisys Incorporated, affiliated
companies, purchased certain assets of Johnson & Higgins/Kirke Van
Orsdel, Inc. (J&H/KVI), an unaffiliated Delaware corporation, for
$2,500,000. The purchased assets are the administrative and service
systems that provide the marketing, underwriting, claims, and
administrative functions for the Company's life and annuity products. On
January 1, 1998, the purchased assets of J&H/KVI were merged into Cova
Life Administrative Service Company (CLASC). Navisys Incorporated
purchased 51% of CLASC, the remaining 49% was purchased by CLMC.
The Company has entered into management, operations, and servicing
agreements with its affiliated companies. The affiliated companies are
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 Company's ultimate parent, GALIC. CLASC provides
various services for the Company including underwriting, claims, and
administrative functions. Expenses and fees paid to affiliated companies
in 1998, 1997, and 1996 for the Company were $20,923,330, $9,400,517,
and $6,618,303, respectively.
In 1998 and 1997, the Company received approximately $3.2 million and
$1.1 million, respectively, in advisory fees from GALIC related to
advisory services on GALIC's individual annuity products.
On December 31, 1996, Cova Corporation transferred its ownership of
CFLIC to the Company. The transfer of ownership was recorded as
additional paid-in capital and increased shareholder's equity on the
Company's 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
CFLIC's balance sheet is fully consolidated with the Company's December
31, 1996 balance sheet, CFLIC's 1996 income and cash flows statements
have not been consolidated with the Company's 1996 income or cash flows
statements. However, CFLIC's December 31, 1996 cash balance of $6.7
million is included in the Company's consolidated cash flows statement.
(10) STATUTORY SURPLUS AND DIVIDEND RESTRICTION
GAAP differs 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 tax under GAAP
reporting, the nonrecognition 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, adjustments to record the carrying values of debt
securities and certain equity securities at fair value 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 shareholder's equity to the net purchase price. Statutory
accounting does not recognize the purchase method of accounting.
<TABLE>
<CAPTION>
As of December 31, the differences between statutory capital and surplus
and shareholder's equity determined in conformity with GAAP are as
follows:
1998 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Statutory capital and surplus $ 104,740 90,439
Reconciling items:
GAAP investment valuation reserves (510) (237)
Statutory asset valuation reserve 19,206 18,301
Statutory interest maintenance reserve 5,983 3,080
GAAP investment adjustments to fair value (3,685) 10,885
GAAP deferred policy acquisition costs 131,973 84,326
GAAP basis policy reserves (52,305) (39,921)
GAAP deferred federal income taxes (net) 4,786 7,933
GAAP guarantee assessment adjustment (9,700) (9,700)
GAAP goodwill 18,373 19,457
GAAP present value of future profits 42,230 41,486
GAAP future purchase price payable (6,976) (12,173)
Other (2,029) (1,338)
------------- -------------
GAAP shareholder's equity $ 252,086 212,538
============= =============
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1998, 1997, and 1996
Statutory net losses for CFSLIC for the years ended
December 31, 1998, 1997, and 1996 were $2,830,105,
$9,816,357, and $13,575,788, 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. Due to the
1998 statutory net loss and the Company's negative earned surplus at
December 31, 1998, no dividends are permissible in 1999 without prior
approval of the insurance commissioner.
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,
1998, the Company's total adjusted capital and authorized control level
RBC were $123,947,126 and $27,386,910, respectively. This level of
adjusted capital qualifies under all tests.
(11) GUARANTY FUND ASSESSMENTS
The Company participates with 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 Company's authority to
issue new business, the Company is contingently liable for its share of
claims covered by the guaranty associations for insolvencies incurred
through 1998, 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 assets as a credit against premium of other state taxes over, most
commonly, five years.
In November 1998, the National Organization of Life and Health Guaranty
Associations 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
$9,700,000 in future assessments on insolvencies that occurred before
December 31, 1998. 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 $9,700,000. The Company paid
approximately $1,500,000, $3,000,000, and $2,000,000 in guaranty fund
assessments in 1998, 1997, and 1996, respectively. These payments were
substantially reimbursed by OakRe. 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 remaining 20%. The
credits retained for 1998 were not material.
(12) SUBSEQUENT EVENT
On January 31, 1999, the Company modified its financing reinsurance
agreement with RGA related to the Company's certain single premium
deferred annuity products. Under the modified financing reinsurance
agreement, the Company will no longer reinsure any new single premium
deferred annuity product policies with RGA.
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 - June 30, 1999 (unaudited).
2. Statement of Operations - Six Months ended June 30, 1999 (unaudited).
3. Statement of Changes in Net Assets - Six Months ended June 30, 1999
(unaudited).
4. Notes to Financial Statements - June 30, 1999 (unaudited).
5. Independent Auditors' Report.
6. Statement of Assets and Liabilities as of December 31, 1998.
7. Statement of Operations for the year ended December 31, 1998.
8. Statements of Changes in Net Assets for the years ended
December 31, 1998 and 1997.
9. Notes to Financial Statements - December 31, 1998 and 1997.
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, 1998 and 1997.
3. Consolidated Statements of Income for the years ended December 31,
1998, 1997 and 1996.
4. Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1998, 1997, and 1996.
5. Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996.
6. Notes to Consolidated Financial Statements - December 31,
1998, 1997, and 1996.
b. Exhibits
---------------------------------------------------------------
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account.**
2. Not Applicable.
3.(i) Form of Principal Underwriter's Agreement. +
(ii) Form of Selling Agreement. +
4.(i) Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.***
(ii)Death Benefit Rider***
(iii)Rider - Nursing Home Waiver***
(iv)Death Benefit Endorsements**
(v) Charitable Remainder Trust Endorsement**
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.(i) Form of Fund Participation Agreement among MFS Variable Insurance
Trust, Cova Financial Services Life Insurance Company and
Massachusetts Financial Services Company+
(ii) Form of Fund Participation Agreement among Cova Financial
Services Life Insurance Company, Cova Life Sales Company,
Alliance Capital Management LP and Alliance Fund Distributors,
Inc.+
(iii) Form of Fund Participation Agreement among Oppenheimer Variable
Account Funds, OppenheimerFunds, Inc. and Cova Financial Services
Life Insurance Company++
(iv) Form of Fund Participation Agreement among Putnam Variable Trust,
Putnam Mutual Funds Corp. and Cova Financial Services Life
Insurance Company++
(v) Form of Fund Participation Agreement by and among AIM Variable
Insurance Funds, Inc., A I M Distributors, Inc., Cova Financial
Services Life Insurance Company, on behalf of itself and its
Separate Accounts, and Cova Life Sales Company++
(vi) Form of Fund Participation Agreement among Investors Fund Series,
Zurich Kemper Investments, Inc., Zurich Kemper Distributors, Inc.
and Cova Financial Services Life Insurance Company++
(vii) Form of Participation Agreement by and between Goldman Sachs
Variable Insurance Trust, Goldman, Sachs & Co. and Cova Financial
Services Life Insurance Company++
(viii) Form of Participation Agreement among Russell Insurance Funds,
Russell Fund Distributors, Inc. and Cova Financial Services Life
Insurance Company++
(ix) Form of Participation Agreement among Liberty Variable Investment
Trust, Liberty Financial Investments, Inc. and Cova Financial
Services Life Insurance Company++
(x) Form of Participation Agreement among Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and Cova
Financial Services Life Insurance Company**
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
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 Form N-4 (File Nos. 333-34741
and 811-05200) electronically filed on August 29, 1997.
+Incorporated by reference to Registrants Pre-Effective Amendment No. 1
to Form N-4 electronically filed on November 19, 1997.
++Incorporated by reference to Post-Effective Amendment No. 1 to Form N-4
electronically filed on January 26, 1998.
**Incorporated by reference to Registrant's Post-Effective Amendment No. 4
(File Nos. 333-34741 and 811-05200) electronically field on April 30, 1999.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
_______________________________ ____________________________________
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Connie A. Doern Vice President
4700 Westown Parkway
West Des Moines, IA 50266
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Executive 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
4700 Westown Parkway
West Des Moines, IA 50266
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
William C. Mair Vice President
One Tower Lane, Suite 3000 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
Bernard J. Spaulding Senior Vice President and General
One Tower Lane, Suite 3000 Counsel
Oakbrook Terrace, IL 60181-4644
Joann T. Tanaka Senior Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Patricia M. Wersching Assistant Treasurer
700 Market Street
St. Louis, MO 63101
Peter L. Witkewiz Vice President and Controller
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart was filed in Registrant's Form N-4 (File Nos.
333-34741 and 811-05200) filed August 29, 1997 as Exhibit 14 and is incorporated
herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of November 9, 1999 there were 1223 Qualified Contract Owners and 4772
Non-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
First Cova Variable Annuity Account One
Cova Variable Life Account One
Cova Variable Life Account Five
Cova Variable Annuity Account Four
General American Separate Account Twenty-Eight
General American Separate Account Twenty-Nine
Security Equity Separate Account 26
Security Equity Separate Account 27
(b) Cova Life Sales Company is the principal underwriter for the Contracts.
The following persons are the officers and directors of Cova Life Sales Company.
The principal business address for each officer and director of Cova Life Sales
Company is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------ --------------------------
Lorry J. Stensrud Director
Patricia E. Gubbe President, Chief Compliance Officer
and Director
William C. Mair Director
Philip A. Haley Vice President
Shari Ruecker Vice President
Mark E. Reynolds Treasurer
James W. Koeger Assistant Treasurer
Bernard J. Spaulding Secretary
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
William Flory, 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 9th day of November, 1999.
<TABLE>
<CAPTION>
<S> <C>
COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud
COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
Depositor
By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud
</TABLE>
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------- Chairman of the Board ------
Richard A. Liddy and Director Date
/s/LORRY J. STENSRUD President and Director 11/8/99
- ---------------------- ------
Lorry J. Stensrud Date
/s/J. ROBERT HOPSON Director 11/9/99
- ---------------------- ------
J. Robert Hopson Date
William C. Mair* Director 11/8/99
- ---------------------- ------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 11/8/99
- ---------------------- ------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 11/8/99
- ---------------------- ------
Matthew P. McCauley Date
John W. Barber* Director 11/8/99
- ---------------------- ------
John W. Barber Date
/s/MARK E. REYNOLDS Director 11/9/99
- ---------------------- ------
Mark E. Reynolds Date
/s/J. TERRI TANAKA 11/9/99
- ---------------------- Director ------
J. Terri Tanaka Date
/s/PETER L. WITKEWIZ 11/9/99
- ---------------------- Controller ------
Peter L. Witkewiz Date
</TABLE>
*By:/s/LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EXHIBIT NO.
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Auditors
EX-99.B13 Calculation of Performance Information
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
November 12, 1999
Board of Directors
Cova Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
RE: Opinion of Counsel - Cova Variable Annuity Account One
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-4 for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts (the "Contracts") to be issued by Cova
Financial Services Life Insurance Company and its separate account, Cova
Variable Annuity Account One.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. Cova Variable Annuity Account One is a Unit Investment Trust as that
term is defined in Section 4(2) of the Investment Company Act of 1940 (the
"Act"), and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by an Owner pursuant to a
Contract issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable law, such an Owner will have a
legally-issued, fully paid, non-assessable contractual interest under such
Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/RAYMOND A. O'HARA III
-----------------------------
Raymond A. O'Hara III
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Cova Financial Services Life Insurance Company
We consent to the use of our reports on the consolidated financial statements
of Cova Financial Services Life Insurance Company and subsidiaries (the
Company) dated March 4, 1999, and on the financial statements of the sub-
accounts of Cova Variable Annuity Account One dated March 1, 1999, and to
the reference to our firm under the heading "Experts" in the Statement of
Additional Information in the Post-Effective Amendment No. 5 to the
Registration Statement (Form N-4, No. 333-34741) of Cova Variable Annuity
Account One.
/S/ KPMG LLP
Chicago, Illinois
November 10, 1999
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Standard 1 Year Performance Data- Part I
As of 6/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Bond Debenture
<S> <C> <C> <C> <C> <C> <C>
6/30/1998 purchase 1,000.00 13.512812 - 74.0038 74.0038
6/30/1999 annual fee (1.00) 13.536168 74.0038 (0.0739) 73.9299
6/30/1999 surrender fee (45.00) 13.536168 73.9299 (3.3244) 70.6055
General American Capital Company Money Market
6/30/1998 purchase 1,000.00 10.891338 - 91.8161 91.8161
6/30/1999 annual fee (1.04) 11.299196 91.8161 (0.0920) 91.7241
6/30/1999 surrender fee (45.00) 11.299196 91.7241 (3.9826) 87.7415
Cova Series Trust Developing Growth
6/30/1998 purchase 1,000.00 11.313738 - 88.3881 88.3881
6/30/1999 annual fee (1.12) 12.724192 88.3881 (0.0880) 88.3001
6/30/1999 surrender fee (45.00) 12.724192 88.3001 (3.5366) 84.7635
Cova Series Trust Large Cap Research
6/30/1998 purchase 1,000.00 11.344054 - 88.1519 88.1519
6/30/1999 annual fee (1.17) 13.320553 88.1519 (0.0878) 88.0641
6/30/1999 surrender fee (45.00) 13.320553 88.0641 (3.3782) 84.6859
Cova Series Trust Mid-Cap Value
6/30/1998 purchase 1,000.00 11.209641 - 89.2089 89.2089
6/30/1999 annual fee (1.03) 11.560414 89.2089 (0.0891) 89.1198
6/30/1999 surrender fee (45.00) 11.560414 89.1198 (3.8926) 85.2272
Cova Series Trust Quality Bond
6/30/1998 purchase 1,000.00 11.525607 - 86.7633 86.7633
6/30/1999 annual fee (1.00) 11.582126 86.7633 (0.0863) 86.6770
6/30/1999 surrender fee (45.00) 11.582126 86.6770 (3.8853) 82.7917
Cova Series Trust Small Cap Stock
6/30/1998 purchase 1,000.00 14.018877 - 71.3324 71.3324
6/30/1999 annual fee (0.95) 13.249386 71.3324 (0.0717) 71.2607
6/30/1999 surrender fee (45.00) 13.249386 71.2607 (3.3964) 67.8643
Cova Series Trust Large Cap Stock
6/30/1998 purchase 1,000.00 17.659381 - 56.6271 56.6271
6/30/1999 annual fee (1.23) 21.760453 56.6271 (0.0565) 56.5706
6/30/1999 surrender fee (45.00) 21.760453 56.5706 (2.0680) 54.5026
Cova Series Trust Select Equity
6/30/1998 purchase 1,000.00 15.795533 - 63.3090 63.3090
6/30/1999 annual fee (1.19) 18.786819 63.3090 (0.0633) 63.2457
6/30/1999 surrender fee (45.00) 18.786819 63.2457 (2.3953) 60.8504
Cova Series Trust International Equity
6/30/1998 purchase 1,000.00 13.059689 - 76.5715 76.5715
6/30/1999 annual fee (1.04) 13.530211 76.5715 (0.0769) 76.4946
6/30/1999 surrender fee (45.00) 13.530211 76.4946 (3.3259) 73.1687
Russell Multi-Style Equity
6/30/1998 purchase 1,000.00 11.950204 - 83.6806 83.6806
6/30/1999 annual fee (1.18) 14.136244 83.6806 (0.0835) 83.5971
6/30/1999 surrender fee (45.00) 14.136244 83.5971 (3.1833) 80.4138
Russell Aggressive Equity
6/30/1998 purchase 1,000.00 10.629243 - 94.0801 94.0801
6/30/1999 annual fee (0.94) 9.994595 94.0801 (0.0941) 93.9860
6/30/1999 surrender fee (45.00) 9.994595 93.9860 (4.5024) 89.4836
Russell Non-U.S.
6/30/1998 purchase 1,000.00 11.200649 - 89.2805 89.2805
6/30/1999 annual fee (1.06) 11.843135 89.2805 (0.0895) 89.1910
6/30/1999 surrender fee (45.00) 11.843135 89.1910 (3.7997) 85.3913
Russell Core Bond
6/30/1998 purchase 1,000.00 10.315688 - 96.9397 96.9397
6/30/1999 annual fee (1.01) 10.400162 96.9397 (0.0971) 96.8426
6/30/1999 surrender fee (45.00) 10.400162 96.8426 (4.3269) 92.5157
AIM V.I. Value
6/30/1998 purchase 1,000.00 11.764796 - 84.9993 84.9993
6/30/1999 annual fee (1.26) 14.842562 84.9993 (0.0849) 84.9144
6/30/1999 surrender fee (45.00) 14.842562 84.9144 (3.0318) 81.8826
AIM V.I. Capital Appreciation
6/30/1998 purchase 1,000.00 11.210744 - 89.2001 89.2001
6/30/1999 annual fee (1.14) 12.802441 89.2001 (0.0890) 89.1111
6/30/1999 surrender fee (45.00) 12.802441 89.1111 (3.5150) 85.5961
AIM V.I. International Equity
6/30/1998 purchase 1,000.00 11.800847 - 84.7397 84.7397
6/30/1999 annual fee (1.00) 11.814369 84.7397 (0.0846) 84.6551
6/30/1999 surrender fee (45.00) 11.814369 84.6551 (3.8089) 80.8462
Alliance Premier Growth
6/30/1998 purchase 1,000.00 12.751717 - 78.4208 78.4208
6/30/1999 annual fee (1.29) 16.395203 78.4208 (0.0787) 78.3421
6/30/1999 surrender fee (45.00) 16.395203 78.3421 (2.7447) 75.5974
Alliance Real Estate Investment
6/30/1998 purchase 1,000.00 9.295588 - 107.5779 107.5779
6/30/1999 annual fee (0.90) 8.410331 107.5779 (0.1070) 107.4709
6/30/1999 surrender fee (45.00) 8.410331 107.4709 (5.3506) 102.1203
Liberty Newport Tiger Fund, Variable Series
6/30/1998 purchase 1,000.00 7.316828 - 136.6712 136.6712
6/30/1999 annual fee (1.62) 11.850543 136.6712 (0.1367) 136.5345
6/30/1999 surrender fee (45.00) 11.850543 136.5345 (3.7973) 132.7372
Goldman Sachs Growth and Income
6/30/1998 purchase 1,000.00 10.776200 - 92.7971 92.7971
6/30/1999 annual fee (1.01) 10.866470 92.7971 (0.0929) 92.7042
6/30/1999 surrender fee (45.00) 10.866470 92.7042 (4.1412) 88.5630
Goldman Sachs International Equity
6/30/1998 purchase 1,000.00 11.429119 - 87.4958 87.4958
6/30/1999 annual fee (1.02) 11.628506 87.4958 (0.0877) 87.4081
6/30/1999 surrender fee (45.00) 11.628506 87.4081 (3.8698) 83.5383
Goldman Sachs Global Income
6/30/1998 purchase 1,000.00 10.297894 - 97.1072 97.1072
6/30/1999 annual fee (1.02) 10.551525 97.1072 (0.0967) 97.0105
6/30/1999 surrender fee (45.00) 10.551525 97.0105 (4.2648) 92.7457
Kemper Small Cap Growth
6/30/1998 purchase 1,000.00 11.245417 - 88.9251 88.9251
6/30/1999 annual fee (1.07) 12.075969 88.9251 (0.0886) 88.8365
6/30/1999 surrender fee (45.00) 12.075969 88.8365 (3.7264) 85.1101
Kemper Small Cap Value
6/30/1998 purchase 1,000.00 10.160018 - 98.4250 98.4250
6/30/1999 annual fee (0.91) 9.212540 98.4250 (0.0988) 98.3262
6/30/1999 surrender fee (45.00) 9.212540 98.3262 (4.8846) 93.4416
Kemper Government Securities
6/30/1998 purchase 1,000.00 10.264104 - 97.4269 97.4269
6/30/1999 annual fee (1.02) 10.486805 97.4269 (0.0973) 97.3296
6/30/1999 surrender fee (45.00) 10.486805 97.3296 (4.2911) 93.0385
MFS Research
6/30/1998 purchase 1,000.00 11.808504 - 84.6847 84.6847
6/30/1999 annual fee (1.11) 13.158217 84.6847 (0.0844) 84.6003
6/30/1999 surrender fee (45.00) 13.158217 84.6003 (3.4199) 81.1804
MFS Growth with Income
6/30/1998 purchase 1,000.00 11.535562 - 86.6885 86.6885
6/30/1999 annual fee (1.10) 12.683197 86.6885 (0.0867) 86.6018
6/30/1999 surrender fee (45.00) 12.683197 86.6018 (3.5480) 83.0538
MFS Emerging Growth
6/30/1998 purchase 1,000.00 12.073075 - 82.8289 82.8289
6/30/1999 annual fee (1.23) 14.825001 82.8289 (0.0830) 82.7459
6/30/1999 surrender fee (45.00) 14.825001 82.7459 (3.0354) 79.7105
MFS / Foreign & Colonial Emerging Markets Equity
6/30/1998 purchase 1,000.00 8.675954 - 115.2611 115.2611
6/30/1999 annual fee (0.92) 7.986146 115.2611 (0.1152) 115.1459
6/30/1999 surrender fee (45.00) 7.986146 115.1459 (5.6348) 109.5111
MFS High Income
6/30/1998 purchase 1,000.00 10.396518 - 96.1860 96.1860
6/30/1999 annual fee (0.99) 10.262353 96.1860 (0.0965) 96.0895
6/30/1999 surrender fee (45.00) 10.262353 96.0895 (4.3850) 91.7045
MFS Global Governments
6/30/1998 purchase 1,000.00 10.172638 - 98.3029 98.3029
6/30/1999 annual fee (1.01) 10.290122 98.3029 (0.0982) 98.2047
6/30/1999 surrender fee (45.00) 10.290122 98.2047 (4.3731) 93.8316
Oppenheimer Capital Appreciation
6/30/1998 purchase 1,000.00 11.627266 - 86.0047 86.0047
6/30/1999 annual fee (1.21) 14.069924 86.0047 (0.0860) 85.9187
6/30/1999 surrender fee (45.00) 14.069924 85.9187 (3.1983) 82.7204
Oppenheimer Main Street Growth & Income
6/30/1998 purchase 1,000.00 11.232688 - 89.0259 89.0259
6/30/1999 annual fee (1.05) 11.756598 89.0259 (0.0893) 88.9366
6/30/1999 surrender fee (45.00) 11.756598 88.9366 (3.8276) 85.1090
Oppenheimer High Income
6/30/1998 purchase 1,000.00 10.407015 - 96.0890 96.0890
6/30/1999 annual fee (0.98) 10.198942 96.0890 (0.0961) 95.9929
6/30/1999 surrender fee (45.00) 10.198942 95.9929 (4.4122) 91.5807
Oppenheimer Bond
6/30/1998 purchase 1,000.00 10.323456 - 96.8668 96.8668
6/30/1999 annual fee (1.00) 10.283438 96.8668 (0.0972) 96.7696
6/30/1999 surrender fee (45.00) 10.283438 96.7696 (4.3760) 92.3936
Oppenheimer Strategic Bond
6/30/1998 purchase 1,000.00 10.263162 - 97.4359 97.4359
6/30/1999 annual fee (0.98) 10.094897 97.4359 (0.0971) 97.3388
6/30/1999 surrender fee (45.00) 10.094897 97.3388 (4.4577) 92.8811
Putnam VT Growth and Income
6/30/1998 purchase 1,000.00 10.917315 - 91.5976 91.5976
6/30/1999 annual fee (1.15) 12.503038 91.5976 (0.0920) 91.5056
6/30/1999 surrender fee (45.00) 12.503038 91.5056 (3.5991) 87.9065
Putnam VT New Value
6/30/1998 purchase 1,000.00 10.313419 - 96.9611 96.9611
6/30/1999 annual fee (1.15) 11.899961 96.9611 (0.0966) 96.8645
6/30/1999 surrender fee (45.00) 11.899961 96.8645 (3.7815) 93.0830
Putnam VT Vista
6/30/1998 purchase 1,000.00 11.611220 - 86.1236 86.1236
6/30/1999 annual fee (1.14) 13.199054 86.1236 (0.0864) 86.0372
6/30/1999 surrender fee (45.00) 13.199054 86.0372 (3.4093) 82.6279
Putnam VT International Growth
6/30/1998 purchase 1,000.00 11.897017 - 84.0547 84.0547
6/30/1999 annual fee (1.10) 13.062217 84.0547 (0.0842) 83.9705
6/30/1999 surrender fee (45.00) 13.062217 83.9705 (3.4451) 80.5254
Putnam VT International New Opportunities
6/30/1998 purchase 1,000.00 11.552897 - 86.5584 86.5584
6/30/1999 annual fee (1.17) 13.536626 86.5584 (0.0864) 86.4720
6/30/1999 surrender fee (45.00) 13.536626 86.4720 (3.3243) 83.1477
Templeton International
6/30/1998 purchase 1,000.00 9.637200 - 103.7646 103.7646
6/30/1999 annual fee (1.04) 10.014949 103.7646 (0.1038) 103.6608
6/30/1999 surrender fee (45.00) 10.014949 103.6608 (4.4933) 99.1675
Templeton Developing Markets
6/30/1998 purchase 1,000.00 7.369957 - 135.6860 135.6860
6/30/1999 annual fee (1.46) 10.737070 135.6860 (0.1360) 135.5500
6/30/1999 surrender fee (45.00) 10.737070 135.5500 (4.1911) 131.3589
Templeton Mutual Shares Investments
6/30/1998 purchase 1,000.00 9.509571 - 105.1572 105.1572
6/30/1999 annual fee (1.16) 11.009906 105.1572 (0.1054) 105.0518
6/30/1999 surrender fee (45.00) 11.009906 105.0518 (4.0872) 100.9646
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
- 1,000.00
1,001.73 1,000.73
1,000.73 955.73
- 1,000.00
1,037.45 1,036.41
1,036.41 991.41
- 1,000.00
1,124.67 1,123.55
1,123.55 1,078.55
- 1,000.00
1,174.23 1,173.06
1,173.06 1,128.06
- 1,000.00
1,031.29 1,030.26
1,030.26 985.26
- 1,000.00
1,004.90 1,003.90
1,003.90 958.90
- 1,000.00
945.11 944.16
944.16 899.16
- 1,000.00
1,232.23 1,231.00
1,231.00 1,186.00
- 1,000.00
1,189.37 1,188.19
1,188.19 1,143.19
- 1,000.00
1,036.03 1,034.99
1,034.99 989.99
- 1,000.00
1,182.93 1,181.75
1,181.75 1,136.75
- 1,000.00
940.29 939.35
939.35 894.35
- 1,000.00
1,057.36 1,056.30
1,056.30 1,011.30
- 1,000.00
1,008.19 1,007.18
1,007.18 962.18
- 1,000.00
1,261.61 1,260.35
1,260.35 1,215.35
- 1,000.00
1,141.98 1,140.84
1,140.84 1,095.84
- 1,000.00
1,001.15 1,000.15
1,000.15 955.15
- 1,000.00
1,285.72 1,284.43
1,284.43 1,239.43
- 1,000.00
904.77 903.87
903.87 858.87
- 1,000.00
1,619.63 1,618.01
1,618.01 1,573.01
- 1,000.00
1,008.38 1,007.37
1,007.37 962.37
- 1,000.00
1,017.45 1,016.43
1,016.43 971.43
- 1,000.00
1,024.63 1,023.61
1,023.61 978.61
- 1,000.00
1,073.86 1,072.79
1,072.79 1,027.79
- 1,000.00
906.74 905.83
905.83 860.83
- 1,000.00
1,021.70 1,020.68
1,020.68 975.68
- 1,000.00
1,114.30 1,113.19
1,113.19 1,068.19
- 1,000.00
1,099.49 1,098.39
1,098.39 1,053.39
- 1,000.00
1,227.94 1,226.71
1,226.71 1,181.71
- 1,000.00
920.49 919.57
919.57 874.57
- 1,000.00
987.09 986.10
986.10 941.10
- 1,000.00
1,011.55 1,010.54
1,010.54 965.54
- 1,000.00
1,210.08 1,208.87
1,208.87 1,163.87
- 1,000.00
1,046.64 1,045.59
1,045.59 1,000.59
- 1,000.00
980.01 979.03
979.03 934.03
- 1,000.00
996.12 995.12
995.12 950.12
- 1,000.00
983.61 982.63
982.63 937.63
- 1,000.00
1,145.25 1,144.10
1,144.10 1,099.10
- 1,000.00
1,153.83 1,152.68
1,152.68 1,107.68
- 1,000.00
1,136.75 1,135.61
1,135.61 1,090.61
- 1,000.00
1,097.94 1,096.84
1,096.84 1,051.84
- 1,000.00
1,171.71 1,170.54
1,170.54 1,125.54
- 1,000.00
1,039.20 1,038.16
1,038.16 993.16
- 1,000.00
1,456.87 1,455.41
1,455.41 1,410.41
- 1,000.00
1,157.77 1,156.61
1,156.61 1,111.61
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Standard 1 Year Performance- Part I
As of 6/30/1999
Sub-Account Total Account Unit Value Initial Inception Days Since
Return Value 6/30/1999 Investment Date Inception
<S> <C> <C> <C>
Cova Series Trust Lord Abbett Growth and Income 1/8/1999 173
Cova Series Trust Bond Debenture -4.43% 955.73 13.536168 1,000.00 5/1/1996 1,155
General American Capital Company Money Market -0.86% 991.41 11.299196 1,000.00 6/3/1996 1,122
Cova Series Trust Developing Growth 7.85% 1,078.55 12.724192 1,000.00 8/20/1997 679
Cova Series Trust Large Cap Research 12.81% 1,128.06 13.320553 1,000.00 8/20/1997 679
Cova Series Trust Mid-Cap Value -1.47% 985.26 11.560414 1,000.00 8/20/1997 679
Cova Series Trust Quality Bond -4.11% 958.90 11.582126 1,000.00 5/1/1996 1,155
Cova Series Trust Small Cap Stock -10.08% 899.16 13.249386 1,000.00 5/1/1996 1,155
Cova Series Trust Large Cap Stock 18.60% 1,186.00 21.760453 1,000.00 5/1/1996 1,155
Cova Series Trust Select Equity 14.32% 1,143.19 18.786819 1,000.00 5/1/1996 1,155
Cova Series Trust International Equity -1.00% 989.99 13.530211 1,000.00 5/1/1996 1,155
Russell Multi-Style Equity 13.68% 1,136.75 14.136244 1,000.00 12/31/1997 546
Russell Aggressive Equity -10.57% 894.35 9.994595 1,000.00 12/31/1997 546
Russell Non-U.S. 1.13% 1,011.30 11.843135 1,000.00 12/31/1997 546
Russell Core Bond -3.78% 962.18 10.400162 1,000.00 12/31/1997 546
AIM V.I. Value 21.54% 1,215.35 14.842562 1,000.00 12/31/1997 546
AIM V.I. Capital Appreciation 9.58% 1,095.84 12.802441 1,000.00 12/31/1997 546
AIM V.I. International Equity -4.49% 955.15 11.814369 1,000.00 12/31/1997 546
Alliance Premier Growth 23.94% 1,239.43 16.395203 1,000.00 12/31/1997 546
Alliance Real Estate Investment -14.11% 858.87 8.410331 1,000.00 12/31/1997 546
Liberty Newport Tiger Fund, Variable Series 57.30% 1,573.01 11.850543 1,000.00 12/31/1997 546
Goldman Sachs Growth and Income -3.76% 962.37 10.866470 1,000.00 1/29/1998 517
Goldman Sachs International Equity -2.86% 971.43 11.628506 1,000.00 1/29/1998 517
Goldman Sachs Global Income -2.14% 978.61 10.551525 1,000.00 1/29/1998 517
Kemper Small Cap Growth 2.78% 1,027.79 12.075969 1,000.00 12/31/1997 546
Kemper Small Cap Value -13.92% 860.83 9.212540 1,000.00 12/31/1997 546
Kemper Government Securities -2.43% 975.68 10.486805 1,000.00 12/31/1997 546
MFS Research 6.82% 1,068.19 13.158217 1,000.00 12/31/1997 546
MFS Growth with Income 5.34% 1,053.39 12.683197 1,000.00 12/31/1997 546
MFS Emerging Growth 18.17% 1,181.71 14.825001 1,000.00 12/31/1997 546
MFS / Foreign & Colonial Emerging Markets Equity -12.54% 874.57 7.986146 1,000.00 12/31/1997 546
MFS High Income -5.89% 941.10 10.262353 1,000.00 12/31/1997 546
MFS Global Governments -3.45% 965.54 10.290122 1,000.00 12/31/1997 546
Oppenheimer Capital Appreciation 16.39% 1,163.87 14.069924 1,000.00 12/31/1997 546
Oppenheimer Main Street Growth & Income 0.06% 1,000.59 11.756598 1,000.00 12/31/1997 546
Oppenheimer High Income -6.60% 934.03 10.198942 1,000.00 12/31/1997 546
Oppenheimer Bond -4.99% 950.12 10.283438 1,000.00 12/31/1997 546
Oppenheimer Strategic Bond -6.24% 937.63 10.094897 1,000.00 12/31/1997 546
Putnam VT Growth and Income 9.91% 1,099.10 12.503038 1,000.00 12/31/1997 546
Putnam VT New Value 10.77% 1,107.68 11.899961 1,000.00 12/31/1997 546
Putnam VT Vista 9.06% 1,090.61 13.199054 1,000.00 12/31/1997 546
Putnam VT International Growth 5.18% 1,051.84 13.062217 1,000.00 12/31/1997 546
Putnam VT International New Opportunities 12.55% 1,125.54 13.536626 1,000.00 12/31/1997 546
Franklin Small Cap Investments 3/1/1999 121
Templeton International -0.68% 993.16 10.014949 1,000.00 5/1/1998 425
Templeton Developing Markets 41.04% 1,410.41 10.737070 1,000.00 5/1/1998 425
Templeton Mutual Shares Investments 11.16% 1,111.61 11.009906 1,000.00 5/1/1998 425
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Standard Since Inception Performance Data- Part I
As of 6/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Lord Abbett Growth and Income
<S> <C> <C> <C> <C> <C> <C>
1/8/1999 purchase 1,000.00 35.903757 - 27.8522 27.8522
6/30/1999 annual fee (1.09) 39.095065 27.8522 (0.0279) 27.8243
6/30/1999 surrender fee (50.00) 39.095065 27.8243 (1.2789) 26.5454
Cova Series Trust Bond Debenture
5/1/1996 purchase 1,000.00 10.097690 - 99.0326 99.0326
5/1/1997 annual fee (1.14) 11.516923 99.0326 (0.0990) 98.9336
5/1/1998 annual fee (1.34) 13.535615 98.9336 (0.0990) 98.8346
6/30/1999 annual fee (1.34) 13.536168 98.8346 (0.0990) 98.7356
6/30/1999 surrender fee (45.00) 13.536168 98.7356 (3.3244) 95.4112
General American Capital Company Money Market
6/3/1996 purchase 1,000.00 10.000000 - 100.0000 100.0000
6/3/1997 annual fee (1.04) 10.410578 100.0000 (0.0999) 99.9001
6/3/1998 annual fee (1.08) 10.858145 99.9001 (0.0995) 99.8006
6/30/1999 annual fee (1.13) 11.299196 99.8006 (0.1000) 99.7006
6/30/1999 surrender fee (45.00) 11.299196 99.7006 (3.9826) 95.7180
Cova Series Trust Developing Growth
8/20/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
8/20/1998 annual fee (0.98) 9.823023 100.0000 (0.0998) 99.9002
6/30/1999 annual fee (1.27) 12.724192 99.9002 (0.0998) 99.8004
6/30/1999 surrender fee (45.00) 12.724192 99.8004 (3.5366) 96.2638
Cova Series Trust Large Cap Research
8/20/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
8/20/1998 annual fee (1.05) 10.537316 100.0000 (0.0996) 99.9004
6/30/1999 annual fee (1.33) 13.320553 99.9004 (0.0998) 99.8006
6/30/1999 surrender fee (45.00) 13.320553 99.8006 (3.3782) 96.4224
Cova Series Trust Mid-Cap Value
8/20/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
8/20/1998 annual fee (0.99) 9.919404 100.0000 (0.0998) 99.9002
6/30/1999 annual fee (1.15) 11.560414 99.9002 (0.0995) 99.8007
6/30/1999 surrender fee (45.00) 11.560414 99.8007 (3.8926) 95.9081
Cova Series Trust Quality Bond
5/1/1996 purchase 1,000.00 9.897228 - 101.0384 101.0384
5/1/1997 annual fee (1.05) 10.405141 101.0384 (0.1009) 100.9375
5/1/1998 annual fee (1.15) 11.356198 100.9375 (0.1013) 100.8362
6/30/1999 annual fee (1.17) 11.582126 100.8362 (0.1010) 100.7352
6/30/1999 surrender fee (45.00) 11.582126 100.7352 (3.8853) 96.8499
Cova Series Trust Small Cap Stock
5/1/1996 purchase 1,000.00 10.512560 - 95.1243 95.1243
5/1/1997 annual fee (0.99) 10.358427 95.1243 (0.0956) 95.0287
5/1/1998 annual fee (1.42) 14.969970 95.0287 (0.0949) 94.9338
6/30/1999 annual fee (1.26) 13.249386 94.9338 (0.0951) 94.8387
6/30/1999 surrender fee (45.00) 13.249386 94.8387 (3.3964) 91.4423
Cova Series Trust Large Cap Stock
5/1/1996 purchase 1,000.00 10.003025 - 99.9698 99.9698
5/1/1997 annual fee (1.22) 12.198198 99.9698 (0.1000) 99.8698
5/1/1998 annual fee (1.75) 17.502632 99.8698 (0.1000) 99.7698
6/30/1999 annual fee (2.17) 21.760453 99.7698 (0.0997) 99.6701
6/30/1999 surrender fee (45.00) 21.760453 99.6701 (2.0680) 97.6021
Cova Series Trust Select Equity
5/1/1996 purchase 1,000.00 10.083890 - 99.1681 99.1681
5/1/1997 annual fee (1.14) 11.445501 99.1681 (0.0996) 99.0685
5/1/1998 annual fee (1.60) 16.125129 99.0685 (0.0992) 98.9693
6/30/1999 annual fee (1.86) 18.786819 98.9693 (0.0990) 98.8703
6/30/1999 surrender fee (45.00) 18.786819 98.8703 (2.3953) 96.4750
Cova Series Trust International Equity
5/1/1996 purchase 1,000.00 10.214899 - 97.8962 97.8962
5/1/1997 annual fee (1.09) 11.135715 97.8962 (0.0979) 97.7983
5/1/1998 annual fee (1.28) 13.138587 97.7983 (0.0974) 97.7009
6/30/1999 annual fee (1.32) 13.530211 97.7009 (0.0976) 97.6033
6/30/1999 surrender fee (45.00) 13.530211 97.6033 (3.3259) 94.2774
Russell Multi-Style Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.27) 12.694810 100.0000 (0.1000) 99.9000
6/30/1999 annual fee (1.41) 14.136244 99.9000 (0.0997) 99.8003
6/30/1999 surrender fee (45.00) 14.136244 99.8003 (3.1833) 96.6170
Russell Aggressive Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.00) 9.963254 100.0000 (0.1004) 99.8996
6/30/1999 annual fee (1.00) 9.994595 99.8996 (0.1001) 99.7995
6/30/1999 surrender fee (45.00) 9.994595 99.7995 (4.5024) 95.2971
Russell Non-U.S.
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.11) 11.142092 100.0000 (0.0996) 99.9004
6/30/1999 annual fee (1.18) 11.843135 99.9004 (0.0996) 99.8008
6/30/1999 surrender fee (45.00) 11.843135 99.8008 (3.7997) 96.0011
Russell Core Bond
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.06) 10.591175 100.0000 (0.1001) 99.8999
6/30/1999 annual fee (1.04) 10.400162 99.8999 (0.1000) 99.7999
6/30/1999 surrender fee (45.00) 10.400162 99.7999 (4.3269) 95.4730
AIM V.I. Value
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.31) 13.060203 100.0000 (0.1003) 99.8997
6/30/1999 annual fee (1.48) 14.842562 99.8997 (0.0997) 99.8000
6/30/1999 surrender fee (45.00) 14.842562 99.8000 (3.0318) 96.7682
AIM V.I. Capital Appreciation
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.18) 11.770729 100.0000 (0.1002) 99.8998
6/30/1999 annual fee (1.28) 12.802441 99.8998 (0.1000) 99.7998
6/30/1999 surrender fee (45.00) 12.802441 99.7998 (3.5150) 96.2848
AIM V.I. International Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.14) 11.391449 100.0000 (0.1001) 99.8999
6/30/1999 annual fee (1.18) 11.814369 99.8999 (0.0999) 99.8000
6/30/1999 surrender fee (45.00) 11.814369 99.8000 (3.8089) 95.9911
Alliance Premier Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.46) 14.595485 100.0000 (0.1000) 99.9000
6/30/1999 annual fee (1.64) 16.395203 99.9000 (0.1000) 99.8000
6/30/1999 surrender fee (45.00) 16.395203 99.8000 (2.7447) 97.0553
Alliance Real Estate Investment
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (0.80) 7.988435 100.0000 (0.1001) 99.8999
6/30/1999 annual fee (0.84) 8.410331 99.8999 (0.0999) 99.8000
6/30/1999 surrender fee (45.00) 8.410331 99.8000 (5.3506) 94.4494
Liberty Newport Tiger Fund, Variable Series
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (0.92) 9.228765 100.0000 (0.0997) 99.9003
6/30/1999 annual fee (1.18) 11.850543 99.9003 (0.0996) 99.8007
6/30/1999 surrender fee (45.00) 11.850543 99.8007 (3.7973) 96.0034
Goldman Sachs Growth and Income
1/29/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
1/29/1999 annual fee (1.00) 9.973396 100.0000 (0.1003) 99.8997
6/30/1999 annual fee (1.09) 10.866470 99.8997 (0.1003) 99.7994
6/30/1999 surrender fee (45.00) 10.866470 99.7994 (4.1412) 95.6582
Goldman Sachs International Equity
1/29/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
1/29/1999 annual fee (1.16) 11.581610 100.0000 (0.1002) 99.8998
6/30/1999 annual fee (1.16) 11.628506 99.8998 (0.0998) 99.8000
6/30/1999 surrender fee (45.00) 11.628506 99.8000 (3.8698) 95.9302
Goldman Sachs Global Income
1/29/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
1/29/1999 annual fee (1.09) 10.874138 100.0000 (0.1002) 99.8998
6/30/1999 annual fee (1.05) 10.551525 99.8998 (0.0995) 99.8003
6/30/1999 surrender fee (45.00) 10.551525 99.8003 (4.2648) 95.5355
Kemper Small Cap Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.17) 11.676086 100.0000 (0.1002) 99.8998
6/30/1999 annual fee (1.21) 12.075969 99.8998 (0.1002) 99.7996
6/30/1999 surrender fee (45.00) 12.075969 99.7996 (3.7264) 96.0732
Kemper Small Cap Value
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (0.88) 8.753222 100.0000 (0.1005) 99.8995
6/30/1999 annual fee (0.92) 9.212540 99.8995 (0.0999) 99.7996
6/30/1999 surrender fee (45.00) 9.212540 99.7996 (4.8846) 94.9150
Kemper Government Securities
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.06) 10.556498 100.0000 (0.1004) 99.8996
6/30/1999 annual fee (1.05) 10.486805 99.8996 (0.1001) 99.7995
6/30/1999 surrender fee (45.00) 10.486805 99.7995 (4.2911) 95.5084
MFS Research
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.22) 12.172796 100.0000 (0.1002) 99.8998
6/30/1999 annual fee (1.31) 13.158217 99.8998 (0.0996) 99.8002
6/30/1999 surrender fee (45.00) 13.158217 99.8002 (3.4199) 96.3803
MFS Growth with Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.21) 12.066568 100.0000 (0.1003) 99.8997
6/30/1999 annual fee (1.27) 12.683197 99.8997 (0.1001) 99.7996
6/30/1999 surrender fee (45.00) 12.683197 99.7996 (3.5480) 96.2516
MFS Emerging Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.32) 13.233235 100.0000 (0.0997) 99.9003
6/30/1999 annual fee (1.48) 14.825001 99.9003 (0.0998) 99.8005
6/30/1999 surrender fee (45.00) 14.825001 99.8005 (3.0354) 96.7651
MFS / Foreign & Colonial Emerging Markets Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (0.66) 6.571830 100.0000 (0.1004) 99.8996
6/30/1999 annual fee (0.80) 7.986146 99.8996 (0.1002) 99.7994
6/30/1999 surrender fee (45.00) 7.986146 99.7994 (5.6348) 94.1646
MFS High Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (0.98) 9.845193 100.0000 (0.0995) 99.9005
6/30/1999 annual fee (1.03) 10.262353 99.9005 (0.1004) 99.8001
6/30/1999 surrender fee (45.00) 10.262353 99.8001 (4.3850) 95.4151
MFS Global Governments
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.07) 10.669943 100.0000 (0.1003) 99.8997
6/30/1999 annual fee (1.03) 10.290122 99.8997 (0.1001) 99.7996
6/30/1999 surrender fee (45.00) 10.290122 99.7996 (4.3731) 95.4265
Oppenheimer Capital Appreciation
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.22) 12.232731 100.0000 (0.0997) 99.9003
6/30/1999 annual fee (1.41) 14.069924 99.9003 (0.1002) 99.8001
6/30/1999 surrender fee (45.00) 14.069924 99.8001 (3.1983) 96.6018
Oppenheimer Main Street Growth & Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.03) 10.326519 100.0000 (0.0997) 99.9003
6/30/1999 annual fee (1.17) 11.756598 99.9003 (0.0995) 99.8008
6/30/1999 surrender fee (45.00) 11.756598 99.8008 (3.8276) 95.9732
Oppenheimer High Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (0.99) 9.893828 100.0000 (0.1001) 99.8999
6/30/1999 annual fee (1.02) 10.198942 99.8999 (0.1000) 99.7999
6/30/1999 surrender fee (45.00) 10.198942 99.7999 (4.4122) 95.3877
Oppenheimer Bond
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (0.99) 9.893828 100.0000 (0.1001) 99.8999
6/30/1999 annual fee (1.03) 10.283438 99.8999 (0.1002) 99.7997
6/30/1999 surrender fee (45.00) 10.283438 99.7997 (4.3760) 95.4237
Oppenheimer Strategic Bond
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.02) 10.151332 100.0000 (0.1005) 99.8995
6/30/1999 annual fee (1.01) 10.094897 99.8995 (0.1001) 99.7994
6/30/1999 surrender fee (45.00) 10.094897 99.7994 (4.4577) 95.3417
Putnam VT Growth and Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.14) 11.382650 100.0000 (0.1002) 99.8998
6/30/1999 annual fee (1.25) 12.503038 99.8998 (0.1000) 99.7998
6/30/1999 surrender fee (45.00) 12.503038 99.7998 (3.5991) 96.2007
Putnam VT New Value
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.05) 10.483517 100.0000 (0.1002) 99.8998
6/30/1999 annual fee (1.19) 11.899961 99.8998 (0.1000) 99.7998
6/30/1999 surrender fee (45.00) 11.899961 99.7998 (3.7815) 96.0183
Putnam VT Vista
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.18) 11.785702 100.0000 (0.1001) 99.8999
6/30/1999 annual fee (1.32) 13.199054 99.8999 (0.1000) 99.7999
6/30/1999 surrender fee (45.00) 13.199054 99.7999 (3.4093) 96.3906
Putnam VT International Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.17) 11.707003 100.0000 (0.0999) 99.9001
6/30/1999 annual fee (1.30) 13.062217 99.9001 (0.0995) 99.8006
6/30/1999 surrender fee (45.00) 13.062217 99.8006 (3.4451) 96.3555
Putnam International New Opportunities
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee (1.14) 11.402252 100.0000 (0.1000) 99.9000
6/30/1999 annual fee (1.35) 13.536626 99.9000 (0.0997) 99.8003
6/30/1999 surrender fee (45.00) 13.536626 99.8003 (3.3243) 96.4760
Franklin Small Cap Investments
3/1/1999 purchase 1,000.00 10.000000 - 100.0000 100.0000
6/30/1999 annual fee (1.21) 12.110248 100.0000 (0.0999) 99.9001
6/30/1999 surrender fee (50.00) 12.110248 99.9001 (4.1287) 95.7714
Templeton International
5/1/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
5/3/1999 annual fee (1.00) 9.996786 100.0000 (0.1000) 99.9000
6/30/1999 annual fee (1.00) 10.014949 99.9000 (0.0999) 99.8001
6/30/1999 surrender fee (45.00) 10.014949 99.8001 (4.4933) 95.3068
Templeton Developing Markets
5/1/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
5/3/1999 annual fee (1.00) 9.972042 100.0000 (0.1003) 99.8997
6/30/1999 annual fee (1.07) 10.737070 99.8997 (0.0997) 99.8000
6/30/1999 surrender fee (45.00) 10.737070 99.8000 (4.1911) 95.6089
Templeton Mutual Shares Investments
5/1/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
5/3/1999 annual fee (1.07) 10.747701 100.0000 (0.0996) 99.9004
6/30/1999 annual fee (1.10) 11.009906 99.9004 (0.0999) 99.8005
6/30/1999 surrender fee (45.00) 11.009906 99.8005 (4.0872) 95.7133
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
- 1,000.00
1,088.88 1,087.79
1,087.79 1,037.79
- 1,000.00
1,140.55 1,139.41
1,339.13 1,337.79
1,337.84 1,336.50
1,336.50 1,291.50
- 1,000.00
1,041.06 1,040.02
1,084.73 1,083.65
1,127.67 1,126.54
1,126.54 1,081.54
- 1,000.00
982.30 981.32
1,271.15 1,269.88
1,269.88 1,224.88
- 1,000.00
1,053.73 1,052.68
1,330.73 1,329.40
1,329.40 1,284.40
- 1,000.00
991.94 990.95
1,154.89 1,153.74
1,153.74 1,108.74
- 1,000.00
1,051.32 1,050.27
1,146.27 1,145.12
1,167.90 1,166.73
1,166.73 1,121.73
- 1,000.00
985.34 984.35
1,422.58 1,421.16
1,257.81 1,256.55
1,256.55 1,211.55
- 1,000.00
1,219.45 1,218.23
1,747.98 1,746.23
2,171.04 2,168.87
2,168.87 2,123.87
- 1,000.00
1,135.03 1,133.89
1,597.49 1,595.89
1,859.32 1,857.46
1,857.46 1,812.46
- 1,000.00
1,090.14 1,089.05
1,284.93 1,283.65
1,321.91 1,320.59
1,320.59 1,275.59
- 1,000.00
1,269.48 1,268.21
1,412.21 1,410.80
1,410.80 1,365.80
- 1,000.00
996.33 995.33
998.46 997.46
997.46 952.46
- 1,000.00
1,114.21 1,113.10
1,183.13 1,181.95
1,181.95 1,136.95
- 1,000.00
1,059.12 1,058.06
1,038.98 1,037.94
1,037.94 992.93
- 1,000.00
1,306.02 1,304.71
1,482.77 1,481.29
1,481.29 1,436.29
- 1,000.00
1,177.07 1,175.89
1,278.96 1,277.68
1,277.68 1,232.68
- 1,000.00
1,139.14 1,138.00
1,180.25 1,179.07
1,179.07 1,134.07
- 1,000.00
1,459.55 1,458.09
1,637.88 1,636.24
1,636.24 1,591.24
- 1,000.00
798.84 798.04
840.19 839.35
839.35 794.35
- 1,000.00
922.88 921.96
1,183.87 1,182.69
1,182.69 1,137.69
- 1,000.00
997.34 996.34
1,085.56 1,084.47
1,084.47 1,039.47
- 1,000.00
1,158.16 1,157.00
1,161.69 1,160.52
1,160.52 1,115.52
- 1,000.00
1,087.41 1,086.32
1,054.10 1,053.05
1,053.05 1,008.05
- 1,000.00
1,167.61 1,166.44
1,206.39 1,205.18
1,205.18 1,160.18
- 1,000.00
875.32 874.44
920.33 919.41
919.41 874.41
- 1,000.00
1,055.65 1,054.59
1,047.63 1,046.58
1,046.58 1,001.58
- 1,000.00
1,217.28 1,216.06
1,314.50 1,313.19
1,313.19 1,268.19
- 1,000.00
1,206.66 1,205.45
1,267.05 1,265.78
1,265.78 1,220.78
- 1,000.00
1,323.32 1,322.00
1,481.02 1,479.54
1,479.54 1,434.54
- 1,000.00
657.18 656.52
797.81 797.01
797.01 752.01
- 1,000.00
984.52 983.54
1,025.21 1,024.18
1,024.18 979.18
- 1,000.00
1,066.99 1,065.92
1,027.98 1,026.95
1,026.95 981.95
- 1,000.00
1,223.27 1,222.05
1,405.59 1,404.18
1,404.18 1,359.18
- 1,000.00
1,032.65 1,031.62
1,174.49 1,173.32
1,173.32 1,128.32
- 1,000.00
989.38 988.39
1,018.87 1,017.85
1,017.85 972.85
- 1,000.00
989.38 988.39
1,027.31 1,026.28
1,026.28 981.28
- 1,000.00
1,015.13 1,014.11
1,008.48 1,007.46
1,007.46 962.46
- 1,000.00
1,138.27 1,137.12
1,249.05 1,247.80
1,247.80 1,202.80
- 1,000.00
1,048.35 1,047.30
1,188.80 1,187.61
1,187.61 1,142.61
- 1,000.00
1,178.57 1,177.39
1,318.58 1,317.26
1,317.26 1,272.26
- 1,000.00
1,170.70 1,169.53
1,304.92 1,303.62
1,303.62 1,258.62
- 1,000.00
1,140.23 1,139.08
1,352.31 1,350.96
1,350.96 1,305.96
- 1,000.00
1,211.02 1,209.81
1,209.81 1,159.82
- 1,000.00
999.68 998.68
1,000.49 999.49
999.49 954.49
- 1,000.00
997.20 996.20
1,072.63 1,071.56
1,071.56 1,026.56
- 1,000.00
1,074.77 1,073.70
1,099.89 1,098.79
1,098.79 1,053.79
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Standard Since Inception Performance- Part I
As of 6/30/99
Sub-Account Annualized Account Unit Value Initial Inception
Return Value 6/30/1999 Investment Date
<S> <C> <C> <C> <C> <C> <C> <C>
Cova Series Trust Lord Abbett Growth and Income (1) 3.78% 1,037.79 39.095065 1,000.00 1/8/1999
Cova Series Trust Bond Debenture 8.41% 1,291.50 13.536168 1,000.00 5/1/1996
General American Capital Company Money Market 2.58% 1,081.54 11.299196 1,000.00 6/3/1996
Cova Series Trust Developing Growth 11.50% 1,224.88 12.724192 1,000.00 8/20/1997
Cova Series Trust Large Cap Research 14.38% 1,284.40 13.320553 1,000.00 8/20/1997
Cova Series Trust Mid-Cap Value 5.70% 1,108.74 11.560414 1,000.00 8/20/1997
Cova Series Trust Quality Bond 3.69% 1,121.73 11.582126 1,000.00 5/1/1996
Cova Series Trust Small Cap Stock 6.25% 1,211.55 13.249386 1,000.00 5/1/1996
Cova Series Trust Large Cap Stock 26.85% 2,123.87 21.760453 1,000.00 5/1/1996
Cova Series Trust Select Equity 20.66% 1,812.46 18.786819 1,000.00 5/1/1996
Cova Series Trust International Equity 7.99% 1,275.59 13.530211 1,000.00 5/1/1996
Russell Multi-Style Equity 23.17% 1,365.80 14.136244 1,000.00 12/31/1997
Russell Aggressive Equity -3.20% 952.46 9.994595 1,000.00 12/31/1997
Russell Non-U.S. 8.96% 1,136.95 11.843135 1,000.00 12/31/1997
Russell Core Bond -0.47% 992.93 10.400162 1,000.00 12/31/1997
AIM V.I. Value 27.38% 1,436.29 14.842562 1,000.00 12/31/1997
AIM V.I. Capital Appreciation 15.01% 1,232.68 12.802441 1,000.00 12/31/1997
AIM V.I. International Equity 8.77% 1,134.07 11.814369 1,000.00 12/31/1997
Alliance Premier Growth 36.41% 1,591.24 16.395203 1,000.00 12/31/1997
Alliance Real Estate Investment -14.27% 794.35 8.410331 1,000.00 12/31/1997
Liberty Newport Tiger Fund, Variable Series 9.01% 1,137.69 11.850543 1,000.00 12/31/1997
Goldman Sachs Growth and Income 2.77% 1,039.47 10.866470 1,000.00 1/29/1998
Goldman Sachs International Equity 8.02% 1,115.52 11.628506 1,000.00 1/29/1998
Goldman Sachs Global Income 0.57% 1,008.05 10.551525 1,000.00 1/29/1998
Kemper Small Cap Growth 10.44% 1,160.18 12.075969 1,000.00 12/31/1997
Kemper Small Cap Value -8.58% 874.41 9.212540 1,000.00 12/31/1997
Kemper Government Securities 0.11% 1,001.58 10.486805 1,000.00 12/31/1997
MFS Research 17.21% 1,268.19 13.158217 1,000.00 12/31/1997
MFS Growth with Income 14.27% 1,220.78 12.683197 1,000.00 12/31/1997
MFS Emerging Growth 27.28% 1,434.54 14.825001 1,000.00 12/31/1997
MFS / Foreign & Colonial Emerging Markets Equity -17.35% 752.01 7.986146 1,000.00 12/31/1997
MFS High Income -1.40% 979.18 10.262353 1,000.00 12/31/1997
MFS Global Governments -1.21% 981.95 10.290122 1,000.00 12/31/1997
Oppenheimer Capital Appreciation 22.77% 1,359.18 14.069924 1,000.00 12/31/1997
Oppenheimer Main Street Growth & Income 8.41% 1,128.32 11.756598 1,000.00 12/31/1997
Oppenheimer High Income -1.82% 972.85 10.198942 1,000.00 12/31/1997
Oppenheimer Bond -1.26% 981.28 10.283438 1,000.00 12/31/1997
Oppenheimer Strategic Bond -2.53% 962.46 10.094897 1,000.00 12/31/1997
Putnam VT Growth and Income 13.14% 1,202.80 12.503038 1,000.00 12/31/1997
Putnam VT New Value 9.32% 1,142.61 11.899961 1,000.00 12/31/1997
Putnam VT Vista 17.47% 1,272.26 13.199054 1,000.00 12/31/1997
Putnam VT International Growth 16.62% 1,258.62 13.062217 1,000.00 12/31/1997
Putnam VT International New Opportunities 19.54% 1,305.96 13.536626 1,000.00 12/31/1997
Franklin Small Cap Investments (1) 15.98% 1,159.82 12.110248 1,000.00 3/1/1999
Templeton International -3.92% 954.49 10.014949 1,000.00 5/1/1998
Templeton Developing Markets 2.28% 1,026.56 10.737070 1,000.00 5/1/1998
Templeton Mutual Shares Investments 4.60% 1,053.79 11.009906 1,000.00 5/1/1998
<FN>
(1) Return is not annualized for periods less than 1 year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Days Since
Inception
<S> <C>
173
1,156
1,122
680
680
680
1,156
1,156
1,156
1,156
1,156
546
546
546
546
546
546
546
546
546
546
517
517
517
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
121
425
425
425
<FN>
(1) Return is not annualized for periods less than 1 year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Non-Standard 1Year Performance Data- Part I
As of 6/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Bond Debenture
<S> <C> <C> <C> <C> <C> <C>
6/30/1998 purchase 1,000.00 13.512812 - 74.0038 74.0038
6/30/1999 annual fee 13.536168 74.0038 - 74.0038
6/30/1999 surrender fee 13.536168 74.0038 - 74.0038
General American Capital Company Money Market
6/30/1998 purchase 1,000.00 10.891338 - 91.8161 91.8161
6/30/1999 annual fee 11.299196 91.8161 - 91.8161
6/30/1999 surrender fee 11.299196 91.8161 - 91.8161
Cova Series Trust Developing Growth
6/30/1998 purchase 1,000.00 11.313738 - 88.3881 88.3881
6/30/1999 annual fee 12.724192 88.3881 - 88.3881
6/30/1999 surrender fee 12.724192 88.3881 - 88.3881
Cova Series Trust Large Cap Research
6/30/1998 purchase 1,000.00 11.344054 - 88.1519 88.1519
6/30/1999 annual fee 13.320553 88.1519 - 88.1519
6/30/1999 surrender fee 13.320553 88.1519 - 88.1519
Cova Series Trust Mid-Cap Value
6/30/1998 purchase 1,000.00 11.209641 - 89.2089 89.2089
6/30/1999 annual fee 11.560414 89.2089 - 89.2089
6/30/1999 surrender fee 11.560414 89.2089 - 89.2089
Cova Series Trust Quality Bond
6/30/1998 purchase 1,000.00 11.525607 - 86.7633 86.7633
6/30/1999 annual fee 11.582126 86.7633 - 86.7633
6/30/1999 surrender fee 11.582126 86.7633 - 86.7633
Cova Series Trust Small Cap Stock
6/30/1998 purchase 1,000.00 14.018877 - 71.3324 71.3324
6/30/1999 annual fee 13.249386 71.3324 - 71.3324
6/30/1999 surrender fee 13.249386 71.3324 - 71.3324
Cova Series Trust Large Cap Stock
6/30/1998 purchase 1,000.00 17.659381 - 56.6271 56.6271
6/30/1999 annual fee 21.760453 56.6271 - 56.6271
6/30/1999 surrender fee 21.760453 56.6271 - 56.6271
Cova Series Trust Select Equity
6/30/1998 purchase 1,000.00 15.795533 - 63.3090 63.3090
6/30/1999 annual fee 18.786819 63.3090 - 63.3090
6/30/1999 surrender fee 18.786819 63.3090 - 63.3090
Cova Series Trust International Equity
6/30/1998 purchase 1,000.00 13.059689 - 76.5715 76.5715
6/30/1999 annual fee 13.530211 76.5715 - 76.5715
6/30/1999 surrender fee 13.530211 76.5715 - 76.5715
Russell Multi-Style Equity
6/30/1998 purchase 1,000.00 11.950204 - 83.6806 83.6806
6/30/1999 annual fee 14.136244 83.6806 - 83.6806
6/30/1999 surrender fee 14.136244 83.6806 - 83.6806
Russell Aggressive Equity
6/30/1998 purchase 1,000.00 10.629243 - 94.0801 94.0801
6/30/1999 annual fee 9.994595 94.0801 - 94.0801
6/30/1999 surrender fee 9.994595 94.0801 - 94.0801
Russell Non-U.S.
6/30/1998 purchase 1,000.00 11.200649 - 89.2805 89.2805
6/30/1999 annual fee 11.843135 89.2805 - 89.2805
6/30/1999 surrender fee 11.843135 89.2805 - 89.2805
Russell Core Bond
6/30/1998 purchase 1,000.00 10.315688 - 96.9397 96.9397
6/30/1999 annual fee 10.400162 96.9397 - 96.9397
6/30/1999 surrender fee 10.400162 96.9397 - 96.9397
AIM V.I. Value
6/30/1998 purchase 1,000.00 11.764796 - 84.9993 84.9993
6/30/1999 annual fee 14.842562 84.9993 - 84.9993
6/30/1999 surrender fee 14.842562 84.9993 - 84.9993
AIM V.I. Capital Appreciation
6/30/1998 purchase 1,000.00 11.210744 - 89.2001 89.2001
6/30/1999 annual fee 12.802441 89.2001 - 89.2001
6/30/1999 surrender fee 12.802441 89.2001 - 89.2001
AIM V.I. International Equity
6/30/1998 purchase 1,000.00 11.800847 - 84.7397 84.7397
6/30/1999 annual fee 11.814369 84.7397 - 84.7397
6/30/1999 surrender fee 11.814369 84.7397 - 84.7397
Alliance Premier Growth
6/30/1998 purchase 1,000.00 12.751717 - 78.4208 78.4208
6/30/1999 annual fee 16.395203 78.4208 - 78.4208
6/30/1999 surrender fee 16.395203 78.4208 - 78.4208
Alliance Real Estate Investment
6/30/1998 purchase 1,000.00 9.295588 - 107.5779 107.5779
6/30/1999 annual fee 8.410331 107.5779 - 107.5779
6/30/1999 surrender fee 8.410331 107.5779 - 107.5779
Liberty Newport Tiger Fund, Variable Series
6/30/1998 purchase 1,000.00 7.316828 - 136.6712 136.6712
6/30/1999 annual fee 11.850543 136.6712 - 136.6712
6/30/1999 surrender fee 11.850543 136.6712 - 136.6712
Goldman Sachs Growth and Income
6/30/1998 purchase 1,000.00 10.776200 - 92.7971 92.7971
6/30/1999 annual fee 10.866470 92.7971 - 92.7971
6/30/1999 surrender fee 10.866470 92.7971 - 92.7971
Goldman Sachs International Equity
6/30/1998 purchase 1,000.00 11.429119 - 87.4958 87.4958
6/30/1999 annual fee 11.628506 87.4958 - 87.4958
6/30/1999 surrender fee 11.628506 87.4958 - 87.4958
Goldman Sachs Global Income
6/30/1998 purchase 1,000.00 10.297894 - 97.1072 97.1072
6/30/1999 annual fee 10.551525 97.1072 - 97.1072
6/30/1999 surrender fee 10.551525 97.1072 - 97.1072
Kemper Small Cap Growth
6/30/1998 purchase 1,000.00 11.245417 - 88.9251 88.9251
6/30/1999 annual fee 12.075969 88.9251 - 88.9251
6/30/1999 surrender fee 12.075969 88.9251 - 88.9251
Kemper Small Cap Value
6/30/1998 purchase 1,000.00 10.160018 - 98.4250 98.4250
6/30/1999 annual fee 9.212540 98.4250 - 98.4250
6/30/1999 surrender fee 9.212540 98.4250 - 98.4250
Kemper Government Securities
6/30/1998 purchase 1,000.00 10.264104 - 97.4269 97.4269
6/30/1999 annual fee 10.486805 97.4269 - 97.4269
6/30/1999 surrender fee 10.486805 97.4269 - 97.4269
MFS Research
6/30/1998 purchase 1,000.00 11.808504 - 84.6847 84.6847
6/30/1999 annual fee 13.158217 84.6847 - 84.6847
6/30/1999 surrender fee 13.158217 84.6847 - 84.6847
MFS Growth with Income
6/30/1998 purchase 1,000.00 11.535562 - 86.6885 86.6885
6/30/1999 annual fee 12.683197 86.6885 - 86.6885
6/30/1999 surrender fee 12.683197 86.6885 - 86.6885
MFS Emerging Growth
6/30/1998 purchase 1,000.00 12.073075 - 82.8289 82.8289
6/30/1999 annual fee 14.825001 82.8289 - 82.8289
6/30/1999 surrender fee 14.825001 82.8289 - 82.8289
MFS / Foreign & Colonial Emerging Markets Equity
6/30/1998 purchase 1,000.00 8.675954 - 115.2611 115.2611
6/30/1999 annual fee 7.986146 115.2611 - 115.2611
6/30/1999 surrender fee 7.986146 115.2611 - 115.2611
MFS High Income
6/30/1998 purchase 1,000.00 10.396518 - 96.1860 96.1860
6/30/1999 annual fee 10.262353 96.1860 - 96.1860
6/30/1999 surrender fee 10.262353 96.1860 - 96.1860
MFS Global Governments
6/30/1998 purchase 1,000.00 10.172638 - 98.3029 98.3029
6/30/1999 annual fee 10.290122 98.3029 - 98.3029
6/30/1999 surrender fee 10.290122 98.3029 - 98.3029
Oppenheimer Capital Appreciation
6/30/1998 purchase 1,000.00 11.627266 - 86.0047 86.0047
6/30/1999 annual fee 14.069924 86.0047 - 86.0047
6/30/1999 surrender fee 14.069924 86.0047 - 86.0047
Oppenheimer Main Street Growth & Income
6/30/1998 purchase 1,000.00 11.232688 - 89.0259 89.0259
6/30/1999 annual fee 11.756598 89.0259 - 89.0259
6/30/1999 surrender fee 11.756598 89.0259 - 89.0259
Oppenheimer High Income
6/30/1998 purchase 1,000.00 10.407015 - 96.0890 96.0890
6/30/1999 annual fee 10.198942 96.0890 - 96.0890
6/30/1999 surrender fee 10.198942 96.0890 - 96.0890
Oppenheimer Bond
6/30/1998 purchase 1,000.00 10.323456 - 96.8668 96.8668
6/30/1999 annual fee 10.283438 96.8668 - 96.8668
6/30/1999 surrender fee 10.283438 96.8668 - 96.8668
Oppenheimer Strategic Bond
6/30/1998 purchase 1,000.00 10.263162 - 97.4359 97.4359
6/30/1999 annual fee 10.094897 97.4359 - 97.4359
6/30/1999 surrender fee 10.094897 97.4359 - 97.4359
Putnam VT Growth and Income
6/30/1998 purchase 1,000.00 10.917315 - 91.5976 91.5976
6/30/1999 annual fee 12.503038 91.5976 - 91.5976
6/30/1999 surrender fee 12.503038 91.5976 - 91.5976
Putnam VT New Value
6/30/1998 purchase 1,000.00 10.313419 - 96.9611 96.9611
6/30/1999 annual fee 11.899961 96.9611 - 96.9611
6/30/1999 surrender fee 11.899961 96.9611 - 96.9611
Putnam VT Vista
6/30/1998 purchase 1,000.00 11.611220 - 86.1236 86.1236
6/30/1999 annual fee 13.199054 86.1236 - 86.1236
6/30/1999 surrender fee 13.199054 86.1236 - 86.1236
Putnam VT International Growth
6/30/1998 purchase 1,000.00 11.897017 - 84.0547 84.0547
6/30/1999 annual fee 13.062217 84.0547 - 84.0547
6/30/1999 surrender fee 13.062217 84.0547 - 84.0547
Putnam VT International New Opportunities
6/30/1998 purchase 1,000.00 11.552897 - 86.5584 86.5584
6/30/1999 annual fee 13.536626 86.5584 - 86.5584
6/30/1999 surrender fee 13.536626 86.5584 - 86.5584
Templeton International
6/30/1998 purchase 1,000.00 9.637200 - 103.7646 103.7646
6/30/1999 annual fee 10.014949 103.7646 - 103.7646
6/30/1999 surrender fee 10.014949 103.7646 - 103.7646
Templeton Developing Markets
6/30/1998 purchase 1,000.00 7.369957 - 135.6860 135.6860
6/30/1999 annual fee 10.737070 135.6860 - 135.6860
6/30/1999 surrender fee 10.737070 135.6860 - 135.6860
Templeton Mutual Shares Investments
6/30/1998 purchase 1,000.00 9.509571 - 105.1572 105.1572
6/30/1999 annual fee 11.009906 105.1572 - 105.1572
6/30/1999 surrender fee 11.009906 105.1572 - 105.1572
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
- 1,000.00
1,001.73 1,001.73
1,001.73 1,001.73
- 1,000.00
1,037.45 1,037.45
1,037.45 1,037.45
- 1,000.00
1,124.67 1,124.67
1,124.67 1,124.67
- 1,000.00
1,174.23 1,174.23
1,174.23 1,174.23
- 1,000.00
1,031.29 1,031.29
1,031.29 1,031.29
- 1,000.00
1,004.90 1,004.90
1,004.90 1,004.90
- 1,000.00
945.11 945.11
945.11 945.11
- 1,000.00
1,232.23 1,232.23
1,232.23 1,232.23
- 1,000.00
1,189.37 1,189.37
1,189.37 1,189.37
- 1,000.00
1,036.03 1,036.03
1,036.03 1,036.03
- 1,000.00
1,182.93 1,182.93
1,182.93 1,182.93
- 1,000.00
940.29 940.29
940.29 940.29
- 1,000.00
1,057.36 1,057.36
1,057.36 1,057.36
- 1,000.00
1,008.19 1,008.19
1,008.19 1,008.19
- 1,000.00
1,261.61 1,261.61
1,261.61 1,261.61
- 1,000.00
1,141.98 1,141.98
1,141.98 1,141.98
- 1,000.00
1,001.15 1,001.15
1,001.15 1,001.15
- 1,000.00
1,285.72 1,285.72
1,285.72 1,285.72
- 1,000.00
904.77 904.77
904.77 904.77
- 1,000.00
1,619.63 1,619.63
1,619.63 1,619.63
- 1,000.00
1,008.38 1,008.38
1,008.38 1,008.38
- 1,000.00
1,017.45 1,017.45
1,017.45 1,017.45
- 1,000.00
1,024.63 1,024.63
1,024.63 1,024.63
- 1,000.00
1,073.86 1,073.86
1,073.86 1,073.86
- 1,000.00
906.74 906.74
906.74 906.74
- 1,000.00
1,021.70 1,021.70
1,021.70 1,021.70
- 1,000.00
1,114.30 1,114.30
1,114.30 1,114.30
- 1,000.00
1,099.49 1,099.49
1,099.49 1,099.49
- 1,000.00
1,227.94 1,227.94
1,227.94 1,227.94
- 1,000.00
920.49 920.49
920.49 920.49
- 1,000.00
987.09 987.09
987.09 987.09
- 1,000.00
1,011.55 1,011.55
1,011.55 1,011.55
- 1,000.00
1,210.08 1,210.08
1,210.08 1,210.08
- 1,000.00
1,046.64 1,046.64
1,046.64 1,046.64
- 1,000.00
980.01 980.01
980.01 980.01
- 1,000.00
996.12 996.12
996.12 996.12
- 1,000.00
983.61 983.61
983.61 983.61
- 1,000.00
1,145.25 1,145.25
1,145.25 1,145.25
- 1,000.00
1,153.83 1,153.83
1,153.83 1,153.83
- 1,000.00
1,136.75 1,136.75
1,136.75 1,136.75
- 1,000.00
1,097.94 1,097.94
1,097.94 1,097.94
- 1,000.00
1,171.71 1,171.71
1,171.71 1,171.71
- 1,000.00
1,039.20 1,039.20
1,039.20 1,039.20
- 1,000.00
1,456.87 1,456.87
1,456.87 1,456.87
- 1,000.00
1,157.77 1,157.77
1,157.77 1,157.77
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Non-Standard 1Year Performance- Part I
As of 6/30/99
Sub-Account Total Account Unit Value Initial Inception Days Since
Return Value 6/30/99 Investment Date Inception
<S> <C> <C> <C>
Cova Series Trust Lord Abbett Growth and Income 1/8/1999 173
Cova Series Trust Bond Debenture 0.17% 1,001.73 13.536168 1,000.00 5/1/1996 1,156
General American Capital Company Money Market 3.75% 1,037.45 11.299196 1,000.00 6/3/1996 1,122
Cova Series Trust Developing Growth 12.47% 1,124.67 12.724192 1,000.00 8/20/1997 680
Cova Series Trust Large Cap Research 17.42% 1,174.23 13.320553 1,000.00 8/20/1997 680
Cova Series Trust Mid-Cap Value 3.13% 1,031.29 11.560414 1,000.00 8/20/1997 680
Cova Series Trust Quality Bond 0.49% 1,004.90 11.582126 1,000.00 5/1/1996 1,156
Cova Series Trust Small Cap Stock -5.49% 945.11 13.249386 1,000.00 5/1/1996 1,156
Cova Series Trust Large Cap Stock 23.22% 1,232.23 21.760453 1,000.00 5/1/1996 1,156
Cova Series Trust Select Equity 18.94% 1,189.37 18.786819 1,000.00 5/1/1996 1,156
Cova Series Trust International Equity 3.60% 1,036.03 13.530211 1,000.00 5/1/1996 1,156
Russell Multi-Style Equity 18.29% 1,182.93 14.136244 1,000.00 12/31/1997 546
Russell Aggressive Equity -5.97% 940.29 9.994595 1,000.00 12/31/1997 546
Russell Non-U.S. 5.74% 1,057.36 11.843135 1,000.00 12/31/1997 546
Russell Core Bond 0.82% 1,008.19 10.400162 1,000.00 12/31/1997 546
AIM V.I. Value 26.16% 1,261.61 14.842562 1,000.00 12/31/1997 546
AIM V.I. Capital Appreciation 14.20% 1,141.98 12.802441 1,000.00 12/31/1997 546
AIM V.I. International Equity 0.11% 1,001.15 11.814369 1,000.00 12/31/1997 546
Alliance Premier Growth 28.57% 1,285.72 16.395203 1,000.00 12/31/1997 546
Alliance Real Estate Investment -9.52% 904.77 8.410331 1,000.00 12/31/1997 546
Liberty Newport Tiger Fund, Variable Series 61.96% 1,619.63 11.850543 1,000.00 12/31/1997 546
Goldman Sachs Growth and Income 0.84% 1,008.38 10.866470 1,000.00 1/29/1998 517
Goldman Sachs International Equity 1.75% 1,017.45 11.628506 1,000.00 1/29/1998 517
Goldman Sachs Global Income 2.46% 1,024.63 10.551525 1,000.00 1/29/1998 517
Kemper Small Cap Growth 7.39% 1,073.86 12.075969 1,000.00 12/31/1997 546
Kemper Small Cap Value -9.33% 906.74 9.212540 1,000.00 12/31/1997 546
Kemper Government Securities 2.17% 1,021.70 10.486805 1,000.00 12/31/1997 546
MFS Research 11.43% 1,114.30 13.158217 1,000.00 12/31/1997 546
MFS Growth with Income 9.95% 1,099.49 12.683197 1,000.00 12/31/1997 546
MFS Emerging Growth 22.79% 1,227.94 14.825001 1,000.00 12/31/1997 546
MFS / Foreign & Colonial Emerging Markets Equity -7.95% 920.49 7.986146 1,000.00 12/31/1997 546
MFS High Income -1.29% 987.09 10.262353 1,000.00 12/31/1997 546
MFS Global Governments 1.15% 1,011.55 10.290122 1,000.00 12/31/1997 546
Oppenheimer Capital Appreciation 21.01% 1,210.08 14.069924 1,000.00 12/31/1997 546
Oppenheimer Main Street Growth & Income 4.66% 1,046.64 11.756598 1,000.00 12/31/1997 546
Oppenheimer High Income -2.00% 980.01 10.198942 1,000.00 12/31/1997 546
Oppenheimer Bond -0.39% 996.12 10.283438 1,000.00 12/31/1997 546
Oppenheimer Strategic Bond -1.64% 983.61 10.094897 1,000.00 12/31/1997 546
Putnam VT Growth and Income 14.53% 1,145.25 12.503038 1,000.00 12/31/1997 546
Putman VT New Value 15.38% 1,153.83 11.899961 1,000.00 12/31/1997 546
Putnam VT Vista 13.68% 1,136.75 13.199054 1,000.00 12/31/1997 546
Putnam VT International Growth 9.79% 1,097.94 13.062217 1,000.00 12/31/1997 546
Putnam VT International New Opportunities 17.17% 1,171.71 13.536626 1,000.00 12/31/1997 546
Franklin Small Cap Investments 3/1/1999 121
Templeton International 3.92% 1,039.20 10.014949 1,000.00 5/1/1998 425
Templeton Developing Markets 45.69% 1,456.87 10.737070 1,000.00 5/1/1998 425
Templeton Mutual Shares Investments 15.78% 1,157.77 11.009906 1,000.00 5/1/1998 425
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Non-Standard Since Inception Performance Data-Part I
As of 6/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Lord Abbett Growth and Income
<S> <C> <C> <C> <C> <C> <C>
1/8/1999 purchase 1,000.00 35.903757 - 27.8522 27.8522
6/30/1999 annual fee 39.095065 27.8522 - 27.8522
6/30/1999 surrender fee 39.095065 27.8522 - 27.8522
Cova Series Trust Bond Debenture
5/1/1996 purchase 1,000.00 10.097690 - 99.0326 99.0326
5/1/1997 annual fee 11.516923 99.0326 - 99.0326
5/1/1998 annual fee 13.535615 99.0326 - 99.0326
6/30/1999 annual fee 13.536168 99.0326 - 99.0326
6/30/1999 surrender fee 13.536168 99.0326 - 99.0326
General American Capital Company Money Market
6/3/1996 purchase 1,000.00 10.000000 - 100.0000 100.0000
6/3/1997 annual fee 10.410578 100.0000 - 100.0000
6/3/1998 annual fee 10.858145 100.0000 - 100.0000
6/30/1999 annual fee 11.299196 100.0000 - 100.0000
6/30/1999 surrender fee 11.299196 100.0000 - 100.0000
Cova Series Trust Developing Growth
8/20/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
8/20/1998 annual fee 9.823023 100.0000 - 100.0000
6/30/1999 annual fee 12.724192 100.0000 - 100.0000
6/30/1999 surrender fee 12.724192 100.0000 - 100.0000
Cova Series Trust Large Cap Research
8/20/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
8/20/1998 annual fee 10.537316 100.0000 - 100.0000
6/30/1999 annual fee 13.320553 100.0000 - 100.0000
6/30/1999 surrender fee 13.320553 100.0000 - 100.0000
Cova Series Trust Mid-Cap Value
8/20/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
8/20/1998 annual fee 9.919404 100.0000 - 100.0000
6/30/1999 annual fee 11.560414 100.0000 - 100.0000
6/30/1999 surrender fee 11.560414 100.0000 - 100.0000
Cova Series Trust Quality Bond
5/1/1996 purchase 1,000.00 9.897228 - 101.0384 101.0384
5/1/1997 annual fee 10.405141 101.0384 - 101.0384
5/1/1998 annual fee 11.356198 101.0384 - 101.0384
6/30/1999 annual fee 11.582126 101.0384 - 101.0384
6/30/1999 surrender fee 11.582126 101.0384 - 101.0384
Cova Series Trust Small Cap Stock
5/1/1996 purchase 1,000.00 10.512560 - 95.1243 95.1243
5/1/1997 annual fee 10.358427 95.1243 - 95.1243
5/1/1998 annual fee 14.969970 95.1243 - 95.1243
6/30/1999 annual fee 13.249386 95.1243 - 95.1243
6/30/1999 surrender fee 13.249386 95.1243 - 95.1243
Cova Series Trust Large Cap Stock
5/1/1996 purchase 1,000.00 10.003025 - 99.9698 99.9698
5/1/1997 annual fee 12.198198 99.9698 - 99.9698
5/1/1998 annual fee 17.502632 99.9698 - 99.9698
6/30/1999 annual fee 21.760453 99.9698 - 99.9698
6/30/1999 surrender fee 21.760453 99.9698 - 99.9698
Cova Series Trust Select Equity
5/1/1996 purchase 1,000.00 10.083890 - 99.1681 99.1681
5/1/1997 annual fee 11.445501 99.1681 - 99.1681
5/1/1998 annual fee 16.125129 99.1681 - 99.1681
6/30/1999 annual fee 18.786819 99.1681 - 99.1681
6/30/1999 surrender fee 18.786819 99.1681 - 99.1681
Cova Series Trust International Equity
5/1/1996 purchase 1,000.00 10.214899 - 97.8962 97.8962
5/1/1997 annual fee 11.135715 97.8962 - 97.8962
5/1/1998 annual fee 13.138587 97.8962 - 97.8962
6/30/1999 annual fee 13.530211 97.8962 - 97.8962
6/30/1999 surrender fee 13.530211 97.8962 - 97.8962
Russell Multi-Style Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 12.694810 100.0000 - 100.0000
6/30/1999 annual fee 14.136244 100.0000 - 100.0000
6/30/1999 surrender fee 14.136244 100.0000 - 100.0000
Russell Aggressive Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 9.963254 100.0000 - 100.0000
6/30/1999 annual fee 9.994595 100.0000 - 100.0000
6/30/1999 surrender fee 9.994595 100.0000 - 100.0000
Russell Non-U.S.
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.142092 100.0000 - 100.0000
6/30/1999 annual fee 11.843135 100.0000 - 100.0000
6/30/1999 surrender fee 11.843135 100.0000 - 100.0000
Russell Core Bond
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 10.591175 100.0000 - 100.0000
6/30/1999 annual fee 10.400162 100.0000 - 100.0000
6/30/1999 surrender fee 10.400162 100.0000 - 100.0000
AIM V.I. Value
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 13.060203 100.0000 - 100.0000
6/30/1999 annual fee 14.842562 100.0000 - 100.0000
6/30/1999 surrender fee 14.842562 100.0000 - 100.0000
AIM V.I. Capital Appreciation
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.770729 100.0000 - 100.0000
6/30/1999 annual fee 12.802441 100.0000 - 100.0000
6/30/1999 surrender fee 12.802441 100.0000 - 100.0000
AIM V.I. International Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.391449 100.0000 - 100.0000
6/30/1999 annual fee 11.814369 100.0000 - 100.0000
6/30/1999 surrender fee 11.814369 100.0000 - 100.0000
Alliance Premier Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 14.595485 100.0000 - 100.0000
6/30/1999 annual fee 16.395203 100.0000 - 100.0000
6/30/1999 surrender fee 16.395203 100.0000 - 100.0000
Alliance Real Estate Investment
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 7.988435 100.0000 - 100.0000
6/30/1999 annual fee 8.410331 100.0000 - 100.0000
6/30/1999 surrender fee 8.410331 100.0000 - 100.0000
Liberty Newport Tiger Fund, Variable Series
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 9.228765 100.0000 - 100.0000
6/30/1999 annual fee 11.850543 100.0000 - 100.0000
6/30/1999 surrender fee 11.850543 100.0000 - 100.0000
Goldman Sachs Growth and Income
1/29/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
1/29/1999 annual fee 9.973396 100.0000 - 100.0000
6/30/1999 annual fee 10.866470 100.0000 - 100.0000
6/30/1999 surrender fee 10.866470 100.0000 - 100.0000
Goldman Sachs International Equity
1/29/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
1/29/1999 annual fee 11.581610 100.0000 - 100.0000
6/30/1999 annual fee 11.628506 100.0000 - 100.0000
6/30/1999 surrender fee 11.628506 100.0000 - 100.0000
Goldman Sachs Global Income
1/29/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
1/29/1999 annual fee 10.874138 100.0000 - 100.0000
6/30/1999 annual fee 10.551525 100.0000 - 100.0000
6/30/1999 surrender fee 10.551525 100.0000 - 100.0000
Kemper Small Cap Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.676086 100.0000 - 100.0000
6/30/1999 annual fee 12.075969 100.0000 - 100.0000
6/30/1999 surrender fee 12.075969 100.0000 - 100.0000
Kemper Small Cap Value
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 8.753222 100.0000 - 100.0000
6/30/1999 annual fee 9.212540 100.0000 - 100.0000
6/30/1999 surrender fee 9.212540 100.0000 - 100.0000
Kemper Government Securities
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 10.556498 100.0000 - 100.0000
6/30/1999 annual fee 10.486805 100.0000 - 100.0000
6/30/1999 surrender fee 10.486805 100.0000 - 100.0000
MFS Research
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 12.172796 100.0000 - 100.0000
6/30/1999 annual fee 13.158217 100.0000 - 100.0000
6/30/1999 surrender fee 13.158217 100.0000 - 100.0000
MFS Growth with Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 12.066568 100.0000 - 100.0000
6/30/1999 annual fee 12.683197 100.0000 - 100.0000
6/30/1999 surrender fee 12.683197 100.0000 - 100.0000
MFS Emerging Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 13.233235 100.0000 - 100.0000
6/30/1999 annual fee 14.825001 100.0000 - 100.0000
6/30/1999 surrender fee 14.825001 100.0000 - 100.0000
MFS / Foreign & Colonial Emerging Markets Equity
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 6.571830 100.0000 - 100.0000
6/30/1999 annual fee 7.986146 100.0000 - 100.0000
6/30/1999 surrender fee 7.986146 100.0000 - 100.0000
MFS High Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 9.845193 100.0000 - 100.0000
6/30/1999 annual fee 10.262353 100.0000 - 100.0000
6/30/1999 surrender fee 10.262353 100.0000 - 100.0000
MFS Global Governments
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 10.669943 100.0000 - 100.0000
6/30/1999 annual fee 10.290122 100.0000 - 100.0000
6/30/1999 surrender fee 10.290122 100.0000 - 100.0000
Oppenheimer Capital Appreciation
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 12.232731 100.0000 - 100.0000
6/30/1999 annual fee 14.069924 100.0000 - 100.0000
6/30/1999 surrender fee 14.069924 100.0000 - 100.0000
Oppenheimer Main Street Growth & Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 10.326519 100.0000 - 100.0000
6/30/1999 annual fee 11.756598 100.0000 - 100.0000
6/30/1999 surrender fee 11.756598 100.0000 - 100.0000
Oppenheimer High Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 9.893828 100.0000 - 100.0000
6/30/1999 annual fee 10.198942 100.0000 - 100.0000
6/30/1999 surrender fee 10.198942 100.0000 - 100.0000
Oppenheimer Bond
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 9.893828 100.0000 - 100.0000
6/30/1999 annual fee 10.283438 100.0000 - 100.0000
6/30/1999 surrender fee 10.283438 100.0000 - 100.0000
Oppenheimer Strategic Bond
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 10.151332 100.0000 - 100.0000
6/30/1999 annual fee 10.094897 100.0000 - 100.0000
6/30/1999 surrender fee 10.094897 100.0000 - 100.0000
Putnam VT Growth and Income
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.382650 100.0000 - 100.0000
6/30/1999 annual fee 12.503038 100.0000 - 100.0000
6/30/1999 surrender fee 12.503038 100.0000 - 100.0000
Putnam VT New Value
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 10.483517 100.0000 - 100.0000
6/30/1999 annual fee 11.899961 100.0000 - 100.0000
6/30/1999 surrender fee 11.899961 100.0000 - 100.0000
Putnam VT Vista
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.785702 100.0000 - 100.0000
6/30/1999 annual fee 13.199054 100.0000 - 100.0000
6/30/1999 surrender fee 13.199054 100.0000 - 100.0000
Putnam VT International Growth
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.707003 100.0000 - 100.0000
6/30/1999 annual fee 13.062217 100.0000 - 100.0000
6/30/1999 surrender fee 13.062217 100.0000 - 100.0000
Putnam International New Opportunities
12/31/1997 purchase 1,000.00 10.000000 - 100.0000 100.0000
12/31/1998 annual fee 11.402252 100.0000 - 100.0000
6/30/1999 annual fee 13.536626 100.0000 - 100.0000
6/30/1999 surrender fee 13.536626 100.0000 - 100.0000
Franklin Small Cap Investments
3/1/1999 purchase 1,000.00 10.000000 - 100.0000 100.0000
6/30/1999 annual fee 12.110248 100.0000 - 100.0000
6/30/1999 surrender fee 12.110248 100.0000 - 100.0000
Templeton International
5/1/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
5/3/1999 annual fee 9.996786 100.0000 - 100.0000
6/30/1999 annual fee 10.014949 100.0000 - 100.0000
6/30/1999 surrender fee 10.014949 100.0000 - 100.0000
Templeton Developing Markets
5/1/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
5/3/1999 annual fee 9.972042 100.0000 - 100.0000
6/30/1999 annual fee 10.737070 100.0000 - 100.0000
6/30/1999 surrender fee 10.737070 100.0000 - 100.0000
Templeton Mutual Shares Investments
5/1/1998 purchase 1,000.00 10.000000 - 100.0000 100.0000
5/3/1999 annual fee 10.747701 100.0000 - 100.0000
6/30/1999 annual fee 11.009906 100.0000 - 100.0000
6/30/1999 surrender fee 11.009906 100.0000 - 100.0000
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
8 Transaction Transaction
<S> <C>
- 1,000.00
1,088.88 1,088.88
1,088.88 1,088.88
- 1,000.00
1,140.55 1,140.55
1,340.47 1,340.47
1,340.52 1,340.52
1,340.52 1,340.52
- 1,000.00
1,041.06 1,041.06
1,085.81 1,085.81
1,129.92 1,129.92
1,129.92 1,129.92
- 1,000.00
982.30 982.30
1,272.42 1,272.42
1,272.42 1,272.42
- 1,000.00
1,053.73 1,053.73
1,332.06 1,332.06
1,332.06 1,332.06
- 1,000.00
991.94 991.94
1,156.04 1,156.04
1,156.04 1,156.04
- 1,000.00
1,051.32 1,051.32
1,147.41 1,147.41
1,170.24 1,170.24
1,170.24 1,170.24
- 1,000.00
985.34 985.34
1,424.01 1,424.01
1,260.34 1,260.34
1,260.34 1,260.34
- 1,000.00
1,219.45 1,219.45
1,749.73 1,749.73
2,175.39 2,175.39
2,175.39 2,175.39
- 1,000.00
1,135.03 1,135.03
1,599.10 1,599.10
1,863.05 1,863.05
1,863.05 1,863.05
- 1,000.00
1,090.14 1,090.14
1,286.22 1,286.22
1,324.56 1,324.56
1,324.56 1,324.56
- 1,000.00
1,269.48 1,269.48
1,413.62 1,413.62
1,413.62 1,413.62
- 1,000.00
996.33 996.33
999.46 999.46
999.46 999.46
- 1,000.00
1,114.21 1,114.21
1,184.31 1,184.31
1,184.31 1,184.31
- 1,000.00
1,059.12 1,059.12
1,040.02 1,040.02
1,040.02 1,040.02
- 1,000.00
1,306.02 1,306.02
1,484.26 1,484.26
1,484.26 1,484.26
- 1,000.00
1,177.07 1,177.07
1,280.24 1,280.24
1,280.24 1,280.24
- 1,000.00
1,139.14 1,139.14
1,181.44 1,181.44
1,181.44 1,181.44
- 1,000.00
1,459.55 1,459.55
1,639.52 1,639.52
1,639.52 1,639.52
- 1,000.00
798.84 798.84
841.03 841.03
841.03 841.03
- 1,000.00
922.88 922.88
1,185.05 1,185.05
1,185.05 1,185.05
- 1,000.00
997.34 997.34
1,086.65 1,086.65
1,086.65 1,086.65
- 1,000.00
1,158.16 1,158.16
1,162.85 1,162.85
1,162.85 1,162.85
- 1,000.00
1,087.41 1,087.41
1,055.15 1,055.15
1,055.15 1,055.15
- 1,000.00
1,167.61 1,167.61
1,207.60 1,207.60
1,207.60 1,207.60
- 1,000.00
875.32 875.32
921.25 921.25
921.25 921.25
- 1,000.00
1,055.65 1,055.65
1,048.68 1,048.68
1,048.68 1,048.68
- 1,000.00
1,217.28 1,217.28
1,315.82 1,315.82
1,315.82 1,315.82
- 1,000.00
1,206.66 1,206.66
1,268.32 1,268.32
1,268.32 1,268.32
- 1,000.00
1,323.32 1,323.32
1,482.50 1,482.50
1,482.50 1,482.50
- 1,000.00
657.18 657.18
798.61 798.61
798.61 798.61
- 1,000.00
984.52 984.52
1,026.24 1,026.24
1,026.24 1,026.24
- 1,000.00
1,066.99 1,066.99
1,029.01 1,029.01
1,029.01 1,029.01
- 1,000.00
1,223.27 1,223.27
1,406.99 1,406.99
1,406.99 1,406.99
- 1,000.00
1,032.65 1,032.65
1,175.66 1,175.66
1,175.66 1,175.66
- 1,000.00
989.38 989.38
1,019.89 1,019.89
1,019.89 1,019.89
- 1,000.00
989.38 989.38
1,028.34 1,028.34
1,028.34 1,028.34
- 1,000.00
1,015.13 1,015.13
1,009.49 1,009.49
1,009.49 1,009.49
- 1,000.00
1,138.27 1,138.27
1,250.30 1,250.30
1,250.30 1,250.30
- 1,000.00
1,048.35 1,048.35
1,190.00 1,190.00
1,190.00 1,190.00
- 1,000.00
1,178.57 1,178.57
1,319.91 1,319.91
1,319.91 1,319.91
- 1,000.00
1,170.70 1,170.70
1,306.22 1,306.22
1,306.22 1,306.22
- 1,000.00
1,140.23 1,140.23
1,353.66 1,353.66
1,353.66 1,353.66
- 1,000.00
1,211.02 1,211.02
1,211.02 1,211.02
- 1,000.00
999.68 999.68
1,001.49 1,001.49
1,001.49 1,001.49
- 1,000.00
997.20 997.20
1,073.71 1,073.71
1,073.71 1,073.71
- 1,000.00
1,074.77 1,074.77
1,100.99 1,100.99
1,100.99 1,100.99
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Non-Standard Since Inception Performance- Part I
As of 6/30/99
Sub-Account Annualized Account Unit Value Initial Inception
Return Value 6/30/1999 Investment Date
<S> <C> <C> <C> <C> <C> <C> <C>
Cova Series Trust Lord Abbett Growth and Income (1) 8.89% 1,088.88 39.095065 1,000.00 1/8/1999
Cova Series Trust Bond Debenture 9.69% 1,340.52 13.536168 1,000.00 5/1/1996
General American Capital Company Money Market 4.05% 1,129.92 11.299196 1,000.00 6/3/1996
Cova Series Trust Developing Growth 13.81% 1,272.42 12.724192 1,000.00 8/20/1997
Cova Series Trust Large Cap Research 16.64% 1,332.06 13.320553 1,000.00 8/20/1997
Cova Series Trust Mid-Cap Value 8.09% 1,156.04 11.560414 1,000.00 8/20/1997
Cova Series Trust Quality Bond 5.09% 1,170.24 11.582126 1,000.00 5/1/1996
Cova Series Trust Small Cap Stock 7.58% 1,260.34 13.249386 1,000.00 5/1/1996
Cova Series Trust Large Cap Stock 27.81% 2,175.39 21.760453 1,000.00 5/1/1996
Cova Series Trust Select Equity 21.71% 1,863.05 18.786819 1,000.00 5/1/1996
Cova Series Trust International Equity 9.28% 1,324.56 13.530211 1,000.00 5/1/1996
Russell Multi-Style Equity 26.04% 1,413.62 14.136244 1,000.00 12/31/1997
Russell Aggressive Equity -0.04% 999.46 9.994595 1,000.00 12/31/1997
Russell Non-U.S. 11.97% 1,184.31 11.843135 1,000.00 12/31/1997
Russell Core Bond 2.66% 1,040.02 10.400162 1,000.00 12/31/1997
AIM V.I. Value 30.21% 1,484.26 14.842562 1,000.00 12/31/1997
AIM V.I. Capital Appreciation 17.96% 1,280.24 12.802441 1,000.00 12/31/1997
AIM V.I. International Equity 11.79% 1,181.44 11.814369 1,000.00 12/31/1997
Alliance Premier Growth 39.17% 1,639.52 16.395203 1,000.00 12/31/1997
Alliance Real Estate Investment -10.93% 841.03 8.410331 1,000.00 12/31/1997
Liberty Newport Tiger Fund, Variable Series 12.02% 1,185.05 11.850543 1,000.00 12/31/1997
Goldman Sachs Growth and Income 6.04% 1,086.65 10.866470 1,000.00 1/29/1998
Goldman Sachs International Equity 11.24% 1,162.85 11.628506 1,000.00 1/29/1998
Goldman Sachs Global Income 3.86% 1,055.15 10.551525 1,000.00 1/29/1998
Kemper Small Cap Growth 13.44% 1,207.60 12.075969 1,000.00 12/31/1997
Kemper Small Cap Value -5.34% 921.25 9.212540 1,000.00 12/31/1997
Kemper Government Securities 3.23% 1,048.68 10.486805 1,000.00 12/31/1997
MFS Research 20.14% 1,315.82 13.158217 1,000.00 12/31/1997
MFS Growth with Income 17.22% 1,268.32 12.683197 1,000.00 12/31/1997
MFS Emerging Growth 30.11% 1,482.50 14.825001 1,000.00 12/31/1997
MFS / Foreign & Colonial Emerging Markets Equity -13.96% 798.61 7.986146 1,000.00 12/31/1997
MFS High Income 1.75% 1,026.24 10.262353 1,000.00 12/31/1997
MFS Global Governments 1.93% 1,029.01 10.290122 1,000.00 12/31/1997
Oppenheimer Capital Appreciation 25.64% 1,406.99 14.069924 1,000.00 12/31/1997
Oppenheimer Main Street Growth & Income 11.43% 1,175.66 11.756598 1,000.00 12/31/1997
Oppenheimer High Income 1.33% 1,019.89 10.198942 1,000.00 12/31/1997
Oppenheimer Bond 1.89% 1,028.34 10.283438 1,000.00 12/31/1997
Oppenheimer Strategic Bond 0.63% 1,009.49 10.094897 1,000.00 12/31/1997
Putnam VT Growth and Income 16.11% 1,250.30 12.503038 1,000.00 12/31/1997
Putman VT New Value 12.33% 1,190.00 11.899961 1,000.00 12/31/1997
Putnam VT Vista 20.39% 1,319.91 13.199054 1,000.00 12/31/1997
Putnam VT International Growth 19.55% 1,306.22 13.062217 1,000.00 12/31/1997
Putnam VT International New Opportunities 22.44% 1,353.66 13.536626 1,000.00 12/31/1997
Franklin Small Cap Investments (1) 21.10% 1,211.02 12.110248 1,000.00 3/1/1999
Templeton International 0.13% 1,001.49 10.014949 1,000.00 5/1/1998
Templeton Developing Markets 6.30% 1,073.71 10.737070 1,000.00 5/1/1998
Templeton Mutual Shares Investments 8.61% 1,100.99 11.009906 1,000.00 5/1/1998
<FN>
(1) Return is not annualized for periods less than 1 year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Days Since
Inception
<S> <C>
173
1,156
1,122
680
680
680
1,156
1,156
1,156
1,156
1,156
546
546
546
546
546
546
546
546
546
546
517
517
517
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
546
121
425
425
425
<FN>
(1) Return is not annualized for periods less than 1 year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
1 Year Performance- Part II
As of 6/30/99
Less:
---------------------------------------
Portfolio Sub-Account 1 Year M & E / Contract
Inception Inception Portfolio Admin Annual Withdrawal
Date Date Return Fees Fee Fee
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Small Cap Investments 5/1/1998 3/1/1999 15.12% 1.40% 0.10% 4.50%
American Century VP Income & Growth 10/30/1997 n / a 18.54% 1.40% 0.10% 4.50%
American Century VP International 5/1/1994 n / a 1.74% 1.40% 0.10% 4.50%
American Century VP Value 5/1/1996 n / a 11.98% 1.40% 0.10% 4.50%
Dreyfus VIF Capital Appreciation 4/5/1993 n / a 15.86% 1.40% 0.10% 4.50%
Dreyfus VIF Disciplined Stock 5/1/1996 n / a 18.85% 1.40% 0.10% 4.50%
Dreyfus Stock Index 9/29/1989 n / a 22.36% 1.40% 0.10% 4.50%
INVESCO VIF Dynamics 8/25/1997 n / a 21.92% 1.40% 0.10% 4.50%
INVESCO VIF High Yield 5/27/1994 n / a 1.73% 1.40% 0.10% 4.50%
PIMCO High Yield Bond 4/30/1998 n / a 2.28% 1.40% 0.10% 4.50%
PIMCO StocksPLUS Growth & Income 12/31/1997 n / a 23.86% 1.40% 0.10% 4.50%
PIMCO Total Return Bond 12/31/1997 n / a 3.55% 1.40% 0.10% 4.50%
Scudder V.L. International 5/1/1987 n / a 7.99% 1.40% 0.10% 4.50%
</TABLE>
<TABLE>
<CAPTION>
Avg. Annual Total Return
1 Year
--------------------------
Non-
Standard Standard
<S> <C>
9.12% 13.72%
12.54% 17.14%
-4.26% 0.34%
5.98% 10.58%
9.86% 14.46%
12.85% 17.45%
16.36% 20.96%
15.92% 20.52%
-4.27% 0.33%
-3.72% 0.88%
17.86% 22.46%
-2.45% 2.15%
1.99% 6.59%
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
5 Year Performance- Part II
As of 6/30/99
Less:
---------------------------------------
Portfolio Sub-Account 5 Year M & E / Contract
Inception Inception Portfolio Admin Annual Withdrawal
Date Date Return Fees Fee Fee
<S> <C> <C> <C> <C> <C> <C> <C>
General American Capital Company Money Market 10/1/1987 6/3/1996 5.54% 1.40% 0.10%
AIM V.I. Value 5/5/1993 12/31/1997 25.41% 1.40% 0.10%
AIM V.I. Capital Appreciation 5/5/1993 12/31/1997 21.16% 1.40% 0.10%
AIM V.I. International Equity 5/5/1993 12/31/1997 12.82% 1.40% 0.10%
Alliance Premier Growth 6/26/1992 12/31/1997 32.57% 1.40% 0.10%
Kemper Small Cap Growth 5/2/1994 12/31/1997 23.95% 1.40% 0.10%
Kemper Government Securities 9/3/1987 12/31/1997 7.41% 1.40% 0.10%
MFS Global Governments 6/14/1994 12/31/1997 4.40% 1.40% 0.10%
Oppenheimer Capital Appreciation 4/3/1985 12/31/1997 27.00% 1.40% 0.10%
Oppenheimer High Income 4/30/1986 12/31/1997 9.79% 1.40% 0.10%
Oppenheimer Bond 4/3/1985 12/31/1997 7.09% 1.40% 0.10%
Oppenheimer Strategic Bond 5/3/1993 12/31/1997 7.60% 1.40% 0.10%
Putnam VT Growth and Income 2/1/1988 12/31/1997 21.98% 1.40% 0.10%
Templeton International 5/1/1992 5/1/1998 15.27% 1.40% 0.10%
American Century VP International 5/1/1994 n / a 13.53% 1.40% 0.10%
Dreyfus VIF Capital Appreciation 4/5/1993 n / a 26.10% 1.40% 0.10%
Dreyfus Stock Index 9/29/1989 n / a 27.36% 1.40% 0.10%
INVESCO VIF High Yield 5/27/1994 n / a 12.18% 1.40% 0.10%
Scudder V.L. International 5/1/1987 n / a 12.28% 1.40% 0.10%
</TABLE>
<TABLE>
<CAPTION>
Avg. Annual Total Return
5 Year
--------------------------
Non-
Standard Standard
<S> <C>
4.04% 4.14%
23.91% 24.01%
19.66% 19.76%
11.32% 11.42%
31.07% 31.17%
22.45% 22.55%
5.91% 6.01%
2.90% 3.00%
25.50% 25.60%
8.29% 8.39%
5.59% 5.69%
6.10% 6.20%
20.48% 20.58%
13.77% 13.87%
12.03% 12.13%
24.60% 24.70%
25.86% 25.96%
10.68% 10.78%
10.78% 10.88%
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One (333-34741)
Since Inception Performance- Part II
As of 6/30/99
Less:
---------------------------------------
Portfolio Sub-Account Inception M & E / Contract
Inception Inception Portfolio Admin Annual Withdrawal
Date Date Return Fees Fee Fee
<S> <C> <C> <C> <C> <C> <C> <C>
General American Capital Company Money Market 10/1/1987 6/3/1996 5.53% 1.40% 0.10%
Russell Multi-Style Equity 1/2/1997 12/31/1997 28.18% 1.40% 0.10% 4.50%
Russell Aggressive Equity 1/2/1997 12/31/1997 13.76% 1.40% 0.10% 4.50%
Russell Non-U.S. 1/2/1997 12/31/1997 8.05% 1.40% 0.10% 4.50%
Russell Core Bond 1/2/1997 12/31/1997 6.34% 1.40% 0.10% 4.50%
AIM V.I. Value 5/5/1993 12/31/1997 22.63% 1.40% 0.10%
AIM V.I. Capital Appreciation 5/5/1993 12/31/1997 18.88% 1.40% 0.10%
AIM V.I. International Equity 5/5/1993 12/31/1997 13.02% 1.40% 0.10%
Alliance Premier Growth 6/26/1992 12/31/1997 25.64% 1.40% 0.10%
Alliance Real Estate Investment 1/9/1997 12/31/1997 2.34% 1.40% 0.10% 4.50%
Liberty Newport Tiger Fund, Variable Series 5/1/1995 12/31/1997 1.65% 1.40% 0.10% 4.50%
Goldman Sachs Growth and Income 1/12/1998 1/29/1998 10.96% 1.40% 0.10% 4.50%
Goldman Sachs International Equity 1/12/1998 1/29/1998 15.36% 1.40% 0.10% 4.50%
Goldman Sachs Global Income 1/12/1998 1/29/1998 4.53% 1.40% 0.10% 4.50%
Kemper Small Cap Growth 5/2/1994 12/31/1997 22.60% 1.40% 0.10%
Kemper Small Cap Value 5/1/1996 12/31/1997 4.98% 1.40% 0.10% 4.50%
Kemper Government Securities 9/3/1987 12/31/1997 7.51% 1.40% 0.10%
MFS Research 7/26/1995 12/31/1997 22.00% 1.40% 0.10% 4.50%
MFS Growth with Income 10/9/1995 12/31/1997 24.02% 1.40% 0.10% 4.50%
MFS Emerging Growth 7/24/1995 12/31/1997 26.65% 1.40% 0.10% 4.50%
MFS / Foreign & Colonial Emerging Markets Equity 10/16/1997 12/31/1997 -16.61% 1.40% 0.10% 4.50%
MFS High Income 7/26/1995 12/31/1997 8.95% 1.40% 0.10% 4.50%
MFS Global Governments 6/14/1994 12/31/1997 4.40% 1.40% 0.10%
Oppenheimer Capital Appreciation 4/3/1985 12/31/1997 16.98% 1.40% 0.10%
Oppenheimer Main Street Growth & Income 7/5/1995 12/31/1997 27.57% 1.40% 0.10% 4.50%
Oppenheimer High Income 4/30/1986 12/31/1997 12.63% 1.40% 0.10%
Oppenheimer Bond 4/3/1985 12/31/1997 8.26% 1.40% 0.10%
Oppenheimer Strategic Bond 5/3/1993 12/31/1997 6.25% 1.40% 0.10%
Putnam VT Growth and Income 2/1/1988 12/31/1997 15.93% 1.40% 0.10%
Putman VT New Value 1/2/1997 12/31/1997 15.39% 1.40% 0.10% 4.50%
Putnam VT Vista 1/2/1997 12/31/1997 22.58% 1.40% 0.10% 4.50%
Putnam VT International Growth 1/2/1997 12/31/1997 19.20% 1.40% 0.10% 4.50%
Putnam VT International New Opportunities 1/2/1997 12/31/1997 13.82% 1.40% 0.10% 4.50%
Franklin Small Cap Investments 5/1/1998 3/1/1999 8.36% 1.40% 0.10% 4.50%
Templeton International 5/1/1992 5/1/1998 14.69% 1.40% 0.10%
Templeton Developing Markets 3/1/1996 5/1/1998 -8.10% 1.40% 0.10% 4.50%
Templeton Mutual Shares Investments 5/1/1998 5/1/1998 10.14% 1.40% 0.10% 4.50%
American Century VP Income & Growth 10/30/1997 n / a 27.61% 1.40% 0.10% 4.50%
American Century VP International 5/1/1994 n / a 12.59% 1.40% 0.10%
American Century VP Value 5/1/1996 n / a 17.79% 1.40% 0.10% 4.50%
Dreyfus VIF Capital Appreciation 4/5/1993 n / a 21.12% 1.40% 0.10%
Dreyfus VIF Disciplined Stock 5/1/1996 n / a 28.12% 1.40% 0.10% 4.50%
Dreyfus Stock Index 9/29/1989 n / a 17.57% 1.40% 0.10%
INVESCO VIF Dynamics 8/25/1997 n / a 23.84% 1.40% 0.10% 4.50%
INVESCO VIF High Yield 5/27/1994 n / a 11.92% 1.40% 0.10%
PIMCO High Yield Bond 4/30/1998 n / a 2.83% 1.40% 0.10% 4.50%
PIMCO Low Duration Bond 2/16/1999 n / a 1.28% 0.52% 0.10% 5.00%
PIMCO StocksPLUS Growth & Income 12/31/1997 n / a 28.16% 1.40% 0.10% 4.50%
PIMCO Total Return Bond 12/31/1997 n / a 4.42% 1.40% 0.10% 4.50%
Scudder V.L. International 5/1/1987 n / a 11.61% 1.40% 0.10%
</TABLE>
<TABLE>
<CAPTION>
Avg. Annual Total Return
Since Inception
- --------------------------
Non-
Standard Standard
<S> <C>
4.03% 4.13%
22.18% 26.78%
7.76% 12.36%
2.05% 6.65%
0.34% 4.94%
21.13% 21.23%
17.38% 17.48%
11.52% 11.62%
24.14% 24.24%
-3.66% 0.94%
-4.35% 0.25%
4.96% 9.56%
9.36% 13.96%
-1.47% 3.13%
21.10% 21.20%
-1.02% 3.58%
6.01% 6.11%
16.00% 20.60%
18.02% 22.62%
20.65% 25.25%
-22.61% -18.01%
2.95% 7.55%
2.90% 3.00%
15.48% 15.58%
21.57% 26.17%
11.13% 11.23%
6.76% 6.86%
4.75% 4.85%
14.43% 14.53%
9.39% 13.99%
16.58% 21.18%
13.20% 17.80%
7.82% 12.42%
2.36% 6.96%
13.19% 13.29%
-14.10% -9.50%
4.14% 8.74%
21.61% 26.21%
11.09% 11.19%
11.79% 16.39%
19.62% 19.72%
22.12% 26.72%
16.07% 16.17%
17.84% 22.44%
10.42% 10.52%
-3.17% 1.43%
-4.34% 0.76%
22.16% 26.76%
-1.58% 3.02%
10.11% 10.21%
</TABLE>
