File Nos. 33-39100
811-5200
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 15 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 32 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT ONE
__________________________________
(Exact Name of Registrant)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
_______________________________________________
(Name of Depositor)
One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644
______________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 831-5433
Name and Address of Agent for Service
Lorry J. Stensrud, President
Cova Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 523-1661
Copies to:
Judith A. Hasenauer and Frances S. Cook
Blazzard, Grodd & Hasenauer, P.C. First Vice President and
P.O. Box 5108 Associate Counsel
Westport, CT 06881 Cova Financial Services
(203) 226-7866 Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X___ on May 1, 1999 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
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This Registration Statement contains three Portfolios of AIM Variable Insurance
Funds, Inc.; two Portfolios of Alliance Variable Products Series Fund, Inc.;
seventeen Portfolios of the Cova Series Trust; one Portfolio of General American
Capital Company; three Portfolios of Goldman Sachs Variable Insurance Trust;
four Portfolios of Kemper Variable Series; one Portfolio of Liberty Variable
Investment Trust; six Portfolios of MFS Variable Insurance Trust; five
Portfolios of Oppenheimer Variable Account Funds; five Portfolios of Putnam
Variable Trust, Class IA Shares; eight Portfolios, Class 1 Shares, of Templeton
Variable Products Series Fund; two Portfolios of Variable Insurance Products
Fund; one Portfolio of Variable Insurance Products Fund II; and two Portfolios
of Variable Insurance Products Fund III. Different versions of the Prospectus
will be created from this Registration Statement. The only differences between
the versions of the Prospectuses created from this Registration Statement will
be the underlying funds available. The distribution system for each version of
the Prospectus is different. These Prospectuses will be filed with the
Commission pursuant to Rule 497 under the Securities Act of 1933. The Registrant
undertakes to update this Explanatory Note, as needed, each time a Post-
Effective Amendment is filed.
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
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PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Profile
Item 4. Condensed Financial Information . . . Appendix A
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Investment
Options
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Fixed and Variable Annuity
Item 8. Annuity Period . . . . . . . . . . . . Income Phase
Item 9. Death Benefit. . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . Table of Contents of the
Statement of Additional
Information
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -----------------------
PART B
Item 15. Cover Page . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . Company
Item 18. Services . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . Financial Statements
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PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
THE FIXED AND VARIABLE ANNUITY
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
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 __ investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and __ investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios (except as noted).
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation
AIM V.I. International Equity
AIM V.I. Value
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
Premier Growth
Real Estate Investment
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity
Small Cap Stock
International Equity
Quality Bond
Large Cap Stock
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture
Mid-Cap Value
Large Cap Research
Developing Growth
Lord Abbett Growth and Income
MANAGED BY MISSISSIPPI VALLEY
ADVISORS, INC.
Balanced
Small Cap Equity
Equity Income
Growth & Income Equity
MANAGED BY RIGGS BANK N.A.
Riggs Stock
Riggs Small Company Stock
Riggs U.S. Government Securities
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market
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 International Equity Fund
Goldman Sachs Global Income Fund
KEMPER VARIABLE SERIES:
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
Kemper Small Cap Value
Kemper Government Securities
Kemper Small Cap Growth
MANAGED BY DREMAN VALUE MANAGEMENT, L.L.C.
Kemper-Dreman High Return Equity
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
MFS Research
MFS Growth With Income
MFS High Income
MFS Global Governments
MFS Bond
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
MANAGED BY OPPENHEIMERFUNDS, INC.
Oppenheimer High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth)
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 Class IA Shares
Putnam VT International Growth Class IA Shares
Putnam VT International New Opportunities Class IA Shares
Putnam VT New Value Class IA Shares
Putnam VT Vista Class IA Shares
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Growth Investments
Franklin Small Cap Investments
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
Mutual Shares Investments
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton Asset Allocation
Templeton Bond
Templeton International
Templeton Stock
MANAGED BY TEMPLETON ASSET MANAGEMENT LTD.
Templeton Developing Markets
VARIABLE INSURANCE PRODUCTS FUND:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP Growth
VIP Equity-Income
VARIABLE INSURANCE PRODUCTS FUND II:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP II Contrafund
VARIABLE INSURANCE PRODUCTS FUND III:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP III Growth Opportunities
VIP III Growth & Income
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 May 1, 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:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* 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.
May 1, 1999
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
EXAMPLES
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund, Inc.
Cova Series Trust
General American Capital Company
Goldman Sachs Variable Insurance Trust
Kemper Variable Series
Liberty Variable Investment Trust
MFS Variable Insurance Trust
Oppenheimer Variable Account Funds
Putnam Variable Trust
Templeton Variable Products Series Fund
Variable Insurance Products Fund
Variable Insurance Products Fund II
Variable Insurance Products Fund III
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Approved Asset Allocation Programs
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the Withdrawal Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Suspension of Payments or Transfers
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
Cova
Year 2000
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Performance Information
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable 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.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Date.............................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Earnings.................................................................
Fixed Account............................................................
Income Phase.............................................................
Investment Portfolios....................................................
Joint Owner..............................................................
Non-Qualified............................................................
Owner....................................................................
Purchase Payment.........................................................
Qualified................................................................
Tax Deferral.............................................................
SUMMARY
The sections in this summary correspond to sections in this prospectus which
discuss the topics in more detail.
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 __ investment portfolios. These portfolios are designed to
offer a 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 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.
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.
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.
INVESTMENT OPTIONS. You can put your money in the following investment
portfolios which are described 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.
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation
AIM V.I. International Equity
AIM V.I. Value
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
Premier Growth
Real Estate Investment
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity
Small Cap Stock
International Equity
Quality Bond
Large Cap Stock
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture
Mid-Cap Value
Large Cap Research
Developing Growth
Lord Abbett Growth and Income
MANAGED BY MISSISSIPPI VALLEY
ADVISORS, INC.
Balanced
Small Cap Equity
Equity Income
Growth & Income Equity
MANAGED BY RIGGS BANK N.A.
Riggs Stock
Riggs Small Company Stock
Riggs U.S. Government Securities
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market
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 International Equity Fund
Goldman Sachs Global Income Fund
KEMPER VARIABLE SERIES:
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
Kemper Small Cap Value
Kemper Government Securities
Kemper Small Cap Growth
MANAGED BY DREMAN VALUE MANAGEMENT, L.L.C.
Kemper-Dreman High Return Equity
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
MFS Research
MFS Growth With Income
MFS High Income
MFS Global Governments (formerly MFS World Governments)
MFS Bond
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
MANAGED BY OPPENHEIMERFUNDS, INC.
Oppenheimer High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Strategic Bond Fund/VA
PUTNAM VARIABLE TRUST:
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam VT Growth and Income Class IA Shares
Putnam VT International Growth Class IA Shares
Putnam VT International New Opportunities Class IA Shares
Putnam VT New Value Class IA Shares
Putnam VT Vista Class IA Shares
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Growth Investments
Franklin Small Cap Investments
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
Mutual Shares Investments
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton Asset Allocation
Templeton Bond
Templeton International
Templeton Stock
MANAGED BY TEMPLETON ASSET MANAGEMENT LTD.
Templeton Developing Markets
VARIABLE INSURANCE PRODUCTS FUND:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP Growth
VIP Equity-Income
VARIABLE INSURANCE PRODUCTS FUND II:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP II Contrafund
VARIABLE INSURANCE PRODUCTS FUND III:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP III Growth Opportunities
VIP III Growth & Income
(VIP, VIP II and VIP III refer to Variable Insurance
Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III, respectively.)
Depending upon market conditions and the performance of the portfolio(s)
you select, you can make or lose money in any of these portfolios.
EXPENSES. The contract has insurance features and investment features, and there
are costs related to each.
* Each year Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, Cova currently waives this charge
if the value of your contract is at least $50,000.
* Cova also deducts for its insurance charges which total 1.40% of the
average daily value of your contract allocated to the investment
portfolios.
* If you take your money out, Cova may assess a withdrawal charge which is
equal to 5% of the purchase payment you withdraw. After Cova has had a
purchase payment for 5 years, there is no charge by Cova for a withdrawal
of that purchase payment.
* When you begin receiving regular income payments from your annuity, Cova
will assess a state premium tax charge which ranges from 0%-4%, depending
upon the state.
* 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.
* There are also investment charges which range from .205% to 1.66% of the
average daily value of the investment portfolio depending upon the
investment portfolio.
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.
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.
DEATH BENEFIT. If you die before moving to the income phase, the person you have
chosen as your beneficiary will receive a death benefit.
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? 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:
You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to pay
taxes on money you receive. We call this feature the Systematic Withdrawal
Program.
You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average cost
per unit over time than a single one time purchase. We call this feature Dollar
Cost Averaging.
You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
Under certain circumstances, Cova will give you your money without a
withdrawal charge if you need it while you're in a nursing home. We call this
feature the Nursing Home Waiver.
These features are not available in all states and may not be suitable for your
particular situation.
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 the investment portfolios.
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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
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SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
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TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
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INVESTMENT PORTFOLIO EXPENSES Other Expenses
(as a percentage of the average daily net (after expense
assets of an investment portfolio) Management reimbursement for Total Annual
Fees certain Portfolios) Portfolio Expenses
----------- ---------------------- ------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation .62% .05% .67%
AIM V.I. International Equity .75% .16% .91%
AIM V.I. Value .61% .05% .66%
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Managed by Alliance Capital Management L.P.
Premier Growth (a) 1.00% .06% 1.06%
Real Estate Investment (b) .08% .87% .95%
COVA SERIES TRUST(c)
Managed by J.P. Morgan Investment Management Inc.
Select Equity .68% .18% .86%
Small Cap Stock .85% .27% 1.12%
International Equity .80% .28% 1.08%
Quality Bond .55% .10% .65%
Large Cap Stock .65% .10% .75%
Managed by Lord, Abbett & Co.
Bond Debenture .75% .10% .85%
Mid-Cap Value 1.00% .30% 1.30%
Large Cap Research 1.00% .30% 1.30%
Developing Growth .90% .30% 1.20%
Lord Abbett Growth and Income(d) .65% .07% .72%
Managed by Mississippi Valley Advisors, Inc.
Balanced 1.00% .10% 1.10%
Small Cap Equity 1.00% .10% 1.10%
Equity Income 1.00% .10% 1.10%
Growth & Income Equity 1.00% .10% 1.10%
Managed by Riggs Bank N.A.
Riggs Stock (e) .95% .10% 1.05%
Riggs Small Company Stock 1.00% .10% 1.10%
Riggs U.S. Government Securities (e) .75% .10% .85%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset
Management Company
Money Market .125% .08% .205%
GOLDMAN SACHS VARIABLE INSURANCE TRUST (f)
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund .75% .15% .90%
Managed By Goldman Sachs Asset Management
International
Goldman Sachs International Equity Fund 1.00% .25% 1.25%
Goldman Sachs Global Income Fund .90% .15% 1.05%
KEMPER VARIABLE SERIES
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value (g) .75% .05% .80%
Kemper Government Securities .55% .11% .66%
Kemper Small Cap Growth .65% .05% .70%
Managed by Dreman Value Management, L.L.C.
Kemper-Dreman High Return Equity (h) .42% .45% .87%
LIBERTY VARIABLE INVESTMENT TRUST
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Series .90% .40% 1.30%
MFS VARIABLE INSURANCE TRUST(i)
Managed by Massachusetts Financial Services Company
MFS Emerging Growth .75% .10% .85%
MFS Research .75% .11% .86%
MFS Growth With Income .75% .13% .88%
MFS High Income .75% .28% 1.03%
MFS Global Governments (j) .75% .26% 1.01%
MFS Bond (j) .60% .42% 1.02%
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA .74% .04% .78%
Oppenheimer Bond Fund/VA .72% .02% .74%
Oppenheimer Capital Appreciation Fund/VA .72% .03% .75%
Oppenheimer Main Street Growth & Income Fund/VA .74% .05% .79%
Oppenheimer Strategic Bond Fund/VA .74% .06% .80%
PUTNAM VARIABLE TRUST
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Class IA Shares .46% .04% .50%
Putnam VT International Growth Class IA Shares .80% .27% 1.07%
Putnam VT International New Opportunities (k)
Class IA Shares 1.18% .42% 1.60%
Putnam VT New Value Class IA Shares .70% .11% .81%
Putnam VT Vista Class IA Shares .65% .12% .77%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1
SHARES
Managed by Franklin Advisers, Inc.
Franklin Growth Investments(l) .00% 1.00% 1.00%
Franklin Small Cap Investments(l) .15% .85% 1.00%
Managed by Franklin Mutual Advisers, Inc.
Mutual Shares Investments(l) .00% 1.00% 1.00%
Managed by Templeton Investment Counsel, Inc.
Templeton Asset Allocation .60% .18% .78%
Templeton Bond .50% .23% .73%
Templeton International .69% .17% .86%
Templeton Stock .70% .19% .89%
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets 1.25% .41% 1.66%
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Managed by Fidelity Management &
Research Company
VIP III Growth Opportunities (m) .59% .11% .70%
VIP Growth (m) .59% .07% .66%
VIP III Growth & Income(m) .49% .11% .60%
VIP Equity-Income (m) .49% .08% .57%
VIP II Contrafund (m) .59% .07% .66%
</TABLE>
(a) The adviser to the Fund discontinued the expense reimbursement with
respect to the Premier Growth Portfolio effective May 1, 1998.
(b) 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.
(c) Since May 1, 1996, Cova has been reimbursing the investment portfolios
of Cova Series Trust (except the Riggs Stock, Riggs Small Company Stock and
Riggs U.S. Government Securities Portfolios which have not yet commenced
investment operations) for all operating expenses (exclusive of the management
fees) in excess of approximately .10%. Beginning May 1, 1999, Cova will
discontinue this reimbursement arrangement for the Select Equity, Small Cap
Stock and International Equity Portfolios. 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. Also beginning May 1,
1999, Cova will reimburse 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%. 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, 1.70% for the Developing Growth Portfolio, 3.08% for the
Balanced Portfolio, 4.19% for the Small Cap Equity Portfolio, 2.69% for the
Equity-Income Portfolio and 2.00% for the Growth & Income Equity Portfolio.
(d) Estimated. The Portfolio commenced investment operations on January
8, 1999.
(e) Estimated. The Riggs Stock and Riggs U.S. Government Securities
Portfolios will commence investment operations on June 1, 1999. Riggs Bank N.A.
has agreed to voluntarily reimburse the Riggs Stock and Riggs U.S. Government
Securities Portfolios for all operating expenses (exclusive of the management
fees) in excess of approximately .10%. Absent the expense reimbursement, the
total estimated expenses, on an annualized basis, for these Portfolios are 3.80%
for the Riggs Stock Portfolio and 3.50% for the Riggs U.S. Government Securities
Portfolio.
(f) 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.
(g) Pursuant to its agreement with Kemper Variable Series, the investment
manager and the accounting agent have agreed, for the one year period commencing
on the date of this prospectus, 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.
(h) Pursuant to its agreement with Kemper Variable Series, the investment
manager and the accounting agent have agreed, for the one year period commencing
on the date of this prospectus, 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-Dreman High
Return Equity of Kemper Variable Series to the levels set forth in the table
above. Without taking into effect these expense caps, for the Kemper-Dreman High
Return Equity: management fees are estimated to be .75%; Other Expenses are
estimated to be .45% and total operating expenses are estimated to be 1.20%.
(i) 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.
(j) MFS has agreed to bear expenses for these series, subject to
reimbursement by these series, such that each such series' "Other Expenses"
shall not exceed the following percentages of the average daily net assets of
the series during the current fiscal year: 0.40% for the Bond Series and .25%
for the Global Governments 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.
(k) 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.
(l) Figures reflect expenses from the Fund's inception on May 1, 1998 and
are annualized. 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%, 4.08% and 4.68% for
the Franklin Growth Investments Fund; 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.
(m) A portion of the brokerage commissions that certain funds pay was used
to reduce fund expenses. In addition, certain funds, or the investment adviser
on behalf of certain funds, have entered into arrangements with their custodian
whereby credits realized as a result of uninvested cash balances were used to
reduce custodian expenses. Including these reductions, the Total Annual
Portfolio Expenses presented in the table would have been .70% for the VIP III
Growth Opportunities Portfolio; .66% for the VIP Growth Portfolio; .60% for the
VIP III Growth & Income Portfolio; .57% for the VIP Equity-Income Portfolio; and
.66% for the VIP II Contrafund Portfolio.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Time Periods
1 year 3 years 5 years 10 years
------ ------- ------- --------
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
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.
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
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
Quality Bond (a) $71.79 (a) $112.12 (a) $159.89 (a) $245.92
(b) $21.79 (b) $ 67.12 (b) $114.89 (b) $245.92
Large Cap Stock (a) $72.80 (a) $115.15 (a) $164.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Managed by Lord, Abbett & Co.
Bond Debenture (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Mid-Cap Value (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
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
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
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
Managed by Mississippi Valley Advisors, Inc.
Balanced (a) $76.30 (a) $125.66 (a) $182.48 (a) $291.02
(b) $26.30 (b) $ 80.66 (b) $137.48 (b) $291.02
Small Cap Equity (a) $76.30 (a) $125.66 (a) $182.48 (a) $291.02
(b) $26.30 (b) $ 80.66 (b) $137.48 (b) $291.02
Equity Income (a) $76.30 (a) $125.66 (a) $182.48 (a) $291.02
(b) $26.30 (b) $ 80.66 (b) $137.48 (b) $291.02
Growth & Income Equity (a) $76.30 (a) $125.66 (a) $182.48 (a) $291.02
(b) $26.30 (b) $ 80.66 (b) $137.48 (b) $291.02
Managed by Riggs Bank N.A.
Riggs Stock (a) $75.80 (a) $124.17
(b) $25.80 (b) $ 79.17
Riggs Small Company Stock (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Riggs U.S. Government Securities (a) $73.80 (a) $118.16
(b) $23.80 (b) $ 73.16
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 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
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
KEMPER VARIABLE SERIES
Managed by Scudder Kemper Investments, Inc.
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
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
Managed by Dreman Value Management, L.L.C.
Kemper-Dreman High Return Equity (a)$74.00 (a)$118.76 (a) $171.00 (a) $268.25
(b)$24.00 (b)$ 73.76 (b) $126.00 (b) $268.25
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 Research (a) $73.90 (a) $118.46 (a) $170.49 (a) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
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 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 Bond (a) $75.50 (a) $123.27 (a) $178.50 (a) $283.17
(b) $25.50 (b) $ 78.27 (b) $133.50 (b) $283.17
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
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 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 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)$81.48 (a)$141.08 (a) $207.93 (a) $340.45
(b)$31.48 (b)$ 96.08 (b) $162.93 (b) $340.45
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 Growth 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
Franklin Small Cap 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 Franklin Mutual Advisers, Inc.
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 Investment Counsel, Inc.
Templeton Asset Allocation (a)$73.10 (a)$116.05 (a) $166.47 (a) $259.18
(b)$23.10 (b)$ 71.05 (b) $121.47 (b) $259.18
Templeton Bond (a)$72.59 (a)$114.54 (a) $163.94 (a) $254.10
(b)$22.59 (b)$ 69.54 (b) $118.94 (b) $254.10
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
Templeton Stock (a)$74.20 (a)$119.37 (a) $172.00 (a) $270.25
(b)$24.20 (b)$ 74.37 (b) $127.00 (b) $270.25
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
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Managed by Fidelity Management &
Research Company
VIP III Growth Opportunities (a) $72.29 (a) $113.63 (a) $162.42 (a) $251.04
(b) $22.29 (b) $ 68.63 (b) $117.42 (b) $251.04
VIP Growth (a) $71.89 (a) $112.42 (a) $160.39 (a) $246.95
(b) $21.89 (b) $ 67.42 (b) $115.39 (b) $246.95
VIP III Growth & Income (a) $71.29 (a) $110.60 (a) $157.34 (a) $240.77
(b) $21.29 (b) $ 65.60 (b) $112.34 (b) $240.77
VIP Equity-Income (a) $70.99 (a) $109.69 (a) $155.81 (a) $237.67
(b) $20.99 (b) $ 64.69 (b) $110.81 (b) $237.67
VIP II Contrafund (a) $71.89 (a) $112.42 (a) $160.39 (a) $246.95
(b) $21.89 (b) $ 67.42 (b) $115.39 (b) $246.95
</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 under 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. 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.
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. Annuity payments must begin 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, on 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 with respect to contracts
issued on or after May 1, 1996. If you select the fixed account, your money will
be placed with the other general assets of Cova. If you select the fixed
account, the amount of money you are able to accumulate in your contract during
the accumulation phase depends upon the total interest credited to your
contract. The amount of the annuity payments you receive during the income phase
from the fixed account portion of the contract will remain level for the entire
income phase.
As owner of the contract, you exercise all 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."
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:
* fixed account,
* the investment portfolio(s) or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the 3% assumed investment rate used in the annuity table for the contract,
and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed 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, except in New Jersey ($2,000 if the contract is issued in
Massachusetts or Texas). In that case, Cova may pay 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.
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 any type of contract. Cova reserves the right to reject any purchase
payment (except in New Jersey).
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise. There is a $500
minimum allocation requirement for the fixed account and for each investment
portfolio.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within two 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 five
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.
INVESTMENT OPTIONS
The contract offers __ 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. CERTAIN PORTFOLIOS
CONTAINED IN THE FUND PROSPECTUSES MAY NOT BE AVAILABLE WITH YOUR CONTRACT.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is a management investment company 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. Each investment portfolio has a different investment
objective. Cova Advisory has engaged sub-advisers to provide investment advice
for the individual investment portfolios. The following investment portfolios
are available under the contract:
J.P. MORGAN INVESTMENT MANAGEMENT INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
MISSISSIPPI VALLEY ADVISORS, INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Balanced Portfolio
Small Cap Equity Portfolio
Equity Income Portfolio
Growth & Income Equity Portfolio
RIGGS BANK N.A. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Riggs Stock Portfolio
Riggs Small Company Stock Portfolio
Riggs U.S. Government Securities 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 Growth and Income Fund
Goldman Sachs International Equity Fund
Goldman Sachs Global Income Fund
KEMPER VARIABLE SERIES
Kemper Variable Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. (Scudder Kemper) is the investment manager for the Kemper
Government Securities Portfolio, the Kemper Small Cap Growth Portfolio and the
Kemper Small Cap Value Portfolio. Scudder Kemper, as investment manager, has
retained Dreman Value Management, L.L.C. to serve as sub-adviser for the
Kemper-Dreman High Return Equity Portfolio. The following portfolios are
available under the contract:
Kemper Small Cap Value Portfolio
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper-Dreman High Return Equity 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 Research Series
MFS Growth With Income Series
MFS High Income Series
MFS Global Governments Series (formerly MFS World Governments Series)
MFS Bond 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 High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth Fund)
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-Class IA Shares (a stock portfolio)
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Templeton Variable Products Series Fund issues two classes of shares
- - Class 1 and Class 2. Only shares of Class 1 are available under your contract.
Franklin Advisers, Inc. is the investment manager of the Franklin Growth
Investments Fund and the Franklin Small Cap Investments Fund; Franklin Mutual
Advisers, Inc. is the investment manager of the Mutual Shares Investments Fund;
Templeton Investment Counsel, Inc. is the investment manager of the Templeton
Asset Allocation Fund, the Templeton Bond Fund, the Templeton International Fund
and the Templeton Stock Fund; and Templeton Asset Management Ltd. is the
investment manager of the Templeton Developing Markets Fund. The following
portfolios are available under the contract:
Franklin Growth Investments Fund
Franklin Small Cap Investments Fund
Mutual Shares Investments Fund (capital appreciation with income as a
secondary objective)
Templeton Asset Allocation Fund
Templeton Bond Fund
Templeton International Fund
Templeton Stock Fund
Templeton Developing Markets Fund
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Variable Insurance Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III are each a mutual fund with multiple
portfolios managed by Fidelity Management & Research Company. The following
portfolios are available under the contract:
Variable Insurance Products Fund:
VIP Growth Portfolio
VIP Equity-Income Portfolio
Variable Insurance Products Fund II:
VIP II Contrafund Portfolio
Variable Insurance Products Fund III:
VIP III Growth Opportunities Portfolio
VIP III Growth & Income Portfolio
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, subject to applicable state laws and
regulations.
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. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio or fixed account.
2. Your request for transfer must clearly state which investment
portfolio(s) or the fixed account are involved in the transfer.
3. Your request for transfer must clearly state how much the transfer is
for.
4. You cannot make any transfers within 7 calendar days of the annuity
date.
TRANSFERS DURING THE INCOME PHASE. You can only make transfers between the
investment portfolios once each year. We measure a year from the anniversary of
the day we issued your contract. You cannot transfer from the fixed account to
an investment portfolio, but you can transfer from one or more investment
portfolios to the fixed account at any time.
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.
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. Currently, Cova does not charge for participating
in the Dollar Cost Averaging Program.
Cova reserves the right to modify, terminate or suspend 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 business day after the end of the period you selected.
The Automatic Rebalancing Program is available only during the accumulation
phase. Currently, Cova does not 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.
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:
* the mortality and expense risk premium, and
* the administrative expense charge.
MORTALITY AND EXPENSE RISK PREMIUM. This charge is equivalent, 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
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 (in New Jersey, on the day Cova processes the withdrawal) the
value of your contract is $5,000 or more. Withdrawals after the first year 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.
* 10% of purchase payments free.
* Remaining purchase payments that are over 5 years old and not subject
to a withdrawal charge.
* Earnings in the contract free.
* 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 (confinement must begin after
the first contract anniversary) if you want to take advantage of this provision.
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.
TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included in the Statement of Additional Information an additional discussion
regarding taxes.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,corporation
or certain other entities other than 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.
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:
* less any applicable withdrawal charge,
* less any premium tax, and
* 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. Under most
circumstances, the amount of any partial withdrawal must be for at least $500.
Cova requires that after a 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.
When you make a withdrawal, the amount of the death benefit may be reduced. See
"Death Benefits."
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.
PERFORMANCE
Cova periodically advertises performance of the various investment portfolios.
Cova will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that unit
by the value of the accumulation unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges. It does not
reflect the deduction of any applicable contract maintenance charge and
withdrawal charge. The deduction of any applicable contract maintenance charge
and withdrawal charges would reduce the percentage increase or make greater any
percentage decrease. Any advertisement will also include total return figures
which reflect the deduction of the insurance charges, contract maintenance
charge and withdrawal charges.
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.
Appendix B contains performance information that you may find informative. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and the results shown are not necessarily
representative of future results.
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 can select Death
Benefit Option B or E. If you do not choose an option on the forms provided by
Cova, Option E will be your death benefit. If, at the time you buy the contract,
the endorsement for Death Benefit Option E is not approved in your state, you
can select Death Benefit Option A or B. If you do not choose an option on the
forms provided by Cova, Option A will be your death benefit.
If you bought your contract before May 1, 1998, you were given the opportunity
to choose Death Benefit Option B or C on your next contract anniversary after
May 1, 1998 (or during a 60 day period after both options were approved in your
state). If you did not make an election during such time period, your death
benefit was automatically enhanced to Death Benefit Option B. If on May 1, 1998,
you or your joint owner were 80 or older, you were unaffected by the changes in
the death benefits and Option D continues to be your death benefit.
From May 1, 1998 to April 30, 1999, at the time you bought the contract, you
were given the opportunity to select Death Benefit Option A or B. If you did not
choose an option on the forms provided by Cova, Option A is your death benefit.
The death benefits are described below. 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 adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary prior to the date of your or
your joint owner's death, and on each day a purchase payment or withdrawal is
made. On the contract anniversary, if the current contract value is greater than
the GACV, the GACV will be increased to the current value of your contract. If a
purchase payment is made, the amount of the purchase payment will increase the
GACV. If a withdrawal is made, the GACV will be reduced by the amount withdrawn
(and any associated withdrawal charges) divided by the value of your contract
immediately before the withdrawal multiplied by the GACV immediately prior to
the withdrawal. The following example describes the effect of a withdrawal on
the GACV:
Example:
Assumed facts for example:
$10,000 current GACV
$ 8,000 contract value
$ 2,100 partial withdrawal ($ 2,000 withdrawal + $100 withdrawal
charge)
New GACV = $10,000 - [($2,100/$8,000) X $10,000]
which results in the current GACV of $10,000 being reduced by $2,625
The new GACV is $7,375.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, 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 adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary on or before your, or your
joint owner's, 80th birthday, and on each day a purchase payment or withdrawal
is made. On the contract anniversary on or before your, or your joint owner's,
80th birthday, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the example above explains the effect of a withdrawal on the
GACV.
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 any withdrawals (and any withdrawal
charges paid on the withdrawals) accumulated at an annual rate of 4% until the
date of death; or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The greatest of the values of your contract resulting from taking the
contract value on any five (5) year contract anniversary prior to your, or your
joint owner's death; plus any 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 made on or before your, or your joint owner's,
80th birthday, less any withdrawals (and any withdrawal charges paid on the
withdrawals) accumulated at an annual rate of 4% until you, or your joint owner,
reach age 80, plus any subsequent purchase payments, less any subsequent
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 of the contract 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 made after that
contract anniversary, less any withdrawals (and any withdrawal charges paid on
the withdrawals) made after 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 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 adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day Cova receives
notice that you have elected this death benefit option. This figure is based on
your existing death benefit as defined in your contract, Option D (not as
defined in the endorsement for this option). The GACV is then evaluated at each
subsequent contract anniversary prior to your or your Joint Owner's death and on
each subsequent day a purchase payment or withdrawal is made. On the contract
anniversary, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the GACV will be reduced by the amount withdrawn (and any
associated withdrawal charges) divided by the value of your contract immediately
before the withdrawal multiplied by the GACV immediately prior to the
withdrawal. The example above under Death Benefit Option A explains the effect
of a withdrawal on the GACV under this death benefit option.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, 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 adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day Cova receives
notice that you have elected this death benefit option. This figure is based on
your existing death benefit as defined in your contract, Option D (not as
defined in the endorsement for this option). The GACV is then evaluated at each
subsequent contract anniversary on or before your, or your joint owner's, 80th
birthday, and on each subsequent day a purchase payment or withdrawal is made.
On the contract anniversary on or before your, or your joint owner's, 80th
birthday, if the current contract value is greater than the GACV, the GACV will
be increased to the current value of your contract. If a purchase payment is
made, the amount of the purchase payment will increase the GACV. If a withdrawal
is made, the GACV will be reduced by the amount withdrawn (and any associated
withdrawal charges) divided by the value of your contract immediately before the
withdrawal, multiplied by the GACV immediately prior to the withdrawal. The
example above under Death Benefit Option A explains the effect of a withdrawal
on the GACV under this death benefit option.
DEATH BENEFIT OPTION D:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greater of:
1. Total purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals) accumulated at an annual rate of 4% from the
date your contract was issued until the date of death; or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The value of your contract on the most recent five year anniversary
before the date of death, plus any subsequent purchase payments, less any
withdrawals (and any withdrawal charges paid on the withdrawals).
After you, or your joint owner, reaches age 80, the death benefit will be the
greater of:
1. Total purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals) accumulated at an annual rate of 4% from the
date your contract was issued until you, or your joint owner, reaches age 80,
plus any subsequent purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The values of your contract on the most recent five year anniversary on
or before your or your joint owner reaches 80, plus any purchase payments, less
any withdrawals (and any withdrawal charges paid on the withdrawals).
DEATH BENEFIT OPTION E:
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);
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 prior to your,
or your 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 any withdrawals (and any withdrawal
charges paid on the withdrawals);
2. The value of your contract at the time the death benefit is to be paid;
or
3. The 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 after that contract anniversary, less any withdrawals (and any withdrawal
charges paid on the withdrawals) you 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.
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.
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.
Although an assessment of the total cost of implementing these plans has not
been completed, the total amounts to be expended are 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 5.5% of purchase payments but,
under certain circumstances, may be paid an additional .5% commission.
Sometimes, Cova enters into an agreement with the broker-dealer to pay the
broker-dealer persistency bonuses, in addition to the standard commissions.
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
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.
<TABLE>
<CAPTION>
Year or Year or Year or
Period Period Period
Ended Ended Ended
12/31/98 12/31/97 12/31/96
---------- ----------- -----------
<S> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC.:
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Sub-Account
Beginning of Period $10.00 * *
End of Period 11.77
Number of Accum. Units Outstanding 183,488
AIM V.I. International Equity Sub-Account
Beginning of Period $10.00 * *
End of Period 11.39
Number of Accum. Units Outstanding 204,072
AIM V.I. Value Sub-Account
Beginning of Period $10.00 * *
End of Period 13.06
Number of Accum. Units Outstanding 521,890
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Managed by Alliance Capital Management L.P.
Premier Growth Sub-Account ** **
Beginning of Period $10.00
End of Period 14.60
Number of Accum. Units Outstanding 667,854
Real Estate Investment Sub-Account ** **
Beginning of Period $10.00
End of Period 7.99
Number of Accum. Units Outstanding 191,411
COVA SERIES TRUST
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $12.88 $11.29 $ 10.10
End of Period 13.50 $12.88 11.29
Number of Accum. Units Outstanding 8,184,894 3,945,097 659,663
Mid-Cap Value Sub-Account
Beginning of Period $10.47 $10.00 * *
End of Period 10.44 $10.47
Number of Accum. Units Outstanding 1,642,553 194,386
Large Cap Research Sub-Account
Beginning of Period $ 9.90 $10.00 * *
End of Period 11.83 $ 9.90
Number of Accum. Units Outstanding 1,094,920 124,559
Developing Growth Sub-Account
Beginning of Period $10.53 $10.00 * *
End of Period 11.07 $10.53
Number of Accum. Units Outstanding 1,342,201 148,658
Managed by J.P. Morgan Investment
Management Inc.
Select Equity Sub-Account
Beginning of Period $14.05 $10.84 $ 10.08
End of Period 16.99 $14.05 10.84
Number of Accum. Units Outstanding10,544,818 6,903,606 2,044,523
Small Cap Stock Sub-Account
Beginning of Period $13.49 $11.31 $ 10.51
End of Period 12.58 $13.49 11.31
Number of Accum. Units Outstanding 5,532,610 3,940,243 1,237,405
International Equity Sub-Account
Beginning of Period $11.46 $10.97 $ 10.21
End of Period 12.89 $11.46 10.97
Number of Accum. Units Outstanding 7,309,325 5,440,592 1,306,892
Quality Bond Sub-Account
Beginning of Period $11.16 $10.37 $ 9.90
End of Period 11.91 $11.16 10.37
Number of Accum. Units Outstanding 3,323,343 1,433,081 508,830
Large Cap Stock Sub-Account
Beginning of Period $14.89 $11.33 $ 10.00
End of Period 19.43 $14.89 11.33
Number of Accum. Units Outstanding 4,178,035 1,473,929 1,389,606
Managed by Mississippi Valley Advisors, Inc.
Balanced Sub-Account
Beginning of Period $10.53 $10.00 *
End of Period 11.77 $10.53
Number of Accum. Units Outstanding 286,511 38,079
Small Cap Equity Sub-Account
Beginning of Period $10.42 $10.00 *
End of Period 10.24 $10.42
Number of Accum. Units Outstanding 129,636 26,148
Equity Income Sub-Account
Beginning of Period $11.19 $10.00 *
End of Period 12.07 $11.19
Number of Accum. Units Outstanding 286,953 49,725
Growth & Income Equity Sub-Account
Beginning of Period $10.76 $10.00 *
End of Period 12.19 $10.76
Number of Accum. Units Outstanding 641,789 121,673
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market Sub-Account
Beginning of Period $10.67 $10.23 $ 10.00
End of Period 11.11 $10.67 10.23
Number of Accum. Units Outstanding 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 $10.00 * *
End of Period 9.91
Number of Accum. Units Outstanding 467,675
Managed by Goldman Sachs Asset Management International
Goldman Sachs International Equity Sub-Account
Beginning of Period $10.00 * *
End of Period 11.40
Number of Accum. Units Outstanding 112,824
Goldman Sachs Global Income Sub-Account
Beginning of Period $10.00 * *
End of Period 10.78
Number of Accum. Units Outstanding 18,833
KEMPER VARIABLE SERIES
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value Sub-Account ** **
Beginning of Period $10.00
End of Period 8.75
Number of Accum. Units Outstanding 245,092
Kemper Government Securities Sub-Account ** **
Beginning of Period $10.00
End of Period 10.56
Number of Accum. Units Outstanding 59,712
Kemper Small Cap Growth Sub-Account ** **
Beginning of Period $10.00
End of Period 11.68
Number of Accum. Units Outstanding 76,492
Managed by Dreman Value Management, L.L.C.
Kemper-Dreman High Return Equity Sub-Account
Beginning of Period $10.00 * *
End of Period 10.49
Number of Accum. Units Outstanding 9,223
LIBERTY VARIABLE INVESTMENT TRUST
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Sub-Account ** **
Beginning of Period $10.00
End of Period 9.23
Number of Accum. Units Outstanding 31,936
MFS VARIABLE INSURANCE TRUST:
Managed by Massachusetts Financial
Services Company
MFS Emerging Growth Sub-Account
Beginning of Period $10.00 * *
End of Period 13.23
Number of Accum. Units Outstanding 539,659
MFS Research Sub-Account
Beginning of Period $10.00 * *
End of Period 12.17
Number of Accum. Units Outstanding 464,786
MFS Growth With Income Sub-Account
Beginning of Period $10.00 * *
End of Period 12.07
Number of Accum. Units Outstanding 581,434
MFS High Income Sub-Account
Beginning of Period $10.00 * *
End of Period 9.85
Number of Accum. Units Outstanding 219,209
MFS Global Governments Sub-Account
Beginning of Period $10.00 * *
End of Period 10.67
Number of Accum. Units Outstanding 2,082
MFS Bond Sub-Account
Beginning of Period $10.00 * *
End of Period 10.49
Number of Accum. Units Outstanding 16,538
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Sub-Account ** **
Beginning of Period $10.00
End of Period 9.89
Number of Accum. Units Outstanding 78,513
Oppenheimer Bond Sub-Account ** **
Beginning of Period $10.00
End of Period 10.53
Number of Accum. Units Outstanding 401,990
Oppenheimer Capital Appreciation Sub-Account ** **
Beginning of Period $10.00
End of Period 12.23
Number of Accum. Units Outstanding 97,161
Oppenheimer Main Street Growth & Income Sub-Account ** **
Beginning of Period $10.00
End of Period 10.33
Number of Accum. Units Outstanding 284,830
Oppenheimer Strategic Bond Sub-Account ** **
Beginning of Period $10.00
End of Period 10.15
Number of Accum. Units Outstanding 107,869
PUTNAM VARIABLE TRUST
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Sub-Account
Beginning of Period $10.00 ** **
End of Period 11.38
Number of Accum. Units Outstanding 1,115,668
Putnam VT International Growth Sub-Account
Beginning of Period $10.00 ** **
End of Period 11.71
Number of Accum. Units Outstanding 530,055
Putnam VT International New Opportunities Sub-Account
Beginning of Period $10.00 ** **
End of Period 11.40
Number of Accum. Units Outstanding 52,809
Putnam VT New Value Sub-Account
Beginning of Period $10.00 ** **
End of Period 10.48
Number of Accum. Units Outstanding 42,091
Putnam VT Vista Sub-Account
Beginning of Period $10.00 ** **
End of Period 11.79
Number of Accum. Units Outstanding 151,405
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Growth Investments Sub-Account
Beginning of Period ** ** ** **
End of Period
Number of Accum. Units Outstanding
Franklin Small Cap Investments Sub-Account
Beginning of Period ** ** ** **
End of Period
Number of Accum. Units Outstanding
Managed by Franklin Mutual Advisers, Inc.
Mutual Shares Investments Sub-Account
Beginning of Period $10.00 ** ** **
End of Period 9.63
Number of Accum. Units Outstanding 106,035
Templeton Bond Sub-Account
Beginning of Period ** ** ** **
End of Period
Number of Accum. Units Outstanding
Templeton International Sub-Account
Beginning of Period $10.00 ** ** **
End of Period 9.14
Number of Accum. Units Outstanding 164,775
Templeton Stock Sub-Account
Beginning of Period ** ** ** **
End of Period
Number of Accum. Units Outstanding
Managed by Templeton Asset Management LTD.
Templeton Developing Markets Sub-Account
Beginning of Period $10.00 ** ** **
End of Period 7.55
Number of Accum. Units Outstanding 89,960
VARIABLE INSURANCE PRODUCTS FUND
Managed by Fidelity Management & Research Company
VIP Growth Sub-Account
Beginning of Period $10.00 * *
End of Period 13.08
Number of Accum. Units Outstanding 6,748
VIP Equity-Income Sub-Account
Beginning of Period $10.00 * *
End of Period 10.63
Number of Accum. Units Outstanding 24,132
VARIABLE INSURANCE PRODUCTS FUND II
Managed by Fidelity Management & Research Company
VIP II Contrafund Sub-Account
Beginning of Period $10.00 * *
End of Period 12.36
Number of Accum. Units Outstanding 32,354
VARIABLE INSURANCE PRODUCTS FUND III
Managed by Fidelity Management & Research Company
VIP III Growth Opportunities Sub-Account
Beginning of Period $10.00 * *
End of Period 11.74
Number of Accum. Units Outstanding 9,523
VIP III Growth & Income Sub-Account
Beginning of Period $10.00 * *
End of Period 12.20
Number of Accum. Units Outstanding 69,833
<FN>
The accumulation unit values shown above for the beginning of the period for the
Select Equity, Small Cap Stock, International Equity, Quality Bond, Large Cap
Stock Portfolios managed by J.P. Morgan Investment Management Inc., and the Bond
Debenture Portfolio managed by Lord, Abbett & Co. reflect the date these
investment portfolios were offered for sale to the public (5/1/96). The Money
Market Fund managed by Conning Asset Management Company started regular
investment operations on June 3, 1996. The Mid-Cap Value, Large Cap Research and
Developing Growth Portfolios started regular investment operations on August 20,
1997. The Balanced, Small Cap Equity, Equity Income and Growth & Income Equity
Portfolios managed by Mississippi Valley Advisors, Inc. commenced regular
investment operations on July 1, 1997. The Lord Abbett Growth and Income
Portfolio commenced regular investment operations on January 8, 1999. The
investment portfolios managed by A I M Advisors, Inc., Massachusetts Financial
Services Company, Alliance Capital Management L.P., Scudder Kemper Investments,
Inc., Newport Fund Management Inc. and OppenheimerFunds, Inc. commenced
investment operations on December 31, 1997. The investment portfolios managed by
Fidelity Management & Research Company, Inc. commenced investment operations on
February 17, 1998. The investment portfolios investing in Templeton Variable
Products Series Fund commenced operations on May 1, 1998. The investment
portfolios investing in Goldman Sachs Variable Insurance Trust and Putnam
Variable Trust commenced operations on January 29, 1998.
</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 December 31, 1998. 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 December 31, 1998 may
be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before December 31, 1998. As a
result, performance information is available for the accumulation unit values
investing in these portfolios.
* Column A presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assume that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
investment portfolio.
The inception dates shown below reflect the dates the Separate Account first
invested in the Portfolio. The performance returns for accumulation units
investing in the portfolios in existence for less than one year are not
annualized.
PART 1 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital 12/31/97 13.09% 13.09% 17.71% 17.71%
Appreciation
AIM V.I. 12/31/97 9.30% 9.30% 13.91% 13.91%
International
Equity
AIM V.I. Value 12/31/97 25.97% 25.97% 30.60% 30.60%
</TABLE>
PART 1 ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Premier Growth 12/31/97 41.31% 41.31% 45.96% 45.96%
Real Estate Investment 12/31/97 (24.70)% (24.70)% (20.12)% (20.12)%
</TABLE>
PART 1 COVA SERIES TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation
Column A Unit Performance Column B
(reflects (reflects
all charges insurance
and portfolio charges and
Separate Account expenses portfolio
Inception Date expenses)
Portfolio in Portfolio 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------------- ---------- -------- ------------- ---------- --------- ----------
inception inception
------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Select Equity 5/1/96 16.25% ____ 20.19% 20.88% _____ 21.56%
Small Cap Stock 5/1/96 (11.33)% ____ 5.31% (6.74)% _____ 6.96%
International Equity 5/1/96 7.84% ____ 7.50% 12.45% _____ 9.10%
Quality Bond 5/1/96 2.20% ____ 5.55% 6.81% _____ 7.19%
Large Cap Stock 5/1/96 25.86% ____ 26.95% 30.49% ____ 28.21%
Bond Debenture 5/1/96 0.17% ____ 9.92% 4.77% ____ 11.47%
Mid-Cap Value 8/20/97 (4.89)% ____ (0.24)% (0.29)% ____ 3.18%
Large Cap Research 8/20/97 14.84% ____ 9.72% 19.46% ____ 13.05%
Developing Growth 8/20/97 0.53% ____ 4.32% 5.13% ____ 7.70%
Balanced 7/1/97 7.12% ____ 8.43% 11.74% ____ 11.43%
Small Cap Equity 7/1/97 (6.32)% ____ (1.55)% (1.72)% ____ 1.58%
Equity Income 7/1/97 3.21% ____ 10.34% 7.81% ____ 13.32%
Growth & Income Equity 7/1/97 8.70% ____ 11.09% 13.32% ____ 14.06%
</TABLE>
PART 1 GENERAL AMERICAN CAPITAL COMPANY
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation
Column A Unit Performance Column B
(reflects (reflects
all charges insurance
and portfolio charges and
Separate Account expenses) portfolio
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
<S> <C> <C>
Money Market 6/3/96 (0.45)% 2.39% 4.15% 4.17%
</TABLE>
PART 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation
Column A Unit Performance Column B
(reflects (reflects
all charges insurance
and portfolio charges and
Separate Account expenses) portfolio
Inception Date expenses)
Portfolio in Portfolio since inception since inception
- ----------------- ---------------- ------------------ -----------------
<S> <C> <C> <C>
Goldman Sachs Variable
Insurance Trust
Goldman Sachs Growth
and Income 1/29/98 (6.01)% (0.91)%
Goldman Sachs
International Equity 1/29/98 8.92% 14.03%
Goldman Sachs Global
Income 1/29/98 2.71% 7.82%
</TABLE>
PART 1 KEMPER VARIABLE SERIES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Kemper Small Cap Value 12/31/97 (17.06)% (17.06)% (12.47)% (12.47)%
Kemper Government
Securities 12/31/97 0.96% 0.96% 5.57% 5.57%
Kemper Small Cap Growth 12/31/97 12.14% 12.14% 16.76% 16.76%
Kemper-Dreman High
Return Equity 5/15/98 -- (0.23)% -- 4.87%
</TABLE>
PART 1 LIBERTY VARIABLE INVESTMENT TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Newport Tiger Fund,
Variable Series 12/31/97 (12.30)% (12.30)% (7.71)% (7.71)%
</TABLE>
PART 1 MFS VARIABLE INSURANCE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
MFS Emerging Growth 12/31/97 27.70% 27.70% 32.33% 32.33%
MFS Research 12/31/97 17.11% 17.11% 21.73% 21.73%
MFS Growth With Income 12/31/97 16.05% 16.05% 20.67% 20.67%
MFS High Income 12/31/97 (6.15)% (6.15)% (1.55)% (1.55)%
MFS Global Governments 12/31/97 2.09% 2.09% 6.70% 6.70%
MFS Bond 5/15/98 -- (0.19)% 4.92%
</TABLE>
PART 1 OPPENHEIMER VARIABLE ACCOUNT FUNDS
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Oppenheimer High Income
Fund/VA 12/31/97 (5.66)% (5.66)% (1.06)% (1.06)%
Oppenheimer Bond Fund/VA
12/31/97 0.72% 0.72% 5.33% 5.33%
Oppenheimer Capital
Appreciation Fund/VA 12/31/97 17.71% 17.71% 22.33% 22.33%
Oppenheimer Main Street
Growth & Income
Fund/VA 12/31/97 (1.34)% (1.34)% 3.27% 3.27%
Oppenheimer Strategic
Bond Fund/VA 12/31/97 (3.09)% (3.09)% 1.51% 1.51%
</TABLE>
PART 1 PUTNAM VARIABLE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
Putnam Variable Trust
Putnam VT Growth and
Income-Class IA
<S> <C> <C> <C> <C> <C> <C>
Shares 12/31/97 9.21% 9.21% 13.83% 13.83%
Putnam VT
International Growth-
Class IA Shares 12/31/97 12.45% 12.45% 17.07% 17.07%
Putnam VT
International New
Opportunities-Class
IA Shares 12/31/97 9.41% 9.41% 14.02% 14.02%
Putnam VT New Value-
Class IA Shares 12/31/97 0.23% 0.23% 4.83% 4.83%
Putnam VT Vista-Class
IA Shares 12/31/97 13.24% 13.24% 17.86% 17.86%
</TABLE>
PART 1 TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Templeton Developing Markets 5/1/98 (29.55)% (24.48)%
Mutual Shares Investments 5/1/98 (8.79)% (3.69)%
Templeton International 5/1/98 (13.65)% (8.55)%
</TABLE>
PART 1 VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VARIABLE INSURANCE PRODUCTS FUND III
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects all (reflects insurance
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
VIP Growth 2/17/98 -- 25.65% -- 30.78%
VIP Equity-Income 2/17/98 -- 1.16% -- 6.27%
VIP II Contrafund 2/17/98 -- 18.45% -- 23.57%
VIP III Growth 2/17/98 -- 12.31% -- 17.42%
Opportunities
VIP III Growth 2/17/98 -- 16.90% -- 22.03%
& Income
</TABLE>
PART 2 - HISTORICAL FUND PERFORMANCE
Shares of the General American Capital Company Money Market Fund were first
offered under the Contract on June 3, 1996. Shares of the Portfolios of Variable
Insurance Products Fund, Variable Insurance Products Fund II and Variable
Insurance Products Fund III, AIM Variable Insurance Funds, Inc. and MFS Variable
Insurance Trust were first offered under the contract on December 30, 1997.
Shares of the Portfolios of Templeton Variable Products Series Fund were first
offered under the contract as of May 1, 1998. Shares of the Portfolios of Putnam
Variable Trust and Goldman Sachs Variable Insurance Trust were first offered
under the contract as of May 1, 1999 (collectively, the "Existing Funds").
However, the Existing Funds have been in existence for some time and therefore
have an investment performance history. In order to show how investment
performance of the Existing Funds affect accumulation unit values, we have
developed performance information.
The chart below shows the investment performance of the Existing Funds and the
accumulation units performance calculated by assuming that accumulation units
were invested in the Portfolio of the Existing Fund for the same periods.
* The performance figures in Column A for the Existing Funds reflect the fees
and expenses paid by the Portfolio.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges, 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.
* Column C presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
Portfolio.
PART 2 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio
Inception since since Unit since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- ---------------- --------- ------- ------ ------------ ------ ------- ---------- ------ ----- ----------
AIM V.I. Capital
Appreciation 5/5/93 19.30% 17.23% 18.77% 13.09% 15.73% 17.27% 17.71% 15.83% 17.37%
AIM V.I.
International
Equity 5/2/93 15.49% 11.33% 13.36% 9.30% 9.83% 11.86% 13.91% 9.93% 11.96%
AIM V.I. Value 5/5/93 32.41% 21.70% 21.90% 25.97% 20.20% 20.40% 30.60% 20.30% 20.50%
</TABLE>
PART 2 ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ --------- ------ ----- --------- ----- ------ ----------
Premier Growth 6/26/92 47.97% 27.85% 25.42% 41.31% 26.35% 23.92% 45.96% 26.45% 24.02%
Real Estate Investment 1/9/97 (19.07)% (0.06)% (24.70)% (6.06)% (20.12)% (1.46)%
</TABLE>
PART 2 GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
Portfolio charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Money Market 10/1/87 5.62% 5.40% 5.78% (0.45)% 3.90% 4.28% 4.15% 4.00% 4.38%
</TABLE>
PART 2
GOLDMAN SACHS VARIABLE INSURANCE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio
Inception since since since
Portfolio Date inception inception inception
- ---------------- --------- ------------ ---------- ----------
Goldman Sachs Variable
Insurance Trust
Goldman Sachs Growth
and Income 1/12/98 5.47% (0.98)% 4.12%
Goldman Sachs
International Equity 1/12/98 20.07% 13.62% 18.72%
Goldman Sachs Global
Income 1/12/98 8.29% 1.84% 6.94%
</TABLE>
PART 2 KEMPER VARIABLE SERIES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Kemper Small Cap Value 5/1/96 (11.25)% 3.65% (17.06)% (2.35)% (12.47)% 2.25%
Kemper Government
Securities 9/3/87 7.03% 6.72% 8.37% 0.96% 5.22% 6.87% 5.57% 5.32% 6.97%
Kemper Small Cap Growth 5/2/94 18.37% 24.20% 12.14% 18.20% 16.76% 22.80%
Kemper-Dreman High
Return Equity 5/4/98 2.80% (3.22)% 1.88%
</TABLE>
PART 2 LIBERTY VARIABLE INVESTMENT TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Newport Tiger Fund,
Variable Series 5/1/95 (6.43)% (5.01)% (12.30)% (11.01)% (7.71)% (6.41)%
</TABLE>
PART 2 MFS VARIABLE INSURANCE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio
Inception since since since
Portfolio Date 1 yr inception 1 yr inception 1 yr inception
- --------------- --------- ------------- ------------ ------- ------------- --------- ------------
MFS Emerging Growth 7/24/95 34.16% 26.55% 27.70% 20.55% 32.33% 25.15%
MFS Research 7/26/95 23.39% 22.52% 17.11% 16.52% 21.73% 21.12%
MFS Growth With Income 10/9/95 22.32% 25.98% 16.05% 19.98% 20.67% 24.58%
MFS High Income 7/26/95 (0.18)% 8.77% (6.15)% 2.77% (1.55)% 7.37%
MFS Global Governments 6/14/94 7.90% 5.57% 2.09% (0.43)% 6.70% 4.17%
MFS Bond 10/24/95 6.79% 6.90% 0.79% 0.90% 5.39% 5.50%
</TABLE>
PART 2 OPPENHEIMER VARIABLE ACCOUNT FUNDS
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Oppenheimer High Income
Fund/VA 4/30/86 0.30% 8.62% 12.71% (5.66)% 7.12% 11.21% (1.06)% 7.22% 11.31%
Oppenheimer Bond Fund/VA 4/3/85 6.80% 7.01% 9.28% 0.72% 5.51% 7.78% 5.33% 5.61% 7.88%
Oppenheimer Capital
Appreciation Fund/VA 4/3/85 24.00% 22.10% 16.85% 17.71% 20.60% 15.35% 22.33% 20.70% 15.45%
Oppenheimer Main Street
Growth & Income Fund/VA 7/5/95 4.70% 27.00% (1.34)% 21.00% 3.27% 25.60%
Oppenheimer Strategic Bond
Fund/VA 5/3/93 2.90% 6.83% 6.79% (3.09)% 5.33% 5.29% 1.51% 5.43% 5.39%
</TABLE>
PART 2 PUTNAM VARIABLE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Putnam VT Growth and
Income-Class IA Shares 2/1/88 15.42% 19.10% 16.04% 9.21% 17.60% 14.54% 13.83% 17.70% 14.64%
Putnam VT New Value-Class
IA Shares 1/2/97 6.26% 11.85% 0.23% 5.85% 4.83% 10.45%
Putnam VT Vista-Class IA
Shares 1/2/97 19.48% 21.45% 13.24% 15.45% 17.86% 20.05%
Putnam VT International
Growth-Class IA Shares 1/2/97 18.69% 17.50% 12.45% 11.50% 17.07% 16.10%
Putnam VT International
New Opportunities-Class
IA Shares 1/2/97 15.58% 7.49% 9.41% 1.49% 14.02% 6.09%
</TABLE>
PART 2 TEMPLETON VARIABLE PRODUCTS SERIES FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Portfolio, Inception or since or since or since
Class 1 Shares Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Templeton Bond 8/24/88 7.17% 5.62% 7.45% 1.17% 4.12% 5.95% 5.77% 4.22% 6.05%
Templeton Stock 8/24/88 1.26% 11.18% 12.23% (4.74)% 9.68% 10.73% (0.14)% 9.78% 10.83%
Templeton International 5/1/92 9.33% 11.84% 14.17% 3.33% 10.34% 12.67% 7.93% 10.44% 12.77%
Templeton Developing
Markets 3/4/96 (20.94)% (20.25)% (26.94)% (26.25)% (22.34)% (21.65)%
Franklin Small Cap
Investments 5/1/98 (7.70)% (13.74)% (8.64)%
Franklin Growth
Investments 5/1/98 13.40% 7.36% 12.46%
</TABLE>
PART 2 VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VARIABLE INSURANCE PRODUCTS FUND III
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects insurance
Portfolio charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- --------- ------------- ------- --------- --------
VIP Growth 10/9/86 39.49% 21.74% 19.41% 33.49% 20.24% 17.91% 38.09% 20.34% 18.01%
VIP Equity-Income 10/9/86 11.63% 18.77% 15.62% 5.63% 17.27% 14.12% 10.23% 17.37% 14.22%
VIP II Contrafund 1/3/95 29.98% 28.62% 23.98% 22.62% 28.58% 27.22%
VIP III Growth
Opportunities 1/3/95 24.51% 26.23% 18.51% 20.23% 23.11% 24.83%
VIP III Growth
& Income 12/31/96 29.59% 29.14% 23.59% 23.14% 28.19% 27.74%
</TABLE>
- --------------------------------------------------------------------------------
Attn: Variable Products
One Tower Lane - Suite 3000
Oakbrook Terrace, IL 60181-4644
Please send me, at no charge, the Statement of Additional Information dated May
1, 1999, for the Annuity Contract issued by Cova.
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED May 1, 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 MAY 1, 1999.
TABLE OF CONTENTS
Page
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reduction or Elimination of the Withdrawal Charge . . . . .4
CALCULATION OF PERFORMANCE INFORMATION. . . . . . . . . . . . . . .. 5
Total Return. . . . . . . . . . . . . . . . . . . . . . . .5
Historical Unit Values. . . . . . . . . . . . . . . . . . .6
Reporting Agencies. . . . . . . . . . . . . . . . . . . . .6
Performance Information . . . . . . . . . . . . . . . . . .7
FEDERAL TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . 7
General . . . . . . . . . . . . . . . . . . . . . . . . . .7
Diversification . . . . . . . . . . . . . . . . . . . . . .9
Multiple Contracts. . . . . . . . . . . . . . . . . . . . 10
Contracts Owned by Other than Natural Persons . . . . . . 10
Tax Treatment of Assignments. . . . . . . . . . . . . . . 10
Income Tax Withholding. . . . . . . . . . . . . . . . . . 11
Tax Treatment of Withdrawals - Non-Qualified Contracts. . 11
Qualified Plans. . . . . . . . . . . . . . . . . . . . . 12
Tax Treatment of Withdrawals - Qualified Contracts. . . . 15
Tax-Sheltered Annuities - Withdrawal Limitations. . . . . 16
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 16
Variable Annuity. . . . . . . . . . . . . . . . . . . . . 16
Fixed Annuity . . . . . . . . . . . . . . . . . . . . . . 17
Annuity Unit. . . . . . . . . . . . . . . . . . . . . . . 17
Net Investment Factor . . . . . . . . . . . . . . . . . . 17
Mortality and Expense Guarantee . . . . . . . . . . . . . 17
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.
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 Charge to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P (1 + T) = ERV
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
Withdrawal Charge. The deduction of any 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.
Historical Unit Values
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
Reporting Agencies
The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
Performance Information
The Accumulation Units which invest in the Portfolios managed by Fidelity
Management & Research Company, A I M Advisors, Inc., Massachusetts Financial
Services Company, Franklin Advisers, Inc., Franklin Mutual Advisers, Inc.,
Templeton Investment Counsel, Inc. and Templeton Asset Management Ltd. have no
meaningful investment performance history yet while the Accumulation Units which
invest in the Portfolio managed by Conning Asset Management Company have a short
investment performance history. (These funds are referred to collectively as the
"Existing Funds.") However, certain Portfolios of the Existing Funds have been
in existence for some time and consequently have an investment performance
history. In order to demonstrate how the investment experience of the Existing
Funds affect Accumulation Unit values, performance information was developed.
The information is based upon the historical experience of the Existing Funds
and is for the periods shown. The prospectus contains a chart of performance
information.
Future performance of the Existing Funds will vary and the results shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance of the Existing Funds is calculated for a specified period of time
by assuming an initial Purchase Payment of $1,000 allocated to the Portfolio.
There are performance figures for the Accumulation Units which reflect the
insurance charges as well as the Portfolio expenses. There are also performance
figures for the Accumulation Units which reflect the insurance charges, the
contract maintenance charge, the Portfolio expenses, and assume that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected. The percentage increases (decreases) are determined by subtracting
the initial Purchase Payment from the ending value and dividing the remainder by
the beginning value. The performance may also show figures when no withdrawal is
assumed.
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 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 that occurred 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 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.
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
Tax-Sheltered Annuities - Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect transfers between Tax-Sheltered Annuity Plans. Owners should consult
their own tax counsel or other tax adviser regarding any distributions.
ANNUITY PROVISIONS
Variable Annuity
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account. At the
Annuity Date, the Contract Value in each investment portfolio will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. If, as of the Annuity Date, the then current Annuity
Option rates applicable to this class of Contracts provide a first Annuity
Payment greater than guaranteed under the same Annuity Option under this
Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value of
an Annuity Unit as of the Annuity Date. This establishes the number of
Annuity Units for each monthly payment. The number of Annuity Units remains
fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit value
for the last Valuation Period of the month preceding the month for which
the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
investment portfolios' Variable Annuity Payments reduced by the applicable
Contract Maintenance Charge.
Fixed Annuity
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. The first monthly Annuity Payment will be based upon
the Annuity Option elected and the appropriate Annuity Option Table.
Annuity Unit
The value of an Annuity Unit for each investment portfolio was arbitrarily set
initially at $10. This was done when the first investment portfolio shares were
purchased. The investment portfolio Annuity Unit value at the end of any
subsequent Valuation Period is determined by multiplying the investment
portfolio Annuity Unit value for the immediately preceding Valuation Period by
the product of (a) the Net Investment Factor for the day for which the Annuity
Unit value is being calculated, and (b) 0.999919.
Net Investment Factor
The Net Investment Factor for any investment portfolio for any Valuation Period
is determined by dividing:
(a) the Accumulation Unit value as of the close of the current Valuation
Period, by
(b) the Accumulation Unit value as of the close of the immediately preceding
Valuation Period.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.
Mortality and Expense Guarantee
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
COVA VARIABLE ANNUITY ACCOUNT ONE
Financial Statements
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. Independent Auditors' Report.
2. Statement of Assets and Liabilities as of December 31, 1998.
3. Statement of Operations for the year ended December 31, 1998.
4. Statements of Changes in Net Assets for the years ended December 31,
1998 and 1997.
5. 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. Principal Underwriter's Agreement.++
4. (i) Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.
(ii) Death Benefit Endorsements
(iii)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)Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and Cova Financial Services Life
Insurance Company+++
(ii)Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Cova Financial Services Life
Insurance Company+++
(iii)Participation Agreement among Variable Insurance Products Fund III,
Fidelity Distributors Corporation and Cova Financial Services Life
Insurance Company+++
(iv) 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+
(v) Form of Fund Participation Agreement among MFS Variable Insurance
Trust, Cova Financial Services Life Insurance Company and
Massachusetts Financial Services Company++
(vi) 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.++
(vii)Form of Fund Participation Agreement among Oppenheimer Variable
Account Funds, OppenheimerFunds, Inc. and Cova Financial Services Life
Insurance Company+
(viii) Form of Fund Participation Agreement among Putnam Variable Trust,
Putnam Mutual Funds Corp. and Cova Financial Services Life Insurance
Company+
(ix) Form of Fund Participation Agreement among Investors Fund Series,
Zurich Kemper Investments, Inc., Zurich Kemper Distributors, Inc. and
Cova Financial Services Life Insurance Company+
(x) Form of Participation Agreement by and between Goldman Sachs Variable
Insurance Trust, Goldman, Sachs & Co. and Cova Financial Services Life
Insurance Company+
(xi) Form of Participation Agreement among Liberty Variable Investment
Trust, Liberty Financial Investments, Inc. and Cova Financial Services
Life Insurance Company+
(xii)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 Amendment No. 18 to Form N-4
(File No. 811-5200) as electronically filed on April 24, 1996.
#### incorporated by reference to Registrant's Amendment No. 20 to Form N-4
(File No. 811-5200) as electronically filed on April 23, 1997.
+ incorporated by reference to Post-Effective Amendment No. 1 to Form
N-4 (File Nos. 333-34741 and 811-5200) as electronically filed on
January 26, 1998.
++ incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4
(File Nos. 333-34741 and 811-5200) as electronically filed on November
19, 1997.
+++ incorporated by reference to Registrant's Amendment No. 26 (File Nos.
33-39100 and 811-5200) as electronically filed on April 29, 1998.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
Name and Principal Positions and Offices
Business Address with Depositor
_______________________________ ____________________________________
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Leonard Rubenstein Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Frances S. Cook Secretary
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Constance A. Doern Vice President
1776 West Lakes Pkwy
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
1776 West Lakes Pkwy
West Des Moines, IA 50266
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
William C. Mair Vice President and Director
One Tower Lane, Suite 3000
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
Shari Ruecker First Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Myron H. Sandberg First Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Schaus First Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Bernard J. Spaulding Senior Vice President and General Counsel
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Joann T. Tanaka Vice President
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 First Vice President and Controller
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart was filed as Exhibit 14 in Registrant's Amendment
No. 18 to Form N-4 and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 24, 1999, there were 34,435 Non-Qualified Contract Owners and
8,057 Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article IV, Section 1) provide that:
Each person who is or was a director, officer or employee of the corporation or
is or was serving at the request of the corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise (including the heirs, executors, administrators or estate of such
person) shall be indemnified by the corporation as of right to the full extent
permitted or authorized by the laws of the State of Missouri, as now in effect
and as hereafter amended, against any liability, judgment, fine, amount paid in
settlement, cost and expenses (including attorney's fees) asserted or threatened
against and incurred by such person in his capacity as or arising out of his
status as a director, officer or employee of the corporation or if serving at
the request of the corporation, as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnification provided by this bylaw provision shall not be exclusive of any
other rights to which those indemnified may be entitled under any other bylaw or
under any agreement, vote of shareholders or disinterested directors or
otherwise, and shall not limit in any way any right which the corporation may
have to make different or further indemnification with respect to the same or
different persons or classes of persons.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Cova Life Sales Company is the principal underwriter for the following
investment companies (other than Registrant):
Cova Variable Annuity Account Five
Cova Variable Life Account One
Cova Variable Life Account Five
First Cova Variable Annuity Account One
Cova Variable Annuity Account Four
General American Separate Account Twenty-Eight
General American Separate Account Twenty-Nine
(b) Cova Life Sales Company is the principal underwriter for the Contracts.
The following persons are the officers and directors of Cova Life Sales Company.
The principal business address for each officer and director of Cova Life Sales
Company is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
Name and Principal Positions and Offices
Business Address with Underwriter
Lorry J. Stensrud Director
Patricia E. Gubbe President, Chief Compliance Officer and Director
William C. Mair Director
Shari Ruecker Vice President
Philip A. Haley Vice President
Frances S. Cook Secretary
Mark E. Reynolds Treasurer
James W. Koeger Assistant Treasurer
Mark A. Kowalczyk Vice President
(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 23rd day of March, 1999.
COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /S/ LORRY J. STENSRUD
_________________________________________
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
Depositor
By: /S/ LORRY J. STENSRUD
________________________________________
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Chairman of the Board and
- ---------------------- Director --------
Richard A. Liddy Date
/S/ LORRY J. STENSRUD President and Director 3/23/99
- ---------------------- --------
Lorry J. Stensrud Date
- ---------------------- Director --------
Leonard M. Rubenstein Date
Director
- ---------------------- --------
J. Robert Hopson Date
William C. Mair* Controller and Director 3/23/99
- ---------------------- --------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 3/23/99
- ---------------------- --------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 3/23/99
- ---------------------- --------
Matthew P. McCauley Date
John W. Barber* Director 3/23/99
- ---------------------- --------
John W. Barber Date
/S/ MARK E. REYNOLDS Director 3/23/99
- ---------------------- --------
Mark E. Reynolds Date
*By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EX-99.B1 Resolution of Board of Directors
EX-99.B4(i) Variable Annuity Contract
EX-99.B4(ii) Death Benefit Endorsements
EX-99.B4(iii) Charitable Remainder Trust Endorsement
EX-99.B5 Application for Variable Annuity
EX-99.B8(xii) Form of Participation Agreement - Templeton
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Auditors
EX-99.B12 Agreement Governing Contribution
EX-99.B13 Calculation of Performance Information
WHEREAS, the Corporation is desirous of developing and marketing certain types
of variable and fixed annuity contracts which may be required to be registered
with the Securities and Exchange Commission pursuant to the various securities
laws; and
WHEREAS, it will be necessary to take certain actions including, but not limited
to, establishing separate accounts for segregation of assets and seeking
approval of regulatory authorities;
NOW THEREFORE BE IT
RESOLVED, That the Corporation is hereby authorized to develop the necessary
program in order to effectuate the issuance and sale of variable and fixed
annuity contracts; and further
RESOLVED, That the Corporation is hereby authorized to establish and to
designate one or more separate accounts of the Corporation in accordance with
the provisions of state insurance law; and that the purpose of any such separate
account shall be to provide an investment medium for such variable and fixed
annuity contracts issued by the Corporation as may be designated as
participating therein; and that any such separate account shall receive, hold,
invest and reinvest only the monies arising from (i) premiums, contributions or
payments made pursuant to the variable and fixed annuity contracts participating
therein (ii) such assets of the Corporation as shall be deemed appropriate to be
invested in the same manner as the assets applicable to the Corporation's
reserve liability under the variable and fixed annuity contracts participating
in such separate accounts or as may be necessary for the establishment of such
separate accounts; and (iii) the dividends, interest and gains produced by the
foregoing; and further
RESOLVED, That the proper officers of the Corporation are hereby authorized:
(i) to register the variable and fixed annuity contracts participating in any
such separate accounts under the provisions of the Securities Act of 1933 to the
extent that it shall be determined that such registration is necessary;
(ii) to register any such separate accounts with the Securities and Exchange
Commission under the provisions of the Investment Corporation Act of 1940 to the
extent that it shall be determined that such registration is necessary;
(iii) to prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including post-effective
amendments), supplements and exhibits thereto as they may be deemed necessary or
desirable;
(iv) to apply for exemption from those provisions of the aforementioned Acts as
shall be deemed necessary and to take any and all other actions which shall be
deemed necessary, desirable, or appropriate in connection with such Acts;
(v) to file the variable and fixed annuity contracts participating in any such
separate accounts with the appropriate state insurance departments and to
prepare and execute all necessary documents to obtain approval of the insurance
departments;
(vi) to prepare or have prepared and execute all necessary documents to obtain
approval of, or clearance with, or other appropriate actions required, of any
other regulatory authority that may be necessary; and further
RESOLVED, That for the purposes of facilitating the execution and filing of any
registration statement and of remedying any deficiencies therein by appropriate
amendments (including post-effective amendments) or supplements thereto, the
following officers of the Corporation: Chairman of the Board, President,
Executive Vice President and Senior Vice President, and each of them, are hereby
designated as attorneys and agents of the Corporation; and the appropriate
officers of the Corporation be, and they hereby are, authorized and directed to
grant the power of attorney of the Corporation to the Chairman of the Board, the
President, the Executive Vice President and the Senior Vice President of the
Corporation by executing and delivering to such individuals, on behalf of the
Corporation, a power of attorney; and further
RESOLVED, That in connection with the offering and sale of the fixed and
variable annuity contracts in the various States of the United States, as and to
the extent necessary, the appropriate officers of the Corporation be, and they
hereby are, authorized to take any and all such action, including but not
limited to the preparation, execution and filing with proper state authorities,
on behalf of and in the name of the Corporation, of such applications, notices,
certificates, affidavits, powers of attorney, consents to service of process,
issuer's covenants, certified copies of minutes of shareholders' and directors'
meetings, bonds, escrow and impounding agreements and other writings and
instruments, as may be required in order to render permissible the offering and
sale of the fixed and variable annuity contracts in such jurisdictions; and
further
RESOLVED, That the forms of any resolutions required by any state authority to
be filed in connection with any of the documents or instruments referred to in
any of the preceding resolutions be, and the same hereby are, adopted as if
fully set forth herein if (1) in the opinion of the appropriate officers of the
Corporation, the adoption of the resolutions is advisable and (2) the Secretary
or any Assistant Secretary of the Corporation evidences such adoption by
inserting into these minutes copies of such resolutions; and further
RESOLVED, That the officers of the Corporation, and each of them, are hereby
authorized to prepare and to execute the necessary documents and to take such
further actions as may be deemed necessary or appropriate, in their discretion,
to implement the purpose of these resolutions.
Cova Financial Services Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY (the "Company") will make Annuity
Payments to the Annuitant starting on the Annuity Date subject to the terms of
this Contract. This Contract is issued in return for the Application and payment
of the initial Purchase Payment. A copy of the Application is attached to and
made a part of the Contract. This is a legal contract between the Owner and the
Company.
TEN DAY FREE LOOK
Within 10 days of the date of receipt of this Contract by the Owner, it may be
returned by delivering or mailing it to the Company or to the agent through whom
it was purchased. When this Contract is received by the Company, it will be
voided as if it had never been in force. The Company will refund the Contract
Value computed at the end of the Valuation Period during which this Contract is
received by the Company.
Signed for the Company.
/s/ JEFFERY K. HOELZEL /s/ LORRY J. STENSRUD
---------------------- ---------------------
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT
NONPARTICIPATING
NO DIVIDENDS
READ YOUR CONTRACT CAREFULLY ANNUITY PAYMENTS AND VALUES PROVIDED BY THIS
CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
THE VARIABLE PROVISIONS OF THIS CONTRACT CAN BE FOUND ON PAGES 9 AND 11.
CONTRACT DATA PAGE
ANNUITANT: John Doe AGE AT ISSUE: 35
OWNER: John Doe AGE AT ISSUE: 35
CONTRACT NUMBER: 123 ISSUE DATE: June 1, 1996
INITIAL PURCHASE PAYMENT: $10,000 ANNUITY DATE: June 1, 2026
MINIMUM SUBSEQUENT PURCHASE PAYMENT: $2,000
BENEFICIARY:
AS STATED IN THE APPLICATION FOR THIS CONTRACT UNLESS CHANGED IN ACCORDANCE
WITH THE CONTRACT PROVISIONS.
INITIAL INTEREST RATE:
7% GUARANTEED THROUGH THE END OF THE CURRENT CALENDAR YEAR
CONTRACT MAINTENANCE CHARGE: $30.00 EACH CONTRACT YEAR.
AFTER THE ANNUITY DATE, THE CONTRACT MAINTENANCE CHARGE WILL BE COLLECTED
ON A MONTHLY BASIS.
MORTALITY AND EXPENSE RISK PREMIUM:
EQUAL ON AN ANNUAL BASIS TO 1.25% OF THE AVERAGE DAILY NET ASSET VALUE OF
THE VARIABLE ACCOUNT.
ADMINISTRATIVE EXPENSE CHARGE:
EQUAL ON AN ANNUAL BASIS TO .15% OF THE AVERAGE DAILY NET ASSET VALUE OF
THE VARIABLE ACCOUNT.
TRANSFER FEE:
$25 PER TRANSACTION IF THERE ARE MORE THAN 12 TRANSFERS IN A CONTRACT YEAR.
ELIGIBLE INVESTMENTS:
- COVA SERIES TRUST
- J.P. MORGAN INVESTMENT MANAGEMENT, INC.
- SELECT EQUITY PORTFOLIO
- SMALL CAP STOCK PORTFOLIO
- LARGE CAP STOCK PORTFOLIO
- INTERNATIONAL EQUITY PORTFOLIO
- QUALITY BOND PORTFOLIO
- LORD, ABBETT & CO.
- BOND DEBENTURE PORTFOLIO
- MID-CAP VALUE PORTFOLIO
- LARGE CAP RESEARCH PORTFOLIO
- DEVELOPING GROWTH PORTFOLIO
- LORD, ABBETT SERIES FUND, INC.
- LORD, ABBETT & CO.
- GROWTH AND INCOME PORTFOLIO
- GENERAL AMERICAN CAPITAL COMPANY
- CONNING ASSET MANAGEMENT COMPANY
- MONEY MARKET FUND
XL-407 (2/91)
VARIABLE ACCOUNT: COVA VARIABLE ANNUITY ACCOUNT ONE
ANNUITY SERVICE OFFICE:
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
P. O. BOX 10366
DES MOINES, IOWA 50306-0366
FOR USE WITH COVA VARIABLE ANNUITY ACCOUNT ONE
A SEPARATE INVESTMENT ACCOUNT OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
XL-407 (2/91)
DEFINITIONS
ACCOUNT -- General Account and/or one or more of the Subaccount(s) of the
Variable Account.
ACCUMULATION UNIT -- An accounting unit of measure used to calculate the
Contract Value in a Subaccount of the Variable Account.
ANNUITANT -- The natural person on whose life Annuity Payments are based.
ANNUITY OR ANNUITY PAYMENTS -- The series of payments made to the Annuitant
after the Annuity Date under the Annuity Option elected.
ANNUITY DATE -- The date on which Annuity Payments begin. The Annuity Date is
shown on the Contract Data Page.
ANNUITY PERIOD -- The period starting on the Annuity Date.
ANNUITY UNIT -- An accounting unit of measure used to calculate Variable Annuity
Payments after the Annuity Date.
ATTAINED AGE -- The age on the birthday prior to any date for which age is to be
determined.
BENEFICIARY -- The person(s) who will receive the Death Benefit.
COMPANY -- Cova Financial Services Life Insurance Company at its Annuity Service
Office shown on the Contract Data Page.
CONTRACT ANNIVERSARY -- An anniversary of the Issue Date.
CONTRACT VALUE -- The sum of the Owner's interest in the General Account and the
Subaccounts of the Variable Account.
CONTRACT YEAR -- One year from the Issue Date and from each Contract
Anniversary.
ELIGIBLE INVESTMENT(S) -- An investment entity shown on the Contract Data Page.
FIXED ANNUITY -- 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 Variable Account.
GENERAL ACCOUNT -- The Company's general investment account which contains all
the assets of the Company with the exception of Cova Variable Annuity Account
One (the "Variable Account") and other segregated asset accounts.
GENERAL ACCOUNT VALUE -- The Owner's interest in the General Account.
ISSUE DATE -- The date this Contract is issued. The Issue Date is shown on the
Contract Data Page.
OWNER -- The person or entity named in the Application who/which has all rights
under this Contract.
PORTFOLIO -- A segment of an Eligible Investment which constitutes a separate
and distinct class of shares.
SUBACCOUNT -- A segment of the Variable Account.
SUBACCOUNT VALUE -- The Owner's interest in a Subaccount.
VALUATION DATE -- The Variable Account will be valued each day that the New York
Stock Exchange is open for trading.
VALUATION PERIOD -- The period beginning at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
VARIABLE ACCOUNT -- A separate investment account of the Company designated on
the Contract Data Page.
VARIABLE ACCOUNT VALUE -- The sum of the Owner's interest in each of the
Subaccounts of the Variable Account.
VARIABLE ANNUITY -- A series of payments made during the Annuity Period which
vary in amount with the investment experience of each applicable Subaccount.
WITHDRAWAL VALUE -- The Withdrawal Value is:
1) the Contract Value for the Valuation Period next following the Valuation
Period during which a written request for a withdrawal is received at the
Company; less
2) any applicable taxes not previously deducted; less
3) the Withdrawal Charge, if any; less
4) the Contract Maintenance Charge, if any.
GENERAL PROVISIONS
THE CONTRACT -- The entire contract consists of:
1) this Contract;
2) the Application which is attached to this Contract; and
3) any riders or endorsements attached to this Contract.
This Contract may be changed or altered only by the President or Secretary of
the Company. A change or alteration must be made in writing.
INCONTESTABILITY -- The Company will not contest this Contract from the Issue
Date.
NON-PARTICIPATING -- This Contract will not share in any distribution of
dividends.
MISSTATEMENT OF AGE -- The Company may require proof of age of the Annuitant
before making any life Annuity Payments under this Contract. If the age of the
Annuitant has been misstated, the amount payable will be the amount that the
Contract Value would have provided at the correct age.
After the Annuity Date, any under payments will be made up in one sum with the
next Annuity Payment. Any overpayments will be deducted from future Annuity
Payments until the total is repaid.
CONTRACT SETTLEMENT -- This Contract must be returned to the Company prior to
any settlement. Prior to any payment as a death claim, due proof of death must
be submitted to the Company.
REPORTS -- At least once each calendar year, the Company will furnish the Owner
with a report showing the Contract Value and any other information as may be
required by law. The Company will also furnish an annual report of the Variable
Account. Reports will be sent to the last known address of the Owner.
TAXES -- Any taxes paid to any governmental entity relating to this Contract
will be deducted from the Purchase Payments or Contract Value when incurred. The
Company will, in its sole discretion, determine when taxes have resulted from:
the investment experience of the Variable Account; receipt by the Company of the
Purchase Payments; or commencement of Annuity Payments. The Company may, at its
sole discretion, pay taxes when due and deduct that amount from the Contract
Value at a later date. Payment at an earlier date does not waive any right the
Company may have to deduct amounts at a later date. The Company will deduct any
withholding taxes required by applicable law.
EVIDENCE OF SURVIVAL -- The Company may require satisfactory evidence of the
continued survival of any person(s) on whose life Annuity Payments are based.
MODIFICATION OF CONTRACT -- This Contract may not be modified by the Company
without the consent of the Owner except as may be required by applicable law.
ANNUITANT, OWNERSHIP, ASSIGNMENT PROVISIONS
ANNUITANT -- The Annuitant is the person on whose life Annuity Payments are
based. The Annuitant is the person designated in the Application, unless
changed.
OWNERSHIP -- The Owner has all rights and may receive all benefits under this
Contract. Prior to the Annuity Date, the Owner is the person designated in the
Application, unless changed. On and after the Annuity Date:
1) the Annuitant is the Owner; and
2) upon the death of the Annuitant, the Beneficiary is the Owner.
The Owner may change the Owner at any time. A change of Owner will automatically
revoke any prior designation of Owner. A request for change must be:
1) made in writing; and
2) received at the Company.
The change will become effective as of the date the written request is signed. A
new designation of Owner will not apply to any payment made or action taken by
the Company prior to the time it was received.
ASSIGNMENT -- The Owner may, at any time during his or her lifetime, assign his
or her rights under this Contract. The Company will not be bound by any
assignment until written notice is received by the Company. The Company is not
responsible for the validity of any assignment. The Company will not be liable
as to any payment or other settlement made by the Company before receipt of the
assignment.
BENEFICIARY PROVISIONS
BENEFICIARY -- The Beneficiary is named in the Application, unless changed. The
Beneficiary is entitled to receive the benefits to be paid at the death of the
Owner.
Unless the Owner provides otherwise, the Death Benefit will be paid in equal
shares or all to the survivor as follows:
1) to the Primary Beneficiaries who survive the Owner's death; or if there are
none,
2) to the Contingent Beneficiaries who survive the Owner's death; or if there
are none,
3) to the estate of the Owner.
CHANGE OF BENEFICIARY -- Subject to the rights of any irrevocable Beneficiary,
the Owner may change the Primary Beneficiary or Contingent Beneficiary. A change
may be made by filing a written request with the Company. The change will take
effect as of the date the notice is signed. The Company will not be liable for
any payment made or action taken before it records the change.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS -- The Initial Purchase Payment is due on the Issue Date. The
Minimum Subsequent Purchase Payment is shown on the Contract Data Page. The
Company reserves the right to reject any Application or Purchase Payment.
CHANGE IN PURCHASE PAYMENTS -- Subject to the minimum shown on the Contract Data
Page, the Owner may increase or decrease or change the frequency of subsequent
Purchase Payments.
ALLOCATION OF PURCHASE PAYMENTS -- The allocation of the initial Purchase
Payment is elected by the Owner on the Application. Unless elected otherwise by
the Owner, subsequent Purchase Payments are allocated in the same manner as the
initial Purchase Payment. Allocation of the Purchase Payments is subject to the
terms and conditions imposed by the Company.
NO DEFAULT -- Unless the Owner makes a total withdrawal, this Contract will
remain in force until the Annuity Date. This Contract will not be in default if
subsequent Purchase Payments are not made.
GENERAL ACCOUNT PROVISIONS
GENERAL ACCOUNT VALUE -- The General Account Value at any time is equal to:
1) the Purchase Payments allocated to the General Account; plus
2) amounts transferred to the General Account; plus
3) interest credited to the General Account; less
4) any prior partial withdrawals and Withdrawal Charges deducted from the
General Account; less
5) amounts transferred from the General Account; less
6) any applicable premium taxes, Contract Maintenance Charge or Transfer Fee.
INTEREST TO BE CREDITED -- The Company guarantees that the interest rate
credited to the General Account will not be less than the Minimum Guaranteed
Interest Rate. The Minimum Guaranteed Interest Rate is 4% per year. The Company
may credit additional interest at its sole discretion.
CONTRACT VALUE PROVISION
CONTRACT VALUE -- Each Purchase Payment is allocated to a Subaccount of the
Variable Account and/or the General Account. A Purchase Payment allocated to a
Subaccount of the Variable Account is converted into Accumulation Units. The
number of Accumulation Units in a Subaccount credited to this Contract is
determined by dividing the Purchase Payment allocated to that Subaccount by the
Accumulation Unit Value for that Subaccount. The Contract Value on any Valuation
Date is the sum of the Owner's interest in the General Account and the
Subaccounts of the Variable Account. The value of the Owner's interest in a
Subaccount is determined by multiplying the number of Accumulation Units
attributable to that Subaccount by the Accumulation Unit Value for that
Subaccount.
Withdrawals will result in the cancellation of Accumulation Units in a
Subaccount or a reduction of the General Account Value.
VARIABLE ACCOUNT PROVISIONS
THE VARIABLE ACCOUNT -- The Variable Account is a separate investment account of
the Company. It is shown on the Contract Data Page. The Company has allocated a
part of its assets for this and certain other contracts to the Variable Account.
The assets of the Variable Account are the property of the Company. However,
they are not chargeable with the liabilities arising out of any other business
the Company may conduct.
INVESTMENTS OF THE VARIABLE ACCOUNT -- Purchase Payments applied to the Variable
Account are allocated to a Subaccount of the Variable Account. The assets of the
Subaccount are allocated to the Eligible Investment(s) and the Portfolio(s), if
any, within an Eligible Investment shown on the Contract Data Page. The Company
may, from time to time, add additional Eligible Investments or Portfolios to
those shown on the Contract Data Page. The Owner may be permitted to transfer
Contract Values to the additional Eligible Investments or Portfolios. However,
the right to make any transfer will be limited by the terms and conditions
imposed by the Company.
If the shares of any of the Eligible Investment(s) or any Portfolio(s) within
the Eligible Investments become unavailable for investment by the Variable
Account, or the Company's Board of Directors deems further investment in these
shares inappropriate, the Company may substitute shares of another Eligible
Investment for shares already purchased under this Contract.
VALUATION OF ASSETS -- Assets of the Variable Account are valued at their fair
market value in accordance with procedures of the Company.
ACCUMULATION UNIT -- A Purchase Payment allocated to the Variable Account is
converted into Accumulation Units for each elected Subaccount. The number of
Accumulation Units in a Subaccount credited to this Contract is determined by
dividing the Purchase Payment allocated to that Subaccount by the Accumulation
Unit Value for that Subaccount as of the Valuation Period during which the
Purchase Payment is allocated to the Subaccount. The Accumulation Unit Value for
each Subaccount was arbitrarily set initially at $10. The Accumulation Unit
Value for any later Valuation Period is determined by subtracting (b) from (a)
and dividing the result by (c) where:
(a) is the net result of
1) the assets of the Subaccount; i.e., the aggregate value of the
underlying Eligible Investment shares held at the end of such Valuation
Period; plus or minus
2) the cumulative charge or credit for taxes reserved which is determined
by the Company to have resulted from the operation of the Subaccount of
the Variable Account;
(b) is the cumulative unpaid charge for the Mortality and Expense Risk Premium
and for the Administrative Expense Charge which are shown on the Contract
Data Page; and
(c) is the number of Accumulation Units in a Subaccount of the Variable Account
outstanding at the end of the Valuation Period.
Withdrawals from a Subaccount will result in the cancellation of Accumulation
Units in each Subaccount of the Variable Account. The Contract Value
attributable to a Subaccount of the Variable Account is determined by
multiplying the number of Accumulation Units attributable to the Subaccount by
the Accumulation Unit Value for that Subaccount. An Accumulation Unit Value may
increase or decrease from Valuation Period to Valuation Period.
MORTALITY AND EXPENSE RISK PREMIUM --The Company deducts a Mortality and Expense
Risk Premium from the Variable Account which is equal, on an annual basis, to
the amount shown on the Contract Data Page. The Mortality and Expense Risk
Premium compensates the Company for assuming the mortality and expense risks
under this Contract.
ADMINISTRATIVE EXPENSE CHARGE -- The Company deducts an Administrative Expense
Charge from the Variable Account which is equal, on an annual basis, to the
amount shown on the Contract Data Page. The Administrative Expense Charge
compensates the Company for the costs associated with the administration of this
Contract and the Variable Account.
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.
CONTRACT MAINTENANCE CHARGE
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE -- The Company deducts an annual
Contract Maintenance Charge from the Contract Value by cancelling Accumulation
Units from each applicable Subaccount or reducing the General Account Value to
reimburse it for expenses relating to maintenance of this Contract. The Contract
Maintenance Charge is shown on the Contract Data Page. The Contract Maintenance
Charge will be deducted from the Contract Value on each Contract Anniversary
while this Contract is in force.
If a total withdrawal is made on other than a Contract Anniversary, the Contract
Maintenance Charge will be deducted at the time of withdrawal. If the Annuity
Date is not a Contract Anniversary, a prorata portion of the annual Contract
Maintenance Charge will be deducted on the Annuity Date. After the Annuity Date,
the Contract Maintenance Charge will be collected on a monthly basis and will
result in a reduction of each Annuity Payment.
TRANSFER PROVISION
TRANSFERS -- Prior to the Annuity Date, the Owner may transfer all or part of an
Account without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year. All transfers are subject to the
following:
1) if more than 12 transfers have been made in the Contract Year, the Company
will deduct a Transfer Fee. The Transfer Fee is shown on the Contract Data
Page. The Transfer Fee will be deducted from the Account from which the
transfer is made. However, if the entire interest in an Account is being
transferred, the Transfer Fee will be deducted from the amount which is
transferred.
2) the minimum amount which may be transferred is the lesser of: (A) $1,000;
or (B) the Owner's entire interest in the Account.
3) transfers will be effected during the Valuation Period next following
receipt by the Company of a written transfer request (or by telephone, if
authorized) containing all required information. However, no transfer may
be made effective within seven calendar days of the Annuity Date.
4) any transfer direction must clearly specify: (A) the amount which is to be
transferred; and (B) the Accounts which are to be affected.
5) the Company reserves the right at any time and without prior notice to any
party to terminate, suspend or modify the transfer privileges described
above.
If the Owner elects to use the transfer privilege, neither the Company nor its
Annuity Service Office will be liable for transfers made in accordance with the
Owner's instructions.
DEATH BENEFIT
DEATH OF ANNUITANT -- Upon death of the Annuitant prior to the Annuity Date, the
Owner must designate a new Annuitant. If no designation is made within 30 days
of the death of the Annuitant, the Owner will become the Annuitant.
Upon death of the Annuitant after the Annuity Date, the Death Benefit, if any,
will be as specified in the Annuity Option elected.
DEATH OF OWNER -- Upon death of the Owner prior to the Annuity Date, the Death
Benefit will be paid to the Beneficiary designated by the Owner. The Death
Benefit will be the greater of:
1) the Purchase Payments less any Withdrawals and any applicable Withdrawal
Charge; or
2) the Contract Value.
The Death Benefit will be determined and paid as of the Valuation Period next
following the date of receipt by the Company of both due proof of death and an
election for a single sum payment or election under an Annuity Option.
If a single sum payment is requested, the proceeds will be paid within seven (7)
days of receipt of proof of death and the election.
Payment under an Annuity Option may only be elected during the sixty-day period
beginning with the date of receipt of proof of death or a single sum payment
will be made to the Beneficiary at the end of the sixty-day period.
The entire Death Benefit must be paid within five (5) years of the date of death
unless:
1) the Beneficiary is the spouse of the Owner, in which event the Beneficiary
will become the Owner and may elect that this Contract remain in effect; or
2) the Beneficiary is not the spouse of the Owner, in which event the
Beneficiary may elect to have the Death Benefit payable under an Annuity
Option over the lifetime of the Beneficiary beginning within 1 year of the
date of death.
PAYMENT OF DEATH BENEFIT -- The Company will require due proof of death before
any Death Benefit is paid. Due proof of death will be:
1) a certified death certificate;
2) a certified decree of a court of competent jurisdiction as to the finding
of death;
3) a written statement by a medical doctor who attended the deceased; or
4) any other proof satisfactory to the Company. Any Death Benefit will be paid
in accordance with applicable law or regulations governing death benefit
payments.
ANNUITY PROVISIONS
ANNUITY DATE -- The Annuity Date is elected by the Owner on the Application. The
Annuity Date is shown on the Contract Data Page. The Annuity Date must be the
first day of a calendar month and must be at least one month after the Issue
Date. The Annuity Date may not be later than the first day of the calendar month
following the Annuitant's 85th birthday.
Prior to the Annuity Date, the Owner may, subject to the above, change the
Annuity Date upon 30 days prior written notice to the Company.
ELECTION OF ANNUITY OPTION -- The Annuity Option is elected by the Owner on the
Application. If no Annuity Option is elected, Option 2 with 10 years guaranteed
will automatically be applied. Prior to the Annuity Date, the Owner may, upon 30
days prior written notice to the Company, change the Annuity Option.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS -- Annuity Payments will be paid as
monthly installments. The Contract Value on the Annuity Date is applied to the
Annuity Table for the Annuity Option elected. If the amount of the Contract
Value to be applied under an Annuity Option is less than $5,000, the Company
reserves the right to make one lump sum payment in lieu of Annuity Payments. If
the amount of any Annuity Payment would be or become less than $100, the Company
will reduce the frequency of payments to an interval which will result in each
payment being at least $100.
The Annuity Tables are based on the 1983 Individual Annuity Mortality Tables
with interest at the rate of 3% per year.
ANNUITY OPTIONS -- The following Annuity Options or any other Annuity Option
acceptable to the Company may be elected.
Option 1 -- Life Annuity -- The Company will make monthly payments during the
life of the Annuitant.
Option 2 -- Life Annuity with 5, 10 or 20 Years Guaranteed -- The Company will
make monthly Annuity Payments during the life of the Annuitant. If payments have
been made for less than the guaranteed period at the death of the Annuitant,
payments will continue to the Beneficiary for the remainder of the guaranteed
period. However, the Beneficiary may elect to receive a single sum payment. A
single sum payment will be equal to the present value of remaining payments as
of the date of receipt of due proof of death commuted at the assumed investment
rate of 3%.
Option 3 -- Joint and Last Survivor Annuity -- The Company will make monthly
Annuity Payments for the joint lifetime of the Annuitant and another person. At
the death of either Payee, Annuity Payments will continue to be made to the
survivor Payee. The survivor's Annuity Payments will be equal to 100%, 662/3% or
50% of the amount payable during the joint lifetime, as chosen.
ANNUITY -- If all of the Contract Value on the seventh calendar day before the
Annuity Date is allocated to the General Account, the Annuity will be paid as a
Fixed Annuity. If all of the Contract Value on the Annuity Date is allocated to
the Variable Account, the Annuity will be paid as a Variable Annuity. If the
Contract Value on the Annuity Date is allocated to both the General Account and
the Variable Account, the Annuity will be paid as a combination of a Fixed
Annuity and a Variable Annuity to reflect the allocation between the Accounts.
Variable Annuity Payments will reflect the investment performance of the
Variable Account in accordance with the allocation of the Contract Value to the
Subaccounts on the Annuity Date.
The Contract Value will be applied to the applicable Annuity Tables. The Annuity
Table used will depend upon the Annuity Option elected. The amount of the first
payment for each $1,000 of Contract Value is shown in the Annuity Tables. 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.
FIXED ANNUITY -- 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.
VARIABLE ANNUITY -- Variable Annuity Payments:
1) are not predetermined as to dollar amount; and
2) will vary in amount with the net investment results of the applicable
Subaccount(s) of the Variable Account at the Annuity Date.
The dollar amount of Variable Annuity Payments for each applicable Subaccount
after the first is determined as follows:
1) the dollar amount of the first Variable Annuity Payment is divided by the
value of an Annuity Unit for each applicable Subaccount as of the Annuity
Date. This establishes the number of Annuity Units for each monthly
payment. The number of Annuity Units for each applicable Subaccount remains
fixed during the Annuity Period;
2) the fixed number of Annuity Units per payment in each Subaccount is
multiplied by the Annuity Unit Value for that Subaccount 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 for each applicable
Subaccount.
The total dollar amount of each Variable Annuity Payment is the sum of all
Subaccount Variable Annuity Payments reduced by the applicable Contract
Maintenance Charge.
ANNUITY UNIT -- The value of an Annuity Unit for each Subaccount of the Variable
Account was arbitrarily set initially at $10. This was done when the first
Eligible Investment shares were purchased.
The Subaccount Annuity Unit Value at the end of any subsequent Valuation Period
is determined by multiplying the Subaccount Annuity Unit Value for the
immediately preceding Valuation Period by the net investment factor for the day
for which the Annuity Unit Value is being calculated; and multiplying the result
by 0.999919 for each day within the Valuation Period.
NET INVESTMENT FACTOR -- The Net Investment Factor for any Subaccount of the
Variable Account for any Valuation Period is determined by dividing:
1) the Accumulation Unit Value as of the close of the current Valuation
Period; by
2) 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.
TRANSFERS DURING THE ANNUITY PERIOD -- During the Annuity Period, the Owner may
make transfers, by written request, as follows:
1) the Owner may make a transfer once each Contract Year between Subaccounts
of the Variable Account.
2) the Owner may at any time, make a transfer from one or more Subaccounts to
the General Account. The Owner may not make a transfer from the General
Account to the Variable Account.
The amount transferred to the General Account from a Subaccount of the Variable
Account will be equal to the annuity reserve for the payee's interest in that
Subaccount. The annuity reserve is the product of "(a)" multiplied by "(b)"
multiplied by "(c)", where (a) is the number of Annuity Units representing the
Owner's interest in the Subaccount per Annuity Payment; (b) is the Annuity Unit
Value for the Subaccount; and (c) is the present value of $1.00 per payment
period as of the Attained Age of the Owner at time of transfer for the Annuity
Option, determined using the 1983 Individual Annuity Mortality Tables with
interest at 3% per year. Amounts transferred to the General Account will be
applied under the Annuity Option elected at the attained age of the Owner at the
time of the transfer. All amounts and Annuity Unit Values will be determined as
of the end of the Valuation Period preceding the effective date of the transfer.
PROTECTION OF PROCEEDS -- No Payee may commute, encumber, alienate or assign any
payments under this Contract. To the extent permitted by law, no payments will
be subject to the debts, contracts or engagements of any Payee or to any
judicial process to levy upon or attach the same for payment thereof.
WITHDRAWAL PROVISIONS
WITHDRAWALS -- Prior to the Annuity Date, the Owner may, upon written request
received by the Company, make a total or partial withdrawal of the Withdrawal
Value. A withdrawal will result in the cancellation of Accumulation Units from
each applicable Subaccount of the Variable Account or a reduction in the General
Account Value in the ratio that the Subaccount Value and/or the General Account
Value bears to the total Contract Value. The Owner must specify in writing in
advance which units are to be cancelled or values are to be reduced if other
than the above method is desired. The Company will pay the amount of any
withdrawal within seven (7) days of receipt of a request in good order unless
the Suspension Or Deferral Of Payments Or Transfers From The Variable Account
provision or the Deferral Of Payments Or Transfers From The General Account
provision is in effect.
Each partial withdrawal must be for an amount which is not less than $1,000 or,
if smaller, the remaining Withdrawal Value. The remaining Withdrawal Value must
be at least $1,000 after a partial withdrawal is completed.
WITHDRAWAL CHARGE -- A Withdrawal Charge may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. The Withdrawal Charge is
imposed on a withdrawal of Contract Value attributable to a Purchase Payment
within five (5) years of receipt. The Withdrawal Charge, if any, is equal to 5%
of the Purchase Payment withdrawn.
For a partial withdrawal, the Withdrawal Charge will be deducted from the
remaining Withdrawal Value, if sufficient, or from the amount withdrawn. The
Withdrawal Charge will be deducted by cancelling Accumulation Units from each
applicable Subaccount or reducing the General Account Value in the ratio that
the Subaccount Value and/ or General Account bears to the total Contract Value.
The Owner must specify in writing in advance if other than the above method of
cancellation is desired.
WAIVER OF WITHDRAWAL CHARGE -- A withdrawal of 10% of the aggregate Purchase
Payments may be made free from the Withdrawal Charge on a non-cumulative basis
as follows
1) Once each Contract Year after the first Contract Year, as a single sum
payment if the Contract Value prior to the withdrawal exceeds $5,000; or
2) At any time, subject to any conditions and fees the Company may impose, as
equal periodic installments.
SUSPENSION OR DEFERRAL OF PAYMENTS OR TRANSFERS FROM THE VARIABLE ACCOUNT
The Company reserves the right to suspend or postpone payments for a withdrawal
or transfer 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 securities held in the
Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets; or
4) during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners; provided that applicable
rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions described in (2) and (3) exist.
DEFERRAL OF PAYMENTS OR TRANSFERS FROM THE GENERAL ACCOUNT
The Company reserves the right to defer payment for a withdrawal or transfer
from the General Account for the period permitted by law but not for more than
six months after written election is received by the Company.
RESERVES, VALUES AND BENEFITS
All reserves are greater to or equal to those required by statute. Any values
and death benefits that may be available under this Contract are not less than
the minimum benefits required by any statute of the state in which this Contract
is delivered.
<TABLE>
<CAPTION>
TABLE 1: MONTHLY ANNUITY PAYMENT UNDER OPTION 1 FOR EACH
$1,000 OF CONTRACT VALUE APPLIED
<S> <C> <C> <C> <C> <C>
Annuitant's Annuitant's Annuitant's
Attained Monthly Attained Monthly Attained Monthly
Age Payment Age Payment Age Payment
--- ------- --- ------- --- -------
5 2.79 32 3.27 59 4.94
6 2.80 33 3.31 60 5.07
7 2.81 34 3.34 61 5.20
8 2.82 35 3.37 62 5.33
9 2.83 36 3.41 63 5.48
10 2.84 37 3.44 64 5.64
11 2.86 38 3.48 65 5.81
12 2.87 39 3.52 66 5.99
13 2.88 40 3.57 67 6.19
14 2.90 41 3.61 68 6.39
15 2.91 42 3.66 69 6.62
16 2.93 43 3.71 70 6.86
17 2.94 44 3.76 71 7.11
18 2.96 45 3.81 72 7.39
19 2.98 46 3.87 73 7.69
20 2.99 47 3.93 74 8.01
21 3.01 48 3.99 75 8.36
22 3.03 49 4.05 76 8.73
23 3.05 50 4.12 77 9.13
24 3.07 51 4.20 78 9.56
25 3.09 52 4.27 79 10.03
26 3.12 53 4.35 80 10.53
27 3.14 54 4.44 81 11.07
28 3.17 55 4.53 82 11.65
29 3.19 56 4.62 83 12.27
30 3.22 57 4.72 84 12.94
31 3.25 58 4.83 85+ 13.64
</TABLE>
<TABLE>
<CAPTION>
TABLE 2: MONTHLY ANNUITY PAYMENT UNDER OPTION 2 FOR EACH
$1,000 OF CONTRACT VALUE APPLIED
<S> <C> <C> <C> <C> <C> <C> <C>
Annuitant's Annuitant's
Attained 5 Years 10 Years 20 Years Attained 5 Years 10 Years 20 Years
Age Guaranteed Guaranteed Guaranteed Age Guaranteed Guaranteed Guaranteed
--- ---------- ---------- ---------- --- ---------- ---------- ----------
5 2.79 2.79 2.78 46 3.85 3.85 3.78
6 2.80 2.80 2.79 47 3.92 3.90 3.83
7 2.81 2.81 2.81 48 3.98 3.96 3.88
8 2.82 2.82 2.82 49 4.05 4.03 3.93
9 2.83 2.83 2.83 50 4.12 4.09 3.99
10 2.84 2.84 2.84 51 4.19 4.16 4.04
11 2.86 2.86 2.85 52 4.26 4.23 4.10
12 2.87 2.87 2.87 53 4.34 4.31 4.16
13 2.88 2.88 2.88 54 4.42 4.39 4.22
14 2.90 2.90 2.89 55 4.51 4.47 4.28
15 2.91 2.91 2.91 56 4.61 4.56 4.35
16 2.93 2.93 2.92 57 4.70 4.65 4.41
17 2.94 2.94 2.94 58 4.81 4.75 4.48
18 2.95 2.95 2.95 59 4.92 4.85 4.55
19 2.95 2.95 2.97 60 5.04 4.96 4.62
20 2.96 2.96 2.99 61 5.17 5.07 4.68
21 3.01 3.01 3.01 62 5.30 5.19 4.75
22 3.03 3.03 3.02 63 5.44 5.32 4.82
23 3.05 3.05 3.04 64 5.60 5.45 4.88
24 3.07 3.07 3.06 65 5.76 5.59 4.95
25 3.09 3.09 3.08 66 5.93 5.74 5.01
26 3.12 3.11 3.11 67 6.11 5.89 5.07
27 3.14 3.14 3.13 68 6.31 6.05 5.13
28 3.16 3.16 3.15 69 6.52 6.21 5.18
29 3.19 3.19 3.18 70 6.74 6.38 5.23
30 3.22 3.21 3.20 71 6.97 6.56 5.27
31 3.24 3.24 3.23 72 7.22 6.74 5.31
32 3.27 3.27 3.26 73 7.49 6.92 5.35
33 3.30 3.30 3.29 74 7.77 7.11 5.38
34 3.33 3.33 3.32 75 8.07 7.30 5.40
35 3.37 3.37 3.35 76 8.39 7.48 5.43
36 3.41 3.40 3.38 77 8.72 7.67 5.44
37 3.44 3.44 3.41 78 9.07 7.85 5.46
38 3.48 3.48 3.45 79 9.43 8.03 5.47
39 3.52 3.51 3.48 80 9.81 8.20 5.48
40 3.56 3.56 3.52 81 10.20 8.37 5.49
41 3.61 3.60 3.56 82 10.61 8.52 5.50
42 3.65 3.65 3.60 83 11.02 8.66 5.50
43 3.70 3.69 3.64 84 11.44 8.79 5.51
44 3.75 3.74 3.69 85+ 11.86 8.91 5.51
45 3.81 3.79 3.73
</TABLE>
<TABLE>
<CAPTION>
TABLE 3: MONTHLY ANNUITY PAYMENT UNDER OPTION 3
FOR EACH $1,000 OF CONTRACT VALUE APPLIED
JOINT AND 50% SURVIVOR ANNUITY
<S> <C> <C> <C> <C> <C> <C>
Attained Age\Attained Age 50 55 60 65 70 75 79
------------------------- -- -- -- -- -- -- --
50 3.87 3.94 3.99 4.03 4.06 4.09 4.10
55 3.94 4.21 4.29 4.37 4.42 4.46 4.48
60 3.99 4.29 4.65 4.77 4.87 4.94 4.98
65 4.03 4.37 4.77 5.27 5.43 5.57 5.65
70 4.06 4.42 4.87 5.43 6.12 6.36 6.51
75 4.09 4.46 4.94 5.57 6.36 7.34 7.62
79 4.10 4.48 4.98 5.65 6.51 7.62 8.69
</TABLE>
<TABLE>
<CAPTION>
JOINT AND 662/3% SURVIVOR ANNUITY
<S> <C> <C> <C> <C> <C>
Attained Age\Attained Age 50 55 60 65 70 75 79
------------------------- -- -- -- -- -- -- --
50 3.94 4.10 4.27 4.47 4.68 4.90 5.08
55 4.10 4.29 4.50 4.73 4.98 5.24 5.46
60 4.27 4.50 4.75 5.04 5.35 5.67 5.94
65 4.47 4.73 5.04 5.39 5.78 6.20 6.54
70 4.68 4.98 5.35 5.78 6.28 6.83 7.29
75 4.90 5.24 5.67 6.20 6.83 7.55 8.18
79 5.08 5.46 5.94 6.54 7.29 8.18 8.97
</TABLE>
<TABLE>
<CAPTION>
JOINT AND 100% SURVIVOR ANNUITY
<S> <C> <C> <C> <C> <C> <C>
Attained Age\Attained Age 50 55 60 65 70 75 79
------------------------- -- -- -- -- -- -- --
50 3.63 3.75 3.85 3.93 3.99 4.03 4.06
55 3.75 3.91 4.06 4.19 4.30 4.37 4.42
60 6.85 4.06 4.28 4.48 4.66 4.79 4.87
65 3.93 4.19 4.48 4.78 5.06 5.30 5.44
70 3.99 4.30 4.66 5.06 5.48 5.87 6.13
75 4.03 4.37 4.79 5.30 5.87 6.46 6.92
79 4.06 4.42 4.87 5.44 6.13 6.92 7.56
</TABLE>
Information about different age combinations will be furnished upon request.
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT
NONPARTICIPATING
NO DIVIDENDS
Cova Financial Services Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
Cova Financial Services Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Issue Date of the Contract. The
Contract is amended in the following manner:
1) The DEATH OF OWNER section of the DEATH BENEFIT provision is deleted
in its entirety and replaced with the following:
"DEATH OF OWNER--Upon death of the Owner prior to the Annuity Date,
the Death Benefit will be paid to the Beneficiary designated by the
Owner.
Before the Owner, or a Joint Owner, attains age 80, the Death Benefit
will be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next
following the date of receipt by the Company of both due proof of
death and an election for payment; or
3. the greatest adjusted Contract Value.
The greatest adjusted Contract Value is evaluated at each Contract
Anniversary prior to the death of the Owner or Joint Owner and on each
day a Purchase Payment or Withdrawal is made. On the Contract
Anniversary, if the current Contract Value exceeds the greatest
adjusted Contract Value, the greatest adjusted Contract Value will be
increased to the current Contract Value. If a Purchase Payment is
made, the amount of the Purchase Payment will increase the greatest
adjusted Contract Value. If a Withdrawal is made, the greatest
adjusted Contract Value will be reduced by the sum of the Withdrawal
Amount and any associated Withdrawal Charges divided by the Contract
Value immediately prior to the Withdrawal, multiplied by the greatest
adjusted Contract Value immediately prior to the Withdrawal.
After the Owner, or a Joint Owner, attains age 80, the Death Benefit
will be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next
following the date of receipt by the Company of both due proof of
death and an election for payment; or
3. the greatest adjusted Contract Value.
The greatest adjusted Contract Value is evaluated at each Contract
Anniversary on or before the Owner's, or a Joint Owner's, 80th
birthday and on each day a Purchase Payment or Withdrawal is made. On
the Contract Anniversary on or before the Owner's or a Joint Owner's
80th birthday, if the current Contract Value exceeds the greatest
adjusted Contract Value, the greatest adjusted Contract Value will be
increased to the current Contract Value. If a Purchase Payment is
made, the amount of the Purchase Payment will increase the greatest
adjusted Contract Value. If a Withdrawal is made, the greatest
adjusted Contract Value will be reduced by the sum of the Withdrawal
Amount and any associated Withdrawal Charges divided by the Contract
Value immediately prior to the Withdrawal, multiplied by the greatest
adjusted Contract Value immediately prior to the Withdrawal.
If Joint Owners are named:
1) The Death Benefit is determined based on the age of the oldest
Joint Owner; and
CL-3059 (2/98)
2) The Death Benefit is payable upon the first death of a Joint
Owner.
The Death Benefit will be paid following receipt by the Company of
both due proof of death and an election for a single sum payment or
election under an Annuity Option.
If a single sum payment is requested, the proceeds will be paid within
seven (7) days of receipt of proof of death and the election. Payment
under an Annuity Option may only be elected during the sixty-day
period beginning with the date of receipt of proof of death or a
single sum payment will be made to the Beneficiary at the end of the
sixty-day period.
The entire Death Benefit must be paid within five (5) years of the
date of death unless the Beneficiary elects to have the Death Benefit
payable under an Annuity option over the Beneficiary's lifetime or for
a period not extending beyond the Beneficiary's life expectancy,
beginning within one (1) year of the date of death.
If the Beneficiary is the spouse of the Owner, the spouse may elect to
become the Owner and continue this Contract in effect at the then
current Contract Value."
2) The WITHDRAWALS section of the WITHDRAWAL provision is amended to
include the following paragraph:
"The Death Benefit is reduced when withdrawals are made. The amount of
the reduction is described in the DEATH OF OWNER section."
All other terms and conditions of the Contract remain unchanged.
Cova Financial Services Life Insurance Company has caused this Endorsement to be
signed by its President and Secretary.
CL-3059 (2/98)
Cova Financial Services Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Issue Date shown on the Contract Data
Page.
The DEATH OF OWNER section of the DEATH BENEFIT provision is deleted in its
entirety and replaced with the following:
"DEATH OF OWNER--Upon death of the Owner prior to the Annuity Date, the
Death Benefit will be paid to the Beneficiary designated by the Owner.
Prior to the Owner, or a Joint Owner, attaining age 80, the Death Benefit
will be the greatest of:
1) the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge accumulated at an effective annual rate of 4% until
the date of death;
2) the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3) the greatest of the values resulting from taking the Contract Value on
any five (5) year Contract Anniversary prior to the death of the Owner
or Joint Owner, plus any Purchase Payments made subsequent to that
Contract Anniversary, less any subsequent Withdrawals and any
applicable Withdrawal Charge.
After the Owner, or a Joint Owner, attains age 80, the Death Benefit will
be the greatest of:
1) A) Purchase Payments made on or before the Owner's, or a Joint
Owner's, 80th birthday less any Withdrawals and any applicable
Withdrawal Charge accumulated at an effective annual rate of 4% until
the Owner, or a Joint Owner, attains age 80; plus B) any subsequent
Purchase Payments less any subsequent Withdrawals and any applicable
Withdrawal Charge; or
2) the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3) the greatest of the values resulting from taking the Contract Value on
any prior five (5) year Contract Anniversary on or before the Owner's
80th birthday plus any Purchase Payments made subsequent to that
Contract Anniversary, less any subsequent Withdrawals and any
applicable Withdrawal Charge.
If Joint Owners are named:
1) The Death Benefit is determined based on the age of the oldest Joint Owner;
and
2) The Death Benefit is payable upon the first death of a Joint Owner.
The Death Benefit will be paid following receipt by the Company of both due
proof of death and an election for a single sum payment or election under an
Annuity Option.
If a single sum payment is requested, the proceeds will be paid within seven (7)
days of receipt of proof of death and the election. Payment under an Annuity
Option may only be elected during the sixty-day period beginning with the date
of receipt of proof of death or a single sum payment will be made to the
Beneficiary at the end of the sixty-day period.
The entire Death Benefit must be paid within five (5) years of the date of death
unless the beneficiary elects to have the Death Benefit payable under an Annuity
option over the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy, beginning within (1) year of the date of death.
CL-3064 (2/98)
<PAGE>
If the Beneficiary is the spouse of the Owner, the spouse may elect to become
the Owner and continue this Contract in effect at the then current Contract
Value."
All other terms and conditions of the Contract remain unchanged.
Cova Financial Services Life Insurance Company has caused this Endorsement to be
signed by its President and Secretary.
CL-3064 (2/98)
Cova Financial Services Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Issue Date of the Contract. The
Contract is amended in the following manner:
The DEATH OF OWNER section of the DEATH BENEFIT provision is deleted in its
entirety and replaced with the following:
"DEATH OF OWNER - Upon death of the Owner prior to the Annuity Date, the Death
Benefit will be paid to the Beneficiary designated by the Owner.
Before the Owner, or a Joint Owner, attains age 80, the Death Benefit will be
the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due
proof of death and an election for payment; or
3. the greatest Contract Value on any Contract Anniversary prior to the
death of the Owner or Joint Owner, plus any Purchase Payments made
subsequent to that Contract Anniversary, less any subsequent
Withdrawals and any applicable Withdrawal Charge.
After the Owner, or a Joint Owner, attains age 80, the Death Benefit will be the
greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due
proof of death and an election for payment; or
3. the greatest Contract Value on any Contract Anniversary on or before
the Owner's or Joint Owner's 80th birthday, plus any Purchase Payments
made subsequent to that Contract Anniversary, less any subsequent
Withdrawals and any applicable Withdrawal Charge.
If Joint Owners are named:
1) The Death Benefit is determined based on the age of the oldest Joint
Owner; and
2) The Death Benefit is payable upon the first death of a Joint Owner.
The Death Benefit will be paid following receipt by the Company of both due
proof of death and an election for a single sum payment or election under an
Annuity Option.
If a single sum payment is requested, the proceeds will be paid within seven (7)
days of receipt of proof of death and the election. Payment under an Annuity
Option may only be elected during the 60-day period beginning with the date of
receipt of proof of death or a single sum payment will be made to the
Beneficiary at the end of the 60-day period.
The entire Death Benefit must be paid within five (5) years of the date of death
unless the Beneficiary elects to have the Death Benefit payable under an Annuity
Option over the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy, beginning within one (1) year of the date of
death.
If the Beneficiary is the spouse of the Owner, the spouse may elect to become
the Owner and continue this Contract in effect at the then current Contract
Value."
All other terms and conditions of the Contract remain unchanged.
Cova Financial Services Life Insurance Company has caused this Endorsement to be
signed by its President and Secretary.
CL-4205 (4/99)
Cova Financial Services Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
CHARITABLE REMAINDER TRUST ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Issue Date shown on the Contract Data
Page.
The Contract is amended in the following manner:
1. The last sentence of the first paragraph of the Annuity Date section is
deleted and replaced by the following: "The Annuity Date may not be later than
the first day of the calendar month following the Annuitant's 100th birthday."
2. The first sentence in the second paragraph of the Withdrawals section is
deleted and replaced with the following: "Each partial withdrawal, unless for
the payment of charitable remainder trust administration fees, must be for an
amount which is not less than $500.00 or, if smaller, the remaining Withdrawal
Value." 3. The following sentence is added to the Waiver of Withdrawal Charge
section: "A withdrawal for the payment of charitable remainder trust
administration fees may be made once during the first Contract Year free from
the Withdrawal Charge."
All other terms and conditions of the Contract remain unchanged.
Cova Financial Services Life Insurance Company has caused this Endorsement to be
signed by its President and Secretary.
CL-4213 (4/99)
Cova Financial Services Life Insurance Company
Send application and check to:
Cova Financial Services Life Insurance Company
P. O. Box 10366
Des Moines, Iowa 50306-9989
FLEXIBLE PURCHASE PAYMENT VARIABLE AND FIXED ANNUITY APPLICATION
1. OWNER (Correspondence is sent to the Owner.)
Name____________________________________________________________________
(First) (Middle) (Last)
Address_________________________________________________________________
(Street)
_________________________________________________________________________
(City) (State) (Zip)
Sex o M o F Phone (_______)_____________________________________
Birthdate____________________/______________/___________________________
(Month) (Day) (Year)
Social Security Number__________________________________________________
Joint Owners must be spouses. Use Special Requests Section to name other Joint
Owner. If Joint Owners are named, upon the death of either Joint Owner, the
surviving spouse will be the beneficiary. If you wish to override the provisions
of the contract and any endorsement, both Joint Owners must initial here.
__________________________ ________________________
Joint Owner's Initials Joint Owner's Initials
2. ANNUITANT (Complete only if different than Owner.)
Name____________________________________________________________________
(First) (Middle) (Last)
Address_________________________________________________________________
(Street) (City) (State) (Zip)
Birthdate_______/______/______ Sex o M o F
(Month) (Day) (Year)
Social
Security No.________________________________________
Phone (_______)_____________________________________
3. BENEFICIARY
(Show full name(s), relationship(s), Social Security number(s), percentage
each is to receive and address. Use Special Requests Section if additional
space is needed.)
Primary ____________________________________________
Primary ____________________________________________
____________________________________________________
____________________________________________________
Contingent__________________________________________
____________________________________________________
4. PURCHASE PAYMENT ALLOCATION
Initial Purchase
Payment
$______________________
Must be whole percentages with a minimum of 10% in any Account or
Portfolio. Unless otherwise directed, subsequent purchase payments will be
allocated as shown. Total Allocation must equal 100%.
____% General Account
J.P. Morgan Investment Management Inc.
____% Select Equity Portfolio
____% Small Cap Stock Portfolio
____% Large Cap Stock Portfolio
____% International Equity Portfolio
____% Quality Bond Portfolio
Lord, Abbett & Co.
____% Growth & Income Portfolio
____% Bond Debenture Portfolio
____% Mid-Cap Value Portfolio
____% Large Cap Research Portfolio
____% Developing Growth Portfolio
Conning Asset Management Company
____% Money Market Portfolio
5. TYPE OF PLAN Check One
o Non-Qualified
o Qualified - Not available in all states.
o 401(a)
o Roth Conversion IRA
Date Established_________________________
Cost Basis $_____________________________
o Roth Contributory IRA
Date Established_________________________
Cost Basis $_____________________________
o Custodial Owned IRA
o Traditional IRA
o Roth Conversion IRA
o 408 IRA Transfer
o 403(b) TSA Rollover -
I acknowledge that I understand the withdrawal restrictions under
Internal Revenue Code Section 403(b)(11) on contributions and earnings
and have received a prospectus explaining the restrictions. I
understand the other investment alternatives available under the
employer's 403(b) arrangement to which I may elect to transfer my
contract value.
6. SPECIAL REQUESTS
7. TRANSFER AUTHORIZATIONS
I/We acknowledge that neither Cova Financial Services Life Insurance
Company (Cova) nor any person authorized by Cova will be responsible for
any claim, loss, liability or expense in connection with a telephone
transfer if Cova or such other person acted on telephone transfer
instructions in good faith in reliance on this authorization. Check here if
you wish to authorize telephone transfer instructions. o Check here if you
wish to authorize your Registered Representative/Agent to make transfers. o
8. DOLLAR COST AVERAGING TRANSFERS - I authorize Dollar Cost Averaging
Transfers of $______________ to be transferred each month ($500 minimum)
from the Conning Money Market Portfolio or the General Account ($6,000
minimum required in the Conning Money Market Portfolio or the General
Account or amount needed to complete all transfers.)
FROM TO
Check One J.P. Morgan Investment Management Inc.
o Conning Money _______% Select Equity Portfolio
Market Portfolio _______% Small Cap Stock Portfolio
o General _______% Large Cap Stock Portfolio
Account _______% International Equity Portfolio
_______% Quality Bond Portfolio
I authorize transfers to be made for:
o 12 months o 24 months o 36 months o 48 months
o 60 months Other ______ months
Dollar Cost Averaging Transfers and Rebalancing Transfers are
not available simultaneously.
9. AUTOMATIC WITHDRAWALS - I authorize automatic monthly withdrawals of
$___________________ to be made on the (check one) o 1st or o 15th day of
the month. Total monthly withdrawals cannot exceed 10% of purchase payments
in any 12 month period.________I understand that Automatic Withdrawals are
available only if I am over age 59 1/2.
<TABLE>
<CAPTION>
<S> <C>
FEDERAL AND STATE INCOME TAX WITHHOLDING
Check one: o I elect to have Federal Income Tax withheld from these distributions.
o I elect NOT to have Federal Income Tax withheld from these distributions.
Note: Even if you elect not to have Federal Income Tax withheld from a distribution, you are liable for
payment of Federal Income Tax on the taxable portion of your contract. You may also be subject to tax
penalties under the estimated tax payment rules if your payments of estimated tax and withholding, if any,
are not adequate. If applicable, a State Income Tax election will be made as elected above for Federal Income
Tax withholding.
</TABLE>
10. REBALANCING TRANSFERS - I authorize Rebalancing Transfers to be made in the
applicable percentages elected in the Purchase Payment Allocation section.
Rebalancing transfers are not made to or from the General Account.
Transfers are to be made: o quarterly o semi-annually o annually. Dollar
Cost Averaging Transfers and Rebalancing Transfers are not available
simultaneously.
11. ANNUITY OPTION - If no Annuity Option is specified, the Life Annuity with
10 years Guaranteed Option will be automatically applied.
- --------------------------------------------------------------------------------
Indicate Annuity Option
12. ANNUITY DATE - The Annuity Date must always be on the first day of a
calendar month and must be at least one month after the Issue Date. The
Annuity Date may not be later than the first day of the calendar month
following the later of: 1) the Annuitant's 85th birthday; or 2) the tenth
Contract Anniversary.
- --------------------------------------------------------------------------------
Indicate Annuity Date
13. Will the annuity applied for replace or change any existing life insurance
or annuity? o Yes No
14. ALLOCATION DURING FREE LOOK PERIOD
Under certain circumstances, as described in the accompanying Prospectus,
the initial purchase payment will be allocated to the Conning Money Market
Portfolio until the expiration of the Free Look period. Thereafter, the
purchase payments will be allocated as directed in the Purchase Payment
Allocation Section.
15. CONSENT FOR ELECTRONIC DELIVERY
I (we) consent to the delivery of the following documents in electronic
format to be effective until I (we) revoke this consent. (Check applicable
box(es).
o Prospectuses and prospectus supplements o Sales literature
o Annual and Semi-Annual Reports o Proxy Statements/materials
16. ACKNOWLEDGEMENT AND AUTHORIZATION - I (We) agree that the above information
and statements and those made on the reverse side are true and correct to
the best of my (our) knowledge and belief and are made as the basis of my
(our) application. I (We) acknowledge receipt of the current prospectus(es)
of Cova Variable Annuity Account One, Cova Series Trust and Lord Abbett
Series Fund, Inc. PAYMENTS AND VALUES PROVIDED BY THE CONTRACT FOR WHICH
APPLICATION IS MADE ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR
AMOUNT.
____________________________________________________
(Signature of Owner(s). Annuitant unless otherwise noted)
____________________________________________________
(Signature of Annuitant if other than Owner)
Signed at __________________________________________
(City) (State)
Date________________________________________________
17. AGENT'S REPORT Will the annuity replace or change any existing life
insurance or annuity?
o No o Yes (Indicate type and cost basis information.)
Type Cost Basis
o Life Pre-TEFRA $___________________ $__________________
(Cost Basis) (Gain)
o Annuity Post-TEFRA $___________________ $__________________
(Cost Basis) (Gain)
Complete any required replacement forms.
Agent's Signature___________________________________
Phone ______________________________________________
Agent's Name and Number_____________________________
____________________________________________________
Name and Address of Firm____________________________
____________________________________________________
PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC. and
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
THIS AGREEMENT made as of May 1, 1998, among Templeton Variable Products
Series Fund (the "Trust"), an open-end management investment company organized
as a business trust under Massachusetts law, Franklin Templeton Distributors,
Inc., a California corporation, the Trust's principal underwriter
("Underwriter"), and COVA Financial Services Life Insurance Company, a life
insurance company organized as a corporation under Missouri law (the "Company"),
on its own behalf and on behalf of each segregated asset account of the Company
set forth in Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act" );
WHEREAS, the Trust and the Underwriter desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated November 16,
1993 (File No. 812-8546), granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2 (b) (15) and 6e-3 (T) (b) (15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless an exemption from registration under
the 1940 Act is available and the Trust has been so advised; and has registered
or will register certain variable annuity contracts and variable life insurance
policies, listed on Schedule C attached hereto, under which the portfolios are
to be made available as investment vehicles (the "Contracts") under the 1933 Act
unless such interests under the Contracts in the Accounts are exempt from
registration under the 1933 Act and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such account on Schedule A hereto, to set aside
and invest assets attributable to one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an "Adviser")
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended ("Advisers Act") and any applicable state securities laws;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as each Account
at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for receipt of purchase orders and requests for redemption relating to each
Portfolio from each Account, provided that the Company notifies the Trust of
such purchase orders and requests for redemption by 9:00 a.m. Eastern time on
the next following Business Day, as defined in Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to the
Accounts for purchase at the net asset value per share next computed after
receipt of a purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust
describing Portfolio purchase procedures on those days on which the Trust
calculates its net asset value pursuant to rules of the SEC, and the Trust shall
use its best efforts to calculate such net asset value on each day on which the
New York Stock Exchange ("NYSE") is open for trading. The Company will transmit
orders from time to time to the Trust for the purchase of shares of the
Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, such action is deemed in the best interests of the shareholders of
such Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust or its designated
custodian. Upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall mean any day
on which the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption procedures.
The Trust shall make payment for such shares in the manner established from time
to time by the Trust. Redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire to the
Company before the close of business on the next Business Day after the receipt
of the request for redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market conditions
exist, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Portfolio Shares purchased from the Trust will be recorded in the appropriate
title for each Account or the appropriate subaccount of each Account.
1.7 The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions payable on the
shares of any Portfolio of the Trust. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net asset
value per share for each Portfolio available to the Company or its designated
agent on a daily basis as soon as reasonably practical after the net asset value
per share is calculated (normally by 6:30 p.m. Eastern time) and shall use
reasonable efforts to make such net asset value per share available by 7:00 p.m.
Eastern time each Business Day.
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans as provided for under Section 817(h)(4)
of the Internal Revenue Code of 1986, as amended, (the "Code"), and to the
extent permitted by the Shared Funding Exemptive Order. No shares of any
Portfolio will be sold directly to the general public. The Company agrees that
it will use Trust shares only for the purposes of funding the Contracts through
the Accounts listed in Schedule A, as amended from time to time.
1.10 The Company agrees that all net amounts available under the Contracts
shall be invested in the Trust, in such other Funds advised by an Adviser or its
affiliates as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Trust if: (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of the
Portfolios; or (b) the Company gives the Trust and the Underwriter 45 days
written notice of its intention to make such other investment company available
as a funding vehicle for the Contracts; or (c) such other investment company is
available as a funding vehicle for the Contracts at the date of this Agreement
and the Company so informs the Trust and the Underwriter prior to their signing
this Agreement (a list of such investment companies appearing on Schedule D to
this Agreement); or (d) the Trust or Underwriter consents to the use of such
other investment company.
1.11 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.10 and Article IV of
this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any affiliate of
any other party), and shall not be liable in the event that an error results
from any incorrect information or confirmations supplied by any other party. If
an error is made in reliance upon incorrect information or confirmations, any
amount required to make a Contract owner's account whole shall be borne by the
party who provided the incorrect information or confirmation.
ARTICLE II.
Obligations of the Parties; Fees and Expenses
2.1 The Trust shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration and qualification of its shares
of the Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance and
transfer of its shares.
2.2 The Trust or its designee shall provide the Company, free of charge,
with as many copies of the current prospectus (or prospectuses), statements of
additional information, annual and semi-annual reports and proxy statements for
the shares of the portfolios as the Company may reasonably request for
distribution to existing Contract owners whose Contracts are funded by such
shares, for non-marketing purposes. The Trust or its designee shall provide the
Company, at the Company's expense, with as many copies of the current prospectus
(or prospectuses) for the shares as the Company may reasonably request for
distribution to prospective purchasers of the Contracts. If requested by the
Company, the Trust or its designee shall provide such documents in a "camera
ready," digital or other form, and other assistance as is reasonably necessary
in order for the parties hereto once a year (or more frequently if necessary) to
have the prospectus for the Contracts and the prospectus (or prospectuses) for
the Trust shares printed together in one document. The expenses of printing such
a combined document for existing Contract owners for non-marketing purposes will
be apportioned between the Company and the Trust in proportion to the number of
pages of the Contract, the Trust prospectus, and the prospectus of other funds,
although such expenses shall not exceed the regular costs for printing the Trust
prospectus. The Trust shall bear the cost of printing the Trust prospectus
portion of such document for distribution only to owners of existing Contracts,
for non-marketing purposes, funded by the Trust shares and the Company shall
bear the expense of printing the portion of such documents relating to the
Separate Account. The Company shall bear all printing expenses of such combined
documents where used for distribution to prospective purchasers or to owners of
existing Contracts not funded by the shares.
2.3 The Company shall bear the costs of distributing proxy materials (or
similar materials such as voting solicitation instructions), prospectuses and
statements of additional information to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i) solicit
voting instructions from Contract owners; (ii) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares for which no instructions have been received in the same proportion
as Trust shares of such Portfolio for which instructions have been received; so
long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Trust shares held in any segregated asset account in
its own right, to the extent permitted by law.
2.5 Except as provided in section 2.7, the Company shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Templeton" or any other Trademark relating to the Trust or Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
the Company shall cease all use of any such name or mark as soon as reasonably
practicable.
2.6 Except as provided in section 2.7, the Trust or the Underwriter shall
not use any designation comprised in whole or in part of the name or mark "COVA"
or any other Trademark relating to the Company without prior written consent,
and upon termination of this Agreement for any reason, the Trust or the
Underwriter shall cease all use of such name or mark as soon as reasonably
practicable.
2.7 The Company shall furnish, or cause to be furnished to the Trust or its
designee, at least one complete copy of each registration statement, prospectus,
statement of additional information, retirement plan disclosure information or
other disclosure documents or similar information, as applicable (collectively
"disclosure documents"), as well as any report, solicitation for voting
instructions, sales literature and other promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts
prior to its first use. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee each piece of sales literature or other
promotional material in which the Trust or an Adviser is named, at least 15
Business Days prior to its use. No such material shall be used if the Trust or
its designee reasonably objects to such use within five Business Days after
receipt of such material. For purposes of this paragraph, "sales literature or
other promotional material" includes, but is not limited to, portions of the
following that use any Trademark related to the Trust or Underwriter or refer to
the Trust or affiliates of the Trust: advertisements (such as material published
or designed for use in a newspaper, magazine or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures or electronic communication or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
any other advertisement, sales literature or published article or electronic
communication), educational or training materials or other communications
distributed or made generally available to some or all agents or employees, and
disclosure documents, shareholder reports and proxy materials.
The Trust shall furnish or cause to be furnished, to the Company or its
designee each piece of sales literature or other promotional material (as
defined above) in which the Company is named, at least 15 Business Days prior to
its use. No such material shall be used if the Company or its designee
reasonably objects to such use within five Business Days after receipt of such
material.
2.8 The Company and its agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser in connection with the sale of the Contracts other
than information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
annual and semi-annual reports of the Trust, Trust-sponsored proxy statements,
or in sales literature or other promotional material approved by the Trust or
its designee, except as required by legal process or regulatory authorities or
with the written permission of the Trust or its designee.
2.9 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of disclosure
documents and annual and semi-annual reports pertaining to the Contracts.
2.10 The Trust shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, the Accounts
or the Contracts other than information or representations contained in and
accurately derived from disclosure documents for the Contracts (as such
disclosure documents may be amended or supplemented from time to time), or in
materials approved by the Company for distribution including sales literature or
other promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.11 So long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for Contract owners, the Company will
provide pass-through voting privileges to Contract owners whose Contract values
are invested, through the registered Accounts, in shares of one or more
Portfolios of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each registered Account,
the Company will vote shares of each Portfolio of the Trust held by a registered
Account and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares held by that registered Account
for which voting instructions are received. The Company and its agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without the prior written consent of
the Trust, which consent may be withheld in the Trust's sole discretion.
2.12 The Trust and Underwriter shall pay no fee or other compensation to
the Company under this Agreement except as provided on Schedule E, if attached.
Nevertheless, the Trust or the Underwriter or an affiliate may make payments
(other than pursuant to a Rule 12b-1 Plan) to the Company or its affiliates or
to the Contracts' underwriter in amounts agreed to by the Underwriter in writing
and such payments may be made out of fees otherwise payable to the Underwriter
or its affiliates, profits of the Underwriter or its affiliates, or other
resources available to the Underwriter or its affiliates.
ARTICLE III.
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Missouri and
that it has legally and validly established each Account as a segregated asset
account under such law as of the date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to each Account,
(1) the Company has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated asset account for
the Contracts, or (2) if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, the Company will make
every effort to maintain such exemption and will notify the Trust and the
Adviser immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to each
Contract, (1) the Contract will be registered under the 1933 Act, or (2) if the
Contract is exempt from registration under Section 3(a)(2) of the 1933 Act or
under Section 4(2) and Regulation D of the 1933 Act, the Company will make every
effort to maintain such exemption and will notify the Trust and the Adviser
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future. The Company further represents
and warrants that the Contracts will be sold by broker-dealers, or their
registered representatives, who are registered with the SEC under the 1934 Act
and who are members in good standing of the NASD; the Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Massachusetts and that it does and will
comply in all material respects with the 1940 Act and the rules and regulations
thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall register
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Code, and the rules and regulations thereunder, including without limitation
Treasury Regulation 1.817-5, and will notify the Company immediately upon having
a reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will in that event immediately take all reasonable steps to
adequately diversify the Portfolio to achieve compliance within the grace period
afforded by Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will
maintain such qualification and will notify the Company immediately upon having
a reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
3.8 The Trust represents and warrants that should it ever desire to make
any payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act, the Trustees, including a majority who are not "interested persons" of
the Trust under the 1940 Act ( "disinterested Trustees" ), will formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
3.9 The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less that the minimum
coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such
bond shall include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Trust and the Underwriter in the event that such coverage
no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized and
validly existing under applicable corporate law and that it is registered and
will during the term of this Agreement remain registered as an investment
adviser under the Advisers Act.
3.12 The Underwriter represents that it is a member in good standing of the
NASD and is registered as a broker-dealer with the SEC. The Underwriter
represents that it will sell and distribute the shares in accordance with all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act and the 1940 Act.
3.13 The Trust currently intends for one or more Classes to make payments
to finance its distribution expenses, including service fees, pursuant to a Plan
adopted under Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may
determine to discontinue such practice in the future. To the extent that any
Class of the Trust finances its distribution expenses pursuant to a Plan adopted
under Rule 12b-1, the Trust undertakes to comply with any then current SEC and
SEC staff interpretations concerning Rule 12b-1 or any successor provisions.
ARTICLE IV.
Potential Conflicts
4.1 The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trust shall promptly inform the Company of any determination by the Trustees
that an irreconcilable material conflict exists and of the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its own expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such withdrawal should be implemented to a vote of all affected
Contract owners and, as appropriate, withdrawal of the assets of any appropriate
group (i.e. , annuity contract owners, life insurance policy owners, or variable
contract owners of one or more Participating Insurance Companies) that votes in
favor of such withdrawal, or offering to the affected Contract owners the option
of making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end of such
six (6) month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Trust be required to establish a new funding medium for the Contracts. In
the event that the Trustees determine that any proposed action does not
adequately remedy any irreconcilable material conflict, then the Company will
withdraw the Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
Indemnification
5.1 Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the Trust and each
of its Trustees, officers, employees and agents and each person, if
any, who controls the Trust within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" and individually the
"Indemnified Party" for purposes of this Article V) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to which
the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses are
related to the sale or acquisition of Trust Shares or the Contracts
and
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a disclosure
document for the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company on behalf
of the Contracts or Accounts (or any amendment or supplement to
any of the foregoing) (collectively, "Company Documents" for the
purposes of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and was accurately derived from written information
furnished to the Company by or on behalf of the Trust for use in
Company Documents or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(ii) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2 (a)(i)) or
wrongful conduct of the Company or persons under its control,
with respect to the sale or acquisition of the Contracts or Trust
shares; or
(iii)arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents
as defined in Section 5.2(a)(i) or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance
upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
(b) The Company shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or
to the Trust or Underwriter, whichever is applicable. The Company
shall also not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure
to notify the Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
(c) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Trust shares or the
Contracts or the operation of the Trust.
5.2 Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the Company, the
underwriter of the Contracts and each of its directors and officers
and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually an "Indemnified Party" for purposes of this Section
5.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter, which consent shall not be unreasonably withheld) or
expenses (including the reasonable costs of investigating or defending
any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses") to which the Indemnified Parties may become subject under
any statute, at common law or otherwise, insofar as such Losses are
related to the sale or acquisition of the Trust's Shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
Registration Statement, prospectus or sales literature of the
Trust (or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") or arise out of or are
based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission of such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on behalf
of the Company for use in the Registration Statement or
prospectus for the Trust or in sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
disclosure documents or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or
wrongful conduct of the Trust, Adviser or Underwriter or persons
under their control, with respect to the sale or distribution of
the Contracts or Trust shares; or
(iii)arise out of any untrue statement or alleged untrue statement of
a material fact contained in a disclosure document or sales
literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the
Trust; or
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the qualification
representation specified in Section 3.7 of this Agreement and the
diversification requirements specified in Section 3.6 of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 5.2(b) and 5.2(c)
hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement or to each Company or the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Underwriter of any such claim shall
not relieve the Underwriter from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Underwriter
will be entitled to participate, at its own expense, in the defense
thereof. The Underwriter also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Underwriter to such party of the Underwriter's
election to assume the defense thereof, the Indemnified Party shall
bear the expenses of any additional counsel retained by it, and the
Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
5.3 Indemnification By The Trust
(a) The Trust agrees to indemnify and hold harmless the Company, and each
of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust, which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Trust, and arise out of
or result from any material breach of any representation and/or
warranty made by the Trust in this Agreement or arise out of or result
from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Section 5.3(b) and
5.3(c) hereof. It is understood and expressly stipulated that neither
the holders of shares of the Trust nor any Trustee, officer, agent or
employee of the Trust shall be personally liable hereunder, nor shall
any resort to be had to other private property for the satisfaction of
any claim or obligation hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement or to the Company, the Trust, the
Underwriter or each Account, whichever is applicable.
(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within
a reasonable time after the summons or other first legal process
giving information of the nature of the claims shall have been served
upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be
entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such
party of the Trust's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Trust will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the Trust of
the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the
operation of either the Account, or the sale or acquisition of share
of the Trust.
ARTICLE VI.
Termination
6.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios or any reason by ninety (90) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
6.2 This Agreement may be terminated immediately by either the Trust or the
Underwriter following consultation with the Trustees upon written notice to the
Company:
(a) if the Company notifies the Trust or the Underwriter that the
exemption from registration under Section 3(c) of the 1940 Act no
longer applies, or might not apply in the future, to the unregistered
Accounts, or that the exemption from registration under Section 4(2)
or Regulation D promulgated under the 1933 Act no longer applies or
might not apply in the future, to interests under the unregistered
Contracts; or
(b) if either one or both of the Trust or the Underwriter respectively,
shall determine, in their sole judgment exercised in good faith, that
the Company or the Contracts' underwriter has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(c) if the Company gives the Trust and the Underwriter the written notice
specified in Section 1.10 hereof and at the same time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, that any termination
under this Section 6.2(c) shall be effective forty-five (45) days
after the notice specified in Section 1.10 was given; or
(d) upon the Company's or the Contracts' underwriter's material breach of
any provision of this Agreement; but no termination shall be effective
under this section 6.2(d) until the Trust has stated in writing the
nature of the breach and the Company or the Contracts' underwriter has
been afforded a reasonable opportunity to cure the breach; or
(e) upon the institution of formal proceedings against the Company or the
Contracts' underwriter by the NASD, the SEC, or any state securities
or insurance department or any other regulatory body regarding the
Company's or the Contracts' underwriter's duties under this Agreement
or related to the sale of its Contracts.
6.3 This Agreement may be terminated immediately by the Company upon
written notice to the Trust and the Underwriter:
(a) if the Company shall determine, in its sole judgment exercised in good
faith, that either the Trust or the Underwriter has suffered a
material adverse change in its business, operations, financial
conditions or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(b) upon the Trust's or the Underwriter's material breach of any provision
of this Agreement; but no termination shall be effective under this
section 6.3(b) until the Company has specified the nature of the
breach in writing and Trust or the Underwriter has been afforded a
reasonable opportunity to cure the breach; or
(c) upon the institution of formal proceedings against the Trust or the
Underwriter by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body regarding the Trust's or the
Underwriter's duties under this Agreement or related to the sale of
its shares.
6.4 If this Agreement is terminated for any reason, except under Article IV
(Potential Conflicts) above, the Trust shall, at the option of the Company,
continue to make available additional shares of any Portfolio and redeem shares
of any Portfolio pursuant to all of the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination of this
Agreement. If this Agreement is terminated pursuant to Article IV, the
provisions of Article IV shall govern.
6.5 The provisions of Articles II (Representations and Warranties) and V
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 6.4, except that the Trust and the Underwriter shall
have no further obligation to sell Trust shares with respect to Contracts issued
after termination.
6.6 The Company shall not redeem Trust shares attributable to the Contracts
(as opposed to Trust shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE VII.
Notices.
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust or the Underwriter:
Templeton Variable Products Series Fund or
Franklin Templeton Distributors, Inc.
500 E. Broward Boulevard
Fort Lauderdale, FL 33394-3091
Attention: Barbara J. Green, Trust Secretary
WITH A COPY TO
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404
Attention: Karen L. Skidmore, Senior Corporate Counsel
If to the Company:
COVA Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Attention: Ms. Shari Ruecker, Vice President,
Product Development Manager
ARTICLE VIII.
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Florida. It shall also be
subject to the provisions of the federal securities laws and the rules and
regulations thereunder and to any orders of the SEC granting exemptive relief
therefrom and the conditions of such orders. Copies of any such orders shall be
promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 Each party hereto shall treat as confidential the names and addresses
of the Contract owners and all information reasonably identified as confidential
in writing by any other party hereto, and, except as permitted by this Agreement
or as required by legal process or regulatory authorities, shall not disclose,
disseminate, or utilize such names and addresses and other confidential
information until such time as they may come into the public domain, without the
express written consent of the affected party. Without limiting the foregoing,
no party hereto shall disclose any information that such party has been advised
is proprietary, except such information that such party is required to disclose
by any appropriate governmental authority (including, without limitation, the
SEC, the NASD, and state securities and insurance regulators).
8.8 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.9 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect, except as provided in Section 1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
The Company:
COVA Financial Services Life Insurance Company
By its authorized officer
By: ______________________________________________
Name:_____________________________________________
Title:____________________________________________
The Trust:
Templeton Variable Products Series Fund
By its authorized officer
By:________________________________________________
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
By its authorized officer
By: ________________________________________________
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant Secretary
SCHEDULE A
Separate Accounts of COVA Financial Services
Life Insurance Company
1. COVA Variable Annuity Account One
Date Established: February 24, 1987
SEC Registration Number: 811-05200
SCHEDULE B
Trust Portfolios and Classes Available
Templeton Variable Products Series Adviser
- ---------------------------------- -------
Templeton Developing Markets Fund Templeton Asset Management Ltd.
-Class 1
Templeton International Fund Templeton Investment Counsel, Inc.
-Class 1
Mutual Shares Investments Fund Franklin Mutual Advisers, Inc.
-Class 1
SCHEDULE C
Variable Annuity Contracts
Issued by COVA Financial Services Life Insurance Company
--------------------------------------------------------
Representative
Contract Form Number
-------- -----------
1. COVA Variable Annuity Account One
Title: Custom Select Variable Annuity Form: XL 407 XL-617
SEC Registration Number: 333-34741 CL-407 CL-617
SCHEDULE D
Other Portfolios Available under the Contracts
----------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY AIM 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.
Small Cap Stock Portfolio
Large Cap Stock Portfolio
Select Equity Portfolio
International Equity Portfolio
Quality Bond Portfolio
MANAGED BY LORD ABBETT & CO.
Bond Debenture Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Mid Cap Value Portfolio
Lord Abbett Growth & Income 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 International Equity Fund
Goldman Sachs Global Income Fund
INVESTORS FUND SERIES:
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
Kemper Small Cap Value Portfolio
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
LIBERTY VARIABLE INVESTMENT TRUST:
MANAGED BY NEWPORT FUND MANAGEMENT INC.
Newport Tiger, Variable Series
LORD ABBETT SERIES FUND, INC.:
MANAGED BY LORD ABBETT & CO.
Growth and Income Portfolio
MFS VARIABLE INSURANCE TRUST:
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY MFS Emerging Growth
Series MFS Research Series MFS Growth With Income Series MFS High
Income Series MFS World Governments Series MFS/Foreign & Colonial
Emerging markets Equity Series
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
MANAGED BY OPPENHEIMER FUNDS, INC.
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer Strategic Bond Fund
PUTNAM VARIABLE TRUST:
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam VT Growth and Income Fund
Putnam VT International Growth Fund
Putnam VT International New Opportunities Fund
Putnam VT New Value Fund
Putnam VT Vista Fund
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 29, 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. 15 to the Registration Statement (Form N-4, No.
33-39100) of Cova Variable Annuity Account One.
/s/KPMG LLP
KPMG LLP
Chicago, Illinois
April 29, 1999
AGREEMENT GOVERNING CONTRIBUTION
TO
XEROX VARIABLE ANNUITY ACCOUNT ONE
BY
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
This Agreement is made by and between XEROX VARIABLE ANNUITY ACCOUNT ONE
("Separate Account"), a separate account of Xerox Financial Services Life
Insurance Company duly organized under the laws of the State of Missouri and
Xerox Financial Services Life Insurance Company ("Insurance Company"), a life
insurance company duly organized under the laws of the State of Missouri.
WHEREAS, Insurance Company has established the Separate Account for the purpose
of issuing variable annuity contracts and proposes to contribute to the Separate
Account up to the sum of $10,000,000 ("Contribution(s)") in the manner
hereinafter described;
WHEREAS, it is necessary and desirable that the terms under which said
Contribution(s) is made and the respective rights of Insurance Company and the
Separate Account with respect thereto be determined;
NOW, THEREFORE, it is hereby agreed between Insurance Company and the Separate
Account as follows:
I
Insurance Company hereby commits itself to make an initial Contribution to the
Separate Account of $100,000 and may, in its sole discretion, make subsequent
Contributions up to the sum of $10,000,000 (inclusive of the $100,000 initial
Contribution). Insurance Company hereby represents and agrees that it is making
such Contribution(s) for purposes of providing working capital for the Separate
Account and not with a view to redeeming or disposing of any interest in the
Separate Account resulting from such Contribution(s).
II
In consideration for such Contribution(s) and without deduction of any sales or
other charges, the Separate Account shall credit Insurance Company with
accumulation units of which Insurance Company shall be the owner. Such
accumulation units shall share pro rate in the investment performance of the
Separate Account and shall be subject to the same valuation procedures and the
same periodic charges as are other accumulation units and annuity units in the
Separate Account.
III
Insurance Company hereby acknowledges that by making such Contribution(s) it is
not and shall not be regarded as a creditor of the Separate Account and that the
relationship of debtor-creditor between the Separate Account and Insurance
Company does not exist with respect to the amount so contributed. Insurance
Company agrees that by making such Contribution(s) it is not now and shall not
in the future be, or be deemed to be, the holder of any interest other than as
provided in paragraph II of this agreement. Insurance Company agrees that its
interest in the Separate Account as a result of such Contribution(s) shall be
neither senior to nor subordinate to the interests of owners of variable annuity
contracts issued with respect to the Separate Account and that, in the event of
liquidation of the Separate Account, however occurring, Insurance Company shall
have no preferential rights of any kind over such contract owners' but shall
share ratably with them.
IV
All commitments of Insurance Company hereunder shall be forever binding upon its
successor or successors.
V
Insurance Company shall not withdraw the initial Contribution of $100,000 prior
to five years from the date hereof unless the program is terminated and no more
variable annuity Contracts are offered through the Separate Account. The Company
may also, at any time, withdraw one dollar of the initial Contribution for each
dollar of assets contributed to the Separate Account in the form of purchase
payments from annuity contract owners. There are no limitations on withdrawals
for subsequent Contributions.
VI
The Separate Account hereby accepts such Contribution(s) subject to the terms of
this Agreement.
Executed this 6th day of December, 1989.
XEROX FINANCIAL SERVICES LIFE
INSURANCE COMPANY
By: /s/ROBERT B. STACK
-----------------------------
Robert B. Stack
ATTEST: /s/signature illegible
----------------------
XEROX VARIABLE ANNUITY ACCOUNT ONE
By: /s/ROBERT B. STACK
-----------------------------
Robert B. Stack
ATTEST: /s/signature illegible
-----------------------
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Standard 1 Year Return Data
As of 12/31/98
Date Transaction Amount Unit Units Transaction Unit
Value Before Units After
Transaction Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 12/31/97 purchase 1,000.00 12.881792 0.0000 77.6290 77.6290
12/31/98 annual fee (1.05) 13.496500 77.6290 (0.0778) 77.5512
12/31/98 surrender fee (45.00) 13.496500 77.5512 (3.3342) 74.2170
GACC Money Market 12/31/97 purchase 1,000.00 10.667011 0.0000 93.7470 93.7470
12/31/98 annual fee (1.04) 11.109943 93.7470 (0.0936) 93.6534
12/31/98 surrender fee (45.00) 11.109943 93.6534 (4.0504) 89.6030
LA Developing Growth 12/31/97 purchase 1,000.00 10.527554 0.0000 94.9888 94.9888
12/31/98 annual fee (1.05) 11.067854 94.9888 (0.0949) 94.8939
12/31/98 surrender fee (45.00) 11.067854 94.8939 (4.0658) 90.8281
LA Large Cap Research 12/31/97 purchase 1,000.00 9.899560 0.0000 101.0146 101.0146
12/31/98 annual fee (1.19) 11.825550 101.0146 (0.1006) 100.9140
12/31/98 surrender fee (45.00) 11.825550 100.9140 (3.8053) 97.1087
LA Mid-Cap Value 12/31/97 purchase 1,000.00 10.467957 0.0000 95.5296 95.5296
12/31/98 annual fee (1.00) 10.437949 95.5296 (0.0958) 95.4338
12/31/98 surrender fee (45.00) 10.437949 95.4338 (4.3112) 91.1226
JPM Quality Bond 12/31/97 purchase 1,000.00 11.155126 0.0000 89.6449 89.6449
12/31/98 annual fee (1.07) 11.914489 89.6449 (0.0898) 89.5551
12/31/98 surrender fee (45.00) 11.914489 89.5551 (3.7769) 85.7782
JPM Small Cap Stock 12/31/97 purchase 1,000.00 13.491466 0.0000 74.1209 74.1209
12/31/98 annual fee (0.93) 12.582860 74.1209 (0.0739) 74.0470
12/31/98 surrender fee (45.00) 12.582860 74.0470 (3.5763) 70.4707
JPM Large Cap Stock 12/31/97 purchase 1,000.00 14.889462 0.0000 67.1616 67.1616
12/31/98 annual fee (1.30) 19.428499 67.1616 (0.0669) 67.0947
12/31/98 surrender fee (45.00) 19.428499 67.0947 (2.3162) 64.7785
JPM Select Equity 12/31/97 purchase 1,000.00 14.053502 0.0000 71.1566 71.1566
12/31/98 annual fee (1.21) 16.987204 71.1566 (0.0712) 71.0854
12/31/98 surrender fee (45.00) 16.987204 71.0854 (2.6491) 68.4363
JPM International Equity 12/31/97 purchase 1,000.00 11.462435 0.0000 87.2415 87.2415
12/31/98 annual fee (1.12) 12.889315 87.2415 (0.0869) 87.1546
12/31/98 surrender fee (45.00) 12.889315 87.1546 (3.4913) 83.6633
MVA Balanced 12/31/97 purchase 1,000.00 10.531920 0.0000 94.9494 94.9494
12/31/98 annual fee (1.12) 11.767845 94.9494 (0.0952) 94.8542
12/31/98 surrender fee (45.00) 11.767845 94.8542 (3.8240) 91.0302
MVA Small Cap Equity 12/31/97 purchase 1,000.00 10.418047 0.0000 95.9873 95.9873
12/31/98 annual fee (0.98) 10.238676 95.9873 (0.0957) 95.8916
12/31/98 surrender fee (45.00) 10.238676 95.8916 (4.3951) 91.4965
MVA Equity Income 12/31/97 purchase 1,000.00 11.194166 0.0000 89.3322 89.3322
12/31/98 annual fee (1.08) 12.068849 89.3322 (0.0895) 89.2427
12/31/98 surrender fee (45.00) 12.068849 89.2427 (3.7286) 85.5141
MVA Growth & Income Equity 12/31/97 purchase 1,000.00 10.756082 0.0000 92.9707 92.9707
12/31/98 annual fee (1.13) 12.188331 92.9707 (0.0927) 92.8780
12/31/98 surrender fee (45.00) 12.188331 92.8780 (3.6921) 89.1859
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.31) 13.060203 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 13.060203 99.8997 (3.4456) 96.4541
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.18) 11.770729 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 11.770729 99.8998 (3.8230) 96.0768
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.391449 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 11.391449 99.8999 (3.9503) 95.9496
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.46) 14.595485 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 14.595485 99.9000 (3.0831) 96.8169
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.80) 7.988435 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 7.988435 99.8999 (5.6331) 94.2668
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.92) 9.228765 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 9.228765 99.9003 (4.8761) 95.0242
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.17) 11.676086 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 11.676086 99.8998 (3.8540) 96.0458
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.88) 8.753222 100.0000 (0.1005) 99.8995
12/31/98 surrender fee (45.00) 8.753222 99.8995 (5.1410) 94.7585
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.556498 100.0000 (0.1004) 99.8996
12/31/98 surrender fee (45.00) 10.556498 99.8996 (4.2628) 95.6368
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.172796 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 12.172796 99.8998 (3.6968) 96.2030
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.21) 12.066568 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 12.066568 99.8997 (3.7293) 96.1704
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.32) 13.233235 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 13.233235 99.9003 (3.4005) 96.4998
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.66) 6.571830 100.0000 (0.1004) 99.8996
12/31/98 surrender fee (45.00) 6.571830 99.8996 (6.8474) 93.0522
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.98) 9.845193 100.0000 (0.0995) 99.9005
12/31/98 surrender fee (45.00) 9.845193 99.9005 (4.5708) 95.3297
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.07) 10.669943 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 10.669943 99.8997 (4.2175) 95.6822
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.232731 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 12.232731 99.9003 (3.6787) 96.2216
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.03) 10.326519 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.326519 99.9003 (4.3577) 95.5426
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.99) 9.893828 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 9.893828 99.8999 (4.5483) 95.3516
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.05) 10.533011 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.533011 99.9003 (4.2723) 95.6280
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.02) 10.151332 100.0000 (0.1005) 99.8995
12/31/98 surrender fee (45.00) 10.151332 99.8995 (4.4329) 95.4666
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,047.72 1,046.67
1,046.67 1,001.67
0.00 1,000.00
1,041.52 1,040.48
1,040.48 995.48
0.00 1,000.00
1,051.32 1,050.27
1,050.27 1,005.27
0.00 1,000.00
1,194.55 1,193.36
1,193.36 1,148.36
0.00 1,000.00
997.13 996.13
996.13 951.13
0.00 1,000.00
1,068.07 1,067.00
1,067.00 1,022.00
0.00 1,000.00
932.65 931.72
931.72 886.72
0.00 1,000.00
1,304.85 1,303.55
1,303.55 1,258.55
0.00 1,000.00
1,208.75 1,207.54
1,207.54 1,162.54
0.00 1,000.00
1,124.48 1,123.36
1,123.36 1,078.36
0.00 1,000.00
1,117.35 1,116.23
1,116.23 1,071.23
0.00 1,000.00
982.78 981.80
981.80 936.80
0.00 1,000.00
1,078.14 1,077.06
1,077.06 1,032.06
0.00 1,000.00
1,133.16 1,132.03
1,132.03 1,087.03
0.00 1,000.00
1,306.02 1,304.71
1,304.71 1,259.71
0.00 1,000.00
1,177.07 1,175.89
1,175.89 1,130.89
0.00 1,000.00
1,139.14 1,138.00
1,138.00 1,093.00
0.00 1,000.00
1,459.55 1,458.09
1,458.09 1,413.09
0.00 1,000.00
798.84 798.04
798.04 753.04
0.00 1,000.00
922.88 921.96
921.96 876.96
0.00 1,000.00
1,167.61 1,166.44
1,166.44 1,121.44
0.00 1,000.00
875.32 874.44
874.44 829.44
0.00 1,000.00
1,055.65 1,054.59
1,054.59 1,009.59
0.00 1,000.00
1,217.28 1,216.06
1,216.06 1,171.06
0.00 1,000.00
1,206.66 1,205.45
1,205.45 1,160.45
0.00 1,000.00
1,323.32 1,322.00
1,322.00 1,277.00
0.00 1,000.00
657.18 656.52
656.52 611.52
0.00 1,000.00
984.52 983.54
983.54 938.54
0.00 1,000.00
1,066.99 1,065.92
1,065.92 1,020.92
0.00 1,000.00
1,223.27 1,222.05
1,222.05 1,177.05
0.00 1,000.00
1,032.65 1,031.62
1,031.62 986.62
0.00 1,000.00
989.38 988.39
988.39 943.39
0.00 1,000.00
1,053.30 1,052.25
1,052.25 1,007.25
0.00 1,000.00
1,015.13 1,014.11
1,014.11 969.11
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Standard 1 Year Returns
As of 12/31/98
Total Account 12/31/98 Initial Inception Days Since
Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 0.17% 1,001.67 13.496500 1,000.00 5/1/96 974
GACC Money Market -0.45% 995.48 11.109943 1,000.00 6/3/96 941
LA Developing Growth 0.53% 1,005.27 11.067854 1,000.00 8/20/97 498
LA Large Cap Research 14.84% 1,148.36 11.825550 1,000.00 8/20/97 498
LA Mid-Cap Value -4.89% 951.13 10.437949 1,000.00 8/20/97 498
JPM Quality Bond 2.20% 1,022.00 11.914489 1,000.00 5/1/96 974
JPM Small Cap Stock -11.33% 886.72 12.582860 1,000.00 5/1/96 974
JPM Large Cap Stock 25.86% 1,258.55 19.428499 1,000.00 5/1/96 974
JPM Select Equity 16.25% 1,162.54 16.987204 1,000.00 5/1/96 974
JPM International Equity 7.84% 1,078.36 12.889315 1,000.00 5/1/96 974
MVA Balanced 7.12% 1,071.23 11.767845 1,000.00 7/1/97 548
MVA Small Cap Equity -6.32% 936.80 10.238676 1,000.00 7/1/97 548
MVA Equity Income 3.21% 1,032.06 12.068849 1,000.00 7/1/97 548
MVA Growth & Income Equity 8.70% 1,087.03 12.188331 1,000.00 7/1/97 548
AIM Value 25.97% 1,259.71 13.060203 1,000.00 12/31/97 365
AIM Capital Appreciation 13.09% 1,130.89 11.770729 1,000.00 12/31/97 365
AIM International Equity 9.30% 1,093.00 11.391449 1,000.00 12/31/97 365
Alliance Premier Growth 41.31% 1,413.09 14.595485 1,000.00 12/31/97 365
Alliance Real Estate Investment -24.70% 753.04 7.988435 1,000.00 12/31/97 365
Liberty Newport Tiger -12.30% 876.96 9.228765 1,000.00 12/31/97 365
Kemper Small Cap Growth 12.14% 1,121.44 11.676086 1,000.00 12/31/97 365
Kemper Small Cap Value -17.06% 829.44 8.753222 1,000.00 12/31/97 365
Kemper Government Securities 0.96% 1,009.59 10.556498 1,000.00 12/31/97 365
MFS Research 17.11% 1,171.06 12.172796 1,000.00 12/31/97 365
MFS Growth with Income 16.05% 1,160.45 12.066568 1,000.00 12/31/97 365
MFS Emerging Growth 27.70% 1,277.00 13.233235 1,000.00 12/31/97 365
MFS F&C Emerging Markets -38.85% 611.52 6.571830 1,000.00 12/31/97 365
MFS High Income -6.15% 938.54 9.845193 1,000.00 12/31/97 365
MFS World Governments 2.09% 1,020.92 10.669943 1,000.00 12/31/97 365
Oppenheimer Growth 17.71% 1,177.05 12.232731 1,000.00 12/31/97 365
Oppenheimer Growth & Income -1.34% 986.62 10.326519 1,000.00 12/31/97 365
Oppenheimer High Income -5.66% 943.39 9.893828 1,000.00 12/31/97 365
Oppenheimer Bond 0.72% 1,007.25 10.533011 1,000.00 12/31/97 365
Oppenheimer Strategic Bond -3.09% 969.11 10.151332 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Standard Inception to Date Return Data
As of 12/31/98
Date Transaction Amount Unit Units TransactionUnit
Value Before Units After
Transaction Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 5/1/96 purchase 1,000.00 10.097690 0.0000 99.0326 99.0326
5/1/97 annual fee (1.14) 11.516923 99.0326 (0.0990) 98.9336
5/1/98 annual fee (1.34) 13.535615 98.9336 (0.0990) 98.8346
12/31/98 annual fee (1.33) 13.496500 98.8346 (0.0985) 98.7361
12/31/98 surrender fee (45.00) 13.496500 98.7361 (3.3342) 95.4019
GACC Money Market 6/3/96 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
6/3/97 annual fee (1.04) 10.410578 100.0000 (0.0999) 99.9001
6/3/98 annual fee (1.08) 10.858145 99.9001 (0.0995) 99.8006
12/31/98 annual fee (1.11) 11.109943 99.8006 (0.0999) 99.7007
12/31/98 surrender fee (45.00) 11.109943 99.7007 (4.0504) 95.6503
LA Developing Growth 8/20/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
8/20/98 annual fee (0.98) 9.823023 100.0000 (0.0998) 99.9002
12/31/98 annual fee (1.11) 11.067854 99.9002 (0.1003) 99.7999
12/31/98 surrender fee (45.00) 11.067854 99.7999 (4.0658) 95.7341
LA Large Cap Research 8/20/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
8/20/98 annual fee (1.05) 10.537316 100.0000 (0.0996) 99.9004
12/31/98 annual fee (1.18) 11.825550 99.9004 (0.0998) 99.8006
12/31/98 surrender fee (45.00) 11.825550 99.8006 (3.8053) 95.9953
LA Mid-Cap Value 8/20/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
8/20/98 annual fee (0.99) 9.919404 100.0000 (0.0998) 99.9002
12/31/98 annual fee (1.04) 10.437949 99.9002 (0.0996) 99.8006
12/31/98 surrender fee (45.00) 10.437949 99.8006 (4.3112) 95.4894
JPM Quality Bond 5/1/96 purchase 1,000.00 9.897228 0.0000 101.0384 101.0384
5/1/97 annual fee (1.05) 10.405141 101.0384 (0.1009) 100.9375
5/1/98 annual fee (1.15) 11.356198 100.9375 (0.1013) 100.8362
12/31/98 annual fee (1.20) 11.914489 100.8362 (0.1007) 100.7355
12/31/98 surrender fee (45.00) 11.914489 100.7355 (3.7769) 96.9586
JPM Small Cap Stock 5/1/96 purchase 1,000.00 10.512560 0.0000 95.1243 95.1243
5/1/97 annual fee (0.99) 10.358427 95.1243 (0.0956) 95.0287
5/1/98 annual fee (1.42) 14.969970 95.0287 (0.0949) 94.9338
12/31/98 annual fee (1.19) 12.582860 94.9338 (0.0946) 94.8392
12/31/98 surrender fee (45.00) 12.582860 94.8392 (3.5763) 91.2629
JPM Large Cap Stock 5/1/96 purchase 1,000.00 10.003025 0.0000 99.9698 99.9698
5/1/97 annual fee (1.22) 12.198198 99.9698 (0.1000) 99.8698
5/1/98 annual fee (1.75) 17.502632 99.8698 (0.1000) 99.7698
12/31/98 annual fee (1.94) 19.428499 99.7698 (0.0999) 99.6699
12/31/98 surrender fee (45.00) 19.428499 99.6699 (2.3162) 97.3537
JPM Select Equity 5/1/96 purchase 1,000.00 10.083890 0.0000 99.1681 99.1681
5/1/97 annual fee (1.14) 11.445501 99.1681 (0.0996) 99.0685
5/1/98 annual fee (1.60) 16.125129 99.0685 (0.0992) 98.9693
12/31/98 annual fee (1.68) 16.987204 98.9693 (0.0989) 98.8704
12/31/98 surrender fee (45.00) 16.987204 98.8704 (2.6491) 96.2213
JPM International Equity 5/1/96 purchase 1,000.00 10.214899 0.0000 97.8962 97.8962
5/1/97 annual fee (1.09) 11.135715 97.8962 (0.0979) 97.7983
5/1/98 annual fee (1.28) 13.138587 97.7983 (0.0974) 97.7009
12/31/98 annual fee (1.26) 12.889315 97.7009 (0.0978) 97.6031
12/31/98 surrender fee (45.00) 12.889315 97.6031 (3.4913) 94.1118
MVA Balanced 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee (1.12) 11.236058 100.0000 (0.0997) 99.9003
12/31/98 annual fee (1.18) 11.767845 99.9003 (0.1003) 99.8000
12/31/98 surrender fee (45.00) 11.767845 99.8000 (3.8240) 95.9760
MVA Small Cap Equity 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee (1.10) 10.989610 100.0000 (0.1001) 99.8999
12/31/98 annual fee (1.02) 10.238676 99.8999 (0.0996) 99.8003
12/31/98 surrender fee (45.00) 10.238676 99.8003 (4.3951) 95.4052
MVA Equity Income 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee (1.24) 12.418195 100.0000 (0.0999) 99.9001
12/31/98 annual fee (1.21) 12.068849 99.9001 (0.1003) 99.7998
12/31/98 surrender fee (45.00) 12.068849 99.7998 (3.7286) 96.0712
MVA Growth & Income Equity 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee (1.19) 11.941375 100.0000 (0.0997) 99.9003
12/31/98 annual fee (1.22) 12.188331 99.9003 (0.1001) 99.8002
12/31/98 surrender fee (45.00) 12.188331 99.8002 (3.6921) 96.1081
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.31) 13.060203 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 13.060203 99.8997 (3.4456) 96.4541
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.18) 11.770729 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 11.770729 99.8998 (3.8230) 96.0768
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.391449 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 11.391449 99.8999 (3.9503) 95.9496
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.46) 14.595485 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 14.595485 99.9000 (3.0831) 96.8169
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.80) 7.988435 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 7.988435 99.8999 (5.6331) 94.2668
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.92) 9.228765 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 9.228765 99.9003 (4.8761) 95.0242
Kemper Dreman High Return 5/15/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.05) 10.487302 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (50.00) 10.487302 99.8999 (4.7677) 95.1322
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.17) 11.676086 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 11.676086 99.8998 (3.8540) 96.0458
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.88) 8.753222 100.0000 (0.1005) 99.8995
12/31/98 surrender fee (45.00) 8.753222 99.8995 (5.1410) 94.7585
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.556498 100.0000 (0.1004) 99.8996
12/31/98 surrender fee (45.00) 10.556498 99.8996 (4.2628) 95.6368
MFS Bond 5/15/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.05) 10.491811 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (50.00) 10.491811 99.8999 (4.7656) 95.1343
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.172796 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 12.172796 99.8998 (3.6968) 96.2030
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.21) 12.066568 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 12.066568 99.8997 (3.7293) 96.1704
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.32) 13.233235 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 13.233235 99.9003 (3.4005) 96.4998
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.66) 6.571830 100.0000 (0.1004) 99.8996
12/31/98 surrender fee (45.00) 6.571830 99.8996 (6.8474) 93.0522
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.98) 9.845193 100.0000 (0.0995) 99.9005
12/31/98 surrender fee (45.00) 9.845193 99.9005 (4.5708) 95.3297
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.07) 10.669943 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 10.669943 99.8997 (4.2175) 95.6822
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.232731 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 12.232731 99.9003 (3.6787) 96.2216
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.03) 10.326519 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.326519 99.9003 (4.3577) 95.5426
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.99) 9.893828 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 9.893828 99.8999 (4.5483) 95.3516
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.05) 10.533011 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.533011 99.9003 (4.2723) 95.6280
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.02) 10.151332 100.0000 (0.1005) 99.8995
12/31/98 surrender fee (45.00) 10.151332 99.8995 (4.4329) 95.4666
Templeton International Fund 5/1/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.91) 9.144522 100.0000 (0.0995) 99.9005
12/31/98 surrender fee (50.00) 9.144522 99.9005 (5.4678) 94.4327
Templeton Developing Markets 5/1/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.76) 7.552448 100.0000 (0.1006) 99.8994
12/31/98 surrender fee (50.00) 7.552448 99.8994 (6.6204) 93.2790
Mutual Shares Investments 5/1/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.96) 9.630622 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (50.00) 9.630622 99.9003 (5.1918) 94.7085
Fidelity Growth 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.31) 13.077878 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (50.00) 13.077878 99.8998 (3.8233) 96.0765
Fidelity Contrafund 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.24) 12.357373 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (50.00) 12.357373 99.8997 (4.0462) 95.8535
Fidelity Growth Opportunities 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.17) 11.742360 100.0000 (0.0996) 99.9004
12/31/98 surrender fee (50.00) 11.742360 99.9004 (4.2581) 95.6423
Fidelity Growth & Income 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.202502 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (50.00) 12.202502 99.9000 (4.0975) 95.8025
Fidelity Equity-Income 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.626607 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (50.00) 10.626607 99.9003 (4.7052) 95.1951
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,140.55 1,139.41
1,339.13 1,337.79
1,333.92 1,332.59
1,332.59 1,287.59
0.00 1,000.00
1,041.06 1,040.02
1,084.73 1,083.65
1,108.78 1,107.67
1,107.67 1,062.67
0.00 1,000.00
982.30 981.32
1,105.68 1,104.57
1,104.57 1,059.57
0.00 1,000.00
1,053.73 1,052.68
1,181.38 1,180.20
1,180.20 1,135.20
0.00 1,000.00
991.94 990.95
1,042.75 1,041.71
1,041.71 996.71
0.00 1,000.00
1,051.32 1,050.27
1,146.27 1,145.12
1,201.41 1,200.21
1,200.21 1,155.21
0.00 1,000.00
985.34 984.35
1,422.58 1,421.16
1,194.54 1,193.35
1,193.35 1,148.35
0.00 1,000.00
1,219.45 1,218.23
1,747.98 1,746.23
1,938.38 1,936.44
1,936.44 1,891.44
0.00 1,000.00
1,135.03 1,133.89
1,597.49 1,595.89
1,681.21 1,679.53
1,679.53 1,634.53
0.00 1,000.00
1,090.14 1,089.05
1,284.93 1,283.65
1,259.30 1,258.04
1,258.04 1,213.04
0.00 1,000.00
1,123.61 1,122.49
1,175.61 1,174.43
1,174.43 1,129.43
0.00 1,000.00
1,098.96 1,097.86
1,022.84 1,021.82
1,021.82 976.82
0.00 1,000.00
1,241.82 1,240.58
1,205.68 1,204.47
1,204.47 1,159.47
0.00 1,000.00
1,194.14 1,192.95
1,217.62 1,216.40
1,216.40 1,171.40
0.00 1,000.00
1,306.02 1,304.71
1,304.71 1,259.71
0.00 1,000.00
1,177.07 1,175.89
1,175.89 1,130.89
0.00 1,000.00
1,139.14 1,138.00
1,138.00 1,093.00
0.00 1,000.00
1,459.55 1,458.09
1,458.09 1,413.09
0.00 1,000.00
798.84 798.04
798.04 753.04
0.00 1,000.00
922.88 921.96
921.96 876.96
0.00 1,000.00
1,048.73 1,047.68
1,047.68 997.68
0.00 1,000.00
1,167.61 1,166.44
1,166.44 1,121.44
0.00 1,000.00
875.32 874.44
874.44 829.44
0.00 1,000.00
1,055.65 1,054.59
1,054.59 1,009.59
0.00 1,000.00
1,049.18 1,048.13
1,048.13 998.13
0.00 1,000.00
1,217.28 1,216.06
1,216.06 1,171.06
0.00 1,000.00
1,206.66 1,205.45
1,205.45 1,160.45
0.00 1,000.00
1,323.32 1,322.00
1,322.00 1,277.00
0.00 1,000.00
657.18 656.52
656.52 611.52
0.00 1,000.00
984.52 983.54
983.54 938.54
0.00 1,000.00
1,066.99 1,065.92
1,065.92 1,020.92
0.00 1,000.00
1,223.27 1,222.05
1,222.05 1,177.05
0.00 1,000.00
1,032.65 1,031.62
1,031.62 986.62
0.00 1,000.00
989.38 988.39
988.39 943.39
0.00 1,000.00
1,053.30 1,052.25
1,052.25 1,007.25
0.00 1,000.00
1,015.13 1,014.11
1,014.11 969.11
0.00 1,000.00
914.45 913.54
913.54 863.54
0.00 1,000.00
755.24 754.49
754.49 704.48
0.00 1,000.00
963.06 962.10
962.10 912.10
0.00 1,000.00
1,307.79 1,306.48
1,306.48 1,256.48
0.00 1,000.00
1,235.74 1,234.50
1,234.50 1,184.50
0.00 1,000.00
1,174.24 1,173.07
1,173.07 1,123.07
0.00 1,000.00
1,220.25 1,219.03
1,219.03 1,169.03
0.00 1,000.00
1,062.66 1,061.60
1,061.60 1,011.60
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Standard Inception-to-Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 9.92% 28.76% 1,287.59 13.496500 1,000.00 5/1/96 975
GACC Money Market 2.39% 6.27% 1,062.67 11.109943 1,000.00 6/3/96 941
LA Developing Growth 4.32% 5.96% 1,059.57 11.067854 1,000.00 8/20/97 499
LA Large Cap Research 9.72% 13.52% 1,135.20 11.825550 1,000.00 8/20/97 499
LA Mid-Cap Value -0.24% -0.33% 996.71 10.437949 1,000.00 8/20/97 499
JPM Quality Bond 5.55% 15.52% 1,155.21 11.914489 1,000.00 5/1/96 975
JPM Small Cap Stock 5.31% 14.84% 1,148.35 12.582860 1,000.00 5/1/96 975
JPM Large Cap Stock 26.95% 89.14% 1,891.44 19.428499 1,000.00 5/1/96 975
JPM Select Equity 20.19% 63.45% 1,634.53 16.987204 1,000.00 5/1/96 975
JPM International Equity 7.50% 21.30% 1,213.04 12.889315 1,000.00 5/1/96 975
MVA Balanced 8.43% 12.94% 1,129.43 11.767845 1,000.00 7/1/97 549
MVA Small Cap Equity -1.55% -2.32% 976.82 10.238676 1,000.00 7/1/97 549
MVA Equity Income 10.34% 15.95% 1,159.47 12.068849 1,000.00 7/1/97 549
MVA Growth & Income Equity 11.09% 17.14% 1,171.40 12.188331 1,000.00 7/1/97 549
AIM Value 25.97% 25.97% 1,259.71 13.060203 1,000.00 12/31/97 365
AIM Capital Appreciation 13.09% 13.09% 1,130.89 11.770729 1,000.00 12/31/97 365
AIM International Equity 9.30% 9.30% 1,093.00 11.391449 1,000.00 12/31/97 365
Alliance Premier Growth 41.31% 41.31% 1,413.09 14.595485 1,000.00 12/31/97 365
Alliance Real Estate Investment -24.70% -24.70% 753.04 7.988435 1,000.00 12/31/97 365
Liberty Newport Tiger -12.30% -12.30% 876.96 9.228765 1,000.00 12/31/97 365
Kemper Dreman High Return -0.23% 997.68 10.487302 1,000.00 5/15/98 230
Kemper Small Cap Growth 12.14% 12.14% 1,121.44 11.676086 1,000.00 12/31/97 365
Kemper Small Cap Value -17.06% -17.06% 829.44 8.753222 1,000.00 12/31/97 365
Kemper Government Securities 0.96% 0.96% 1,009.59 10.556498 1,000.00 12/31/97 365
MFS Bond -0.19% 998.13 10.491811 1,000.00 5/15/98 230
MFS Research 17.11% 17.11% 1,171.06 12.172796 1,000.00 12/31/97 365
MFS Growth with Income 16.05% 16.05% 1,160.45 12.066568 1,000.00 12/31/97 365
MFS Emerging Growth 27.70% 27.70% 1,277.00 13.233235 1,000.00 12/31/97 365
MFS F&C Emerging Markets -38.85% -38.85% 611.52 6.571830 1,000.00 12/31/97 365
MFS High Income -6.15% -6.15% 938.54 9.845193 1,000.00 12/31/97 365
MFS World Governments 2.09% 2.09% 1,020.92 10.669943 1,000.00 12/31/97 365
Oppenheimer Growth 17.71% 17.71% 1,177.05 12.232731 1,000.00 12/31/97 365
Oppenheimer Growth & Income -1.34% -1.34% 986.62 10.326519 1,000.00 12/31/97 365
Oppenheimer High Income -5.66% -5.66% 943.39 9.893828 1,000.00 12/31/97 365
Oppenheimer Bond 0.72% 0.72% 1,007.25 10.533011 1,000.00 12/31/97 365
Oppenheimer Strategic Bond -3.09% -3.09% 969.11 10.151332 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Standard Inception-to-Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C>
Templeton International -13.65% 863.54 9.144522 1,000.00 5/1/98 244
Templeton Developing Markets -29.55% 704.48 7.552448 1,000.00 5/1/98 244
Mutual Shares Investments -8.79% 912.10 9.630622 1,000.00 5/1/98 244
Fidelity Growth 25.65% 1,256.48 13.077878 1,000.00 2/17/98 317
Fidelity Contrafund 18.45% 1,184.50 12.357373 1,000.00 2/17/98 317
Fidelity Growth Opportunities 12.31% 1,123.07 11.742360 1,000.00 2/17/98 317
Fidelity Growth & Income 16.90% 1,169.03 12.202502 1,000.00 2/17/98 317
Fidelity Equity-Income 1.16% 1,011.60 10.626607 1,000.00 2/17/98 317
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Non-Standard 1 Year Data
As of 12/31/98
Date Transaction Amount Unit Units TransactionUnit
Value Before Units After
Transaction Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 12/31/97 purchase 1,000.00 12.881792 0.0000 77.6290 77.6290
12/31/98 annual fee 13.496500 77.6290 0.0000 77.6290
12/31/98 surrender fee 13.496500 77.6290 0.0000 77.6290
GACC Money Market 12/31/97 purchase 1,000.00 10.667011 0.0000 93.7470 93.7470
12/31/98 annual fee 11.109943 93.7470 0.0000 93.7470
12/31/98 surrender fee 11.109943 93.7470 0.0000 93.7470
LA Developing Growth 12/31/97 purchase 1,000.00 10.527554 0.0000 94.9888 94.9888
12/31/98 annual fee 11.067854 94.9888 0.0000 94.9888
12/31/98 surrender fee 11.067854 94.9888 0.0000 94.9888
LA Large Cap Research 12/31/97 purchase 1,000.00 9.899560 0.0000 101.0146 101.0146
12/31/98 annual fee 11.825550 101.0146 0.0000 101.0146
12/31/98 surrender fee 11.825550 101.0146 0.0000 101.0146
LA Mid-Cap Value 12/31/97 purchase 1,000.00 10.467957 0.0000 95.5296 95.5296
12/31/98 annual fee 10.437949 95.5296 0.0000 95.5296
12/31/98 surrender fee 10.437949 95.5296 0.0000 95.5296
JPM Quality Bond 12/31/97 purchase 1,000.00 11.155126 0.0000 89.6449 89.6449
12/31/98 annual fee 11.914489 89.6449 0.0000 89.6449
12/31/98 surrender fee 11.914489 89.6449 0.0000 89.6449
JPM Small Cap Stock 12/31/97 purchase 1,000.00 13.491466 0.0000 74.1209 74.1209
12/31/98 annual fee 12.582860 74.1209 0.0000 74.1209
12/31/98 surrender fee 12.582860 74.1209 0.0000 74.1209
JPM Large Cap Stock 12/31/97 purchase 1,000.00 14.889462 0.0000 67.1616 67.1616
12/31/98 annual fee 19.428499 67.1616 0.0000 67.1616
12/31/98 surrender fee 19.428499 67.1616 0.0000 67.1616
JPM Select Equity 12/31/97 purchase 1,000.00 14.053502 0.0000 71.1566 71.1566
12/31/98 annual fee 16.987204 71.1566 0.0000 71.1566
12/31/98 surrender fee 16.987204 71.1566 0.0000 71.1566
JPM International Equity 12/31/97 purchase 1,000.00 11.462435 0.0000 87.2415 87.2415
12/31/98 annual fee 12.889315 87.2415 0.0000 87.2415
12/31/98 surrender fee 12.889315 87.2415 0.0000 87.2415
MVA Balanced 12/31/97 Purchase 1,000.00 10.531920 0.0000 94.9494 94.9494
12/31/98 Annual Fee 11.767845 94.9494 0.0000 94.9494
12/31/98 Surrender 11.767845 94.9494 0.0000 94.9494
MVA Small Cap Equity 12/31/97 Purchase 1,000.00 10.418047 0.0000 95.9873 95.9873
12/31/98 Annual Fee 10.238676 95.9873 0.0000 95.9873
12/31/98 Surrender 10.238676 95.9873 0.0000 95.9873
MVA Equity Income 12/31/97 Purchase 1,000.00 11.194166 0.0000 89.3322 89.3322
12/31/98 Annual Fee 12.068849 89.3322 0.0000 89.3322
12/31/98 Surrender 12.068849 89.3322 0.0000 89.3322
MVA Growth & Income Equity 12/31/97 Purchase 1,000.00 10.756082 0.0000 92.9707 92.9707
12/31/98 Annual Fee 12.188331 92.9707 0.0000 92.9707
12/31/98 Surrender 12.188331 92.9707 0.0000 92.9707
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.060203 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.060203 100.0000 0.0000 100.0000
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.770729 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.770729 100.0000 0.0000 100.0000
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.391449 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.391449 100.0000 0.0000 100.0000
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 14.595485 100.0000 0.0000 100.0000
12/31/98 surrender fee 14.595485 100.0000 0.0000 100.0000
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 7.988435 100.0000 0.0000 100.0000
12/31/98 surrender fee 7.988435 100.0000 0.0000 100.0000
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.228765 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.228765 100.0000 0.0000 100.0000
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.676086 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.676086 100.0000 0.0000 100.0000
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 8.753222 100.0000 0.0000 100.0000
12/31/98 surrender fee 8.753222 100.0000 0.0000 100.0000
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.556498 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.556498 100.0000 0.0000 100.0000
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.172796 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.172796 100.0000 0.0000 100.0000
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.066568 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.066568 100.0000 0.0000 100.0000
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.233235 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.233235 100.0000 0.0000 100.0000
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 6.571830 100.0000 0.0000 100.0000
12/31/98 surrender fee 6.571830 100.0000 0.0000 100.0000
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.845193 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.845193 100.0000 0.0000 100.0000
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.669943 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.669943 100.0000 0.0000 100.0000
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.232731 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.232731 100.0000 0.0000 100.0000
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.326519 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.326519 100.0000 0.0000 100.0000
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.893828 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.893828 100.0000 0.0000 100.0000
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.533011 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.533011 100.0000 0.0000 100.0000
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.151332 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.151332 100.0000 0.0000 100.0000
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,047.72 1,047.72
1,047.72 1,047.72
0.00 1,000.00
1,041.52 1,041.52
1,041.52 1,041.52
0.00 1,000.00
1,051.32 1,051.32
1,051.32 1,051.32
0.00 1,000.00
1,194.55 1,194.55
1,194.55 1,194.55
0.00 1,000.00
997.13 997.13
997.13 997.13
0.00 1,000.00
1,068.07 1,068.07
1,068.07 1,068.07
0.00 1,000.00
932.65 932.65
932.65 932.65
0.00 1,000.00
1,304.85 1,304.85
1,304.85 1,304.85
0.00 1,000.00
1,208.75 1,208.75
1,208.75 1,208.75
0.00 1,000.00
1,124.48 1,124.48
1,124.48 1,124.48
0.00 1,000.00
1,117.35 1,117.35
1,117.35 1,117.35
0.00 1,000.00
982.78 982.78
982.78 982.78
0.00 1,000.00
1,078.14 1,078.14
1,078.14 1,078.14
0.00 1,000.00
1,133.16 1,133.16
1,133.16 1,133.16
0.00 1,000.00
1,306.02 1,306.02
1,306.02 1,306.02
0.00 1,000.00
1,177.07 1,177.07
1,177.07 1,177.07
0.00 1,000.00
1,139.14 1,139.14
1,139.14 1,139.14
0.00 1,000.00
1,459.55 1,459.55
1,459.55 1,459.55
0.00 1,000.00
798.84 798.84
798.84 798.84
0.00 1,000.00
922.88 922.88
922.88 922.88
0.00 1,000.00
1,167.61 1,167.61
1,167.61 1,167.61
0.00 1,000.00
875.32 875.32
875.32 875.32
0.00 1,000.00
1,055.65 1,055.65
1,055.65 1,055.65
0.00 1,000.00
1,217.28 1,217.28
1,217.28 1,217.28
0.00 1,000.00
1,206.66 1,206.66
1,206.66 1,206.66
0.00 1,000.00
1,323.32 1,323.32
1,323.32 1,323.32
0.00 1,000.00
657.18 657.18
657.18 657.18
0.00 1,000.00
984.52 984.52
984.52 984.52
0.00 1,000.00
1,066.99 1,066.99
1,066.99 1,066.99
0.00 1,000.00
1,223.27 1,223.27
1,223.27 1,223.27
0.00 1,000.00
1,032.65 1,032.65
1,032.65 1,032.65
0.00 1,000.00
989.38 989.38
989.38 989.38
0.00 1,000.00
1,053.30 1,053.30
1,053.30 1,053.30
0.00 1,000.00
1,015.13 1,015.13
1,015.13 1,015.13
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Non-Standard 1 Year Returns
As of 12/31/98
Total Account 12/31/98 Initial Inception Days Since
Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 4.77% 1,047.72 13.496500 1,000.00 5/1/96 975
GACC Money Market 4.15% 1,041.52 11.109943 1,000.00 6/3/96 941
LA Developing Growth 5.13% 1,051.32 11.067854 1,000.00 8/20/97 499
LA Large Cap Research 19.46% 1,194.55 11.825550 1,000.00 8/20/97 499
LA Mid-Cap Value -0.29% 997.13 10.437949 1,000.00 8/20/97 499
JPM Quality Bond 6.81% 1,068.07 11.914489 1,000.00 5/1/96 975
JPM Small Cap Stock -6.74% 932.65 12.582860 1,000.00 5/1/96 975
JPM Large Cap Stock 30.49% 1,304.85 19.428499 1,000.00 5/1/96 975
JPM Select Equity 20.88% 1,208.75 16.987204 1,000.00 5/1/96 975
JPM International Equity 12.45% 1,124.48 12.889315 1,000.00 5/1/96 975
MVA Balanced 11.74% 1,117.35 11.767845 1,000.00 7/1/97 549
MVA Small Cap Equity -1.72% 982.78 10.238676 1,000.00 7/1/97 549
MVA Equity Income 7.81% 1,078.14 12.068849 1,000.00 7/1/97 549
MVA Growth & Income Equity 13.32% 1,133.16 12.188331 1,000.00 7/1/97 549
AIM Value 30.60% 1,306.02 13.060203 1,000.00 12/31/97 365
AIM Capital Appreciation 17.71% 1,177.07 11.770729 1,000.00 12/31/97 365
AIM International Equity 13.91% 1,139.14 11.391449 1,000.00 12/31/97 365
Alliance Premier Growth 45.96% 1,459.55 14.595485 1,000.00 12/31/97 365
Alliance Real Estate Investment -20.12% 798.84 7.988435 1,000.00 12/31/97 365
Liberty Newport Tiger -7.71% 922.88 9.228765 1,000.00 12/31/97 365
Kemper Small Cap Growth 16.76% 1,167.61 11.676086 1,000.00 12/31/97 365
Kemper Small Cap Value -12.47% 875.32 8.753222 1,000.00 12/31/97 365
Kemper Government Securities 5.57% 1,055.65 10.556498 1,000.00 12/31/97 365
MFS Research 21.73% 1,217.28 12.172796 1,000.00 12/31/97 365
MFS Growth with Income 20.67% 1,206.66 12.066568 1,000.00 12/31/97 365
MFS Emerging Growth 32.33% 1,323.32 13.233235 1,000.00 12/31/97 365
MFS F&C Emerging Markets -34.28% 657.18 6.571830 1,000.00 12/31/97 365
MFS High Income -1.55% 984.52 9.845193 1,000.00 12/31/97 365
MFS World Governments 6.70% 1,066.99 10.669943 1,000.00 12/31/97 365
Oppenheimer Growth 22.33% 1,223.27 12.232731 1,000.00 12/31/97 365
Oppenheimer Growth & Income 3.27% 1,032.65 10.326519 1,000.00 12/31/97 365
Oppenheimer High Income -1.06% 989.38 9.893828 1,000.00 12/31/97 365
Oppenheimer Bond 5.33% 1,053.30 10.533011 1,000.00 12/31/97 365
Oppenheimer Strategic Bond 1.51% 1,015.13 10.151332 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Non-Standard Inception to Date Return Data
As of 12/31/98
Date Transaction Amount Unit Units TransactionUnit
Value Before Units After
Transaction Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 5/1/96 purchase 1,000.00 10.097690 0.0000 99.0326 99.0326
5/1/97 annual fee 11.516923 99.0326 0.0000 99.0326
5/1/98 annual fee 13.535615 99.0326 0.0000 99.0326
12/31/98 annual fee 13.496500 99.0326 0.0000 99.0326
12/31/98 surrender fee 13.496500 99.0326 0.0000 99.0326
GACC Money Market 6/3/96 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
6/3/97 annual fee 10.410578 100.0000 0.0000 100.0000
6/3/98 annual fee 10.858145 100.0000 0.0000 100.0000
12/31/98 annual fee 11.109943 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.109943 100.0000 0.0000 100.0000
LA Developing Growth 8/20/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
8/20/98 annual fee 9.823023 100.0000 0.0000 100.0000
12/31/98 annual fee 11.067854 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.067854 100.0000 0.0000 100.0000
LA Large Cap Research 8/20/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
8/20/98 annual fee 10.537316 100.0000 0.0000 100.0000
12/31/98 annual fee 11.825550 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.825550 100.0000 0.0000 100.0000
LA Mid-Cap Value 8/20/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
8/20/98 annual fee 9.919404 100.0000 0.0000 100.0000
12/31/98 annual fee 10.437949 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.437949 100.0000 0.0000 100.0000
JPM Quality Bond 5/1/96 purchase 1,000.00 9.897228 0.0000 101.0384 101.0384
5/1/97 annual fee 10.405141 101.0384 0.0000 101.0384
5/1/98 annual fee 11.356198 101.0384 0.0000 101.0384
12/31/98 annual fee 11.914489 101.0384 0.0000 101.0384
12/31/98 surrender fee 11.914489 101.0384 0.0000 101.0384
JPM Small Cap Stock 5/1/96 purchase 1,000.00 10.512560 0.0000 95.1243 95.1243
5/1/97 annual fee 10.358427 95.1243 0.0000 95.1243
5/1/98 annual fee 14.969970 95.1243 0.0000 95.1243
12/31/98 annual fee 12.582860 95.1243 0.0000 95.1243
12/31/98 surrender fee 12.582860 95.1243 0.0000 95.1243
JPM Large Cap Stock 5/1/96 purchase 1,000.00 10.003025 0.0000 99.9698 99.9698
5/1/97 annual fee 12.198198 99.9698 0.0000 99.9698
5/1/98 annual fee 17.502632 99.9698 0.0000 99.9698
12/31/98 annual fee 19.428499 99.9698 0.0000 99.9698
12/31/98 surrender fee 19.428499 99.9698 0.0000 99.9698
JPM Select Equity 5/1/96 purchase 1,000.00 10.083890 0.0000 99.1681 99.1681
5/1/97 annual fee 11.445501 99.1681 0.0000 99.1681
5/1/98 annual fee 16.125129 99.1681 0.0000 99.1681
12/31/98 annual fee 16.987204 99.1681 0.0000 99.1681
12/31/98 surrender fee 16.987204 99.1681 0.0000 99.1681
JPM International Equity 5/1/96 purchase 1,000.00 10.214899 0.0000 97.8962 97.8962
5/1/97 annual fee 11.135715 97.8962 0.0000 97.8962
5/1/98 annual fee 13.138587 97.8962 0.0000 97.8962
12/31/98 annual fee 12.889315 97.8962 0.0000 97.8962
12/31/98 surrender fee 12.889315 97.8962 0.0000 97.8962
MVA Balanced 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee 11.236058 100.0000 0.0000 100.0000
12/31/98 annual fee 11.767845 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.767845 100.0000 0.0000 100.0000
MVA Small Cap Equity 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee 10.989610 100.0000 0.0000 100.0000
12/31/98 annual fee 10.238676 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.238676 100.0000 0.0000 100.0000
MVA Equity Income 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee 12.418195 100.0000 0.0000 100.0000
12/31/98 annual fee 12.068849 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.068849 100.0000 0.0000 100.0000
MVA Growth & Income Equity 7/1/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
7/1/98 annual fee 11.941375 100.0000 0.0000 100.0000
12/31/98 annual fee 12.188331 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.188331 100.0000 0.0000 100.0000
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.060203 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.060203 100.0000 0.0000 100.0000
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.770729 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.770729 100.0000 0.0000 100.0000
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.391449 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.391449 100.0000 0.0000 100.0000
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 14.595485 100.0000 0.0000 100.0000
12/31/98 surrender fee 14.595485 100.0000 0.0000 100.0000
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 7.988435 100.0000 0.0000 100.0000
12/31/98 surrender fee 7.988435 100.0000 0.0000 100.0000
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.228765 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.228765 100.0000 0.0000 100.0000
Kemper Dreman High Return 5/15/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.487302 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.487302 100.0000 0.0000 100.0000
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.676086 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.676086 100.0000 0.0000 100.0000
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 8.753222 100.0000 0.0000 100.0000
12/31/98 surrender fee 8.753222 100.0000 0.0000 100.0000
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.556498 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.556498 100.0000 0.0000 100.0000
MFS Bond 5/15/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.491811 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.491811 100.0000 0.0000 100.0000
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.172796 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.172796 100.0000 0.0000 100.0000
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.066568 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.066568 100.0000 0.0000 100.0000
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.233235 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.233235 100.0000 0.0000 100.0000
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 6.571830 100.0000 0.0000 100.0000
12/31/98 surrender fee 6.571830 100.0000 0.0000 100.0000
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.845193 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.845193 100.0000 0.0000 100.0000
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.669943 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.669943 100.0000 0.0000 100.0000
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.232731 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.232731 100.0000 0.0000 100.0000
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.326519 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.326519 100.0000 0.0000 100.0000
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.893828 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.893828 100.0000 0.0000 100.0000
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.533011 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.533011 100.0000 0.0000 100.0000
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.151332 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.151332 100.0000 0.0000 100.0000
Templeton International Fund 5/1/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.144522 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.144522 100.0000 0.0000 100.0000
Templeton Developing Markets 5/1/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 7.552448 100.0000 0.0000 100.0000
12/31/98 surrender fee 7.552448 100.0000 0.0000 100.0000
Mutual Shares Investments 5/1/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.630622 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.630622 100.0000 0.0000 100.0000
Fidelity Growth 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.077878 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.077878 100.0000 0.0000 100.0000
Fidelity Contrafund 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.357373 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.357373 100.0000 0.0000 100.0000
Fidelity Growth Opportunities 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.742360 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.742360 100.0000 0.0000 100.0000
Fidelity Growth & Income 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.202502 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.202502 100.0000 0.0000 100.0000
Fidelity Equity-Income 2/17/98 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.626607 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.626607 100.0000 0.0000 100.0000
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,140.55 1,140.55
1,340.47 1,340.47
1,336.59 1,336.59
1,336.59 1,336.59
0.00 1,000.00
1,041.06 1,041.06
1,085.81 1,085.81
1,110.99 1,110.99
1,110.99 1,110.99
0.00 1,000.00
982.30 982.30
1,106.79 1,106.79
1,106.79 1,106.79
0.00 1,000.00
1,053.73 1,053.73
1,182.56 1,182.56
1,182.56 1,182.56
0.00 1,000.00
991.94 991.94
1,043.79 1,043.79
1,043.79 1,043.79
0.00 1,000.00
1,051.32 1,051.32
1,147.41 1,147.41
1,203.82 1,203.82
1,203.82 1,203.82
0.00 1,000.00
985.34 985.34
1,424.01 1,424.01
1,196.94 1,196.94
1,196.94 1,196.94
0.00 1,000.00
1,219.45 1,219.45
1,749.73 1,749.73
1,942.26 1,942.26
1,942.26 1,942.26
0.00 1,000.00
1,135.03 1,135.03
1,599.10 1,599.10
1,684.59 1,684.59
1,684.59 1,684.59
0.00 1,000.00
1,090.14 1,090.14
1,286.22 1,286.22
1,261.81 1,261.81
1,261.81 1,261.81
0.00 1,000.00
1,123.61 1,123.61
1,176.78 1,176.78
1,176.78 1,176.78
0.00 1,000.00
1,098.96 1,098.96
1,023.87 1,023.87
1,023.87 1,023.87
0.00 1,000.00
1,241.82 1,241.82
1,206.88 1,206.88
1,206.88 1,206.88
0.00 1,000.00
1,194.14 1,194.14
1,218.83 1,218.83
1,218.83 1,218.83
0.00 1,000.00
1,306.02 1,306.02
1,306.02 1,306.02
0.00 1,000.00
1,177.07 1,177.07
1,177.07 1,177.07
0.00 1,000.00
1,139.14 1,139.14
1,139.14 1,139.14
0.00 1,000.00
1,459.55 1,459.55
1,459.55 1,459.55
0.00 1,000.00
798.84 798.84
798.84 798.84
0.00 1,000.00
922.88 922.88
922.88 922.88
0.00 1,000.00
1,048.73 1,048.73
1,048.73 1,048.73
0.00 1,000.00
1,167.61 1,167.61
1,167.61 1,167.61
0.00 1,000.00
875.32 875.32
875.32 875.32
0.00 1,000.00
1,055.65 1,055.65
1,055.65 1,055.65
0.00 1,000.00
1,049.18 1,049.18
1,049.18 1,049.18
0.00 1,000.00
1,217.28 1,217.28
1,217.28 1,217.28
0.00 1,000.00
1,206.66 1,206.66
1,206.66 1,206.66
0.00 1,000.00
1,323.32 1,323.32
1,323.32 1,323.32
0.00 1,000.00
657.18 657.18
657.18 657.18
0.00 1,000.00
984.52 984.52
984.52 984.52
0.00 1,000.00
1,066.99 1,066.99
1,066.99 1,066.99
0.00 1,000.00
1,223.27 1,223.27
1,223.27 1,223.27
0.00 1,000.00
1,032.65 1,032.65
1,032.65 1,032.65
0.00 1,000.00
989.38 989.38
989.38 989.38
0.00 1,000.00
1,053.30 1,053.30
1,053.30 1,053.30
0.00 1,000.00
1,015.13 1,015.13
1,015.13 1,015.13
0.00 1,000.00
914.45 914.45
914.45 914.45
0.00 1,000.00
755.24 755.24
755.24 755.24
0.00 1,000.00
963.06 963.06
963.06 963.06
0.00 1,000.00
1,307.79 1,307.79
1,307.79 1,307.79
0.00 1,000.00
1,235.74 1,235.74
1,235.74 1,235.74
0.00 1,000.00
1,174.24 1,174.24
1,174.24 1,174.24
0.00 1,000.00
1,220.25 1,220.25
1,220.25 1,220.25
0.00 1,000.00
1,062.66 1,062.66
1,062.66 1,062.66
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Non-Standard Inception to Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 11.47% 33.66% 1,336.59 13.496500 1,000.00 5/1/96 975
GACC Money Market 4.17% 11.10% 1,110.99 11.109943 1,000.00 6/3/96 941
LA Developing Growth 7.70% 10.68% 1,106.79 11.067854 1,000.00 8/20/97 499
LA Large Cap Research 13.05% 18.26% 1,182.56 11.825550 1,000.00 8/20/97 499
LA Mid-Cap Value 3.18% 4.38% 1,043.79 10.437949 1,000.00 8/20/97 499
JPM Quality Bond 7.19% 20.38% 1,203.82 11.914489 1,000.00 5/1/96 975
JPM Small Cap Stock 6.96% 19.69% 1,196.94 12.582860 1,000.00 5/1/96 975
JPM Large Cap Stock 28.21% 94.23% 1,942.26 19.428499 1,000.00 5/1/96 975
JPM Select Equity 21.56% 68.46% 1,684.59 16.987204 1,000.00 5/1/96 975
JPM International Equity 9.10% 26.18% 1,261.81 12.889315 1,000.00 5/1/96 975
MVA Balanced 11.43% 17.68% 1,176.78 11.767845 1,000.00 7/1/97 549
MVA Small Cap Equity 1.58% 2.39% 1,023.87 10.238676 1,000.00 7/1/97 549
MVA Equity Income 13.32% 20.69% 1,206.88 12.068849 1,000.00 7/1/97 549
MVA Growth & Income Equity 14.06% 21.88% 1,218.83 12.188331 1,000.00 7/1/97 549
AIM Value 30.60% 30.60% 1,306.02 13.060203 1,000.00 12/31/97 365
AIM Capital Appreciation 17.71% 17.71% 1,177.07 11.770729 1,000.00 12/31/97 365
AIM International Equity 13.91% 13.91% 1,139.14 11.391449 1,000.00 12/31/97 365
Alliance Premier Growth 45.96% 45.96% 1,459.55 14.595485 1,000.00 12/31/97 365
Alliance Real Estate Investment -20.12% -20.12% 798.84 7.988435 1,000.00 12/31/97 365
Liberty Newport Tiger -7.71% -7.71% 922.88 9.228765 1,000.00 12/31/97 365
Kemper Dreman High Return 4.87% 1,048.73 10.487302 1,000.00 5/15/98 230
Kemper Small Cap Growth 16.76% 16.76% 1,167.61 11.676086 1,000.00 12/31/97 365
Kemper Small Cap Value -12.47% -12.47% 875.32 8.753222 1,000.00 12/31/97 365
Kemper Government Securities 5.57% 5.57% 1,055.65 10.556498 1,000.00 12/31/97 365
MFS Bond 4.92% 1,049.18 10.491811 1,000.00 5/15/98 230
MFS Research 21.73% 21.73% 1,217.28 12.172796 1,000.00 12/31/97 365
MFS Growth with Income 20.67% 20.67% 1,206.66 12.066568 1,000.00 12/31/97 365
MFS Emerging Growth 32.33% 32.33% 1,323.32 13.233235 1,000.00 12/31/97 365
MFS F&C Emerging Markets -34.28% -34.28% 657.18 6.571830 1,000.00 12/31/97 365
MFS High Income -1.55% -1.55% 984.52 9.845193 1,000.00 12/31/97 365
MFS World Governments 6.70% 6.70% 1,066.99 10.669943 1,000.00 12/31/97 365
Oppenheimer Growth 22.33% 22.33% 1,223.27 12.232731 1,000.00 12/31/97 365
Oppenheimer Growth & Income 3.27% 3.27% 1,032.65 10.326519 1,000.00 12/31/97 365
Oppenheimer High Income -1.06% -1.06% 989.38 9.893828 1,000.00 12/31/97 365
Oppenheimer Bond 5.33% 5.33% 1,053.30 10.533011 1,000.00 12/31/97 365
Oppenheimer Strategic Bond 1.51% 1.51% 1,015.13 10.151332 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Non-Standard Inception to Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C>
Templeton International -8.55% 914.45 9.144522 1,000.00 5/1/98 244
Templeton Developing Markets -24.48% 755.24 7.552448 1,000.00 5/1/98 244
Mutual Shares Investments -3.69% 963.06 9.630622 1,000.00 5/1/98 244
Fidelity Growth 30.78% 1,307.79 13.077878 1,000.00 2/17/98 317
Fidelity Contrafund 23.57% 1,235.74 12.357373 1,000.00 2/17/98 317
Fidelity Growth Opportunities 17.42% 1,174.24 11.742360 1,000.00 2/17/98 317
Fidelity Growth & Income 22.03% 1,220.25 12.202502 1,000.00 2/17/98 317
Fidelity Equity-Income 6.27% 1,062.66 10.626607 1,000.00 2/17/98 317
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Pro Forma 1 Year Returns
As of 12/31/98
Less: 1 Year Less:
Portfolio Sub-Account 1 Year M & E / Non- Contract
Incept Incept Portfolio Admin Standard Annual
Date Date Return Fees Return Fee
--------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MFS Bond 10/24/95 5/15/98 6.79% 1.40% 5.39% 0.10%
Templeton International 5/1/92 5/1/98 9.33% 1.40% 7.93% 0.10%
Templeton Developing Markets 3/4/96 5/1/98 -20.94% 1.40% -22.34% 0.10%
Templeton Bond 8/24/88 3/1/99 7.17% 1.40% 5.77% 0.10%
Templeton Stock 8/24/88 1/19/99 1.26% 1.40% -0.14% 0.10%
Fidelity Growth 10/9/86 2/17/98 39.49% 1.40% 38.09% 0.10%
Fidelity Contrafund 1/3/95 2/17/98 29.98% 1.40% 28.58% 0.10%
Fidelity Growth Opportunities 1/3/95 2/17/98 24.51% 1.40% 23.11% 0.10%
Fidelity Growth & Income 12/31/96 2/17/98 29.59% 1.40% 28.19% 0.10%
Fidelity Equity-Income 10/9/86 2/17/98 11.63% 1.40% 10.23% 0.10%
</TABLE>
<TABLE>
<CAPTION>
Less: 1 Year
Withdrawal Standard
Fee Return
- -------------------------
<S> <C>
4.50% 0.79%
4.50% 3.33%
4.50% -26.94%
4.50% 1.17%
4.50% -4.74%
4.50% 33.49%
4.50% 23.98%
4.50% 18.51%
4.50% 23.59%
4.50% 5.63%
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Pro Forma 5 Year Returns
As of 12/31/98
5 Year
5 Year Less: Annualized Less:
Portfolio Sub-Account Annualized M & E / Non- Contract
Incept Incept Portfolio Admin Standard Annual
Date Date Return Fees Return Fee
--------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GACC Money Market 10/1/87 6/3/96 5.40% 1.40% 4.00% 0.10%
AIM Value 5/5/93 12/31/97 21.70% 1.40% 20.30% 0.10%
AIM Capital Appreciation 5/5/93 12/31/97 17.23% 1.40% 15.83% 0.10%
AIM International Equity 5/2/93 12/31/97 11.33% 1.40% 9.93% 0.10%
Alliance Premier Growth 6/26/92 12/31/97 27.85% 1.40% 26.45% 0.10%
Kemper Government Securities 9/3/87 12/31/97 6.72% 1.40% 5.32% 0.10%
Oppenheimer Growth 4/3/85 12/31/97 22.10% 1.40% 20.70% 0.10%
Oppenheimer High Income 4/30/86 12/31/97 8.62% 1.40% 7.22% 0.10%
Oppenheimer Bond 4/3/85 12/31/97 7.01% 1.40% 5.61% 0.10%
Oppenheimer Strategic Bond 5/3/93 12/31/97 6.83% 1.40% 5.43% 0.10%
Templeton International 5/1/92 5/1/98 11.84% 1.40% 10.44% 0.10%
Templeton Bond 8/24/88 3/1/99 5.62% 1.40% 4.22% 0.10%
Templeton Stock 8/24/88 1/19/99 11.18% 1.40% 9.78% 0.10%
Fidelity Growth 10/9/86 2/17/98 21.74% 1.40% 20.34% 0.10%
Fidelity Equity-Income 10/9/86 2/17/98 18.77% 1.40% 17.37% 0.10%
</TABLE>
<TABLE>
<CAPTION>
5 Year
Less: Annualized
Withdrawal Standard
Fee Return
- -------------------------
<S> <C>
0.00% 3.90%
0.00% 20.20%
0.00% 15.73%
0.00% 9.83%
0.00% 26.35%
0.00% 5.22%
0.00% 20.60%
0.00% 7.12%
0.00% 5.51%
0.00% 5.33%
0.00% 10.34%
0.00% 4.12%
0.00% 9.68%
0.00% 20.24%
0.00% 17.27%
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account One
Pro Forma Inception to Date Returns
As of 12/31/98
Incept
Incept Less: Annualized Less:
Portfolio Sub-Account Annualized M & E / Non- Contract
Incept Incept Portfolio Admin Standard Annual
Date Date Return Fees Return Fee
--------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GACC Money Market 10/1/87 6/3/96 5.78% 1.40% 4.38% 0.10%
AIM Value 5/5/93 12/31/97 21.90% 1.40% 20.50% 0.10%
AIM Capital Appreciation 5/5/93 12/31/97 18.77% 1.40% 17.37% 0.10%
AIM International Equity 5/2/93 12/31/97 13.36% 1.40% 11.96% 0.10%
Alliance Premier Growth 6/26/92 12/31/97 25.42% 1.40% 24.02% 0.10%
Alliance Real Estate Investment 1/9/97 12/31/97 -0.06% 1.40% -1.46% 0.10%
Liberty Newport Tiger 5/1/95 12/31/97 -5.01% 1.40% -6.41% 0.10%
Kemper Dreman High Return 5/4/98 5/15/98 2.80% 0.92% 1.88% 0.10%
Kemper Small Cap Growth 5/2/94 12/31/97 24.20% 1.40% 22.80% 0.10%
Kemper Small Cap Value 5/1/96 12/31/97 3.65% 1.40% 2.25% 0.10%
Kemper Government Securities 9/3/87 12/31/97 8.37% 1.40% 6.97% 0.10%
MFS Bond 10/24/95 5/15/98 6.90% 1.40% 5.50% 0.10%
MFS Research 7/26/95 12/31/97 22.52% 1.40% 21.12% 0.10%
MFS Growth with Income 10/9/95 12/31/97 25.98% 1.40% 24.58% 0.10%
MFS Emerging Growth 7/24/95 12/31/97 26.55% 1.40% 25.15% 0.10%
MFS F&C Emerging Markets 10/16/97 12/31/97 -34.51% 1.40% -35.91% 0.10%
MFS High Income 7/26/95 12/31/97 8.77% 1.40% 7.37% 0.10%
MFS World Governments 6/14/94 12/31/97 5.57% 1.40% 4.17% 0.10%
Oppenheimer Growth 4/3/85 12/31/97 16.85% 1.40% 15.45% 0.10%
Oppenheimer Growth & Income 7/5/95 12/31/97 27.00% 1.40% 25.60% 0.10%
Oppenheimer High Income 4/30/86 12/31/97 12.71% 1.40% 11.31% 0.10%
Oppenheimer Bond 4/3/85 12/31/97 9.28% 1.40% 7.88% 0.10%
Oppenheimer Strategic Bond 5/3/93 12/31/97 6.79% 1.40% 5.39% 0.10%
Templeton International 5/1/92 5/1/98 14.17% 1.40% 12.77% 0.10%
Templeton Developing Markets 3/4/96 5/1/98 -20.25% 1.40% -21.65% 0.10%
Templeton Bond 8/24/88 3/1/99 7.45% 1.40% 6.05% 0.10%
Franklin Small Cap Investments 5/1/98 3/1/99 -7.70% 0.94% -8.64% 0.10%
Templeton Stock 8/24/88 1/19/99 12.23% 1.40% 10.83% 0.10%
Franklin Growth Investments 5/1/98 3/1/99 13.40% 0.94% 12.46% 0.10%
Fidelity Growth 10/9/86 2/17/98 19.41% 1.40% 18.01% 0.10%
Fidelity Contrafund 1/3/95 2/17/98 28.62% 1.40% 27.22% 0.10%
Fidelity Growth Opportunities 1/3/95 2/17/98 26.23% 1.40% 24.83% 0.10%
Fidelity Growth & Income 12/31/96 2/17/98 29.14% 1.40% 27.74% 0.10%
Fidelity Equity-Income 10/9/86 2/17/98 15.62% 1.40% 14.22% 0.10%
</TABLE>
<TABLE>
<CAPTION>
Incept
Less: Annualized
Withdrawal Standard
Fee Return
- -------------------------
<S> <C>
0.00% 4.28%
0.00% 20.40%
0.00% 17.27%
0.00% 11.86%
0.00% 23.92%
4.50% -6.06%
4.50% -11.01%
5.00% -3.22%
4.50% 18.20%
4.50% -2.35%
0.00% 6.87%
4.50% 0.90%
4.50% 16.52%
4.50% 19.98%
4.50% 20.55%
4.50% -40.51%
4.50% 2.77%
4.50% -0.43%
0.00% 15.35%
4.50% 21.00%
0.00% 11.21%
0.00% 7.78%
0.00% 5.29%
0.00% 12.67%
4.50% -26.25%
0.00% 5.95%
5.00% -13.74%
0.00% 10.73%
5.00% 7.36%
0.00% 17.91%
4.50% 22.62%
4.50% 20.23%
4.50% 23.14%
0.00% 14.12%
</TABLE>
