File Nos. 333-_____
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 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 35 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT ONE
__________________________________
(Exact Name of Registrant)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
_______________________________________________
(Name of Depositor)
One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644
______________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 831-5433
Name and Address of Agent for Service
Lorry J. Stensrud, President
Cova Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 523-1661
Copies to:
Judith A. Hasenauer and Bernard J. Spaulding
Blazzard, Grodd & Hasenauer, P.C. Senior Vice President,
P.O Box 5108 General Counsel and Secretary
Westport, CT 06881 Cova Financial Services
(203) 226-7866 Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Title of Securities Registered:
Individual Variable Annuity Contracts
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------------------------------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Summary
Item 4. Condensed Financial Information . . . Not Applicable
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 Annuity Contract
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 SERIES A FIXED AND VARIABLE ANNUITY
ISSUED BY
COVA VARIABLE ANNUITY ACCOUNT ONE
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
This prospectus describes the Series A Fixed and Variable Annuity Contract
offered by Cova Financial Services Life Insurance Company (Cova).
The annuity contract has 19 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 18 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 Fund
AIM V.I. Value Fund
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES:
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Small Cap Investments Fund
Franklin Growth Investments Fund*
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton International Fund
Templeton Stock Fund
Templeton Bond Fund
* Effective December 15, 1999, the fund's name will change to Franklin Large Cap
Growth Investments Fund.
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 Series A Fixed and Variable Annuity Contract, you
can obtain a copy of the Statement of Additional Information (SAI) dated ______,
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.
______________, 1999
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds, Inc.
Cova Series Trust
General American Capital Company
Templeton Variable Products Series Fund
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Sales Charge
Reduction or Elimination of the Sales 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
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
Cova
Year 2000
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Suspension of Payments or Transfers
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX - Performance Information
INDEX OF SPECIAL TERMS
Because of the complex nature of the contract, we have used certain words or
terms in this Prospectus which may need an explanation. We have identified the
following as some of these words or terms. The page that is indicated here is
where we believe you will find the best explanation for the word or term. These
words and terms are in italics on the indicated page.
Page
Accumulation Phase.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Date.............................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Fixed Account............................................................
Income Phase.............................................................
Investment Portfolios....................................................
Joint Owner..............................................................
Non-Qualified............................................................
Owner....................................................................
Purchase Payment (including Gross Purchase Payment and
Net 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 18 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 contract also offers a fixed account with an interest rate that is
guaranteed by Cova. While your money is in the fixed account, we guarantee the
interest your money will earn as well as your principal.
You can put money into any or all of the investment portfolios (except as noted)
and the fixed account. You can transfer between accounts up to 12 times a year
without charge or tax implications. After 12 transfers, the charge is $25.
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.
ANNUITY PAYMENTS (THE INCOME PHASE). If you want to receive regular income from
your annuity, you can choose one of three payment plans (we call them annuity
options). Once you begin receiving regular payments, you cannot change your
annuity option.
PURCHASE. 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. We will not issue a contract to someone over age 90. Your
registered representative can help you complete the proper forms.
INVESTMENT OPTIONS. You can put your money in any or all of these investment
portfolios listed below which are described in the prospectuses for the funds:
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Small Cap Investments Fund
Franklin Growth Investments Fund *
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton International Fund
Templeton Stock Fund
Templeton Bond Fund
* Effective December 15, 1999 the fund's name will change to Franklin Large Cap
Growth Investments Fund.
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 and investment features. 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 a mortality and expense risk charge which is equivalent,
on an annual basis, to .95% of the average daily value of your contract
allocated to the investment portfolios.
Cova will deduct a sales charge from each purchase payment you make before
it allocates your money to the investment portfolios and/or the fixed account.
The amount of the sales charge varies depending upon the amount of the purchase
payments you make and the value of your contract at the time Cova receives your
purchase payment. Cova will also take into account the amount of purchase
payments which you represent in writing will be made during a 13-month period.
The larger your purchase payments and contract value are, the less your sales
charge will be. The charge ranges from 5.75% to 1.00%.
When you begin receiving regular income payments from your annuity, Cova
may assess a state premium tax charge which ranges from 0%-4%, depending upon
the state.
There are also investment charges which currently range from .205% to 1.30%
of the average daily value of the investment portfolio depending upon the
investment portfolio.
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. 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. Cova
will refund the value of your contract plus the sales charge determined as of
the business day that the refund is made. In certain states, or if you buy the
contract as an IRA, we may be required to refund the gross purchase payment.
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:
Systematic Withdrawal Program - You can arrange to have money automatically
sent to you each month while your contract is still in the accumulation phase.
Of course, you may have to pay taxes on money you receive.
Dollar Cost Averaging 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.
Automatic Rebalancing - You can arrange to automatically readjust the money
between investment portfolios periodically to keep the blend you select.
These features 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
Service Office
P.O. Box 10366
Des Moines, IA 50306-0366
800-343-8496
For Express Mail Only:
4700 Westown Parkway, Suite 200
West Des Moines, IA 50266-6718
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
Sales Charge (See Note 1 below)
(as a percentage of gross purchase payment)
Owner's Investment Sales Charge
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Less than $50,000 5.75%
$50,000-$99,999.99 4.50%
$100,000 - $249,999.99 3.50%
$250,000-$499,999.99 2.50%
$500,000-$999,999.99 2.00%
$1,000,000 or greater 1.00%
Transfer Fee (see Note 2 below) No charge for first 12 transfers in a
contract year; thereafter, the fee is
$25 per transfer.
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 Charge .95%
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Total Separate Account Annual Expenses .95%
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INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an investment portfolio)
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Other Expenses
(after expense
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 Fund .62% .05% .67%
AIM V.I. Value Fund .61% .05% .66%
COVA SERIES TRUST(a)
Managed by J.P. Morgan Investment Management Inc.
Select Equity Portfolio .68% .18% .86%
Small Cap Stock Portfolio .85% .27% 1.12%
International Equity Portfolio .80% .28% 1.08%
Quality Bond Portfolio .55% .10% .65%
Large Cap Stock Portfolio .65% .10% .75%
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio .75% .10% .85%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
Large Cap Research Portfolio 1.00% .30% 1.30%
Developing Growth Portfolio .90% .30% 1.20%
Lord Abbett Growth and Income Portfolio (b) .65% .07% .72%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset
Management Company
Money Market Fund .125% .08% .205%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund (c) .15% .85% 1.00%
Franklin Growth Investments Fund (d) .00% 1.00% 1.00%
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund .69% .17% .86%
Templeton Stock Fund .70% .19% .89%
Templeton Bond .50% .23% .73%
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(a) Since May 1, 1996, Cova has been reimbursing the investment portfolios
of Cova Series Trust for all operating expenses (exclusive of the management
fees) in excess of approximately .10%. 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, and 1.70% for the Developing Growth Portfolio.
(b) Estimated. The Portfolio commenced investment operations on January 8,
1999.
(c) Figures reflect expenses from the Fund's inception on May 1, 1998,
which have been annualized for the management fees and estimated for other
expenses. The investment manager agreed in advance to limit management fees and
make certain payments to reduce Fund expenses as necessary so that Total Annual
Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets in
1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were .75%, 1.00% and 1.75% for the Franklin Small Cap
Investments Fund.
(d) Figures reflect expenses from the Fund's inception on May 1, 1998,
which have been annualized for the management fees and estimated for other
expenses. The investment manager agreed in advance to limit management fees and
make certain payments to reduce Fund expenses as necessary so that Total Annual
Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets in
1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were .60%, 4.08% and 4.68% for the Franklin Growth
Investments Fund.
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 $________.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets regardless of whether you surrender your contract at the
end of each time period:
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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 Fund $_____ $______ $______ $______
AIM V.I. Value Fund $_____ $______ $______ $______
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity Portfolio $_____ $______ $______ $______
Small Cap Stock Portfolio $_____ $______ $______ $______
International Equity Portfolio $_____ $______ $______ $______
Quality Bond Portfolio $_____ $______ $______ $______
Large Cap Stock Portfolio $_____ $______ $______ $______
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio $_____ $______ $______ $______
Mid-Cap Value Portfolio $_____ $______ $______ $______
Large Cap Research Portfolio $_____ $______ $______ $______
Developing Growth Portfolio $_____ $______ $______ $______
Lord Abbett Growth and Income Portfolio $_____ $______ $______ $______
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market Fund $_____ $______ $______ $______
TEMPLETON VARIABLE PRODUCTS SERIES FUND,
CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund $_____ $______ $______ $______
Franklin Growth Investments Fund $_____ $______ $______ $______
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund $_____ $______ $______ $______
Templeton Stock Fund $_____ $______ $______ $______
Templeton Bond Fund $_____ $______ $______ $______
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EXPLANATION OF FEE TABLE
1. You may be entitled to a reduced sales charge if: 1) you indicate in
writing that you will make additional purchase payments to your contract during
a 13-month period; and 2) if the amount of the owner's investment (purchase
payment plus contract value) falls within certain dollar ranges. See "Expenses"
for a discussion of how the sales charge is determined.
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 or
Automatic Rebalancing Programs.
3. During the accumulation phase, Cova will not charge the contract
maintenance charge if the value of your contract is $50,000 or more, although,
if you make a complete withdrawal, Cova will charge the contract maintenance
charge.
4. Premium taxes are not reflected. Premium taxes may apply depending on
the state where you live.
THE ANNUITY CONTRACT
This Prospectus describes the Series A Fixed and Variable Annuity Contract
offered by Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case Cova), where the insurance company promises to pay an income to you,
in the form of annuity payments, beginning on a designated date that is at least
one month after we issue your contract. 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 upon the investment performance of the investment
portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by Cova. Cova guarantees that the interest rate credited
to the fixed account will not be less than 3% per year. If you select the fixed
account, your money will be placed with the other general account assets of
Cova. If you select the fixed account, the amount of money you are able to
accumulate in your contract during the accumulation phase depends upon the total
interest credited to your contract. The amount of the annuity payments you
receive during the income phase from the fixed account portion of the contract
will remain level for the entire income phase.
As owner of the contract, you exercise all rights under the contract. You can
change the owner at any time by notifying Cova in writing. You and your spouse
can be named joint owners. We have described more information on this under
"Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Selecting an 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 must begin by the first day of a calendar month following the
annuitant's 85th birthday or 10 years from the date the contract was issued,
whichever is later.
Annuity Payments
Unless you designate another person to receive the annuity payments, Cova will
pay you the 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 (fixed annuity payout);
the investment portfolio(s) (variable annuity payout); 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 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 assumed investment rate (AIR), your
annuity payments will increase. Similarly, if the performance is less than the
AIR, your annuity payments will decrease. Currently, the AIR is 3%. Cova may
change the AIR or add AIRs in the future.
Annuity payments will be paid in monthly installments or at any frequency
acceptable to Cova. Each annuity payment will be reduced by a pro-rata portion
of the contract maintenance charge. (See "Expenses").
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. 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,
Cova has the right to change the frequency of payments so that your annuity
payments are at least $100.
Selecting an Annuity Option
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. 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 change the annuity option at any time before the annuity date
with 30 days notice to us.
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 periodic annuity
payments 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 periodic annuity payments 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. If you do not want to receive annuity
payments, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
periodic annuity payments 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 purchase the contract. When you
make a purchase payment (we call this the "gross purchase payment"), we will
deduct the sales charge and any applicable premium taxes before we allocate it
to the investment portfolio(s) and/or the fixed account (we call this the "net
purchase payment"). See "Expenses" for a discussion of the sales charge.
The minimum gross purchase payment 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 gross purchase payment we will accept is $2,000. The maximum gross
purchase payments we accept are $1 million without our prior approval. You can
make additional gross purchase payments of $500 or more to any type of contract
any time during the accumulation phase.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your net 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. Currently, you may
allocate your money to any of the investment portfolios. Cova reserves the right
to limit the number of investment portfolios you may invest in at any one time
in the future. 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 2 business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 p.m. Eastern time.
Free Look
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it (or the period required in your state). Cova will refund
the contract value plus the sales charge determined as of the business day that
the refund is made, which may be less than your gross purchase payment. In
certain states, or if you have purchased the contract as an IRA, we may be
required to refund your gross purchase payment if you decide to cancel your
contract within 10 days after receiving it (or whatever period is required in
your state).
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 business 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 the mortality and expense risk charge 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 net 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 from you. The amount of the
net purchase payment is $5,000. 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 18 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
The investment objectives and policies of certain 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.
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 that it provides to the portfolios.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
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. Value Fund
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. 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
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
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. Templeton
Investment Counsel, Inc. is the investment manager of the Templeton
International Fund, the Templeton Bond Fund and the Templeton Stock Fund. The
following portfolios are available under the contract:
Franklin Small Cap Investments Fund
Franklin Growth Investments Fund *
Templeton International Fund
Templeton Stock Fund
Templeton Bond Fund
* Effective December 15, 1999 the fund's name will change to Franklin Large Cap
Growth Investments Fund and its principal strategies and risks will be restated
to those of investing primarily in large cap growth companies.
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.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The fee is $25 per transfer. 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. The minimum amount which must
remain in an investment portfolio and/or the fixed account after a transfer is
$500.
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. We will process your transfer as of the end of the business day when our
Service Office receives an acceptable transfer request which contains all
required information (including the amount which is to be transferred and the
investment portfolio(s) and/or fixed account involved in the transfer).
5. Neither Cova nor its Service Office is liable for a transfer made in
accordance with your instructions.
6. Cova reserves the right to restrict the number of transfers per year and
to restrict transfers from being made on consecutive business days.
7. Your right to make transfers is subject to modification if Cova
determines, in Cova's sole opinion, that the exercise of the right by one or
more owners is or would be to the disadvantage of other owners. Restrictions may
be applied in any manner reasonably designed to prevent any use of the transfer
right which is considered by Cova to be to the disadvantage of other owners. A
modification could be applied to transfers to or from one or more of the
investment portfolios and could include, but not be limited to:
the requirement of a minimum time period between each transfer;
not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one owner; or
limiting the dollar amount that may be transferred between the investment
portfolios by an owner at any one time.
8. 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 a fixed annuity payout
to a variable annuity payout, but you can transfer from a variable annuity
payout to a fixed annuity payout at any time.
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.
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.
Cova reserves the right, without notice, to modify, terminate or suspend the
Dollar Cost Averaging Program. Cova does not currently charge for participating
in this program.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
AUTOMATIC REBALANCING PROGRAM
Once your money has been allocated 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.
Cova does not currently charge for participating in this 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 had chosen to have your holdings rebalanced
quarterly, on the first business day of the next quarter, Cova would sell some
of your units in the Quality Bond Portfolio to bring its value back to 40% and
use the money to buy more units in the Select Equity Portfolio to increase those
holdings to 60%.
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 or more 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. Cova may limit further purchases in an investment
portfolio if it deems the investment inappropriate.
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:
MORTALITY AND EXPENSE RISK CHARGE
This charge is equivalent, on an annual basis, to .95% of the daily value of the
contracts invested in an investment portfolio, after fund expenses have been
deducted. This charge may be increased but will never exceed 1.50%, on an annual
basis. This charge is for all the insurance benefits e.g., guarantee of annuity
rates, the death benefits, for certain expenses of the contract, and for
assuming the risk (expense risk) that the current charges will be insufficient
in the future to cover the cost of administering the contract. This charge is
also for administrative expenses. Cova may use any profits it makes from this
charge to pay for the costs of distributing the contract.
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. 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 out of each annuity payment.
SALES CHARGE
Cova deducts a sales charge from a gross purchase payment before the payment is
allocated to an investment portfolio and/or the fixed account. The amount of the
sales charge depends on the "owner's investment." The owner's investment for the
initial purchase payment equals the amount of the initial gross purchase
payment. The owner's investment for subsequent purchase payments equals the
amount the subsequent gross purchase payment and the value of your contract on
the day Cova receives the subsequent gross purchase payment. The charge is:
<TABLE>
<CAPTION>
<S> <C>
Sales Charge (as a
percentage of gross
Owner's Investment purchase payment)
- -------------------- --------------------
Less than $50,000 5.75%
$50,000-$99,999.99 4.50%
$100,000-$249,999.99 3.50%
$250,000-$499,999.99 2.50%
$500,000-$999,999.99 2.00%
$1,000,000 or greater 1.00%
</TABLE>
HOW TO REDUCE THE SALES CHARGE
You may be able to lower the sales charge you pay by indicating in writing
the amount of gross purchase payments you intend to make during a 13 month
period. You have 13 months from the date Cova receives the written indication to
make the purchase payments you chose as your goal. We will deduct the sales
charge based on the total of the purchase payments intended to be made plus the
value of your contract on the date the first purchase payment is made. You are
not obligated to reach your purchase payment goal. If you do not make the amount
of purchase payments you indicated during the 13-month period, we will deduct an
additional charge from your contract in the 14th month based on: (1) the actual
gross purchase payments made during the 13 months; plus (2) the value of the
contract on the date the first gross purchase payment was made. Any additional
sales charge will be deducted during the 14th month from the investment
portfolios and the fixed account in the ratio that they bear to the value of
your contract. Cova reserves the right to modify, suspend or terminate this
feature at any time.
In addition, Cova will reduce or eliminate the amount of the sales 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 may not deduct a sales charge under a contract issued to an officer,
director or employee of Cova or any of its affiliates.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is Cova's current practice to not charge anyone for these
taxes until annuity payments begin. Cova may some time in the future discontinue
this practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 4%, depending on the state.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 per transfer. We will deduct the transfer fee from the
investment portfolio and/or the fixed account from which the transfer is made or
from the amount transferred if the entire amount in the investment portfolio
and/or the fixed account is transferred.
If the transfer is part of the Dollar Cost Averaging Program or the Automatic
Rebalancing 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 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 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:
by making a withdrawal (either a partial or a complete withdrawal);
by electing to receive annuity payments; or
when a death benefit is paid to your beneficiary.
Under most circumstances, withdrawals can only be made during the accumulation
phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal, less any contract maintenance charge. Cova
will pay the amount of a withdrawal from the investment portfolios within 7 days
of the withdrawal request unless the Suspension of Payments or Transfers
provision is in effect (see below).
Unless you instruct Cova in advance 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 partial withdrawal is made you keep at least
$500 in any selected investment portfolio or the fixed account.
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.
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.
SYSTEMATIC WITHDRAWAL PROGRAM
You may use the Systematic Withdrawal Program. This program provides automatic
monthly payments to you. Cova does not charge for participation in this program,
but reserves the right to charge in the future.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
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 mortality and expense risk
charge and the operating expenses of the portfolios. It does not reflect the
deduction of any applicable contract maintenance charge and sales charge. The
deduction of any applicable contract maintenance charge and sales charge 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 sales charge, mortality and expense risk charge, contract maintenance
charge and the operating expenses of the portfolios.
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.
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). Joint owners must be spouses. The surviving joint owner
will be treated as the beneficiary.
If you, or a joint owner, who is not the annuitant, die during the income phase,
any remaining payments under the annuity option elected will continue at least
as rapidly as under the method of distribution in effect at your death. If you
die during the income phase, the beneficiary will become the owner of the
contract.
At the time you buy the contract, you can select the Annual Step-Up Option or
the Five Year Step-Up with 4% Accumulation Option. If you do not choose a death
benefit option on the forms provided by Cova, the Annual Step-Up Option will be
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.
ANNUAL STEP-UP OPTION:
The death benefit will be the greatest of:
1. Gross purchase payments less any withdrawals; or
2. The value of your contract determined on the business day following the
day when Cova receives both due proof of death and an election for payment; or
3. The greatest contract value (as explained below).
Prior to you or your joint owner's 80th birthday, the greatest contract value 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 exceeds the greatest
contract value, the greatest contract value will be increased to the current
value of your contract. If a purchase payment is made, the amount of the gross
purchase payment will increase the greatest contract value. If a withdrawal is
made, the greatest contract value will be reduced by the amount withdrawn.
After you or your joint owner attains age 80, the greatest contract value 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 exceeds the greatest contract value, the greatest
contract value will be increased to the current contract value. If a purchase
payment is made, the amount of the gross purchase payment will increase the
greatest contract value. If a withdrawal is made, the greatest contract value
will be reduced by the amount withdrawn.
FIVE YEAR STEP-UP WITH 4% ACCUMULATION OPTION:
The death benefit will be the greatest of:
1. Gross purchase payments, less any withdrawals made on or before you or
your joint owner's 80th birthday, accumulated at an effective annual rate of 4%
until the owner's or joint owner's 80th birthday or death; plus any subsequent
gross purchase payments less any subsequent withdrawals made subsequent to the
owner's or a joint owner's 80th birthday; or
2. The value of your contract determined on the business day following the
day when Cova receives both due proof of death and an election for payment; or
3. The greatest of the values of your contract resulting from taking the
contract value on any 5 year contract anniversary while the owner, or a joint
owner is living, on or before your, or your joint owner's 80th birthday, plus
any gross purchase payments you made subsequent to that contract anniversary,
less any withdrawals subsequent to that contract anniversary.
In certain states, one or both of the death benefit options described above may
not be available. Check your contract for your applicable death benefit
provision.
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.
The amount of the death benefit is determined as of the end of the business day
during which Cova receives both due proof of death and an election for the
payment option. The death benefit amount remains in the investment portfolios
and/or the fixed account until distribution begins. From the time we determine
the death benefit until we make a complete distribution, any amount in an
investment portfolio will be subject to investment risk which is borne by the
beneficiary.
DEATH OF ANNUITANT
If the annuitant, not an owner or joint owner, dies during the accumulation
phase, you, as the owner automatically become the annuitant. You can name a new
annuitant, subject to Cova's administrative rules then in effect. 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 during the income phase, the death benefit, if
any, will be as provided for in the annuity option selected and will be paid at
least as rapidly as under the method of distribution in effect at the
annuitant's death.
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 (General
American Life) purchased Cova which on that date changed its name to Cova
Financial Services Life Insurance Company. On August 26, 1999, it was announced
that the Metropolitan Life Insurance Company would purchase General American
Life. Metropolitan Life is one of the country's oldest and most financially
sound life insurance organizations.
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.
The total cost of implementing these plans is not expected to have a material
effect on Cova's financial position or results of operations. Cova believes that
it has taken all reasonable steps to address these potential problems. There can
be no guarantee, however, that the steps taken will be adequate to avoid any
adverse impact.
THE SEPARATE ACCOUNT
Cova has established a separate account, Cova Variable Annuity Account One
(Separate Account), to hold the assets that underlie the contracts (except the
assets allocated to the fixed account). 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 ranging up to 5.0% of purchase payments,
depending on the size of the purchase payment. Commissions are reduced once
certain breakpoints in purchase payments and/or contract value are achieved for
a contract. In addition, broker-dealers will be paid annual trail commissions in
the amount of .25% of purchase payments, beginning in year 2. Additional
compensation will be paid through a marketing fee and asset-based fee
arrangements.
OWNERSHIP
OWNER. You, as the owner of the contract, have all the interest and rights under
the contract. The owner is as designated at the time the contract is issued,
unless changed. You can change the owner at any time. A change will
automatically revoke any prior designation of an owner.
The change must be:
made in writing; and
received at Cova's Service Office.
The change will become effective as of the date when the written request is
signed. A new designation of owner will not apply to any payment Cova makes or
action it takes before it receives the change.
JOINT OWNER. The contract can be owned by joint owners. Any joint owner must be
the spouse of the other owner (except in states which do not allow this
limitation on joint owners). Upon the death of either joint owner, the surviving
joint owner will be the primary 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. Joint owners
must both authorize exercising any ownership rights (except telephone transfers)
unless Cova permits otherwise.
ANNUITANT
The annuitant is the person whose life we look to when we make annuity payments.
You may change the annuitant at any time prior to the annuity date unless the
contract is owned by a non-natural person (e.g. a corporation). On or after the
annuity date, any reference to the annuitant includes any joint annuitant.
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 by written request at
Cova's Service Office. The change is effective as of the date you signed the
notice.
ASSIGNMENT
You can assign the contract at any time before the annuity date. Cova will not
be bound by the assignment until it receives the written notice of the
assignment at its Service Office. 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
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
PART 1 SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before _______, 1999. 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 mortality and expense risk charge, the contract maintenance
charge, the sales charge, and the fees and expenses of the investment
portfolio.
Column B presents performance figures for the accumulation units which
reflect the mortality and expense risk charge as well as the 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.
<TABLE>
<CAPTION>
PART 1 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED _____:
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Column A Unit Performance
(reflects Column B
all charges (reflects mortality
and expense risk charge
and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------------- ---------- -------- ------------- ---------- --------- ----------
inception inception
------------- ----------
AIM VI Capital
Appreciation Fund
AIM VI Value Fund
</TABLE>
PART 1 COVA SERIES TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED :
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------------- ---------- -------- ------------- ---------- --------- ----------
inception inception
------------- ----------
Select Equity Portfolio 5/1/96 _____% _____% _____% _____% _____% _____%
Small Cap Stock Portfolio 5/1/96 _____% _____% _____% _____% _____% _____%
International Equity
Portfolio 5/1/96 _____% _____% _____% _____% _____% _____%
Quality Bond Portfolio 5/1/96 _____% _____% _____% _____% _____% _____%
Large Cap Stock Portfolio 5/1/96 _____% _____% _____% _____% _____% _____%
Bond Debenture Portfolio 5/1/96 _____% _____% _____% _____% _____% _____%
Mid-Cap Value Portfolio 8/20/97 _____% _____% _____% _____% _____% _____%
Large Cap Research Portfolio 8/20/97 _____% _____% _____% _____% _____% _____%
Developing Growth Portfolio 8/20/97 _____% _____% _____% _____% _____% _____%
</TABLE>
PART 1 GENERAL AMERICAN CAPITAL COMPANY
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED :
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
Money Market Fund 6/3/96 ______% _______% ______% _______%
PART 1 TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED :
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------------- ---------- -------- ------------- ---------- --------- ----------
inception inception
------------- ----------
Franklin Small Cap ____% ____% ____% ____% ____% ____% _____% _____% ____%
Investments Fund
Franklin Growth ____% ____% ____% ____% ____% ____% _____% _____% ____%
Investments Fund
Templeton International
Fund ____% ____% ____% ____% ____% ____% _____% _____% ____%
Templeton Stock Fund ____% ____% ____% ____% ____% ____% _____% _____% ____%
Templeton Bond Fund ____% ____% ____% ____% ____% ____% _____% _____% ____%
</TABLE>
PART 2 HISTORICAL FUND PERFORMANCE
Shares of certain portfolios have been offered prior to the time the Separate
Account first invested in them and therefore have an investment performance
history. In order to show how investment performance of certain portfolios
affect accumulation unit values, we have developed performance information.
The chart below shows the investment performance of the portfolio and the
accumulation unit performance calculated by assuming that accumulation units
were invested in the portfolio for the same periods.
The performance figures in Column A for the portfolio reflect the fees and
expenses paid by the portfolio.
Column B presents performance figures for the accumulation units which
reflect the mortality and expense risk charge, the contract maintenance
charge, the sales charge and the expenses of the portfolio.
Column C presents performance figures for the accumulation units which
reflect the mortality and expense risk charge as well as the fees and
expenses of the portfolio.
<TABLE>
<CAPTION>
PART 2
AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED :
<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 mortality and
Portfolio charges and expense risk charge 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
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
AIM V.I. Capital
Appreciation Fund 5/5/93 ____% ____% ____% ____% ____% ____% _____% _____% ____%
AIM V.I. Value Fund 5/5/93 ____% ____% ____% ____% ____% ____% _____% _____% ____%
</TABLE>
PART 2 GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED :
<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 mortality and
Portfolio charges and expense risk charge 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 Fund 10/1/87 ____% ____% ____% ____% ____% ____% _____% _____% ____%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED :
<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 mortality and
Portfolio charges and expense risk charge 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
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Templeton
International Fund 5/1/92 ____% ____% ____% ____% ____% ____% _____% _____% ____%
Templeton Stock Fund 8/24/88 ____% ____% ____% ____% ____% ____% _____% _____% ____%
Templeton Bond Fund 8/24/88 ____% ____% ____% ____% ____% ____% _____% _____% ____%
</TABLE>
- ---------------------------
- --------------------------- STAMP
- ---------------------------
Cova Financial Services Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
Please send me, at no charge, the Statement of Additional Information dated
_________, 1999 for the Series A 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 ______________, 1999 FOR THE
SERIES A 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 _________________, 1999.
TABLE OF CONTENTS
Page
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTION
REDUCTION OR ELIMINATION OF SALES CHARGE
CALCULATION OF PERFORMANCE INFORMATION
Total Return
Historical Unit Values
Reporting Agencies
FEDERAL TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other than Natural Persons
Tax Treatment of Assignments
Death Benefits
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations
ANNUITY PROVISIONS
Variable Annuity
Fixed Annuity
Annuity Unit
Net Investment Factor
Mortality and Expense Guarantee
FINANCIAL STATEMENTS
COMPANY
Cova Financial Services Life Insurance Company (the "Company") was originally
incorporated on August 17, 1981 as Assurance Life Company, a Missouri
corporation and changed its name to Xerox Financial Services Life Insurance
Company in 1985. On June 1, 1995 a wholly-owned subsidiary of General American
Life Insurance Company ("General American Life") purchased the Company from
Xerox Financial Services, Inc. The Company changed its name to Cova Financial
Services Life Insurance Company. On August 26, 1999, it was announced that the
Metropolitan Life Insurance Company would purchase General American Life.
Metropolitan Life is one of the country's oldest and most financially sound life
insurance organizations. General American Life 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.
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.
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 ______, 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 SALES CHARGE
The amount of the Sales 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 Sales 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 Sales Charge.
The Sales 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 Sales Charge be permitted where the
reduction or elimination of the Sales Charge 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 .95% Mortality and Expense Risk Charge, the Sales Charge and the
expenses for the underlying investment portfolio being advertised and any
applicable Contract Maintenance Charge.
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 Charge and any Sales Charge to arrive at the ending
hypothetical value. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:
n
P (1 + T) = ERV
<TABLE>
<CAPTION>
<S> <C> <C>
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.
</TABLE>
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of the
Sales Charge. The deduction of any Sales 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.
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
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
DEATH BENEFITS
Any death benefit paid under the Contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered herein are designed to be suitable for use under various
types of Qualified Plans. Taxation of participants in each Qualified Plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations" below.) Employee loans are not allowable under the
Contracts. Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-
employed individuals, to establish various types of retirement plans for
employees. These retirement plans may permit the purchase of the Contracts to
provide benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all Plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Pension or Profit
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b)(Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been rolled over to an IRA or to another eligible Qualified Plan, no
tax penalty will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Owner or Annuitant (as applicable) reaches age 59 1/2; (b) distributions
following the death or disability of the Owner or Annuitant (as applicable)(for
this purpose disability is as defined in Section 72(m) (7) of the Code); (c)
after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the Owner or Annuitant (as applicable) or the joint lives
(or joint life expectancies) of such Owner or Annuitant (as applicable) and his
or her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (g) distributions from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8)of
the Code.) The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for 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. On the Annuity Date, a fixed number of Annuity Units will
be purchased as follows:
The first Annuity Payment is equal to A divided first by B then multiplied by C
where:
A. is the Variable Annuity Value.
B. is $1,000.
C. is the appropriate Annuity Payment amount for each $1,000 of Variable
Annuity Value for the Annuity Option elected.
Each Annuity Payment will be reduced by a pro rata portion of the annual
Contract Maintenance Charge. In each Subaccount, the fixed number of Annuity
Units is determined by dividing the amount of the initial Annuity Payment
determined for each Subaccount by the Annuity Unit value on the Annuity Date.
Thereafter, the number of Annuity Units in each Subaccount remains unchanged
unless you elect a transfer between Subaccounts. All calculations will
appropriately reflect the Annuity Payment frequency selected.
On the date of each subsequent Annuity Payment, the total Annuity Payment is the
sum of the Annuity Payments for each Subaccount reduced by the Contract
Maintenance Charge. The Annuity Payment in each Subaccount is determined by
multiplying the number of Annuity Units then allocated to such Subaccount by the
Annuity Unit value for that Subaccount.
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
Annuity Unit Value for each applicable Subaccount as of the Annuity Date.
2) the established number of Annuity Units per payment in each Subaccount is
multiplied by the Annuity Unit value for that Subaccount for the last business
day 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.
ANNUITY UNIT
The value of an Annuity Unit for each sub-account was arbitrarily set initially.
This was done when the first investment portfolio shares were purchased. The
Subaccount Annuity Unit value at the end of any subsequent business day is
determined by multiplying the Subaccount Annuity Unit value for the immediately
preceding business day by the net investment factor for the day for which the
Annuity Unit Value is being calculated; and dividing the result by the factor
equivalent to the Assumed Investment Rate for the period from the immediately
preceding business day to the current business day. The Assumed Investment Rate
is 3%.
NET INVESTMENT FACTOR
The net investment factor for any Subaccount of the Variable Account for any
business day is determined by dividing:
1) the Accumulation Unit Value as of the close of the current business day; by
2) the Accumulation Unit Value as of the close of the immediately preceding
business day.
The net investment factor may be greater or less than one, as the Annuity Unit
Value may increase or decrease.
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. Each Annuity Payment will be reduced by a pro rata
portion of the annual contract maintenance charge. The first monthly Annuity
Payment will be based upon the Annuity Option elected and the appropriate
Annuity Option Table.
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.
[Financial statements will be filed by amendment]
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
---------------------------------------------------------------
The financial statements of the Separate Account and the
Company will be filed by amendment.
b. Exhibits
---------------------------------------------------------------
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account.
2. Not Applicable.
3. Principal Underwriter's Agreement.++
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.
5. Application for Variable Annuity.
6.(i) Copy of Articles of Incorporation of the Company.***
(ii) Copy of the Bylaws of the Company.***
7. Not Applicable.
8.(i) 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*
(ii) 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 (to be filed by amendment).
10. Consent of Independent Auditors (to be filed by amendment).
11. Not Applicable.
12. Agreement Governing Contribution.
13. Not Applicable
14. Company Organizational Chart.***
* incorporated by reference to Registrant's 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 Registrant's Post-Effective Amendment
No. 4 to Form N-4 (File Nos. 333-34741 and 811-5200) as electronically
filed on April 30, 1999.
*** incorporated by reference to Registrant's Amendment No. 20 to
Form N-4 (File Nos. 33-39100 and 811-5200) as electronically filed
on April 23, 1997.
++ incorporated by reference to Registrant's Amendment No. 24 (File
Nos. 333-34741 and 811-5200) as electronically filed on November 19,
1997.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
Name and Principal Positions and Offices
Business Address with Depositor
_______________________________ ____________________________________
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Connie A. Doern Vice President
4700 Westown Parkway
West Des Moines, IA 50266
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer and Director
700 Market St.
St. Louis, MO 63101
Douglas E. Jacobs Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Lisa O. Kirchner Vice President
4700 Westown Parkway
West Des Moines, IA 50266
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
William C. Mair Vice President
One Tower Lane, Suite 3000 and Director
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market St.
St. Louis, MO 63101
Mark E. Reynolds Executive Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Myron H. Sandberg Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Schaus Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Bernard J. Spaulding Senior Vice President, General
One Tower Lane, Suite 3000 Counsel and Secretary
Oakbrook Terrace, IL 60181-4644
Joann T. Tanaka Senior Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Patricia M. Wersching Assistant Treasurer
700 Market Street
St. Louis, MO 63101
Peter L. Witkewiz Vice President and Controller
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
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. 20 to Form N-4 (File Nos. 33-39100 and 811-5200) and is incorporated herein
by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
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
Philip A. Haley Vice President
Shari Ruecker Vice President
Mark E. Reynolds Treasurer
James W. Koeger Assistant Treasurer
Bernard J. Spaulding Secretary
(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 has caused this Registration Statement
to be signed on its behalf, in the City of Oakbrook Terrace, and State of
Illinois on this 27th day of October, 1999.
COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /S/ BERNARD J. SPAULDING
_________________________________________
Bernard J. Spaulding, Senior Vice President,
General Counsel and Secretary
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
Depositor
By: /S/ BERNARD J. SPAULDING
________________________________________
Bernard J. Spaulding, Senior Vice President,
General Counsel and Secretary
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 10/27/99
- ---------------------- --------
Lorry J. Stensrud Date
Director
- ---------------------- --------
J. Robert Hopson Date
William C. Mair* Director 10/27/99
- ---------------------- --------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 10/27/99
- ---------------------- --------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 10/27/99
- ---------------------- --------
Matthew P. McCauley Date
John W. Barber* Director 10/27/99
- ---------------------- --------
John W. Barber Date
/S/ MARK S. REYNOLDS Director 10/27/99
- ---------------------- --------
Mark E. Reynolds Date
/S/ J. TERRI TANAKA 10/27/99
- --------------------- Director --------
J. Terri Tanaka Date
/S/ PETER L. WITKEWIZ 10/27/99
- ---------------------- Controller --------
Peter L. Witkewiz 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 Individual Flexible Purchase Payment Deferred Variable Annuity
Contract
EX-99.B5 Application for Variable Annuity
EX-99.B12 Agreement Governing Contribution
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
(A Stock Corporation)
700 Market Street
St. Louis, Missouri 63101
This is a legal contract between the Owner (referred to as "You" and "Your") and
Cova Financial Services Life Insurance Company (referred to as "Cova"). Cova
will make Annuity Payments as described in this Contract beginning on the
Annuity Date.
This Contract is issued in return for the payment of the initial Gross Purchase
Payment.
FREE LOOK PROVISION - RIGHT TO CANCEL
This Contract may be returned within [10] days after You receive it. It can be
mailed or delivered to Cova at the Service Office or the agent who sold it.
Return of this Contract by mail is effective on being postmarked, properly
addressed and postage prepaid. The returned Contract will be treated as if it
was not issued. Cova will refund the Contract Value plus the sales charge
determined as of the Business Day that the refund is made in states where
permitted, which may be less than Your Gross Purchase Payment. In some states,
Cova may be required to refund the Gross Purchase Payment.
Signed for the Company.
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 VARIABLE 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].
<TABLE>
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INDEX
Page
<S> <C>
Data Page.................................................................................................................. 3
Definitions................................................................................................................ 7
General Provisions......................................................................................................... 8
Ownership, Annuitant, Assignment Provisions................................................................................ 8
Beneficiary Provisions..................................................................................................... 8
Purchase Payment Provisions................................................................................................ 8
Contract Value Provision................................................................................................... 9
General Account Provisions................................................................................................. 9
Contract Maintenance Charge................................................................................................ 9
General Account Provisions................................................................................................. 10
Death Benefit Provisions................................................................................................... 10
Annuity Provisions......................................................................................................... 11
Annuity.................................................................................................................... 11
Variable Annuity........................................................................................................... 11
Fixed Annuity.............................................................................................................. 12
Transfer Provisions........................................................................................................ 12
Withdrawal Provisions...................................................................................................... 13
Suspension or Deferral of Payments or Transfers from a Subaccount.......................................................... 13
Deferral of Payments or Transfers from the General Account................................................................. 13
Reserves, Values and Benefits.............................................................................................. 13
</TABLE>
<TABLE>
<CAPTION>
CONTRACT DATA PAGE
<S> <C>
OWNER: [John Doe] AGE AT ISSUE: [35]
SEX: [Male]
[JOINT OWNER: Jane Doe] [AGE AT ISSUE: 35]
SEX: [Female]
ANNUITANT: [John Doe] AGE AT ISSUE: [35]
SEX: [Male]
CONTRACT NUMBER: [1234] ISSUE DATE: [10/01/98]
ANNUITY DATE: [10/01/2028]
</TABLE>
PURCHASE PAYMENTS:
INITIAL GROSS PURCHASE PAYMENT: [ $10,000 ]
MINIMUM SUBSEQUENT GROSS PURCHASE PAYMENT: [$500]
MAXIMUM TOTAL GROSS PURCHASE PAYMENTS: [$1,000,000 without prior approval by
Cova]
ALLOCATION OF NET PURCHASE PAYMENT REQUIREMENTS:
[1. Cova may limit the number of Subaccounts to which Net Purchase Payments
are allocated.]
[2. If the Net Purchase Payment and forms required to issue a Contract are
in good order, the initial Net Purchase Payment will be allocated within two (2)
business days of receipt at the Service Office. Subsequent Net Purchase Payments
will be allocated as of the business day Net Purchase Payment is received at the
Service Office.]
[3. The allocation of a Net Purchase Payment must be in whole percentages
and must be at least $500 to a Subaccount and/or the General Account. An
allocation made in accordance with a pre-scheduled transfer is not subject to
these requirements.]
SALES CHARGE:
[The sales charge is deducted from a Gross Purchase Payment prior to allocation
to the Variable Account and/or the General Account. The amount of the Sales
Charge as shown below is based on the Owner's Investment on the day Cova
receives a Purchase Payment. The Owner's Investment for the initial Purchase
Payment equals the Gross Purchase Payment. For subsequent Purchase Payments, the
Owner's Investment equals: 1) that subsequent Gross Purchase Payment; plus 2)
the Contract Value on the date the subsequent Gross Purchase Payment is
received.
Sales Charge
Owner's as a Percentage of
Investment Gross Purchase Payments
[Less than $50,000] [5.75%]
[$50,000 - $99,999.99] [4.50%]
[$100,000 - $249,999.99] [3.50%]
[$250,000 - $499,999.99] [2.50%]
[$500,000 - $999,999.99] [2.00%]
[$1,000,000 or greater] [1.00%]
The Owner may also indicate in writing to Cova the amount of Gross Purchase
Payments intended to be made during a 13 month period. The Owner's Investment
will then be: 1) the total of the Gross Purchase Payments intended to be made;
plus 2) the Contract Value on the date the first of the Gross Purchase Payments
is made. If at the end of the 13th month, the indicated amount of Gross Purchase
Payments has not been made, an additional Sales Charge will be deducted from the
Contract Value based on:
1) the actual Gross Purchase Payments made during the 13 months; plus
2) the Contract Value on the date the first of the Gross Purchase Payments was
made. The amount of any additional Sales Charge will be deducted during the
14th month from the Subaccount Value in the ratio that the Subaccount Value
bears to the Contract Value and from the General Account Value in the ratio
that the General Account Value bears to the Contract Value.]
MORTALITY AND EXPENSE RISK CHARGE: [Equivalent on an annual basis to 0.95% of
the average daily net asset value of the Variable Account. Cova may increase
this charge but it will never be greater than 1.50%.]
CONTRACT MAINTENANCE CHARGE: [$30 each Contract Year. Currently during the
Accumulation Period, the Contract Maintenance Charge is not deducted if the
Contract Value as of the date the deduction is made is $50,000 or more. Cova may
discontinue this practice in the future and deduct the Contract Maintenance
Charge.]
<TABLE>
<CAPTION>
<S> <C>
GENERAL ACCOUNT: [Initial Guarantee Period:] [Through the end of the current calendar year.]
Renewal Guarantee Period: [A calendar year.]
Initial Current Interest Rate: [6%]
Minimum Guaranteed Interest Rate: [3%]
</TABLE>
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD - [DEATH OF OWNER - Upon the
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 greatest of:
1. the Gross Purchase Payments less any Withdrawals; or
2. the Contract Value determined on the Business Day next following the
date of receipt by Cova of both due proof of death and an election for payment;
or
3. the greatest Contract Value.
Prior to the Owner's, or Joint Owner's, 80th birthday, the greatest 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
Contract Value, the greatest Contract Value will be increased to the current
Contract Value. If a Purchase Payment is made, the amount of the Gross Purchase
Payment will increase the greatest Contract Value. If a Withdrawal is made, the
greatest Contract Value will be reduced by the Withdrawal Amount.
After the Owner, or a Joint Owner, attains age 80, the greatest 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 Contract Value, the
greatest Contract Value will be increased to the current Contract Value. If a
Purchase Payment is made, the amount of the Gross Purchase Payment will increase
the greatest Contract Value. If a Withdrawal is made, the greatest Contract
Value will be reduced by the Withdrawal Amount.
The Death Benefit is determined based on the age of the oldest Joint Owner. The
Death Benefit is payable upon the first death of a Joint Owner.]
[OR]
[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 greatest of:
1. the Gross Purchase Payments less any Withdrawals made on or before the
Owner's, or Joint Owner's, 80th birthday, accumulated at an effective
annual rate of 4% until the Owner's, or a Joint Owner's, 80th birthday or
death; plus any subsequent Gross Purchase Payments less any subsequent
Withdrawals made subsequent to the Owner's, or a Joint Owner's, 80th
birthday; or
2. the Contract Value determined on the Business Day next following the date
of receipt by Cova 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 while the Owner, or a Joint Owner, is
living, on or before the Owner's, or a Joint Owner's, 80th birthday plus
any Gross Purchase Payments made subsequent to that Contract Anniversary,
less any subsequent Withdrawals.
The Death Benefit is determined based on the age of the oldest Joint Owner. The
Death Benefit is payable upon the first death of a Joint Owner.]
MAXIMUM NUMBER OF TRANSFERS NOT SUBJECT TO A TRANSFER FEE: [12 Per Contract
Year]
TRANSFER FEE: [Assessed if more than 12 transfers are made in a Contract Year.
The transfer fee is $25. The transfer fee is assessed against each transfer
after the 12th transfer. The transfer fee is deducted from the Subaccount and/or
General Account from which the transfer is made or from the amount which is
transferred if the entire amount in the Subaccount and/or General Account is
transferred.]
MINIMUM TRANSFER AMOUNT: [The lesser of: 1) $500; or 2) the remaining Contract
Value in the Subaccount and/or General Account.]
TRANSFER(S) DURING THE ANNUITY PERIOD: [A transfer between Subaccounts may be
made once each Contract Year.]
MINIMUM REMAINING CONTRACT VALUE IN A SUBACCOUNT AND/OR GENERAL ACCOUNT AFTER A
TRANSFER: [$500]
MINIMUM PARTIAL WITHDRAWAL AMOUNT: [$500]
MINIMUM REMAINING CONTRACT VALUE IN A SUBACCOUNT OR THE GENERAL ACCOUNT AFTER A
WITHDRAWAL: [$500]
ANNUITY DATE REQUIREMENTS: The Annuity Date must be:
[1) the first day of a calendar month:
2) at least one month after the Issue Date; and
3) no later than the first day of the calendar month following the
annuitant's 85th birthday or, if later, the tenth Contract
Anniversary.]
MINIMUM ANNUITY VALUE TO BE APPLIED UNDER AN ANNUITY OPTION: [$5,000]
MINIMUM ANNUITY PAYMENT AMOUNT: [$100]
MINIMUM GUARANTEED INTEREST RATE FOR THE FIXED ANNUITY OPTION: [3%]
ASSUMED INVESTMENT RATE FOR THE VARIABLE ANNUITY OPTION: [3%]
VARIABLE ACCOUNT: [COVA VARIABLE ANNUITY ACCOUNT ONE]
SERVICE OFFICE:
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
[P.O. BOX 10366]
[DES MOINES, IA 50306-0366]
[800-343-8496]
[FOR USE WITH COVA VARIABLE ANNUITY ACCOUNT ONE]
A SEPARATE INVESTMENT ACCOUNT OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
DEFINITIONS
ACCUMULATION UNIT - A unit of measure used to calculate a Subaccount Value
during the Accumulation Period.
ACCUMULATION PERIOD - The period prior to the Annuity Date.
ADJUSTED ATTAINED AGE - Attained Age of the Annuitant less one year for every
eight years elapsed between January 1, 2000 and the Annuity Date.
ANNUITANT - The natural person on whose life Annuity Payments are based. You may
change the Annuitant at any time prior to the Annuity Date unless the Owner is a
non-natural person. On or after the Annuity Date, reference to Annuitant
includes any Joint Annuitant.
ANNUITY OR ANNUITY PAYMENTS - The series of payments made to You or other named
payee 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 Data Page unless changed.
ANNUITY OPTION - The form of Annuity Payments.
ANNUITY PERIOD - The period starting on the Annuity Date during which Annuity
Payments are made.
ANNUITY UNIT - A unit of measure used to calculate Variable Annuity Payments
after the Annuity Date.
ANNUITY VALUE - The Contract Value less any applicable taxes less the prorata
deduction of the Contract Maintenance Charge which is applied to the applicable
Annuity Table to determine the initial Annuity Payment.
ATTAINED AGE - The age on the birthday prior to any date for which age is to be
determined.
BENEFICIARY - The person(s) or entity(ies) who will receive any death benefit
payable under this Contract.
BUSINESS DAY - Each day that the New York Stock Exchange is open for business.
Our business day closes when the New York Exchange closes.
COMPANY - Cova Financial Services Life Insurance Company ("Cova").
CONTRACT ANNIVERSARY - An anniversary of the Issue Date.
CONTRACT VALUE - The sum of Your interest in the Variable Account and/or the
General Account.
CONTRACT YEAR - One year from the Issue Date and from each Contract Anniversary.
CURRENT INTEREST RATE - The effective rate of interest credited by Cova to the
General Account during a Guarantee Period.
FIXED ANNUITY - A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by Cova and do not vary with the investment
experience of the Variable Account.
FIXED ANNUITY VALUE - The General Account Value less any applicable taxes less
the pro rata deduction of the Contract Maintenance Charge which is applied to
the applicable Annuity Table to determine the initial Annuity Payment.
GENERAL ACCOUNT - Cova's general investment account which contains all of Cova's
assets with the exception of the Variable Account and other segregated asset
accounts.
GENERAL ACCOUNT VALUE - Your interest in the General Account.
GROSS PURCHASE PAYMENT - An amount paid into this Contract before deduction of
the sales charge and any Premium Taxes or other taxes Cova may deduct.
GUARANTEE PERIOD - The period for which a Current Interest Rate is credited.
INVESTMENT OPTION - An investment entity in which the assets of the Variable
Account may be invested.
ISSUE DATE - The date this Contract was issued. The Issue Date is shown on the
Data Page.
JOINT OWNER - If there is more than one Owner, each Owner is a Joint Owner of
this Contract. Any Joint Owner must be the spouse of the other Owner, unless
limited by state law.
NET PURCHASE PAYMENT - A Gross Purchase Payment less the sales charge and any
Premium Taxes or other taxes Cova may deduct which is allocated to the Variable
Account and/or the General Account.
OWNER - The person(s) entitled to the ownership rights under this Contract. If
Joint Owners are named, all references to Owner means Joint Owners. The Owner is
also referred to as "You" or "Your".
PORTFOLIO - A segment of an Investment Option which constitutes a separate and
distinct class of shares.
PURCHASE PAYMENT - The amount you use to purchase this Contract.
SERVICE OFFICE - The office indicated on the Data Page at which notices,
requests and Purchase Payments must be received. All sums payable to Cova under
this Contract are payable only at the Service Office.
SUBACCOUNT - A segment of the Variable Account.
SUBACCOUNT VALUE - Your interest in a Subaccount.
VARIABLE ACCOUNT - A separate investment account maintained by Cova and
designated on the Data Page.
VARIABLE ACCOUNT VALUE - Your interest in 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.
VARIABLE ANNUITY VALUE - The Variable Account Value less any applicable taxes
less the pro rata deduction of the Contract Maintenance Charge which is applied
to the applicable Annuity Table to determine the initial Annuity Payment.
GENERAL PROVISIONS
THE CONTRACT - The entire contract consists of this Contract, the application,
if any, which is attached to this Contract and any riders or endorsements
attached to this Contract. This Contract may be changed or altered only by
Cova's President or Secretary. A change or alteration must be made in writing.
INCONTESTABILITY - Cova will not contest this Contract from the Issue Date.
NON-PARTICIPATING - This Contract will not share in any distribution of
dividends.
MISSTATEMENT OF AGE AND SEX - Cova may require proof of age of the Annuitant
before making any Annuity Payments based on the life of the Annuitant under this
Contract. If the age or sex of the Annuitant has been misstated, the amount
payable will be the amount that the Contract Value would have provided at the
true age or sex. Once Annuity Payments have begun, any underpayments will be
made 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 Service Office prior
to any settlement. Prior to any payment of a death claim, due proof of death
must be submitted to the Service Office.
REPORTS - At least once each calendar year, Cova will furnish You with a report
showing the Contract Value and any other information as may be required by law.
Reports will be sent to Your last known address.
TAXES - Any taxes, including any Premium Taxes, paid to any governmental entity
relating to this Contract will be deducted from the Purchase Payments or
Contract Value when incurred. Cova will, at its sole discretion, determine when
taxes have resulted from: the investment experience of the Variable Account;
receipt by Cova of Gross Purchase Payments; or commencement of Annuity Payments.
Cova 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 Cova has to deduct amounts at a later date. Cova will deduct any
withholding taxes required by applicable law.
EVIDENCE OF SURVIVAL - Cova may require satisfactory evidence of the continued
survival of the Annuitant on whose life Annuity Payments are based.
MODIFICATION OF CONTRACT - This Contract may be modified by Cova in order to
maintain compliance with applicable state and federal law.
OWNERSHIP, ANNUITANT, ASSIGNMENT
PROVISIONS
OWNER - You, as the Owner, have all the interest and rights under this Contract.
The Owner is the person designated as such on the Issue Date, unless changed.
You 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 Service Office.
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
Cova prior to the time it was received.
JOINT OWNER - A Contract may be owned by Joint Owners. If you name Joint Owners,
any Joint Owner must be the spouse of the other Owner unless limited by state
law. Upon the death of either Joint Owner, the surviving Joint Owner will be the
primary Beneficiary. Any other Beneficiary designation will be treated as a
contingent Beneficiary unless otherwise indicated in a written notice to the
Service Office. Joint Owners must both authorize exercising any ownership rights
unless otherwise allowed by Cova.
ANNUITANT - The Annuitant may not be changed in a Contract which is owned by a
non-natural person. Any change of Annuitant is subject to Cova's administrative
rules then in effect.
ASSIGNMENT - You may, at any time before the Annuity Date, assign Your rights
under this Contract. Cova will not be bound by any assignment until written
notice is received at the Service Office. Cova is not responsible for the
validity of any assignment. Cova will not be liable as to any payment or other
settlement made by Cova before receipt of the assignment.
BENEFICIARY PROVISIONS
BENEFICIARY - The Beneficiary designation You have made is in effect on the
Issue Date and will remain in effect, unless changed. Unless You provide
otherwise, the Death Benefit will be paid in equal shares or all as follows:
1. to the primary Beneficiaries who survive Your death and/or the Annuitant's
death, as applicable; or if there are none,
2. to the contingent Beneficiaries who survive You and/or the Annuitant's
death, as applicable; or if there are none,
3. to Your estate.
CHANGE OF BENEFICIARY - Subject to the rights of any irrevocable Beneficiary,
You may change the primary Beneficiary or contingent Beneficiary. A change may
be made by filing a written request at the Service Office. The change will take
effect as of the date the notice is signed. Cova will not be liable for any
payment made or action taken before Cova records the change.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS - The initial Gross Purchase Payment is due on the Issue Date.
The Gross Purchase Payment requirements are shown on the Data Page. Cova
reserves the right to reject any Purchase Payment.
ALLOCATION OF NET PURCHASE PAYMENTS - You elect the allocation of the initial
Net Purchase Payment at the time You purchase this Contract. Unless You elect
otherwise, subsequent Net Purchase Payments are allocated in accordance with
your initial election. The requirements regarding allocation of Net Purchase
Payments are shown on the Data Page.
SALES CHARGE - Cova deducts a sales charge as shown on the Data Page.
CHANGE IN GROSS PURCHASE PAYMENTS - Subject to the minimum and maximum
requirements, You may increase or decrease or change the frequency of subsequent
Gross Purchase Payments.
NO DEFAULT - Unless You make a total withdrawal, this Contract will remain in
force until the Annuity Date. Cova reserves the right to terminate a Contract if
after a transfer or withdrawal the Contract Value is less than the minimum
remaining Contract Value in a Subaccount or the General Account as shown on the
Data Page. This Contract will not be in default if subsequent Purchase Payments
are not made.
CONTRACT VALUE PROVISION
CONTRACT VALUE - The Contract Value for any Business Day is the sum of the
Contract Value in each Subaccount and the General Account.
VARIABLE ACCOUNT PROVISIONS
SUBACCOUNT VALUE - The Subaccount Value is determined by multiplying the number
of Accumulation Units allocated to this Contract for that Subaccount by the
Accumulation Unit Value for that Subaccount. Withdrawals will result in the
cancellation of Accumulation Units in a Subaccount.
THE VARIABLE ACCOUNT - The Variable Account is designated on the Data Page.
Variable Account assets are set aside by Cova and are kept separate from Cova's
General Account assets and other separate account assets. The Variable Account
assets equal to reserves and other liabilities will not be charged with
liabilities arising out of any other business of Cova.
INVESTMENTS OF THE VARIABLE ACCOUNT - Net Purchase Payments applied to the
Variable Account are allocated to a Subaccount. The assets of a Subaccount are
allocated to the Investment Option(s) and Portfolio(s), if any, within the
Variable Account. Cova may from time to time add additional Investment Option(s)
or Portfolio(s). You may be permitted to transfer Subaccount Values or allocate
Purchase Payments to the additional Investment Option(s) or Portfolio(s),
however, the right to make any transfer or allocation will be limited by the
terms and conditions imposed by Cova.
If the shares of an Investment Option or a Portfolio within an Investment Option
become unavailable for investment by the Variable Account or Cova's Board of
Directors deems further investment in these shares inappropriate, Cova may limit
further purchase of the shares or substitute shares of another eligible
Investment Option or Portfolio 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 applicable law.
ACCUMULATION UNIT - Accumulation Units are used to account for all amounts
allocated to or withdrawn from a Subaccount as a result of Net Purchase
Payments, withdrawals, transfers, fees and charges. Cova will determine the
number of Accumulation Units of a Subaccount purchased or canceled by dividing
the amount allocated to (or the amount withdrawn from) the Subaccount by the
dollar value of one Accumulation Unit of the Subaccount as of the Business Day
during which the request for a transaction is received at the Service Office.
ACCUMULATION UNIT VALUE - The Accumulation Unit Value for each Subaccount was
arbitrarily set initially. The Accumulation Unit Value for any later Business
Day 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 Investment Option shares held at the end of such Business
Day; plus or minus
2) the cumulative charge or credit for taxes reserved which is determined
by Cova 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 Charge
which is shown on the Data Page; and
c) is the number of Accumulation Units in a Subaccount of the Variable Account
outstanding at the end of the Business Day.
The Subaccount 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.
The Accumulation Unit Value may increase or decrease from Business Day to
Business Day.
MORTALITY AND EXPENSE RISK CHARGE - Cova deducts a Mortality and Expense Risk
Charge from the Variable Account which is equivalent to, on an annual basis, the
amount shown on the Data Page.
MORTALITY AND EXPENSE GUARANTEE - Cova guarantees that the dollar amount of each
Variable Annuity Payment after the first Variable Annuity Payment will not be
affected by variations in mortality or expense experience.
CONTRACT MAINTENANCE CHARGE
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE - The Contract Maintenance Charge is
shown on the Data Page. Before the Annuity Date, the Contract Maintenance
Charge, if any, will be deducted from the Contract Value on each Contract
Anniversary on a pro rata basis by canceling Accumulation Units from each
applicable Subaccount and/or proportionally reducing the General Account Value
to reimburse Cova for expenses relating to maintenance of this Contract. If a
total withdrawal is made on other than a Contract Anniversary, the full Contract
Maintenance Charge will be deducted at the time of withdrawal.
If the Annuity Date is not a Contract Anniversary, a pro rata portion of the
annual Contract Maintenance Charge will be deducted on the Annuity Date. After
the Annuity Date, a pro rata portion of the Contract Maintenance Charge will be
collected and will result in a reduction of each Annuity Payment.
GENERAL ACCOUNT PROVISIONS
GENERAL ACCOUNT VALUE - The General Account Value is equal to:
1. the Net 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 deducted from the General Account; less
5. amounts transferred from the General Account; less
6. any applicable taxes, Contract Maintenance Charge or transfer fee.
MINIMUM GENERAL ACCOUNT VALUES - The minimum values of the General Account are
at least equal to the amount required under the nonforfeiture laws of the state
where this Contract is delivered.
CURRENT INTEREST RATE - A Current Interest Rate is credited to the General
Account. The initial Current Interest Rate is in effect for the initial
Guarantee Period. The initial Current Interest Rate is shown on the Data Page.
The Current Interest Rate for a renewal Guarantee Period may change. A Current
Interest Rate will never be less than the Minimum Guaranteed Interest Rate.
MINIMUM GUARANTEED INTEREST RATE - The Minimum Guaranteed Interest Rate credited
to the General Account is shown on the Data Page.
GUARANTEE PERIOD - The initial Guarantee Period and the renewal Guarantee Period
are shown on the Data Page.
DEATH BENEFIT PROVISIONS
DEATH OF OWNER DURING THE ACCUMULATION PERIOD - Upon death of the Owner or a
Joint Owner during the Accumulation Period, the Death Benefit will be paid to
the Beneficiary(ies) designated by You.
Upon the death of a Joint Owner, the surviving Joint Owner, if any, will be
treated as the primary Beneficiary. Any other beneficiary designation on record
at the time of death will be treated as a contingent Beneficiary unless
otherwise indicated by filing a written request at the Service Office.
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD - The amount of the Death
Benefit is equal to the Contract Value. Other Death Benefit amounts, if any, are
shown on the Data Page. The Contract Value is determined as of the end of the
Business Day during which the Service Office receives both due proof of death
and an election for method of payment.
DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD - A Beneficiary must elect
the Death Benefit to be paid under one of the options below in the event of the
death of an Owner during the Accumulation Period. In addition, if the
Beneficiary is the spouse of the Owner, the Beneficiary may elect to continue
this Contract at the then current Contract Value in his or her own name and
exercise all the Owner's rights under this Contract.
Option 1 - lump sum payment payable within seven (7) days of receipt of proof of
death and the election.
Option 2 - the payment of the entire Contract Value within five (5) years of the
date of the death of the Owner or any Joint Owner;
Option 3 - payment of the death benefit under an Annuity Option over the
lifetime of the Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary with distribution beginning within one year of the
date of death of the Owner or any Joint Owner.
Any portion of the Death Benefit not applied under Option 3 within one (1) year
of the date of the Owner's, or a Joint Owner's, death must be distributed within
five (5) years of the date of death. Payment to the Beneficiary, other than in a
single sum, may only be elected during the 60-day period beginning with the date
of receipt of proof of death.
The amount of the Death Benefit is determined as of the end of the Business Day
during which Cova receives both due proof of death and an election for the
payment option. The Death Benefit amount remains in the Variable Account and/or
General Account until distribution begins. From the time the Death Benefit is
determined until complete distribution is made, any amount in a Subaccount will
be subject to investment risk which is borne by the Beneficiary.
DEATH OF OWNER DURING THE ANNUITY PERIOD - If the Owner, or a Joint Owner, who
is not the Annuitant, dies during the Annuity Period, any remaining payments
under the Annuity Option elected will continue at least as rapidly as under the
method of distribution in effect at the Owner's death. Upon the death of the
Owner during the Annuity Period, the Beneficiary will become the Owner.
DEATH OF ANNUITANT - Upon the death of an Annuitant, who is not the Owner,
during the Accumulation Period, the Owner automatically becomes the Annuitant.
The Owner may designate a new Annuitant, subject to Cova's administrative rules
then in effect. If the Owner is a non-natural person, the death of an Annuitant
will be treated as the death of the Owner and a new Annuitant may not be
designated.
Upon the death of the Annuitant during the Annuity Period, the Death Benefit, if
any, will be as specified in the Annuity Option elected and will be paid at
least as rapidly as under the method of distribution in effect at the
Annuitant's death.
PAYMENT OF DEATH BENEFIT - The Service Office will require due proof of death
before any Death Benefit is paid. Due proof of death is:
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 Cova.
Any Death Benefit will be paid in accordance with applicable law or regulations
governing Death Benefit payments.
ANNUITY PROVISIONS
ANNUITY DATE - You elect the Annuity Date. The Annuity Date and requirements
regarding the Annuity Date are shown on the Data Page.
Prior to the Annuity Date, You may, subject to the above, change the Annuity
Date upon 30 days prior written notice to the Service Office.
ELECTION OF ANNUITY OPTION - You elect the Annuity Option. If no Annuity Option
is elected, Option 2, Life Annuity with a Guaranteed Period of 10 years, will
automatically be applied. Prior to the Annuity Date, You may, upon 30 days prior
written notice to the Service Office, change the Annuity Option. You may specify
the proportion of the Annuity Value which is to be applied to provide a Variable
Annuity, a Fixed Annuity or a combination of both. If You do not specify, the
Annuity Value will be applied to provide a Variable Annuity and/or a Fixed
Annuity based on the proportion of the Annuity Value represented by the
Subaccount Value(s) and/or the General Account Value on the Annuity Date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS - Annuity Payments will be paid as
monthly installments or at any frequency acceptable to Cova. On the Annuity
Date, the Annuity Value is applied to the Annuity Table for the Annuity Option
elected. If the minimum amount of the Annuity Value required to be applied under
an Annuity Option is less than the minimum amount shown on the Data Page, Cova
reserves the right to make one lump sum payment in lieu of Annuity Payments.
Cova reserves the right to reduce the frequency of Annuity Payments to an
interval which will result in each Annuity Payment exceeding the minimum amount
shown on the Data Page.
BASIS OF PAYMENTS - The Annuity Tables are based on the Annuity 2000 mortality
table with interest at the Minimum Guaranteed Interest Rate For The Fixed
Annuity Option and interest at the Assumed Investment Rate For The Variable
Annuity Option shown on the Data Page. The Adjusted Attained Age of the
Annuitant on the Annuity Date is used to determine the Annuity Payments.
ANNUITY OPTIONS - The following Annuity Options or any other Annuity Option
acceptable to Cova may be elected.
Option 1 - Life Annuity - Cova will make periodic Annuity Payments during the
life of the Annuitant.
Option 2 - Life Annuity with a Guaranteed Period of 5, 10 or 20 Years - Cova
will make periodic 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 for the remainder of the guaranteed period.
However, the Owner 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 Minimum Guaranteed Interest
Rate for the Fixed Annuity Option and/or the Assumed Investment Rate for the
Variable Annuity Option.
Option 3 - Joint and Last Survivor Annuity - Cova will make periodic Annuity
Payments for the joint lifetime of the Annuitant and another person. At the
death of either person, Annuity Payments will continue to be made for the life
of the survivor. The survivor Annuity Payments will be equal to 100%, 66 2/3% or
50% of the amount payable during the joint lifetime, as chosen.
ANNUITY: Unless You designate another payee, You will be the payee of the
Annuity Payments. The Annuity Value will be applied to the applicable Annuity
Table contained in this Contract based upon the Annuity Option You have elected.
The amount of the first payment for each $1000 of Annuity Value is shown in the
Annuity Tables. Annuity Payments will depend on the age and, where permitted,
sex of the Annuitant.
VARIABLE ANNUITY: You may elect to have the Variable Annuity Value paid as a
Variable Annuity. Variable Annuity Payments reflect the investment performance
of the Variable Account in accordance with the allocation of the Variable
Annuity Value to the Subaccounts during the Annuity Period. Variable Annuity
Payments are not guaranteed as to dollar amount.
On the Annuity Date, a fixed number of Annuity Units will be purchased as
follows:
The first Variable Annuity Payment is equal to A divided first by B then
multiplied by C where:
A. is the Variable Annuity Value.
B. is $1,000.
C. is the appropriate Annuity Payment amount for each $1,000 of Variable
Annuity Value for the Annuity Option elected. Each Annuity Payment will be
reduced by a pro rata portion of the annual Contract Maintenance Charge. In
each Subaccount, the fixed number of Annuity Units is determined by
dividing the amount of the initial Annuity Payment determined for each
Subaccount by the Annuity Unit value on the Annuity Date. Thereafter, the
number of Annuity Units in each Subaccount remains unchanged unless You
elect a transfer between Subaccounts. All calculations will appropriately
reflect the Annuity Payment frequency selected.
On the date of each subsequent Annuity Payment, the total Annuity Payment is the
sum of the Annuity Payments for each Subaccount reduced by the Contract
Maintenance Charge. The Annuity Payment in each Subaccount is determined by
multiplying the number of Annuity Units then allocated to such Subaccount by the
Annuity Unit value for that Subaccount.
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
Annuity Unit Value for each applicable Subaccount as of the Annuity Date.
2) the established number of Annuity Units per payment in each Subaccount is
multiplied by the Annuity Unit value for that Subaccount for the last
Business Day 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.
ANNUITY UNIT - The value of an Annuity Unit for each Subaccount of the Variable
Account was arbitrarily set initially.
The Subaccount Annuity Unit Value at the end of any subsequent Business Day is
determined by multiplying the Subaccount Annuity Unit Value for the immediately
preceding Business Day by the Net Investment Factor for the day for which the
Annuity Unit Value is being calculated; and dividing the result by the factor
equivalent to the Assumed Investment Rate for the period from the immediately
preceding Business Day to the current Business Day. The Assumed Investment Rate
is shown on the Data Page.
NET INVESTMENT FACTOR - The Net Investment Factor for any Subaccount of the
Variable Account for any Business Day is determined by dividing:
1) the Accumulation Unit Value as of the close of the current Business Day; by
2) the Accumulation Unit Value as of the close of the immediately preceding
Business Day.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
Value may increase or decrease.
FIXED ANNUITY: You may elect to have the Fixed Annuity Value paid as a Fixed
Annuity. The Fixed Annuity Value on the day preceding the Annuity Date is used
to determine the Fixed Annuity periodic payment. Each Annuity Payment will be
reduced by a pro rata portion of the annual Contract Maintenance Charge. The
dollar amount of each Fixed Annuity Payment is determined in accordance with
Annuity Tables contained in this Contract.
PROTECTION OF PROCEEDS - No Beneficiary 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.
TRANSFER PROVISIONS
TRANSFERS - A transfer is subject to the following:
1. the maximum number of transfers which may be made not subject to a transfer
fee is shown on the Data Page;
2. information regarding the transfer fee is shown on the Data Page;
3. pre-scheduled transfers are not counted when determining the transfer fee;
4. the minimum amount which may be transferred is shown on the Data Page. This
requirement does not apply to a pre-scheduled transfer;
5. the minimum remaining Contract Value in a Subaccount and/or the General
Account after a transfer is shown on the Data Page;
6. a transfer will be effected as of the end of the Business Day when the
Service Office receives an acceptable transfer request containing all
required information including the amount which is to be transferred and
the Subaccounts and/or General Account affected;
7. neither Cova nor its Service Office is liable for a transfer made in
accordance with Your instructions;
8. Cova reserves the right to restrict the number of transfers per year and to
restrict transfers from being made on consecutive Business Days;
9. Your right to make transfers is subject to modification if Cova determines,
in Cova's sole opinion, that the exercise of the right by one or more
Owners is or would be to the disadvantage of other Owners. Restrictions may
be applied in any manner reasonably designed to prevent any use of the
transfer right which is considered by Cova to be to the disadvantage of the
Owners. A modification could be applied to transfers to or from one or more
of the Subaccounts and could include, but not be limited to:
A. the requirement of a minimum time period between each transfer;
B. not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one Owner; or
C. limiting the dollar amount that may be transferred between the
Subaccounts by an Owner at any one time.
10. Transfers made during the Annuity Period are subject to the following:
A. You may, at any time, make a transfer from a Variable Annuity to a
Fixed Annuity. You may not make a transfer from a Fixed Annuity to a
Variable Annuity. You may make a transfer between Subaccounts as shown
on the Data Page.
B. The amount transferred from a Variable Annuity 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 Your
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 based on the Adjusted Attained Age of the Annuitant
for the Annuity Option, determined using the Annuity 2000 mortality
table, Male/Female, with interest at the applicable Assumed Interest
Rate for the Variable Annuity Option. Amounts transferred from a
Variable Annuity to a Fixed Annuity will be applied under the Annuity
Option elected at the Adjusted Attained Age of the Annuitant at the
time of the transfer. All amounts and Annuity Unit Values will be
determined as of the end of the Business Day which is the effective
date of the transfer.
WITHDRAWAL PROVISIONS
WITHDRAWALS - Prior to the Annuity Date, You may, upon written request received
at the Service Office, make a total or partial withdrawal of the Contract Value
less the Contract Maintenance Charge, if applicable.
The minimum partial withdrawal amount and the minimum remaining Contract Value
remaining in a Subaccount or the General Account after a withdrawal are shown on
the Data Page.
A withdrawal will result in the cancellation of Accumulation Units from the
applicable Subaccounts in the ratio that the Subaccount Value bears to the
Contract Value and a reduction of the General Account Value in the ratio that
the General Account Value bears to the Contract Value. You may specify another
method in advance if a different method of cancellation is desired.
Cova will make payment of a withdrawal from a Subaccount within seven (7) days
of receipt of a request in good order unless the Suspension Or Deferral Of
Payments Or Transfers From A Subaccount provision is in effect.
SUSPENSION OR DEFERRAL OF
PAYMENTS OR TRANSFERS FROM
A SUBACCOUNT
Cova 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
Cova 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 (6)
months after written election is received at its Service Office.
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 law of the state in which this Contract is
delivered.
<TABLE>
<CAPTION>
[Fixed] [Variable] ANNUITY TABLE OPTION 1
[Minimum Guaranteed Interest Rate for a Fixed Annuity Option: 3%]
[Assumed Investment Rate for a Variable Annuity Option: 3%]
Monthly Annuity Payments for Life Annuity
For Each $1,000 Of Adjusted Contract Value Applied
Male Female Male Female Male Female
Adjusted Monthly Monthly Adjusted Monthly Monthly Adjusted Monthly Monthly
Age Payment Payment Age Payment Payment Age Payment Payment
___________ ___________ __________ ___________ ___________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 2.79 2.74 32 3.27 3.15 59 4.91 4.53
6 2.80 2.74 33 3.30 3.17 60 5.03 4.63
7 2.81 2.75 34 3.33 3.20 61 5.16 4.74
8 2.82 2.76 35 3.36 3.23 62 5.30 4.86
9 2.83 2.77 36 3.40 3.26 63 5.44 4.98
10 2.84 2.78 37 3.43 3.29 64 5.60 5.11
11 2.85 2.80 38 3.47 3.32 65 5.77 5.24
12 2.87 2.81 39 3.51 3.35 66 5.94 5.39
13 2.88 2.82 40 3.55 3.39 67 6.13 5.55
14 2.90 2.83 41 3.60 3.43 68 6.34 5.72
15 2.91 2.84 42 3.65 3.46 69 6.55 5.91
16 2.92 2.86 43 3.69 3.50 70 6.78 6.10
17 2.94 2.87 44 3.75 3.55 71 7.02 6.32
18 2.96 2.88 45 3.80 3.59 72 7.28 6.55
19 2.97 2.90 46 3.86 3.64 73 7.56 6.80
20 2.99 2.91 47 3.91 3.69 74 7.86 7.07
21 3.01 2.93 48 3.98 3.74 75 8.18 7.37
22 3.03 2.94 49 4.04 3.79 76 8.52 7.68
23 3.05 2.96 50 4.11 3.85 77 8.88 8.02
24 3.07 2.98 51 4.18 3.91 78 9.27 8.40
25 3.09 3.00 52 4.25 3.97 79 9.69 8.80
26 3.11 3.02 53 4.33 4.04 80 10.13 9.23
27 3.13 3.04 54 4.42 4.11 81 10.60 9.71
28 3.16 3.06 55 4.50 4.19 82 11.11 10.22
29 3.18 3.08 56 4.60 4.27 83 11.65 10.77
30 3.21 3.10 57 4.70 4.35 84 12.23 11.37
31 3.24 3.12 58 4.80 4.44 85+ 12.84 12.01
</TABLE>
<TABLE>
<CAPTION>
[Fixed] [Variable] ANNUITY TABLE OPTION 2
[Minimum Guaranteed Interest Rate for a Fixed Annuity Option: 3%]
[Assumed Investment Rate for a Variable Annuity Option: 3%]
Monthly Annuity Payments for Life Annuity with 5, 10 or 20 Years Guaranteed
For Each $1,000 Of Adjusted Contract Value Applied
Female's Female's
Adjusted 5 Years 10 Years 20 Years Adjusted 5 Years 10 Years 20 Years
Age Guaranteed Guaranteed Guaranteed Age Guaranteed Guaranteed Guaranteed
_______________ ______________ ______________ ______________ _________________ ______________ ______________ ______________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 2.74 2.74 2.73 46 3.64 3.63 3.59
6 2.74 2.74 2.74 47 3.69 3.68 3.64
7 2.75 2.75 2.75 48 3.74 3.73 3.68
8 2.76 2.76 2.76 49 3.79 3.78 3.73
9 2.77 2.77 2.77 50 3.85 3.84 3.78
10 2.78 2.78 2.78 51 3.91 3.89 3.83
11 2.80 2.79 2.79 52 3.97 3.96 3.88
12 2.81 2.81 2.80 53 4.04 4.02 3.94
13 2.82 2.82 2.82 54 4.11 4.09 4.00
14 2.83 2.83 2.83 55 4.18 4.16 4.06
15 2.84 2.84 2.84 56 4.26 4.23 4.12
16 2.86 2.85 2.85 57 4.34 4.31 4.18
17 2.87 2.87 2.87 58 4.43 4.40 4.25
18 2.88 2.88 2.88 59 4.52 4.49 4.31
19 2.90 2.90 2.89 60 4.62 4.58 4.38
20 2.91 2.91 2.91 61 4.73 4.68 4.45
21 2.93 2.93 2.92 62 4.84 4.78 4.52
22 2.94 2.94 2.94 63 4.96 4.89 4.60
23 2.96 2.96 2.96 64 5.08 5.01 4.67
24 2.98 2.98 2.97 65 5.22 5.13 4.74
25 3.00 3.00 2.99 66 5.36 5.26 4.81
26 3.02 3.01 3.01 67 5.51 5.40 4.88
27 3.04 3.03 3.03 68 5.68 5.54 4.95
28 3.06 3.05 3.05 69 5.86 5.69 5.02
29 3.08 3.08 3.07 70 6.05 5.85 5.08
30 3.10 3.10 3.09 71 6.25 6.02 5.14
31 3.12 3.12 3.11 72 6.47 6.20 5.19
32 3.15 3.15 3.14 73 6.70 6.38 5.24
33 3.17 3.17 3.16 74 6.95 6.56 5.28
34 3.20 3.20 3.19 75 7.21 6.76 5.32
35 3.23 3.23 3.21 76 7.50 6.96 5.36
36 3.26 3.25 3.24 77 7.80 7.16 5.39
37 3.29 3.28 3.27 78 8.12 7.36 5.41
38 3.32 3.32 3.30 79 8.46 7.56 5.43
39 3.35 3.35 3.33 80 8.82 7.75 5.45
40 3.39 3.38 3.37 81 9.20 7.95 5.46
41 3.42 3.42 3.40 82 9.60 8.13 5.48
42 3.46 3.46 3.44 83 10.01 8.30 5.48
43 3.50 3.50 3.47 84 10.44 8.47 5.49
44 3.55 3.54 3.51 85+ 10.88 8.62 5.50
45 3.59 3.58 3.55
</TABLE>
<TABLE>
<CAPTION>
[Fixed] [Variable] ANNUITY TABLE OPTION 2
[Minimum Guaranteed Interest Rate for a Fixed Annuity Option: 3%]
[Assumed Investment Rate for a Variable Annuity Option: 3%]
Monthly Annuity Payments for Life Annuity with 5, 10 or 20 Years Guaranteed
For Each $1,000 Of Adjusted Contract Value Applied
Male's Male's
Adjusted 5 Years 10 Years 20 Years Adjusted 5 Years 10 Years 20 Years
Age Guaranteed Guaranteed Guaranteed Age Guaranteed Guaranteed Guaranteed
_______________ ______________ ______________ ______________ _________________ ______________ ______________ ______________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 2.79 2.78 2.78 46 3.85 3.84 3.77
6 2.80 2.80 2.79 47 3.91 3.89 3.82
7 2.81 2.81 2.80 48 3.97 3.95 3.87
8 2.82 2.82 2.81 49 4.03 4.01 3.92
9 2.83 2.83 2.82 50 4.10 4.08 3.97
10 2.84 2.84 2.84 51 4.17 4.14 4.03
11 2.85 2.85 2.85 52 4.24 4.21 4.08
12 2.87 2.87 2.86 53 4.32 4.29 4.14
13 2.88 2.88 2.87 54 4.40 4.37 4.20
14 2.89 2.89 2.89 55 4.49 4.45 4.26
15 2.91 2.91 2.90 56 4.58 4.53 4.32
16 2.92 2.92 2.92 57 4.68 4.63 4.39
17 2.94 2.94 2.93 58 4.78 4.72 4.45
18 2.96 2.95 2.95 59 4.89 4.82 4.52
19 2.97 2.97 2.96 60 5.01 4.93 4.58
20 2.99 2.99 2.98 61 5.13 5.04 4.65
21 3.01 3.01 3.00 62 5.27 5.16 4.72
22 3.03 3.02 3.02 63 5.41 5.28 4.78
23 3.05 3.04 3.04 64 5.56 5.41 4.85
24 3.07 3.06 3.06 65 5.71 5.55 4.91
25 3.09 3.09 3.08 66 5.88 5.69 4.97
26 3.11 3.11 3.10 67 6.06 5.84 5.03
27 3.13 3.13 3.12 68 6.25 5.99 5.08
28 3.16 3.15 3.14 69 6.45 6.14 5.13
29 3.18 3.18 3.17 70 6.66 6.30 5.18
30 3.21 3.21 3.19 71 6.88 6.47 5.23
31 3.24 3.23 3.22 72 7.12 6.64 5.27
32 3.26 3.26 3.25 73 7.36 6.81 5.31
33 3.29 3.29 3.28 74 7.62 6.98 5.34
34 3.33 3.32 3.31 75 7.90 7.16 5.37
35 3.36 3.36 3.34 76 8.19 7.34 5.39
36 3.39 3.39 3.37 77 8.49 7.51 5.42
37 3.43 3.43 3.40 78 8.81 7.69 5.43
38 3.47 3.46 3.44 79 9.13 7.86 5.45
39 3.51 3.50 3.47 80 9.48 8.02 5.46
40 3.55 3.55 3.51 81 9.83 8.18 5.47
41 3.60 3.59 3.55 82 10.20 8.33 5.48
42 3.64 3.63 3.59 83 10.57 8.48 5.49
43 3.69 3.68 3.63 84 10.95 8.62 5.50
44 3.74 3.73 3.68 85+ 11.34 8.74 5.50
45 3.80 3.78 3.72
</TABLE>
<TABLE>
<CAPTION>
[Fixed] [Variable] ANNUITY TABLE OPTION 3
[Minimum Guaranteed Interest Rate for a Fixed Annuity Option: 3%]
[Assumed Investment Rate for a Variable Annuity Option: 3%]
Monthly Payments for Joint & Last Survivor Annuity
For Each $1,000 Of Adjusted Contract Value Applied
JOINT AND 50% SURVIVOR ANNUITY
Male's Adjusted Age
Female's Adjusted Age 50 55 60 65 70 75
_________________________________ ______ ______ ______ ______ ______ _____
<S> <C> <C> <C> <C> <C> <C> <C>
50 3.98 4.15 4.36 4.62 4.91 5.24
55 4.15 4.34 4.57 4.85 5.18 5.54
60 4.36 4.57 4.83 5.14 5.51 5.92
65 4.61 4.85 5.14 5.49 5.91 6.39
70 4.91 5.18 5.52 5.93 6.42 6.99
75 5.27 5.59 5.98 6.47 7.06 7.75
</TABLE>
<TABLE>
<CAPTION>
JOINT AND 66 2/3% SURVIVOR ANNUITY
Male's Adjusted Age
Female's Adjusted Age 50 55 60 65 70 75
_________________________________ ______ ______ ______ ______ ______ _____
<S> <C> <C> <C> <C> <C> <C> <C>
50 3.82 3.96 4.12 4.29 4.47 4.66
55 3.98 4.14 4.33 4.53 4.75 4.97
60 4.15 4.35 4.57 4.82 5.08 5.35
65 4.34 4.58 4.85 5.16 5.49 5.83
70 4.55 4.83 5.16 5.54 5.97 6.41
75 4.77 5.10 5.49 5.97 6.52 7.12
</TABLE>
<TABLE>
<CAPTION>
JOINT AND 100% SURVIVOR ANNUITY
Male's Adjusted Age
Female's Adjusted Age 50 55 60 65 70 75
_________________________________ ______ ______ ______ ______ ______ _____
<S> <C> <C> <C> <C> <C> <C> <C>
50 3.54 3.63 3.70 3.75 3.79 3.81
55 3.67 3.80 3.91 4.00 4.07 4.11
60 3.79 3.97 4.14 4.29 4.40 4.49
65 3.88 4.12 4.36 4.59 4.80 4.95
70 3.96 4.24 4.56 4.90 5.22 5.51
75 4.01 4.34 4.73 5.17 5.65 6.12
</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
(A Stock Corporation)
700 Market Street
St. Louis, Missouri 63101
CL-4155 (1/99)
<TABLE>
<CAPTION>
Send Application and check to:
Cova Financial Services Life Insurance Company
Policy Service Office
P.O. Box 10366
Des Moines, Iowa 50306-0366
Individual Flexible Purchase Payment Deferred
Variable and Fixed Annuity Application
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
1. Annuitant
- ---------------------------------------------------------------------------------------------------------------------------
Name (First) (Middle) (Last)
- ---------------------------------------------------------------------------------------------------------------------------
Address (Street) (City) (State) (Zip)
- ---------------------------------------------------------------------------------------------------------------------------
2. Owner (Complete only if different than Annuitant)
Correspondence is sent to the Owner.
- ---------------------------------------------------------------------------------------------------------------------------
Name/Name of Trust (First) (Middle) (Last)
- ---------------------------------------------------------------------------------------------------------------------------
Address (Street) (City) (State) (Zip)
- ---------------------------------------------------------------------------------------------------------------------------
3. Joint Owner
- ---------------------------------------------------------------------------------------------------------------------------
Name (First) (Middle) (Last)
- ---------------------------------------------------------------------------------------------------------------------------
Address (Street) (City) (State) (Zip)
Joint Owners must be spouses. 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
- ---------------------------------------------------------------------------------------------------------------------------
4. Beneficiary
Show full name(s), address(es), relationship to Owner, Social Security Number(s), and percentage each is to receive.
Use the Special Requests section if additional space is needed.
- --------------------------------------------------------------------------------------------------------------------------
Primary Name Address Relationship Social Security Number %
- --------------------------------------------------------------------------------------------------------------------------
Primary Name Address Relationship Social Security Number %
Contingent Name Address Relationship Social Security Number %
- --------------------------------------------------------------------------------------------------------------------------
Contingent Name Address Relationship Social Security Number %
- ---------------------------------------------------------------------------------------------------------------------------
5. Initial Purchase Payment
Initial Purchase Payment $ _______________________________
Make Check Payable to Cova
Plan Type: | | Non-Qualified
| | 401(a)
| | 408 Traditional IRA* (Type: | | Contribution - Year _________, | | Transfer, or | | Rollover)
| | 408 Roth IRA* (Type: | | Contribution - Year __________, | | Transfer, or | | Rollover)
| | 408 SEP IRA* (Type: | | Contribution - Year __________, | | Transfer, or | | Rollover)
| |_______________________________________________________________________
| | 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.
* The annuitant and owner must be the same person.
Social
Security Number _____________ - ______ - _________
Sex | | M | | F Birthdate____________ / ______ / _____
Phone (_______) __________________________________
Social Security/
Tax ID Number _____________ - _________ - ________
Sex | | M | | F Date of Birth/Trust_________ /___ /___
Phone (_______) __________________________________
Social
Security Number _____________ - ______ - _________
Sex | | M | | F Birthdate____________ / ______ / _____
- ---------------------------------------------------------------------------------------------------------------------------
6. Purchase Payment Allocation
Must be whole percentages. Unless otherwise directed, subsequent purchase payments will be allocated as shown.
Allocation must equal 100%.
____ % General Account
AIM Advisors Inc.
____ % AIM V.I. Value
____ % AIM V.I. Capital Appreciation
Conning Asset Management Company
____ % Money Market
Franklin Advisors, Inc.
____ % Franklin Small Cap Investments
____ % Franklin Growth Investments
J.P. Morgan Investment Management
____ % Select Equity
____ % Large Cap Stock
____ % Small Cap Stock
____ % International Equity
____ % Quality Bond
Lord, Abbett & Company
____ % Mid-Cap Value
____ % Large Cap Research
____ % Developing Growth
____ % Bond Debenture
____ % Growth & Income
Templeton Investment Counsel, Inc.
____ % Templeton Bond Fund
____ % Templeton International Fund
____ % Templeton Stock Fund
____ % Other _________________________
- --------------------------------------------------------------------------------------------------------------------------
7. Allocation During Freelook Period
Under certain circumstances, as described in the accompanying Prospectus, the initial Purchase Payment will be
allocated to the 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.
- ---------------------------------------------------------------------------------------------------------------------------
8. Death Benefit (Check one. If no election is made, Option A will apply.)
| | Option A - Annual Step-Up | | Option B - Five Year Step-Up with 4% Accumulation
- ---------------------------------------------------------------------------------------------------------------------------
9. Replacement
Will the proposed annuity replace or change any existing annuity or life insurance policy? | | No | | Yes
- ---------------------------------------------------------------------------------------------------------------------------
10. Telephone Transfer
I/We authorize Cova Financial Services Life Insurance Company (Cova) or any person authorized by Cova to accept
telephone transfer instructions and/or future payment allocation changes from me/us and my Registered
Representative/Agent. Telephone transfers will be automatically permitted unless you check one or both of the boxes
below indicating that you do not wish to authorize telephone transfers. Cova will use reasonable procedures to confirm
that instructions communicated by telephone are genuine. If Cova fails to use such procedures, Cova may be liable for
any losses due to unauthorized or fraudulent instructions.
I/We DO NOT wish to authorize telephone transfers for the following (check applicable boxes):
| | Owner(s) | | Registered Representative/Agent
- ---------------------------------------------------------------------------------------------------------------------------
11. Dollar Cost Averaging Transfers
I authorize Dollar Cost Averaging Transfers of $ _______________ ($500 minimum) to be transferred each month as
selected below (Note: $6,000 minimum or the amount needed to complete all transfers is required in the Conning Money
Market Portfolio or the General Account).
FROM: TO:
Check One
| | Conning Money
Market Portfolio
| | General Account
AIM Advisors Inc.
____ % AIM V.I. Value
____ % AIM V.I. Capital Appreciation
Conning Asset Management Company
____ % Money Market
Franklin Advisors, Inc.
____ % Franklin Small Cap Investments
____ % Franklin Growth Investments
J.P. Morgan Investment Management
____ % Select Equity
____ % Large Cap Stock
____ % Small Cap Stock
____ % International Equity
____ % Quality Bond
Lord, Abbett & Company
____ % Mid-Cap Value
____ % Large Cap Research
____ % Developing Growth
____ % Bond Debenture
____ % Growth & Income
Templeton Investment Counsel, Inc.
____ % Templeton Bond Fund
____ % Templeton International Fund
____ % Templeton Stock Fund
____ % Other ___________________________
____
100% Total
I authorize transfers to be made for:
| | 12 months | | 24 months | | 36 months
| | 48 months | | 60 months Other ___________months
Dollar Cost Averaging Transfers and Rebalancing Transfers are not available simultaneously.
- ---------------------------------------------------------------------------------------------------------------------------
12. Systematic Withdrawals
I authorize automatic monthly withdrawals of $ ________ to be made on the (check one) | | 1st or | | 15th day of the
month.
FEDERAL AND STATE INCOME TAX WITHHOLDING
Check one: | | I elect to have Federal Income Tax withheld from these distributions.
| | 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.
- ---------------------------------------------------------------------------------------------------------------------------
13. 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:
| | quarterly | | semi-annually | | annually
Rebalancing Transfers and Dollar Cost Averaging Transfers are not available simultaneously.
- ---------------------------------------------------------------------------------------------------------------------------
14. 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)
- ---------------------------------------------------------------------------------------------------------------------------
15. Annuity Option
If no Annuity Option is specified, the Life Annuity with 10 years _________________________________________________________
Guaranteed Option will be automatically applied. (Indicate Annuity Option)
- ---------------------------------------------------------------------------------------------------------------------------
16. Right of Accumulation - Owner's Investment
| | I own a Cova variable annuity under policy form series CL-4155 and/or CC-4181 which may entitle me to a reduced
sales charge. My contract numbers are: _________________________________________________________________________________________
| | The ownership of some contracts differ. The contract numbers are:
Contract No.______________________ Name_________________________________________________ Soc. Sec. No._____________________
Contract No.______________________ Name_________________________________________________ Soc. Sec. No._____________________
- ---------------------------------------------------------------------------------------------------------------------------
17. Special Requests
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
18. Electronic Prospectus Option
In the future, Cova may deliver prospectus updates, semi-annual and annual reports to consenting contract owners
electronically by the delivery methods listed below. If you wish to receive future updates in this manner, check your
choice below.
| | 1) mailing a diskette containing the document;
| | 2) mailing a CD-ROM containing the document;
| | 3) e-mailing the document; or
| | 4) e-mailing a notice identifying an Internet site where the document can be viewed and downloaded.
Whichever option you choose, Cova will supply the documents in a format compatible with one of the following (please
choose one):
| | Microsoft Windows | | Macintosh
Please indicate your consent by checking the appropriate boxes.
You may incur normal and customary online usage charges to receive a document under Option 3 or 4. If you would like
to receive these documents in electronic format when available, please check the box and insert your e-mail address
here (___________________________________). This consent will be in effect until you revoke it. You can revoke your
consent by calling Cova at: 1-800-343-8496 or writing to Cova at P.O. Box 10366, Des Moines, IA 50306-0366. You may
revoke it at any time. If you consent to electronic delivery, at any time you also may request that we send you a
paper copy.
19. Fraud Statement
Any person who knowingly and with intent to defraud any insurance company or other person files an application for
insurance or statement of claim containing any materially false information or conceals for the purpose of misleading
information concerning any fact material thereto commits a fraudulent insurance act, which is a crime and subjects
such person to criminal and civil penalties.
- ---------------------------------------------------------------------------------------------------------------------------
20. Acknowledgement and Authorization
I (We) agree that the above information and statements and
those made on all pages of this application 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 of Cova
Variable Annuity Account One. PAYMENTS AND VALUES PROVIDED
BY THE CONTRACT FOR WHICH APPLICATION IS MADE ARE VARIABLE
AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
- ---------------------------------------------------------------------------------------------------------------------------
(Owner Signature & Title, Annuitant unless otherwise noted)
- ---------------------------------------------------------------------------------------------------------------------------
(Joint Owner Signature & Title)
(Signature of Annuitant if other than Owner)
Signed at
(City) (State)
Date
- ---------------------------------------------------------------------------------------------------------------------------
21. Agent's Report
Will the proposed annuity replace or change any existing
annuity or life insurance policy?
| | No | | Yes (Indicate type)
Type:
| | Life | |Annuity
Complete any required replacement forms.
- ---------------------------------------------------------------------------------------------------------------------------
Agent's Signature
- ---------------------------------------------------------------------------------------------------------------------------
Phone
Agent's Name and Number
Name and Address of Firm
CL-4156 (2/99) 02-FELV-AFMO (2/99) STANDARD
</TABLE>
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
-----------------------
