File Nos. 33-39100
811-5200
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 31 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT ONE
__________________________________
(Exact Name of Registrant)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
_______________________________________________
(Name of Depositor)
One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644
______________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 831-5433
Name and Address of Agent for Service
Lorry J. Stensrud, President
Cova Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 523-1661
Copies to:
Judith A. Hasenauer and Frances S. Cook
Blazzard, Grodd & Hasenauer, P.C. First Vice President and
P.O. Box 5108 Associate Counsel
Westport, CT 06881 Cova Financial Services
(203) 226-7866 Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
__X__ on May 1, 1999 pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Registered:
Individual Variable Annuity Contracts
EXPLANATORY NOTE
==============================================================================
This Registration Statement contains fourteen Portfolios of the Cova Series
Trust; one Portfolio of General American Capital Company; three Portfolios of
AIM Variable Insurance Funds; two Portfolios of Variable Insurance Products
Fund; one Portfolio of Variable Insurance Products Fund II; two Portfolios of
Variable Insurance Products Fund III; seven Portfolios of MFS Variable Insurance
Trust; two Portfolios of Alliance Variable Products Series Fund, Inc.; four
Portfolios of Investors Fund Series; one Portfolio of Liberty Variable
Investment Trust; five Portfolios of Oppenheimer Variable Account Funds; and
nine Portfolios, Class 1 Shares, of Templeton Variable Products Series Fund.
Different versions of the Prospectus will be created from this Registration
Statement. The only differences between the versions of the Prospectuses created
from this Registration Statement will be the underlying funds available. The
distribution system for each version of the Prospectus is different. These
Prospectuses will be filed with the Commission pursuant to Rule 497 under the
Securities Act of 1933. The Registrant undertakes to update this Explanatory
Note, as needed, each time a Post-Effective Amendment is filed.
==============================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------------------------------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Profile
Item 4. Condensed Financial Information . . . Appendix A
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Investment
Options
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Fixed and Variable Annuity
Item 8. Annuity Period . . . . . . . . . . . . Income Phase
Item 9. Death Benefit. . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . Table of Contents of the
Statement of Additional
Information
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -----------------------
PART B
Item 15. Cover Page . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . Company
Item 18. Services . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
THE FIXED AND VARIABLE ANNUITY
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
and
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
This prospectus describes the Fixed and Variable Annuity Contract offered by
Cova Financial Services Life Insurance Company (Cova).
The annuity contract has 52 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 51 investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios (except as noted).
AIM VARIABLE INSURANCE FUNDS INC.:
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation
AIM V.I. International Equity
AIM V.I. Value
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
Premier Growth Portfolio
Real Estate Investment Portfolio
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity
Small Cap Stock
International Equity
Quality Bond
Large Cap Stock
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture
Mid-Cap Value
Large Cap Research
Developing Growth
Lord Abbett Growth and Income
MANAGED BY MISSISSIPPI VALLEY
ADVISORS, INC.
Balanced
Small Cap Equity
Equity Income
Growth & Income Equity
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market
INVESTORS FUND SERIES:
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
Kemper Small Cap Value
Kemper Government Securities
Kemper Small Cap Growth
MANAGED BY DREMAN VALUE MANAGEMENT, L.L.C.
Kemper-Dreman High Return Equity
LIBERTY VARIABLE INVESTMENT TRUST:
MANAGED BY NEWPORT FUND MANAGEMENT INC.
Newport Tiger, Variable Series
MFS VARIABLE INSURANCE TRUST:
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
MFS Emerging Growth
MFS Research
MFS Growth With Income
MFS High Income
MFS World Governments
MFS/Foreign & Colonial Emerging Markets Equity (not available)
MFS Bond
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
MANAGED BY OPPENHEIMERFUNDS, INC.
Oppenheimer High Income
Oppenheimer Bond
Oppenheimer Growth
Oppenheimer Growth & Income
Oppenheimer Strategic Bond
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Growth Investments
Franklin Small Cap Investments
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
Mutual Discovery Investments
Mutual Shares Investments
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton Asset Allocation
Templeton Bond
Templeton International
Templeton Stock
MANAGED BY TEMPLETON ASSET MANAGEMENT LTD.
Templeton Developing Markets
VARIABLE INSURANCE PRODUCTS FUND:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP Growth
VIP Equity-Income
VARIABLE INSURANCE PRODUCTS FUND II:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP II Contrafund
VARIABLE INSURANCE PRODUCTS FUND III:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP III Growth Opportunities
VIP III Growth & Income
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Cova Fixed and Variable
Annuity Contract.
To learn more about the Cova Fixed and Variable Annuity Contract, you can obtain
a copy of the Statement of Additional Information (SAI) dated May 1, 1999. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page __ of this prospectus. For a free
copy of the SAI, call us at (800) 523-1661 or write us at: One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 1999
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
EXAMPLES
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund, Inc.
Cova Series Trust
General American Capital Company
Investors Fund Series
Liberty Variable Investment Trust
MFS Variable Insurance Trust
Oppenheimer Variable Account Funds
Templeton Variable Products Series Fund
Variable Insurance Products Fund
Variable Insurance Products Fund II
Variable Insurance Products Fund III
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Approved Asset Allocation Programs
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the Withdrawal Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
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 A
Condensed Financial Information
APPENDIX B
Performance Information
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable and need an explanation. We have identified the
following as some of these words or terms. They are identified in the text in
italic and the page that is indicated here is where we believe you will find the
best explanation for the word or term.
Page
Accumulation Phase.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Date.............................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Earnings.................................................................
Fixed Account............................................................
Income Phase.............................................................
Investment Portfolios....................................................
Joint Owner..............................................................
Non-Qualified............................................................
Owner....................................................................
Purchase Payment.........................................................
Qualified................................................................
Tax Deferral.............................................................
SUMMARY
The sections in this summary correspond to sections in this prospectus which
discuss the topics in more detail.
THE ANNUITY CONTRACT. The fixed and variable annuity contract offered by Cova is
a contract between you, the owner, and Cova, an insurance company. The contract
provides a means for investing on a tax-deferred basis. The contract is intended
for retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
This contract offers 51 investment portfolios. These portfolios are designed to
offer a better return than the fixed account. However, this is NOT guaranteed.
You can also lose your money.
The fixed account offers an interest rate that is guaranteed by the insurance
company, Cova. While your money is in the fixed account, the interest your money
will earn as well as your principal is guaranteed by Cova.
You can transfer between accounts up to 12 times a year without charge or tax
implications.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments during
the income phase.
ANNUITY PAYMENTS (THE INCOME PHASE). If you want to receive regular income from
your annuity, you can choose an annuity option. Once you begin receiving regular
payments, you cannot change your payment plan. During the income phase, you have
the same investment choices you had during the accumulation phase. You can
choose to have payments come from the fixed account, the investment portfolios
or both. If you choose to have any part of your payments come from the
investment portfolios, the dollar amount of your payments may go up or down.
HOW TO PURCHASE THE CONTRACT. You can buy this contract with $5,000 or more
under most circumstances. You can add $500 or more any time you like during the
accumulation phase. Your registered representative can help you fill out the
proper forms.
INVESTMENT OPTIONS. You can put your money in any or all of these investment
portfolios 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
AIM V.I. International Equity
AIM V.I. Value
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
Premier Growth Portfolio
Real Estate Investment Portfolio
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity
Small Cap Stock
International Equity
Quality Bond
Large Cap Stock
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture
Mid-Cap Value
Large Cap Research
Developing Growth
Lord Abbett Growth and Income
MANAGED BY MISSISSIPPI VALLEY
ADVISORS, INC.
Balanced
Small Cap Equity
Equity Income
Growth & Income Equity
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market
INVESTORS FUND SERIES:
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
Kemper Small Cap Value
Kemper Government Securities
Kemper Small Cap Growth
MANAGED BY DREMAN VALUE MANAGEMENT, L.L.C.
Kemper-Dreman High Return Equity
LIBERTY VARIABLE INVESTMENT TRUST:
MANAGED BY NEWPORT FUND MANAGEMENT INC.
Newport Tiger, Variable Series
MFS VARIABLE INSURANCE TRUST:
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
MFS Emerging Growth
MFS Research
MFS Growth With Income
MFS High Income
MFS World Governments
MFS/Foreign & Colonial Emerging Markets Equity (not available)
MFS Bond
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
MANAGED BY OPPENHEIMERFUNDS, INC.
Oppenheimer High Income
Oppenheimer Bond
Oppenheimer Growth
Oppenheimer Growth & Income
Oppenheimer Strategic Bond
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Growth Investments
Franklin Small Cap Investments
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
Mutual Discovery Investments
Mutual Shares Investments
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton Asset Allocation
Templeton Bond
Templeton International
Templeton Stock
MANAGED BY TEMPLETON ASSET MANAGEMENT LTD.
Templeton Developing Markets
VARIABLE INSURANCE PRODUCTS FUND:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP Growth
VIP Equity-Income
VARIABLE INSURANCE PRODUCTS FUND II:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP II Contrafund
VARIABLE INSURANCE PRODUCTS FUND III:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
VIP III Growth Opportunities
VIP III Growth & Income
(VIP, VIP II and VIP III refer to Variable Insurance
Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III, respectively.)
Depending upon market conditions, you can make or lose money in any of these
portfolios.
EXPENSES. The contract has insurance features and investment features, and there
are costs related to each.
* Each year Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, Cova currently waives this charge
if the value of your contract is at least $50,000.
* Cova also deducts for its insurance charges which total 1.40% of the
average daily value of your contract allocated to the investment
portfolios.
* If you take your money out, Cova may assess a withdrawal charge which is
equal to 5% of the purchase payment you withdraw.
* When you begin receiving regular income payments from your annuity, Cova
will assess a state premium tax charge which ranges from 0%-4%, depending
upon the state.
* The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
* There are also investment charges which range from ____% to ____% of the
average daily value of the investment portfolio depending upon the
investment portfolio.
TAXES. Your earnings are not taxed until you take them out. If you take money
out during the accumulation phase, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on the earnings. Payments during the income
phase are considered partly a return of your original investment. That part of
each payment is not taxable as income.
ACCESS TO YOUR MONEY. You can take money out at any time during the accumulation
phase. After the first year, you can take up to 10% of your total purchase
payments each year without charge from Cova. Withdrawals of purchase payments in
excess of that may be charged a withdrawal charge, depending on how long your
money has been in the contract. However, Cova will never assess a withdrawal
charge on earnings you withdraw. Earnings are defined as the value in your
contract minus the remaining purchase payments in your contract. Of course, you
may also have to pay income tax and a tax penalty on any money you take out.
DEATH BENEFIT. If you die before moving to the income phase, the person you have
chosen as your beneficiary will receive a death benefit.
OTHER INFORMATION.
Free Look. If you cancel the contract within 10 days after receiving it (or
whatever period is required in your state), we will send your money back without
assessing a withdrawal charge. You will receive whatever your contract is worth
on the day we receive your request. This may be more or less than your original
payment. If we're required by law to return your original payment, we reserve
the right to put your money in the Money Market Fund during the free-look
period.
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
Who should purchase the Contract? This contract is designed for people
seeking long-term tax-deferred accumulation of assets, generally for retirement
or other long-term purposes. The tax-deferred feature is most attractive to
people in high federal and state income tax brackets. You should not buy this
contract if you are looking for a short-term investment or if you cannot take
the risk of getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to pay
taxes on money you receive. We call this feature the Systematic Withdrawal
Program.
You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average cost
per unit over time than a single one time purchase. We call this feature Dollar
Cost Averaging.
You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
Under certain circumstances, Cova will give you your money without a
withdrawal charge if you need it while you're in a nursing home. We call this
feature the Nursing Home Waiver.
These features are not available in all states and may not be suitable for your
particular situation.
INQUIRIES. If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract. The Fee Table reflects expenses
of the Separate Account as well as the investment portfolios.
<TABLE>
<CAPTION>
<S> <C>
OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 1 below) 5% of purchase payment withdrawn
Transfer Fee (see Note 2 below) No charge for first 12 transfers in a
contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the
amount transferred.
Contract Maintenance Charge (see Note 3 below) $30 per contract per year
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
-----
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
INVESTMENT PORTFOLIO EXPENSES Other Expenses
(as a percentage of the average daily net (after expense
assets of an investment portfolio) Management reimbursement for Total Annual
Fees certain Portfolios) Portfolio Expenses
----------- ---------------------- ------------------
COVA SERIES TRUST(a)
Managed by J.P. Morgan Investment Management Inc.
Select Equity .75% .10% .85%
Small Cap Stock .85% .10% .95%
International Equity .85% .10% .95%
Quality Bond .55% .10% .65%
Large Cap Stock .65% .10% .75%
Managed by Lord, Abbett & Co.
Bond Debenture .75% .10% .85%
Mid-Cap Value(b) 1.00% .10% 1.10%
Large Cap Research(b) 1.00% .10% 1.10%
Developing Growth(b) .90% .10% 1.00%
Lord Abbett Growth and Income(c) .65% .07% .72%
Managed by Mississippi Valley Advisors, Inc.
Balanced(d) 1.00% .10% 1.10%
Small Cap Equity(d) 1.00% .10% 1.10%
Equity Income(d) 1.00% .10% 1.10%
Growth & Income Equity(d) 1.00% .10% 1.10%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset
Management Company
Money Market .125% .08% .205%
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Managed by Fidelity Management &
Research Company
VIP III Growth Opportunities (e) .61% .16% .77%
VIP Growth (e) .61% .08% .69%
VIP III Growth & Income .50% .50% 1.00%
VIP Equity-Income (e) .51% .07% .58%
VIP II Contrafund (e) .61% .13% .74%
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation(f) .63% .05% .68%
AIM V.I. International Equity(f) .75% .18% .93%
AIM V.I. Value(f) .62% .08% .70%
MFS VARIABLE INSURANCE TRUST
Managed by Massachusetts Financial Services Company
MFS Emerging Growth .75% .12% .87%
MFS Research .75% .13% .88%
MFS Growth With Income (g) .75% .25% 1.00%
MFS High Income (g) .75% .25% 1.00%
MFS World Governments (g) .75% .25% 1.00%
MFS/Foreign & Colonial Emerging Markets Equity (g) 1.25% .25% 1.50%
MFS Bond (g) .60% .40% 1.00%
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Managed by Alliance Capital Management L.P.
Premier Growth (h) 1.00% .08% 1.08%
Real Estate Investment (i)(j) 0% .95% .95%
INVESTORS FUND SERIES
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value .75% .09% .84%
Kemper Government Securities .55% .09% .64%
Kemper Small Cap Growth .65% .06% .71%
Managed by Dreman Value Management, L.L.C.
Kemper-Dreman High Return Equity (k) .75% .12% .87%
LIBERTY VARIABLE INVESTMENT TRUST
Managed by Newport Fund Management Inc.
Newport Tiger, Variable Series .90% .37% 1.27%
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income .75% .07% .82%
Oppenheimer Bond .73% .05% .78%
Oppenheimer Growth .73% .02% .75%
Oppenheimer Growth & Income .75% .08% .83%
Oppenheimer Strategic Bond .75% .08% .83%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1
SHARES
Managed by Franklin Advisers, Inc.
Franklin Growth Investments(l) .40% .60% 1.00%
Franklin Small Cap Investments(m) .40% .60% 1.00%
Managed by Franklin Mutual Advisers, Inc.
Mutual Discovery Investments(n) .40% .60% 1.00%
Mutual Shares Investments(o) .40% .60% 1.00%
Managed by Templeton Investment Counsel, Inc.
Templeton Asset Allocation(p) .60% .18% .78%
Templeton Bond .50% .18% .68%
Templeton International(p) .69% .19% .88%
Templeton Stock(p) .69% .19% .88%
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets 1.25% .33% 1.58%
</TABLE>
(a) Since August 20, 1990, Cova has been reimbursing the investment
portfolios of Cova Series Trust for all operating expenses (exclusive of the
management fees) in excess of approximately .10%. Absent the expense
reimbursement and management fee waiver, the percentages shown for total annual
portfolio expenses (on an annualized basis) for the year or period ended
December 31, 1997 would have been 1.00% for the Select Equity Portfolio, 1.39%
for the Small Cap Stock Portfolio, 1.53% for the International Equity Portfolio,
1.08% for the Quality Bond Portfolio, 1.08% for the Large Cap Stock Portfolio,
1.07% for the Bond Debenture Portfolio, 8.41% for the Mid-Cap Value Portfolio,
10.04% for the Large Cap Research Portfolio, 9.00% for the Developing Growth
Portfolio, 3.81% for the Balanced Portfolio, 3.97% for the Small Cap Equity
Portfolio, 3.58% for the Equity-Income Portfolio and 3.51% for the Growth &
Income Equity Portfolio.
(b) Annualized. The Portfolio commenced investment operations on August 20,
1997.
(c) Estimated. The Portfolio commenced investment operations on or about
January 8, 1999.
(d)Annualized. The Portfolio commenced investment operations on July 1,
1997.
(e) A portion of the brokerage commissions that certain funds pay was used
to reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest earned on
uninvested cash balances was used to reduce custodian and transfer agent
expenses. Including these reductions, the total operating expenses presented in
the table would have been .56% for the VIP Equity-Income Portfolio, .67% for the
VIP Growth Portfolio, .71% for the VIP II Contrafund Portfolio and .76% for the
VIP III Growth Opportunities Portfolio.
(f) A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its respective fees. Effective May 1, 1998, the Funds reimburse AIM in an
amount up to 0.25% of the average net asset value of each Fund, for expenses
incurred in providing, or assuring that participating insurance companies
provide, certain administrative services. Currently, the fee only applies to the
average net asset value of each Fund in excess of the net asset value of each
Fund as calculated on April 30, 1998.
(g) The adviser has agreed to bear expenses for the Series, subject to
reimbursement by the Series, so that the Series' "Other Expenses" do not exceed
.25% (.40% with respect to the MFS Bond Series) annually. Absent such
reimbursement, "Total Annual Portfolio Expenses" would be: 1.10% for the MFS
Growth With Income Series; 1.15% for the MFS High Income Series and the MFS
World Governments Series; 3.58% for the MFS Bond Series and are estimated to be
5.92% for the MFS/Foreign & Colonial Emerging Markets Equity Series.
(h) The adviser to the Fund discontinued the expense reimbursement with
respect to the Premier Growth Portfolio effective May 1, 1998.
(i) The expenses shown with respect to the Real Estate Investment Portfolio
are net of voluntary reimbursements. Expenses have been capped at .95% annually
and the adviser to the Fund intends to continue such reimbursements for the
foreseeable future. The estimated expenses for the Real Estate Investment
Portfolio, before reimbursement, are: .90% management fees and 1.41% for other
expenses.
(j) Annualized.
(k) Other Expenses have been estimated for the first year.
(l) The investment manager has agreed in advance to waive management fees
and make certain payments to reduce Fund expenses as necessary so that Total
Annual Portfolio Expenses do not exceed 1.00% of the Fund's Class 1 net assets
through 1998. The investment manager may end this arrangement at a later date.
Estimated Management Fees, Other Expenses and Total Annual Portfolio Expenses
before any waivers would be 0.60%, 0.60% and 1.20%, respectively.
(m) The investment manager has agreed in advance to waive management fees
and make certain payments to reduce Fund expenses as necessary so that Total
Annual Portfolio Expenses do not exceed 1.00% of the Fund's Class 1 net assets
through 1998. The investment manager may end this arrangement at a later date.
Estimated Management Fees, Other Expenses and Total Annual Portfolio Expenses
before any waivers would be 0.75%, 0.60% and 1.35%, respectively.
(n) The investment manager has agreed in advance to waive management fees
and make certain payments to reduce Fund expenses as necessary so that Total
Annual Portfolio Expenses do not exceed 1.00% of the Fund's Class 1 net assets
through 1998. The investment manager may end this arrangement at a later date.
Estimated Management Fees, Other Expenses and Total Annual Portfolio Expenses
before any waivers would be 0.80%, 0.60% and 1.40%, respectively.
(o) The investment manager has agreed in advance to waive management fees
and make certain payments to reduce Fund expenses as necessary so that Total
Annual Portfolio Expenses do not exceed 1.00% of the Fund's Class 1 net assets
through 1998. The investment manager may end this arrangement at a later date.
Estimated Management Fees, Other Expenses and Total Annual Portfolio Expenses
before any waivers would be 0.60%, 0.60% and 1.20%, respectively.
(p) Management Fees and Total Annual Portfolio Expenses have been restated
to reflect the management fee schedule approved by shareholders and effective
May 1, 1997. Actual Management Fees and Total Annual Portfolio Expenses before
May 1, 1997 were lower.
EXAMPLES:
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract value
to an annuity option.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Time Periods
1 year 3 years 5 years 10 years
------ ------- ------- --------
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Small Cap Stock (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
International Equity (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
Quality Bond (a) $71.79 (a) $112.12 (a) $159.89 (a) $245.92
(b) $21.79 (b) $ 67.12 (b) $114.89 (b) $245.92
Large Cap Stock (a) $72.80 (a) $115.15 (a) $164.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Managed by Lord, Abbett & Co.
Bond Debenture (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Mid-Cap Value (a) $76.30 (a) $125.66 (a) $ (a) $
(b) $26.30 (b) $ 80.66 (b) $ (b) $
Large Cap Research (a) $76.30 (a) $125.66 (a) $ (a) $
(b) $26.30 (b) $ 80.66 (b) $ (b) $
Developing Growth (a) $75.30 (a) $122.67 (a) $ (a) $
(b) $25.30 (b) $ 77.67 (b) $ (b) $
Lord Abbett Growth and Income (a) $72.80 (a) $115.15 (a) $ (a) $
(b) $22.80 (b) $ 70.15 (b) $ (b) $
Managed by Mississippi Valley Advisors, Inc.
Balanced (a) $76.30 (a) $125.66 (a) $ (a) $
(b) $26.30 (b) $ 80.66 (b) $ (b) $
Small Cap Equity (a) $76.30 (a) $125.66 (a) $ (a) $
(b) $26.30 (b) $ 80.66 (b) $ (b) $
Equity Income (a) $76.30 (a) $125.66 (a) $ (a) $
(b) $26.30 (b) $ 80.66 (b) $ (b) $
Growth & Income Equity (a) $76.30 (a) $125.66 (a) $ (a) $
(b) $26.30 (b) $ 80.66 (b) $ (b) $
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market (a) $67.31 (a) $ 98.54 (a) $137.02 (a) $199.08
(b) $17.31 (b) $ 53.54 (b) $ 92.02 (b) $199.08
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Managed by Fidelity Management &
Research Company
VIP III Growth Opportunities (a) $73.00 (a) $115.75 (a) $ (a) $
(b) $23.00 (b) $ 70.75 (b) $ (b) $
VIP Growth (a) $72.19 (a) $113.33 (a) $ (a) $
(b) $22.19 (b) $ 68.33 (b) $ (b) $
VIP III Growth & Income (a) $75.30 (a) $122.67 (a) $ (a) $
(b) $25.30 (b) $ 77.67 (b) $ (b) $
VIP Equity-Income (a) $71.09 (a) $110.00 (a) $ (a) $
(b) $21.09 (b) $ 65.00 (b) $ (b) $
VIP II Contrafund (a) $72.69 (a) $114.84 (a) $ (a) $
(b) $22.69 (b) $ 69.84 (b) $ (b) $
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation (a) $72.09 (a) $113.03 (a) $ (a) $
(b) $22.09 (b) $ 68.03 (b) $ (b) $
AIM V.I. International Equity (a) $74.60 (a) $120.57 (a) $ (a) $
(b) $24.60 (b) $ 75.57 (b) $ (b) $
AIM V.I. Value (a) $72.29 (a) $113.63 (a) $ (a) $
(b) $22.29 (b) $ 68.63 (b) $ (b) $
MFS VARIABLE INSURANCE TRUST
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $74.00 (a) $118.76 (a) $ (a) $
(b) $24.00 (b) $ 73.76 (b) $ (b) $
MFS Research (a) $74.10 (a) $119.07 (a) $ (a) $
(b) $24.10 (b) $ 74.07 (b) $ (b) $
MFS Growth with Income (a) $75.30 (a) $122.67 (a) $ (a) $
(b) $25.30 (b) $ 77.67 (b) $ (b) $
MFS High Income (a) $75.30 (a) $122.67 (a) $ (a) $
(b) $25.30 (b) $ 77.67 (b) $ (b) $
MFS World Governments (a) $75.30 (a) $122.67 (a) $ (a) $
(b) $25.30 (b) $ 77.67 (b) $ (b) $
MFS/Foreign & Colonial Emerging
Markets Equity (a) $80.29 (a) $137.54 (a) $ (a) $
(b) $30.29 (b) $ 92.54 (b) $ (b) $
MFS Bond (a) $75.30 (a) $122.67 (a) $ (a) $
(b) $25.30 (b) $ 77.67 (b) $ (b) $
ALLIANCE VARIABLE PRODUCTS SERIES FUND,
INC.
Managed by Alliance Capital
Management L.P.
Premier Growth (a)$76.10 (a)$125.06 (a) $ (a) $
(b)$26.10 (b)$ 80.06 (b) $ (b) $
Real Estate Investment (a)$74.80 (a)$121.17 (a) $ (a) $
(b)$24.80 (b)$ 76.17 (b) $ (b) $
INVESTORS FUND SERIES
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value (a)$73.70 (a)$117.86 (a) $ (a) $
(b)$23.70 (b)$ 72.86 (b) $ (b) $
Kemper Government Securities (a)$71.69 (a)$111.82 (a) $ (a) $
(b)$21.69 (b)$ 66.82 (b) $ (b) $
Kemper Small Cap Growth (a)$72.39 (a)$113.94 (a) $ (a) $
(b)$22.39 (b)$ 68.94 (b) $ (b) $
Managed by Dreman Value Management, L.L.C.
Kemper-Dreman High Return Equity (a)$74.00 (a)$118.76 (a) $ (a) $
(b)$24.00 (b)$ 73.76 (b) $ (b) $
LIBERTY VARIABLE INVESTMENT TRUST
Managed by Newport Fund Management Inc.
Newport Tiger, Variable Series (a)$78.00 (a)$130.73 (a) $ (a) $
(b)$28.00 (b)$ 85.73 (b) $ (b) $
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income (a)$73.50 (a)$117.26 (a) $ (a) $
(b)$23.50 (b)$ 72.26 (b) $ (b) $
Oppenheimer Bond (a)$73.10 (a)$116.05 (a) $ (a) $
(b)$23.10 (b)$ 71.05 (b) $ (b) $
Oppenheimer Growth (a)$72.80 (a)$115.15 (a) $ (a) $
(b)$22.80 (b)$ 70.15 (b) $ (b) $
Oppenheimer Growth & Income (a)$73.60 (a)$117.56 (a) $ (a) $
(b)$23.60 (b)$ 72.56 (b) $ (b) $
Oppenheimer Strategic Bond (a)$73.60 (a)$117.56 (a) $ (a) $
(b)$23.60 (b)$ 72.56 (b) $ (b) $
TEMPLETON VARIABLE PRODUCTS SERIES FUND,
CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Growth Investments (a)$75.30 (a)$122.67 (a) $ (a) $
(b)$25.30 (b)$ 77.67 (b) $ (b) $
Franklin Small Cap Investments (a)$75.30 (a)$122.67 (a) $ (a) $
(b)$25.30 (b)$ 77.67 (b) $ (b) $
Managed by Franklin Mutual Advisers, Inc.
Mutual Discovery Investments (a)$75.30 (a)$122.67 (a) $ (a) $
(b)$25.30 (b)$ 77.67 (b) $ (b) $
Mutual Shares Investments (a)$75.30 (a)$122.67 (a) $ (a) $
(b)$25.30 (b)$ 77.67 (b) $ (b) $
Managed by Templeton Investment Counsel, Inc.
Templeton Asset Allocation (a)$73.10 (a)$116.05 (a) $ (a) $
(b)$23.10 (b)$ 71.05 (b) $ (b) $
Templeton Bond (a)$72.09 (a)$113.03 (a) $ (a) $
(b)$22.09 (b)$ 68.03 (b) $ (b) $
Templeton International (a)$74.10 (a)$119.07 (a) $ (a) $
(b)$24.10 (b)$ 74.07 (b) $ (b) $
Templeton Stock (a)$74.10 (a)$119.07 (a) $ (a) $
(b)$24.10 (b)$ 74.07 (b) $ (b) $
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets (a)$81.08 (a)$139.90 (a) $ (a) $
(b)$31.08 (b)$ 94.90 (b) $ (b) $
</TABLE>
EXPLANATION OF FEE TABLE
1. The withdrawal charge is 5% of the purchase payments you withdraw. After
Cova has had a purchase payment for 5 years, there is no charge by Cova for a
withdrawal of that purchase payment. You may also have to pay income tax and a
tax penalty on any money you take out. After the first year, you can take up to
10% of your total purchase payments each year without a charge from Cova.
2. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is under the Dollar Cost Averaging,
Automatic Rebalancing or Approved Asset Allocation Programs.
3. During the accumulation phase, Cova will not charge the contract
maintenance charge if the value of your contract is $50,000 or more. If you make
a complete withdrawal, Cova will charge the contract maintenance charge.
4. Premium taxes are not reflected. Premium taxes may apply depending on
the state where you live.
There is an accumulation unit value history (Condensed Financial Information)
contained in Appendix A.
THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case Cova), where the insurance company promises to pay an income to you,
in the form of annuity payments. Annuity payments must begin on a designated
date that is at least 30 days in the future. Until you decide to begin receiving
annuity payments, your annuity is in the accumulation phase. Once you begin
receiving annuity payments, your contract switches to the income phase.
The Contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your contract until you take
money out of your contract.
The contract is called a variable annuity because you can choose among the
investment portfolios and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends, in part, on the investment performance of the investment
portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by Cova. Cova guarantees that the interest rate credited
to the fixed account will not be less than 3% per year with respect to contracts
issued on or after May 1, 1996. If you select the fixed account, your money will
be placed with the other general assets of Cova. If you select the fixed
account, the amount of money you are able to accumulate in your contract during
the accumulation phase depends upon the total interest credited to your
contract. The amount of the annuity payments you receive during the income phase
from the fixed account portion of the contract will remain level for the entire
income phase.
As owner of the contract, you exercise all interest and rights under the
contract. You can change the owner at any time by notifying Cova in writing. You
and your spouse can be named joint owners. We have described more information on
this under "Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one month after you buy the contract.
Annuity Payments
You will receive annuity payments during the income phase. In general, annuity
payments must begin by the annuitant's 85th birthday or 10 years from the date
the contract was issued, whichever is later (this requirement may differ
slightly for special programs). The annuitant is the person whose life we look
to when we make annuity payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from the:
* fixed account,
* the investment portfolio(s) or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the 3% assumed investment rate used in the annuity table for the contract,
and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment, except in New Jersey ($2,000 if the contract is issued in
Massachusetts or Texas). In that case, Cova may pay your annuity payment in a
single lump sum. Likewise, if your annuity payments would be less than $100 a
month ($20 in Texas), Cova has the right to change the frequency of payments so
that your annuity payments are at least $100 ($20 in Texas).
Annuity Options
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. If you do not choose
an annuity option at the time you purchase the contract, we will assume that you
selected Option 2 which provides a life annuity with 10 years of guaranteed
payments.
You can choose one of the following annuity options or any other annuity option
acceptable to Cova. After annuity payments begin, you cannot change the annuity
option.
OPTION 1. LIFE ANNUITY. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
OPTION 2. LIFE ANNUITY WITH 5, 10 OR 20 YEARS GUARANTEED. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you give us to purchase the contract. The
minimum we will accept is $5,000 when the contract is purchased as a
non-qualified contract. If you are purchasing the contract as part of an IRA
(Individual Retirement Annuity), 401(k) or other qualified plan, the minimum we
will accept is $2,000. The maximum purchase payment we accept is $1 million
without our prior approval. You can make additional purchase payments of $500 or
more to any type of contract. Cova reserves the right to reject any purchase
payment (except in New Jersey).
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise. There is a $500
minimum allocation requirement for the fixed account and for each investment
portfolio.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within two business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within five
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 p.m. Eastern time.
Free Look
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it (or the period required in your state). When you cancel
the contract within this time period, Cova will not assess a withdrawal charge.
You will receive back whatever your contract is worth on the day we receive your
request. In certain states, or if you have purchased the contract as an IRA, we
may be required to give you back your purchase payment if you decide to cancel
your contract within 10 days after receiving it (or whatever period is required
in your state). If that is the case, we reserve the right to put your purchase
payment in the Money Market Fund of General American Capital Company for 15 days
before we allocate your first purchase payment to the investment portfolio(s)
you have selected. (In some states, the period may be longer.) In such case, we
will refund the greater of purchase payments (less withdrawals) or contract
value. Currently, Cova directly allocates your purchase payment to the
investment portfolios and/or fixed account you select.
ACCUMULATION UNITS
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular
investment portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
EXAMPLE:
On Monday we receive an additional purchase payment of $5,000 from you. You have
told us you want this to go to the Quality Bond Portfolio. When the New York
Stock Exchange closes on that Monday, we determine that the value of an
accumulation unit for the Quality Bond Portfolio is $13.90. We then divide
$5,000 by $13.90 and credit your contract on Monday night with 359.71
accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The contract offers 51 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS. CERTAIN PORTFOLIOS
CONTAINED IN THE FUND PROSPECTUSES MAY NOT BE AVAILABLE WITH YOUR CONTRACT.
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. Each investment portfolio has a different investment
objective. Cova Advisory has engaged sub-advisers to provide investment advice
for the individual investment portfolios. The following investment portfolios
are available under the contract:
J.P. MORGAN INVESTMENT MANAGEMENT INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
MISSISSIPPI VALLEY ADVISORS, INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Balanced Portfolio
Small Cap Equity Portfolio
Equity Income Portfolio
Growth & Income Equity Portfolio
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
VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
Variable Insurance Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III are each a mutual fund with multiple
portfolios managed by Fidelity Management & Research Company. The following
portfolios are available under the contract:
Variable Insurance Products Fund:
VIP Growth Portfolio
VIP Equity-Income Portfolio
Variable Insurance Products Fund II:
VIP II Contrafund Portfolio
Variable Insurance Products Fund III:
VIP III Growth Opportunities Portfolio
VIP III Growth & Income Portfolio
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is a management investment company with
multiple portfolios. A I M Advisors, Inc. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
MFS VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust is a mutual fund with multiple portfolios.
Massachusetts Financial Services Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS High Income Series
MFS World Governments Series
MFS/Foreign & Colonial Emerging Markets Equity Series (not available)
MFS Bond Series
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
Premier Growth Portfolio
Real Estate Investment Portfolio
INVESTORS FUND SERIES
Investors Fund Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. (Scudder Kemper) is the investment manager for the Kemper
Government Securities Portfolio, the Kemper Small Cap Growth Portfolio and the
Kemper Small Cap Value Portfolio. Scudder Kemper, as investment manager, has
retained Dreman Value Management, L.L.C. to serve as sub-adviser for the
Kemper-Dreman High Return Equity Portfolio. The following portfolios are
available under the contract:
Kemper Small Cap Value Portfolio
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper-Dreman High Return Equity Portfolio
LIBERTY VARIABLE INVESTMENT TRUST
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger, Variable Series. The following
portfolio is available under the contract:
Newport Tiger, Variable Series (a portfolio investing in equity securities of
companies located in certain countries of Asia).
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Variable Account Funds is a mutual fund with multiple portfolios.
OppenheimerFunds, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer Strategic Bond 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; Franklin Mutual
Advisers, Inc. is the investment manager of the Mutual Discovery Investments
Fund and the Mutual Shares Investments Fund; Templeton Investment Counsel, Inc.
is the investment manager of the Templeton Asset Allocation Fund, the Templeton
Bond Fund, the Templeton International Fund and the Templeton Stock Fund; and
Templeton Asset Management Ltd. is the investment manager of the Templeton
Developing Markets Fund. The following portfolios are available under the
contract:
Franklin Growth Investments Fund
Franklin Small Cap Investments Fund
Mutual Discovery Investments Fund (capital appreciation)
Mutual Shares Investments Fund (capital appreciation with income as a
secondary objective)
Templeton Asset Allocation Fund
Templeton Bond Fund
Templeton International Fund
Templeton Stock Fund
Templeton Developing Markets Fund
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' advisors, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
TRANSFERS
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described below, subject to applicable state laws and
regulations.
TELEPHONE TRANSFERS. You and/or your registered representative on your behalf,
can make transfers by telephone. Telephone transfers will be automatically
permitted unless you tell us otherwise. If you own the contract with a joint
owner, unless Cova is instructed otherwise, Cova will accept instructions from
either you or the other owner. Cova will use reasonable procedures to confirm
that instructions given us by telephone are genuine. If Cova fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. Cova tape records all telephone instructions.
TRANSFERS DURING THE ACCUMULATION PHASE. You can make 12 transfers every year
during the accumulation phase without charge. We measure a year from the
anniversary of the day we issued your contract. You can make a transfer to or
from the fixed account and to or from any investment portfolio. If you make more
than 12 transfers in a year, there is a transfer fee deducted. The following
apply to any transfer during the accumulation phase:
1. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio or fixed account.
2. Your request for transfer must clearly state which investment
portfolio(s) or the fixed account are involved in the transfer.
3. Your request for transfer must clearly state how much the transfer is
for.
4. You cannot make any transfers within 7 calendar days of the annuity
date.
TRANSFERS DURING THE INCOME PHASE. You can only make transfers between the
investment portfolios once each year. We measure a year from the anniversary of
the day we issued your contract. You cannot transfer from the fixed account to
an investment portfolio, but you can transfer from one or more investment
portfolios to the fixed account at any time.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund or the fixed account to any of the
other investment portfolio(s). By allocating amounts on a regular schedule as
opposed to allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations. The Dollar Cost Averaging
Program is available only during the accumulation phase.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program.
Cova reserves the right to modify, terminate or suspend the Dollar Cost
Averaging Program.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
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. If you participate in the Automatic Rebalancing Program, the transfers
made under the program are not taken into account in determining any transfer
fee.
EXAMPLE:
Assume that you want your initial purchase payment split between 2 investment
portfolios. You want 40% to be in the Quality Bond Portfolio and 60% to be in
the Select Equity Portfolio. Over the next 2 1/2 months the bond market does
very well while the stock market performs poorly. At the end of the first
quarter, the Quality Bond Portfolio now represents 50% of your holdings because
of its increase in value. If you had chosen to have your holdings rebalanced
quarterly, on the first day of the next quarter, Cova would sell some of your
units in the Quality Bond Portfolio to bring its value back to 40% and use the
money to buy more units in the Select Equity Portfolio to increase those
holdings to 60%.
APPROVED ASSET ALLOCATION PROGRAMS
Cova recognizes the value to certain owners of having available, on a continuous
basis, advice for the allocation of your money among the investment options
available under the contracts. Certain providers of these types of services have
agreed to provide such services to owners in accordance with Cova's
administrative rules regarding such programs.
Cova has made no independent investigation of these programs. Cova has only
established that these programs are compatible with our administrative systems
and rules. Approved asset allocation programs are only available during the
accumulation phase.
Even though Cova permits the use of approved asset allocation programs, the
contract was not designed for professional market timing organizations. Repeated
patterns of frequent transfers are disruptive to the operations of the
investment portfolios, and when Cova becomes aware of such disruptive practices,
we may modify the transfer provisions of the contract.
If you participate in an Approved Asset Allocation Program, the transfers made
under the program are not taken into account in determining any transfer fee.
VOTING RIGHTS
Cova is the legal owner of the investment portfolio shares. However, Cova
believes that when an investment portfolio solicits proxies in conjunction with
a vote of shareholders, it is required to obtain from you and other affected
owners instructions as to how to vote those shares. When we receive those
instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that Cova owns on its own
behalf. Should Cova determine that it is no longer required to comply with the
above, we will vote the shares in our own right.
SUBSTITUTION
Cova may be required to substitute one of the investment portfolios you have
selected with another portfolio. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give you notice of our intent
to do this.
EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
INSURANCE CHARGES
Each day, Cova makes a deduction for its insurance charges. Cova does this as
part of its calculation of the value of the accumulation units and the annuity
units. The insurance charge has two parts:
* the mortality and expense risk premium and
* the administrative expense charge.
MORTALITY AND EXPENSE RISK PREMIUM. This charge is equivalent, on an annual
basis, to 1.25% of the daily value of the contracts invested in an investment
portfolio, after fund expenses have been deducted. This charge is for all the
insurance benefits e.g., guarantee of annuity rates, the death benefits, for
certain expenses of the contract, and for assuming the risk (expense risk) that
the current charges will be insufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then Cova will bear the loss. Cova does, however, expect to profit
from this charge. The mortality and expense risk premium cannot be increased.
Cova may use any profits it makes from this charge to pay for the costs of
distributing the contract.
ADMINISTRATIVE EXPENSE CHARGE. This charge is equal, on an annual basis, to .15%
of the daily value of the contracts invested in an investment portfolio, after
expenses have been deducted. This charge, together with the contract maintenance
charge (see below), is for all the expenses associated with the administration
of the contract. Some of these expenses are: preparation of the contract,
confirmations, annual reports and statements, maintenance of contract records,
personnel costs, legal and accounting fees, filing fees, and computer and
systems costs. Because this charge is taken out of every unit value, you may pay
more in administrative costs than those that are associated solely with your
contract. Cova does not intend to profit from this charge. However, if this
charge and the contract maintenance charge are not enough to cover the costs of
the contracts in the future, Cova will bear the loss.
CONTRACT MAINTENANCE CHARGE
During the accumulation phase, every year on the anniversary of the date when
your contract was issued, Cova deducts $30 from your contract as a contract
maintenance charge. (In South Carolina, the charge is the lesser of $30 or 2% of
the value of the contract.) This charge is for administrative expenses (see
above). This charge cannot be increased.
Cova will not deduct this charge during the accumulation phase if when the
deduction is to be made, the value of your contract is $50,000 or more. Cova may
some time in the future discontinue this practice and deduct the charge.
If you make a complete withdrawal from your contract, the contract maintenance
charge will also be deducted. A pro rata portion of the charge will be deducted
if the annuity date is other than an anniversary. After the annuity date, the
charge will be collected monthly out of the annuity payment.
WITHDRAWAL CHARGE
During the accumulation phase, you can make withdrawals from your contract. Cova
keeps track of each purchase payment. Once a year after the first year, you can
withdraw up to 10% of your total purchase payments and no withdrawal charge will
be assessed on the 10%, if on the day you make your withdrawal (in New Jersey,
on the day Cova processes the withdrawal) the value of your contract is $5,000
or more. Otherwise, the charge is 5% of each purchase payment you take out
unless the purchase payment was made more than 5 years ago. After Cova has had a
purchase payment for 5 years, there is no charge when you withdraw that purchase
payment. Cova does not assess a withdrawal charge on earnings withdrawn from the
contract. Earnings are defined as the value in your contract minus the remaining
purchase payments in your contract. The withdrawal order for calculating the
withdrawal charges is shown below.
* 10% of purchase payments free.
* Remaining purchase payments that are over 5 years old and not subject
to a withdrawal charge.
* Earnings in the contract free.
* Remaining purchase payments that are less than 5 years old and are
subject to a withdrawal charge.
When the withdrawal is for only part of the value of your contract, the
withdrawal charge is deducted from the remaining value in your contract.
Cova does not assess the withdrawal charge on any payments paid out as annuity
payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
General:
Cova will reduce or eliminate the amount of the withdrawal charge when the
contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the contract or a prospective purchaser already had a relationship with Cova.
Cova will not deduct a withdrawal charge under a contract issued to an officer,
director or employee of Cova or any of its affiliates.
Nursing Home Waiver:
After you have owned the contract for one year, if you, or your joint owner,
becomes confined to a nursing home or hospital for at least 90 consecutive days
under a doctor's care and you need part or all of the money from your contract,
Cova will not impose a withdrawal charge. You or your joint owner cannot have
been so confined when you purchased your contract (confinement must begin after
the first contract anniversary) if you want to take advantage of this provision.
This is called the Nursing Home Waiver. This provision is not available in all
states.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is Cova's current practice to not charge anyone for these
taxes until annuity payments begin. Cova may, some time in the future,
discontinue this practice and assess the charge when the tax is due. Premium
taxes generally range from 0% to 4%, depending on the state.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred, whichever is less.
If the transfer is part of the Dollar Cost Averaging Program, the Automatic
Rebalancing Program or an Approved Asset Allocation Program, it will not count
in determining the transfer fee.
INCOME TAXES
Cova will deduct from the contract for any income taxes which it incurs because
of the contract. At the present time, we are not making any such deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the attached fund prospectuses.
TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included an additional discussion regarding taxes in the Statement of Additional
Information.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,corporation
or certain other entities other than a trust holding the contract as an agent
for a natural person), the contract will generally not be treated as an annuity
for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts), and
pension and profit-sharing plans, which include 401(k) plans and H.R. 10
plans.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined in
the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of purchase payments made by owners from certain
Tax-Sheltered Annuities. Withdrawals can only be made when an owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship. However, in the case of hardship, the owner can
only withdraw the purchase payments and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Cova believes that the investment portfolios are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Cova would be
considered the owner of the shares of the investment portfolios. If 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:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
Under most circumstances, withdrawals can only be made during the accumulation
phase.
When you make a complete withdrawal you will receive the withdrawal value of the
contract. The withdrawal value of the contract is the value of the contract at
the end of the business day when Cova receives a written request for a
withdrawal:
* less any applicable withdrawal charge,
* less any premium tax, and
* less any contract maintenance charge.
Unless you instruct Cova otherwise, any partial withdrawal will be made pro-rata
from all the investment portfolios and the fixed account. Under most
circumstances, the amount of any partial withdrawal must be for at least $500.
Cova requires that after a partial withdrawal is made you keep at least $500 in
any selected investment portfolio. If the remaining withdrawal value would be
less than $500 after you make a partial withdrawal, the partial withdrawal
amount will be the remaining withdrawal value ($1,000 in New Jersey).
When you make a withdrawal, the amount of the death benefit may be reduced. See
"Death Benefits."
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan. For a more complete explanation see Section 6. Taxes and
the discussion in the Statement of Additional Information.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
SYSTEMATIC WITHDRAWAL PROGRAM
You may use the Systematic Withdrawal Program. This program provides an
automatic monthly payment to you of up to 10% of your total purchase payments
each year. No withdrawal charge will be made for these payments. Cova does not
have any charge for this program, but reserves the right to charge in the
future. If you use this program, you may not also make a single 10% free
withdrawal. For a discussion of the withdrawal charge and the 10% free
withdrawal, see Section 5. Expenses.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
SUSPENSION OF PAYMENTS OR TRANSFERS
Cova may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or Cova cannot reasonably
value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
Cova has reserved the right to defer payment for a withdrawal or transfer from
the fixed account for the period permitted by law but not for more than six
months.
PERFORMANCE
Cova periodically advertises performance of the various investment portfolios.
Cova will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that unit
by the value of the accumulation unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges. It does not
reflect the deduction of any applicable contract maintenance charge and
withdrawal charge. The deduction of any applicable contract maintenance charge
and withdrawal charges would reduce the percentage increase or make greater any
percentage decrease. Any advertisement will also include total return figures
which reflect the deduction of the insurance charges, contract maintenance
charge and withdrawal charges.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
Cova may, from time to time, include in its advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
Appendix B contains performance information that you may find informative. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and the results shown are not necessarily
representative of future results.
DEATH BENEFIT
UPON YOUR DEATH
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). If you have a joint owner, the death benefit will be
paid when the first of you dies. Joint owners must be spouses. The surviving
joint owner will be treated as the beneficiary.
Beginning May 1, 1998, at the time you buy the contract, you can select Death
Benefit Option A or B. If no option is chosen on the forms provided by Cova,
Option A will be your Death Benefit. If you bought your contract before May 1,
1998, you were given the opportunity to choose Death Benefit Option B or C on
your next contract anniversary after May 1, 1998 (or during a 60 day period
after both endorsements were approved in your state). If you did not make an
election during such time period, your death benefit was automatically enhanced
to Death Benefit Option B.
The death benefits are described below. If you have a Joint Owner, the death
benefit is determined based on the age of the oldest Joint Owner and the death
benefit is payable on the death of the first Joint Owner.
DEATH BENEFIT OPTION A:
Prior to you, or your Joint Owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary prior to the date of your or
your Joint Owner's death, and on each day a purchase payment or withdrawal is
made. On the contract anniversary, if the current contract value is greater than
the GACV, the GACV will be increased to the current value of your contract. If a
purchase payment is made, the amount of the purchase payment will increase the
GACV. If a withdrawal is made, the GACV will be reduced by the amount withdrawn
(and any associated withdrawal charges) divided by the value of your contract
immediately before the withdrawal multiplied by the GACV immediately prior to
the withdrawal. The following example describes the effect of a withdrawal on
the GACV:
Example:
Assumed facts for example:
$10,000 current GACV
$ 8,000 contract value
$ 2,100 partial withdrawal ($ 2,000 withdrawal + $100 withdrawal
charge)
New GACV = $10,000 - [($2,100 - $8,000) X $10,000]
which results in the current GACV of $10,000 being reduced by $2,625
The new GACV is $7,375.
After you, or your Joint Owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary on or before your, or your
Joint Owner's, 80th birthday, and on each day a purchase payment or withdrawal
is made. On the contract anniversary on or before your, or your Joint Owner's,
80th birthday, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the example above explains the effect of a withdrawal on the
GACV.
DEATH BENEFIT OPTION B:
Prior to you, or your Joint Owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals) accumulated at an annual rate of 4% until the
date of death; or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The greatest of the values of your contract resulting from taking the
contract value on any five (5) year contract anniversary prior to your, or your
Joint Owner's death; plus any payments you made subsequent to that contract
anniversary, less any withdrawals (and any withdrawal charges paid on the
withdrawals) subsequent to that contract anniversary.
After you, or your Joint Owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made on or before your, or your Joint Owner's,
80th birthday, less any withdrawals (and any withdrawal charges paid on the
withdrawals) accumulated at an annual rate of 4% until you, or your Joint Owner,
reach age 80, plus any subsequent purchase payments, less any subsequent
withdrawals (and any withdrawal charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The greatest of the values of the contract resulting from taking the
contract value on any prior five (5) year contract anniversary on or before your
or your Joint Owner's 80th birthday, plus any purchase payments made after that
contract anniversary, less any withdrawals (and any withdrawal charges paid on
the withdrawals) made after that contract anniversary.
DEATH BENEFIT OPTION C:
Prior to you, or your Joint Owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day Cova receives
notice that you have elected this death benefit option. This figure is based on
your existing death benefit as defined in your contract, (not as defined in the
endorsement for this option). The GACV is then evaluated at each subsequent
contract anniversary prior to your or your Joint Owner's death and on each
subsequent day a purchase payment or withdrawal is made. On the contract
anniversary, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the GACV will be reduced by the amount withdrawn (and any
associated withdrawal charges) divided by the value of your contract immediately
before the withdrawal multiplied by the GACV immediately prior to the
withdrawal. The example above under Death Benefit Option A explains the effect
of a withdrawal on the GACV under this death benefit option.
After you, or your Joint Owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid;
or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day Cova receives
notice that you have elected this death benefit option. This figure is based on
your existing death benefit as defined in your contract, (not as defined in the
endorsement for this option). The GACV is then evaluated at each subsequent
contract anniversary on or before your, or your joint owner's, 80th birthday,
and on each subsequent day a purchase payment or withdrawal is made. On the
contract anniversary on or before your, or your joint owner's, 80th birthday, if
the current contract value is greater than the GACV, the GACV will be increased
to the current value of your contract. If a purchase payment is made, the amount
of the purchase payment will increase the GACV. If a withdrawal is made, the
GACV will be reduced by the sum of the amount withdrawn (and any associated
withdrawal charges) divided by the value of your contract immediately before the
withdrawal, multiplied by the GACV immediately prior to the withdrawal. The
example above under Death Benefit Option A explains the effect of a withdrawal
on the GACV under this death benefit option.
CHECK YOUR CONTRACT AND APPLICABLE ENDORSEMENT FOR YOUR DEATH BENEFIT.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name at the then current value. If a lump sum payment is elected and
all the necessary requirements are met, the payment will be made within 7 days.
DEATH OF ANNUITANT
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death benefit,
if any, will be as provided for in the annuity option selected.
OTHER INFORMATION
COVA
Cova Financial Services Life Insurance Company (Cova) was incorporated on August
17, 1981 as Assurance Life Company, a Missouri corporation, and changed its name
to Xerox Financial Services Life Insurance Company in 1985. On June 1, 1995, a
wholly-owned subsidiary of General American Life Insurance Company purchased
Cova which on that date changed its name to Cova Financial Services Life
Insurance Company.
Cova is licensed to do business in the District of Columbia and all states
except California, Maine, New Hampshire, New York and Vermont.
YEAR 2000
Cova has developed and initiated plans to assure that its computer systems will
function properly in the year 2000 and later years. These efforts have included
receiving assurances from outside service providers that their computer systems
will also function properly in this context. Included within these plans are the
computer systems of the advisers and sub-advisers of the various investment
portfolios underlying the Separate Account.
Although an assessment of the total cost of implementing these plans has not
been completed, the total amounts to be expended are not expected to have a
material effect on Cova's financial position or results of operations. Cova
believes that it has taken all reasonable steps to address these potential
problems. There can be no guarantee, however, that the steps taken will be
adequate to avoid any adverse impact.
THE SEPARATE ACCOUNT
Cova has established a separate account, Cova Variable Annuity Account One
(Separate Account), to hold the assets that underlie the contracts. The Board of
Directors of Cova adopted a resolution to establish the Separate Account under
Missouri insurance law on February 24, 1987. We have registered the Separate
Account with the Securities and Exchange Commission as a unit investment trust
under the Investment Company Act of 1940. The Separate Account is divided into
sub-accounts.
The assets of the Separate Account are held in Cova's name on behalf of the
Separate Account and legally belong to Cova. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts Cova may issue.
DISTRIBUTOR
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the contracts. Life
Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions up to 5.5% of purchase payments but,
under certain circumstances, may be paid an additional .5% commission.
Sometimes, Cova enters into an agreement with the broker-dealer to pay the
broker-dealer persistency bonuses, in addition to the standard commissions.
OWNERSHIP
OWNER. You, as the owner of the contract, have all the interest and rights under
the contract. Prior to the annuity date, the owner is as designated at the time
the contract is issued, unless changed. On and after the annuity date, the
annuitant is the owner. The beneficiary becomes the owner when a death benefit
is payable. When this occurs, some ownership rights may be limited.
JOINT OWNER. The contract can be owned by joint owners. Any joint owner must be
the spouse of the other owner (except in Pennsylvania). Upon the death of either
joint owner, the surviving spouse will be the designated beneficiary. Any other
beneficiary designation at the time the contract was issued or as may have been
later changed will be treated as a contingent beneficiary unless otherwise
indicated.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before you die.
ASSIGNMENT
You can assign the contract at any time during your lifetime. Cova will not be
bound by the assignment until it receives the written notice of the assignment.
Cova will not be liable for any payment or other action we take in accordance
with the contract before we receive notice of the assignment. AN ASSIGNMENT MAY
BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be limitations
on your ability to assign the contract.
FINANCIAL STATEMENTS
The consolidated financial statements of Cova and the Separate Account have been
included in the Statement of Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Company
Experts
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
APPENDIX A
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUE HISTORY
The following schedule includes accumulation unit values for the periods
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
Year or Year or Year or Year or Year or Year or Year or Year or
Period Period Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended Ended Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
---------- ----------- ----------- ---------- ---------- ---------- ---------- --------
COVA SERIES TRUST
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
<S> <C> <C> <C>
Beginning of Period $12.88 $11.29 $ 10.10 * * * * *
End of Period $12.88 11.29
Number of Accum. Units Outstanding 3,945,097 659,663
Mid-Cap Value Sub-Account
Beginning of Period $10.47 $10.00 * * * * * *
End of Period $10.47
Number of Accum. Units Outstanding 194,386
Large Cap Research Sub-Account
Beginning of Period $ 9.90 $10.00 * * * * * *
End of Period $ 9.90
Number of Accum. Units Outstanding 124,559
Developing Growth Sub-Account
Beginning of Period $10.53 $10.00 * * * * * *
End of Period $10.53
Number of Accum. Units Outstanding 148,658
Managed by J.P. Morgan Investment
Management Inc.
Select Equity Sub-Account
Beginning of Period $14.05 $10.84 $ 10.08 * * * * *
End of Period $14.05 10.84
Number of Accum. Units Outstanding 6,903,606 2,044,523
Small Cap Stock Sub-Account
Beginning of Period $13.49 $11.31 $ 10.51 * * * * *
End of Period $13.49 11.31
Number of Accum. Units Outstanding 3,940,243 1,237,405
International Equity Sub-Account
Beginning of Period $11.46 $10.97 $ 10.21 * * * * *
End of Period $11.46 10.97
Number of Accum. Units Outstanding 5,440,592 1,306,892
Quality Bond Sub-Account
Beginning of Period $11.16 $10.37 $ 9.90 * * * * *
End of Period $11.16 10.37
Number of Accum. Units Outstanding 1,433,081 508,830
Large Cap Stock Sub-Account
Beginning of Period $14.89 $11.33 $ 10.00 * * * * *
End of Period $14.89 11.33
Number of Accum. Units Outstanding 1,473,929 1,389,606
Managed by Mississippi Valley Advisors, Inc.
Balanced Sub-Account
Beginning of Period $10.53 $10.00 * * * * * *
End of Period $10.53
Number of Accum. Units Outstanding 38,079
Small Cap Equity Sub-Account
Beginning of Period $10.42 $10.00 * * * * * *
End of Period $10.42
Number of Accum. Units Outstanding 26,148
Equity Income Sub-Account
Beginning of Period $11.19 $10.00 * * * * * *
End of Period $11.19
Number of Accum. Units Outstanding 49,725
Growth & Income Equity Sub-Account
Beginning of Period $10.76 $10.00 * * * * * *
End of Period $10.76
Number of Accum. Units Outstanding 121,673
GENERAL AMERICAN CAPITAL COMPANY
Money Market Sub-Account
Beginning of Period $10.67 $10.23 $ 10.00 * * * * *
End of Period $10.67 10.23
Number of Accum. Units Outstanding 311,051 34,964
AIM VARIABLE INSURANCE FUNDS INC.:
AIM V.I. Capital Appreciation Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
AIM V.I. International Equity Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
AIM V.I. Value Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
MFS VARIABLE INSURANCE TRUST:
MFS Emerging Growth Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
MFS Research Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
MFS Growth With Income Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
MFS High Income Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
MFS World Governments Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
MFS/Foreign & Colonial Emerging Markets Equity Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
VARIABLE INSURANCE PRODUCTS FUND
VIP Growth Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
VIP Equity-Income Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
VARIABLE INSURANCE PRODUCTS FUND II
VIP II Contrafund Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
VARIABLE INSURANCE PRODUCTS FUND III
VIP III Growth Opportunities Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
VIP III Growth & Income Sub-Account
Beginning of Period $10.00 * * * * * * *
End of Period
Number of Accum. Units Outstanding
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Managed by Alliance Capital Management L.P.
Premier Growth Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
Real Estate Investment Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
INVESTORS FUND SERIES
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
Kemper Government Securities Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
Kemper Small Cap Growth Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
LIBERTY VARIABLE INVESTMENT TRUST
Managed by Newport Fund Management Inc.
Newport Tiger, Variable Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
Oppenheimer Bond Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
Oppenheimer Growth Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
Oppenheimer Growth & Income Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
Oppenheimer Strategic Bond Sub-Account ** ** ** ** ** ** **
Beginning of Period $10.00
End of Period
Number of Accum. Units Outstanding
<FN>
The accumulation unit values shown above for the beginning of the period for the
Select Equity, Small Cap Stock, International Equity, Quality Bond, Large Cap
Stock Portfolios managed by J.P. Morgan Investment Management Inc., and the Bond
Debenture Portfolio managed by Lord, Abbett & Co. reflect the date these
investment portfolios were offered for sale to the public (5/1/96). The Money
Market Fund managed by Conning Asset Management Company started regular
investment operations on June 3, 1996. The Mid-Cap Value, Large Cap Research and
Developing Growth Portfolios started regular investment operations on August 20,
1997. The Balanced, Small Cap Equity, Equity Income and Growth & Income Equity
Portfolios managed by Mississippi Valley Advisors, Inc. commenced regular
investment operations on July 1, 1997. The Lord Abbett Growth and Income
Portfolio commenced regular investment operations on January 8, 1999. The
investment portfolios managed by A I M Advisors, Inc., Massachusetts Financial
Services Company, Alliance Capital Management L.P., Scudder Kemper Investments,
Inc., Newport Fund Management Inc. and OppenheimerFunds, Inc. commenced
investment operations on January 2, 1998. The investment portfolios managed by
Fidelity Management & Research Company, Inc. commenced investment operations on
February 17, 1998. The investment portfolios investing in Templeton Variable
Products Series Fund commenced operation on ________________, 1998.
</FN>
</TABLE>
APPENDIX B
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
Note: The figures below present investment performance information for the
periods ended December 31, 1998. While these numbers represent the returns as of
that date, they do not represent performance information of the portfolios since
that date. Performance information for the periods after December 31, 1998 may
be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before December 31, 1998. As a
result, performance information is available for the accumulation unit values
investing in these portfolios.
* Column A presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
investment portfolio.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assume that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
The inception dates shown below reflect the dates the Separate Account first
invested in the Portfolio. The performance returns for accumulation units
investing in the portfolios in existence for less than one year are not
annualized.
PART 1 COVA SERIES TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation
Column A Unit Performance
(reflects Column B
insurance (reflects
charges and all charges
Separate Account portfolio and portfolio
Inception Date expenses) expenses)
Portfolio in Portfolio 1 yr 5 yrs since 1 yr 5 yrs since
- ----------------- ---------------- ---------- -------- ------------- ---------- --------- ----------
inception inception
------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Select Equity 5/1/96 22.89% -- 23.01% 17.76% -- 21.19%
Small Cap Stock 5/1/96 16.63% -- 14.20% 11.51% -- 12.25%
International Equity 5/1/96 8.34% -- 12.00% 3.23% -- 10.01%
Quality Bond 5/1/96 8.94% -- 7.28% 3.83% -- 5.20%
Large Cap Stock 5/1/96 29.38% -- 29.99% 24.25% -- 28.27%
Bond Debenture 5/1/96 11.92% -- 14.39% 6.81% -- 12.44%
Mid-Cap Value 8/20/97 -- -- 12.10% -- -- 6.87%
Large Cap Research 8/20/97 -- -- 13.44% -- -- 8.21%
Developing Growth 8/20/97 -- -- 13.14% -- -- 7.91%
Balanced 7/1/97 11.75% -- 11.75% 6.63% -- 6.63%
Small Cap Equity 7/1/97 9.46% -- 9.46% 4.35% -- 4.35%
Equity Income 7/1/97 22.58% -- 22.58% 17.46% -- 17.46%
Growth & Income Equity 7/1/97 18.12% -- 18.12% 13.00% -- 13.00%
</TABLE>
PART 1 GENERAL AMERICAN CAPITAL COMPANY
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation
Column A Unit Performance
(reflects Column B
insurance (reflects
charges and all charges
Separate Account portfolio and portfolio
Inception Date expenses) expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
<S> <C> <C>
Money Market 6/3/96 ____% ____% _____% ____%
</TABLE>
PART 1 VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VARIABLE INSURANCE PRODUCTS FUND III
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects insurance (reflects all
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
VIP Growth 2/17/98 -- _____% -- ____%
VIP Equity-Income 2/17/98 -- _____% -- ____%
VIP II Contrafund 2/17/98 -- _____% -- ____%
VIP III Growth 2/17/98 -- _____% -- ____%
Opportunities
VIP III Growth 2/17/98 -- _____% -- ____%
& Income
</TABLE>
PART 1 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects insurance (reflects all
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital 1/2/98 -- _____% -- ____%
Appreciation
AIM V.I. 1/2/98 -- _____% -- _____%
International
Equity
AIM V.I. Value 1/2/98 -- _____% -- _____%
</TABLE>
PART 1 MFS VARIABLE INSURANCE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects insurance (reflects all
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
MFS Emerging Growth 1/2/98 -- _____% -- _____%
MFS Research 1/2/98 -- _____% -- _____%
MFS Growth With Income 1/2/98 -- _____% -- _____%
MFS High Income 1/2/98 -- _____% -- _____%
MFS World Governments 1/2/98 -- _____% -- _____%
</TABLE>
PART 1 ALLIANCE VARIABLE PRODUCTS
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects insurance (reflects all
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Premier Growth 1/2/98 -- _____% -- _____%
Real Estate Investment 1/2/98 -- _____% -- _____%
</TABLE>
PART 1 LIBERTY VARIABLE INVESTMENT TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects insurance (reflects all
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Newport Tiger, Variable 1/2/98 -- _____% -- _____%
Series
</TABLE>
PART 1 INVESTORS FUND SERIES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects insurance (reflects all
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Kemper Small Cap Value 1/2/98 -- _____% -- _____%
Kemper Government 1/2/98 -- _____% -- _____%
Securities
Kemper Small Cap Growth 1/2/98 -- _____% -- _____%
</TABLE>
PART 1 OPPENHEIMER VARIABLE ACCOUNT FUNDS
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
Accumulation Unit Performance
Column A Column B
Separate (reflects insurance (reflects all
Account charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date in 1 yr since 1 yr since
Portfolio inception inception
- ---------------- --------- -------- --------- ------------- ----------
<S> <C> <C>
Oppenheimer High Income 1/2/98 -- _____% -- _____%
Oppenheimer Bond 1/2/98 -- _____% -- _____%
Oppenheimer Growth 1/2/98 -- _____% -- _____%
Oppenheimer Growth &
Income 1/2/98 -- _____% -- _____%
Oppenheimer Strategic
Bond 1/2/98 -- _____% -- _____%
</TABLE>
PART 2 - HISTORICAL FUND PERFORMANCE
Shares of the General American Capital Company Money Market Fund were first
offered under the Contract on June 3, 1996. Shares of the Portfolios of Variable
Insurance Products Fund, Variable Insurance Products Fund II and Variable
Insurance Products Fund III, AIM Variable Insurance Funds, Inc. and MFS Variable
Insurance Trust were first offered under the contract on December 30, 1997.
Shares of the Portfolios of Templeton Variable Products Series Fund were first
offered under the contract as of __________________ (collectively, the "Existing
Funds"). However, the Existing Funds have been in existence for some time and
therefore have an investment performance history. In order to show how
investment performance of the Existing Funds affect accumulation unit values, we
have developed performance information.
The chart below shows the investment performance of the Existing Funds and the
accumulation units performance calculated by assuming that accumulation units
were invested in the Portfolio of the Existing Fund for the same periods.
* The performance figures in Column A for the Existing Funds reflect the fees
and expenses paid by the Portfolio.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
Portfolio.
* Column C presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the Portfolio and assumes that you make a withdrawal at the
end of the period and therefore the withdrawal charge is reflected.
PART 2 GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
Portfolio charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Money Market 10/1/87 ____% ____% ____% ____% ____% ____% _____% _____% ____%
</TABLE>
PART 2 VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VARIABLE INSURANCE PRODUCTS FUND III
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
Portfolio charges and charges and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- --------- ------------- ------- --------- --------
VIP Growth 10/9/86 _____% _____% _____% _____% _____% _____% _____% _____% _____%
VIP Equity-Income 10/9/86 _____% _____% _____% _____% _____% _____% _____% _____% _____%
VIP II Contrafund 1/3/95 _____% _____% _____% _____% _____% _____% _____% _____% _____%
VIP III Growth
Opportunities 1/3/95 _____% _____% _____% _____% _____% _____% _____% _____%
VIP III Growth
& Income 12/31/96 _____% _____% _____% _____% _____% _____% _____% _____%
PART 2 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio
Inception since since Unit since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- ---------------- --------- ------- ------ ------------ ------ ------- ---------- ------ ----- ----------
AIM V.I. Capital
Appreciation 5/5/93 _____% _____% _____% _____% _____% _____% _____% _____% _____%
AIM V.I.
International
Equity 5/5/93 _____% _____% _____% _____% _____% _____% _____% _____% _____%
AIM V.I. Value 5/5/93 _____% _____% _____% _____% _____% _____% _____% _____% _____%
</TABLE>
PART 2 MFS VARIABLE INSURANCE TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio
Inception since since Unit since
Portfolio Date 1 yr inception 1 yr inception 1 yr inception
- --------------- --------- ------------- ------------ ------- ------------- --------- ------------
MFS Emerging Growth 7/24/95 _____% _____% _____% _____% _____% _____%
MFS Research 7/26/95 _____% _____% _____% _____% _____% _____%
MFS Growth With Income 10/9/95 _____% _____% _____% _____% _____% _____%
MFS High Income 7/26/95 _____% _____% _____% _____% _____% _____%
MFS World Governments 6/14/94 _____% _____% _____% _____% _____% _____%
MFS Bond 10/24/95 _____% _____% _____% _____% _____% _____%
MFS Foreign & Colonial
Emerging Markets Equity 10/16/97 -- _____% -- _____% -- _____%
</TABLE>
PART 2 ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Premier Growth 6/26/92 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Real Estate Investment 1/9/97 _____% _____ _____% _____% _____ _____% _____% _____ _____%
</TABLE>
PART 2 LIBERTY VARIABLE INVESTMENT TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Newport Tiger, Variable
Series 5/1/95 _____% _____ ______% ______% _____ _____% _____% ______ _____%
</TABLE>
PART 2 INVESTORS FUND SERIES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Kemper Small Cap Value 5/1/96 ____% _____ _____% ____% ____ _____% _____% ____ _____%
Kemper Government
Securities 9/3/87 ____% ____% _____% _____% ____% _____% _____% ____% _____%
Kemper Small Cap Growth 5/2/94 ____% _____ _____% _____% ____ _____% _____% ____ _____%
</TABLE>
PART 2 OPPENHEIMER VARIABLE ACCOUNT FUNDS
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Inception or since or since or since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Oppenheimer High Income 4/30/86 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Oppenheimer Bond 4/3/85 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Oppenheimer Growth 4/3/85 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Oppenheimer Growth & Income 7/5/95 _____% _____ _____% _____% _____ _____% _____% _____ _____%
Oppenheimer Strategic Bond 5/3/93 _____% _____% _____% _____% _____% _____% _____% _____% _____%
</TABLE>
PART 2 TEMPLETON VARIABLE PRODUCTS SERIES FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects insurance (reflects all
charges and charges and
portfolio expenses) portfolio expenses)
Portfolio 10 yrs 10 yrs 10 yrs
Portfolio, Inception or since or since or since
Class 1 Shares Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- --------------- --------- ------ ------ ---------- ------ ----- --------- ----- ------- ----------
Templeton Asset 8/24/88 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Allocation
Templeton Bond 8/24/88 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Templeton International 5/1/92 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Templeton Stock 8/24/88 _____% _____% _____% _____% _____% _____% _____% _____% _____%
Templeton Developing 3/1/96 _____% _____ _____% _____% _____ _____% _____% _____ _____%
Markets
</TABLE>
PART 3 - LORD ABBETT SERIES FUND, INC. PERFORMANCE
Pursuant to a substitution order issued by the Securities and Exchange
Commission, all of the assets held by the separate account of Cova in the Growth
and Income Portfolio of Lord Abbett Series Fund, Inc. and in the VKAC Growth and
Income Portfolio of Cova Series Trust were transferred on January 8, 1999 to a
new investment portfolio of Cova Series Trust known as the Lord Abbett Growth
and Income Portfolio. The investment objective, policies and strategies and the
portfolio manager of the Growth and Income Portfolio of Lord Abbett Series Fund,
Inc. and of the new Lord Abbett Growth and Income Portfolio of Cova Series Trust
are identical.
The chart below shows the investment performance of the Growth and Income
Portfolio of Lord Abbett Series Fund Inc. from December 11, 1989 (inception
date) through December 31, 1998, and the related accumulation unit performance.
* The performance figures in Column A for the Growth and Income Portfolio of
Lord Abbett Series Fund, Inc. reflect the fees and expenses paid by this
Portfolio. These fees and expenses are not the same as those to be paid by
the new Lord Abbett Growth and Income Portfolio of Cova Series Trust.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
Growth and Income Portfolio of Lord Abbett Series Fund, Inc.
* Column C presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the Growth and Income Portfolio of Lord Abbett Series Fund,
Inc. The Column C figures also assume that you make a withdrawal at the end
of the period and therefore the withdrawal charge is reflected.
<TABLE>
<CAPTION>
PART 3 LORD ABBETT SERIES FUND, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED 12/31/98:
Accumulation Unit Performance
Column B Column C
(reflects insurance (reflects all
Portfolio Performance charges and charges and
Column A portfolio expenses) portfolio expenses)
----------------------------------------------------------------------------
Portfolio
Inception Since Since Since
<S> <C> <C> <C> <C> <C> <C>
Portfolio Date 1 yr 5 yrs Inception 1 yr 5 yrs Inception 1 yr 5 yrs Inception
</TABLE>
- --------------------------------------------------------------------------------
Attn: Variable Products
One Tower Lane - Suite 3000
Oakbrook Terrace, IL 60181-4644
Please send me, at no charge, the Statement of Additional Information dated May
1, 1999, for the Annuity Contract issued by Cova.
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED May 1, 1999, FOR THE INDIVIDUAL
FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS DESCRIBED HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644,
(800) 831-5433.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1999.
TABLE OF CONTENTS
Page
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reduction or Elimination of the Withdrawal Charge . . . . .4
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 5
Total Return. . . . . . . . . . . . . . . . . . . . . . . .5
Historical Unit Values. . . . . . . . . . . . . . . . . . .6
Reporting Agencies. . . . . . . . . . . . . . . . . . . . .6
Performance Information . . . . . . . . . . . . . . . . . .7
FEDERAL TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . 7
General . . . . . . . . . . . . . . . . . . . . . . . . . .7
Diversification . . . . . . . . . . . . . . . . . . . . . .9
Multiple Contracts. . . . . . . . . . . . . . . . . . . . 10
Contracts Owned by Other than Natural Persons . . . . . . 10
Tax Treatment of Assignments. . . . . . . . . . . . . . . 10
Income Tax Withholding. . . . . . . . . . . . . . . . . . 11
Tax Treatment of Withdrawals - Non-Qualified Contracts. . 11
Qualified Plans. . . . . . . . . . . . . . . . . . . . . 12
Tax Treatment of Withdrawals - Qualified Contracts. . . . 15
Tax-Sheltered Annuities - Withdrawal Limitations. . . . . 16
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 16
Variable Annuity. . . . . . . . . . . . . . . . . . . . . 16
Fixed Annuity . . . . . . . . . . . . . . . . . . . . . . 17
Annuity Unit. . . . . . . . . . . . . . . . . . . . . . . 17
Net Investment Factor . . . . . . . . . . . . . . . . . . 17
Mortality and Expense Guarantee . . . . . . . . . . . . . 17
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . 18
COMPANY
Cova Financial Services Life Insurance Company (the "Company") was originally
incorporated on August 17, 1981 as Assurance Life Company, a Missouri
corporation and changed its name to Xerox Financial Services Life Insurance
Company in 1985. On June 1, 1995 a wholly-owned subsidiary of General American
Life Insurance Company ("General American") purchased the Company from Xerox
Financial Services, Inc. The Company changed its name to Cova Financial Services
Life Insurance Company. The Company presently is licensed to do business in the
District of Columbia and all states except California, Maine, New Hampshire, New
York and Vermont.
General American is a St. Louis-based mutual company with more than $300 billion
of life insurance in force and approximately $24 billion in assets. It provides
life and health insurance, retirement plans, and related financial services to
individuals and groups.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1998 and 1997,
and the related consolidated statements of income, shareholder's equity, and
cash flows for the years ended December 31, 1998, 1997 and 1996 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 or period then ended,
the statements of changes in contract owners' equity for each of the years or
periods presented, and the financial highlights for each of the years or periods
presented, 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. The report of _____________________ covering the Company's
consolidated financial statements referred to above contains an explanatory
paragraph stating that as a result of its 1995 acquisition, the consolidated
financial information for the periods subsequent to the acquisition is presented
on a different cost basis than for the period prior to the acquisition and,
therefore, is not comparable.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
DISTRIBUTION
Cova Life Sales Company ("Life Sales") acts as the distributor. Prior to June 1,
1995, Cova Life Sales Company was known as Xerox Life Sales Company. Life Sales
is an affiliate of the Company. The offering is on a continuous basis.
Reduction or Elimination of the Withdrawal Charge
The amount of the Withdrawal Charge on the Contracts may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group of
individuals in a manner that results in savings of sales expenses. The
entitlement to reduction of the Withdrawal Charge will be determined by the
Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Contracts
with fewer sales contacts.
2. The total amount of purchase payments to be received will be considered.
Per Contract sales expenses are likely to be less on larger purchase payments
than on smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract with fewer
sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Withdrawal Charge.
The Withdrawal Charge may be eliminated when the Contracts are issued to an
officer, director or employee of the Company or any of its affiliates. In no
event will any reduction or elimination of the Withdrawal Charge be permitted
where the reduction or elimination will be unfairly discriminatory to any
person.
PERFORMANCE INFORMATION
Total Return
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.25% Mortality and Expense Risk Premium, a .15% Administrative
Expense Charge, the expenses for the underlying investment portfolio being
advertised and any applicable Contract Maintenance Charges and Withdrawal
Charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Withdrawal Charge to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment made at the
beginning of the time periods used.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
You should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what your total return may be in any future period.
Historical Unit Values
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
Reporting Agencies
The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
Performance Information
The Accumulation Units which invest in the Portfolios managed by Fidelity
Management & Research Company, A I M Advisors, Inc., Massachusetts Financial
Services Company, Franklin Advisers, Inc., Franklin Mutual Advisers, Inc.,
Templeton Investment Counsel, Inc. and Templeton Asset Management Ltd. have no
meaningful investment performance history yet while the Accumulation Units which
invest in the Portfolio managed by Conning Asset Management Company have a short
investment performance history. (These funds are referred to collectively as the
"Existing Funds.") However, certain Portfolios of the Existing Funds have been
in existence for some time and consequently have an investment performance
history. In order to demonstrate how the investment experience of the Existing
Funds affect Accumulation Unit values, performance information was developed.
The information is based upon the historical experience of the Existing Funds
and is for the periods shown. The prospectus contains a chart of performance
information.
Future performance of the Existing Funds will vary and the results shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance of the Existing Funds is calculated for a specified period of time
by assuming an initial Purchase Payment of $1,000 allocated to the Portfolio.
There are performance figures for the Accumulation Units which reflect the
insurance charges as well as the Portfolio expenses. There are also performance
figures for the Accumulation Units which reflect the insurance charges, the
contract maintenance charge, the Portfolio expenses, and assume that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected. The percentage increases (decreases) are determined by subtracting
the initial Purchase Payment from the ending value and dividing the remainder by
the beginning value. The performance may also show figures when no withdrawal is
assumed.
FEDERAL TAX STATUS
General
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment or as annuity payments under the Annuity
Option selected. For a lump sum payment received as a total withdrawal (total
surrender), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
Diversification
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
Tax Treatment of Assignments
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
Income Tax Withholding
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions). Participants should consult their own tax counsel
or other tax adviser regarding withholding requirements.
Tax Treatment of Withdrawals - Non-Qualified Contracts
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Qualified Plans
The Contracts offered herein are designed to be suitable for use under various
types of Qualified Plans. Taxation of participants in each Qualified Plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations" below.) Employee loans are not allowable under the
Contracts. Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers that occurred in
1998, the individual may pay that tax ratably over the four taxable year period
beginning with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from the
Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Purchasers of Contracts for use with Pension or Profit Sharing Plans should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.
Tax Treatment of Withdrawals - Qualified Contracts
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b)(Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been rolled over to an IRA or to another eligible Qualified Plan, no
tax penalty will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Owner or Annuitant (as applicable) reaches age 59 1/2; (b) distributions
following the death or disability of the Owner or Annuitant (as applicable) (for
this purpose disability is as defined in Section 72(m) (7) of the Code); (c)
after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the Owner or Annuitant (as applicable) or the joint lives
(or joint life expectancies) of such Owner or Annuitant (as applicable) and his
or her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (g) distributions from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8)of
the Code.) The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
Tax-Sheltered Annuities - Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect transfers between Tax-Sheltered Annuity Plans. Owners should consult
their own tax counsel or other tax adviser regarding any distributions.
ANNUITY PROVISIONS
Variable Annuity
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account. At the
Annuity Date, the Contract Value in each investment portfolio will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. If, as of the Annuity Date, the then current Annuity
Option rates applicable to this class of Contracts provide a first Annuity
Payment greater than guaranteed under the same Annuity Option under this
Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value of
an Annuity Unit as of the Annuity Date. This establishes the number of
Annuity Units for each monthly payment. The number of Annuity Units remains
fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit value
for the last Valuation Period of the month preceding the month for which
the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
investment portfolios' Variable Annuity Payments reduced by the applicable
Contract Maintenance Charge.
Fixed Annuity
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. The first monthly Annuity Payment will be based upon
the Annuity Option elected and the appropriate Annuity Option Table.
Annuity Unit
The value of an Annuity Unit for each investment portfolio was arbitrarily set
initially at $10. This was done when the first investment portfolio shares were
purchased. The investment portfolio Annuity Unit value at the end of any
subsequent Valuation Period is determined by multiplying the investment
portfolio Annuity Unit value for the immediately preceding Valuation Period by
the product of (a) the Net Investment Factor for the day for which the Annuity
Unit value is being calculated, and (b) 0.999919.
Net Investment Factor
The Net Investment Factor for any investment portfolio for any Valuation Period
is determined by dividing:
(a) the Accumulation Unit value as of the close of the current Valuation
Period, by
(b) the Accumulation Unit value as of the close of the immediately preceding
Valuation Period.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.
Mortality and Expense Guarantee
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
(to 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)Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and Cova Financial Services Life
Insurance Company+++
(ii)Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Cova Financial Services Life
Insurance Company+++
(iii) Participation Agreement among Variable Insurance Products Fund
III, Fidelity Distributors Corporation and Cova Financial Services
Life Insurance Company+++
(iv) Form of Fund Participation Agreement by and among AIM Variable
Insurance Funds, Inc., A I M Distributors, Inc., Cova Financial
Services Life Insurance Company, on behalf of itself and its Separate
Accounts, and Cova Life Sales Company.+
(v) Form of Fund Participation Agreement among MFS Variable Insurance
Trust, Cova Financial Services Life Insurance Company and
Massachusetts Financial Services Company.++
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. Calculation of Performance Information (to be filed by amendment).
14. Company Organizational Chart.####
27. Not Applicable
*incorporated by reference to Registrant's initial filing on Form N-4
(File No. 811-5200) as filed on June 11, 1987.
**incorporated by reference to Registrant's Amendment No. 5 to
Form N-4 (File No. 811-5200) as filed on April 2, 1990.
***incorporated by reference to Registrant's Amendment No. 8 to
Form N-4 (File No. 811-5200) as filed on June 10, 1991.
# incorporated by reference to Registrant's Amendment No. 13 to
Form N-4 (File No. 811-5200) as filed on May 1, 1992.
## incorporated by reference to Registrant's Amendment No. 14 to
Form N-4 (File No. 811-5200) as filed on May 1, 1993.
### incorporated by reference to Registrant's Amendment No. 18 to
Form N-4 (File No. 811-5200) as electronically filed on April 24,
1996.
#### incorporated by reference to Registrant's Amendment No. 20 to
Form N-4 (File No. 811-5200) as electronically filed on April 23,
1997.
+ incorporated by reference to Registrant's Amendment No. 25 (File
Nos. 333-34741 and 811-5200) as electronically filed on January 26, 1998.
++ incorporated by reference to Registrant's Amendment No. 24 (File
Nos. 333-34741 and 811-5200) as electronically filed on November 19,
1997.
+++ incorporated by reference to Registrant's Amendment No. 26 (File
Nos. 33-39100 and 811-5200) as electronically filed on April 29, 1998.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
Name and Principal Positions and Offices
Business Address with Depositor
_______________________________ ____________________________________
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Leonard Rubenstein Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
Frances S. Cook Secretary
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Connie A. Doern Vice President
1776 West Lakes Pkwy
West Des Moines, IA 50266
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer and Director
700 Market St.
St. Louis, MO 63101
Douglas E. Jacobs Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Lisa O. Kirchner Vice President
1776 West Lakes Pkwy
West Des Moines, IA 50266
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
William C. Mair Vice President,
One Tower Lane, Suite 3000 Controller and Director
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market St.
St. Louis, MO 63101
Mark E. Reynolds Executive Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Myron H. Sandberg Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Schaus Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Peter L. Witkewiz Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart was filed as Exhibit 14 in Registrant's Amendment
No. 18 to Form N-4 and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of __________________, there were ______ Non-Qualified Contract Owners and
_____ Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article IV, Section 1) provide that:
Each person who is or was a director, officer or employee of the corporation or
is or was serving at the request of the corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise (including the heirs, executors, administrators or estate of such
person) shall be indemnified by the corporation as of right to the full extent
permitted or authorized by the laws of the State of Missouri, as now in effect
and as hereafter amended, against any liability, judgment, fine, amount paid in
settlement, cost and expenses (including attorney's fees) asserted or threatened
against and incurred by such person in his capacity as or arising out of his
status as a director, officer or employee of the corporation or if serving at
the request of the corporation, as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnification provided by this bylaw provision shall not be exclusive of any
other rights to which those indemnified may be entitled under any other bylaw or
under any agreement, vote of shareholders or disinterested directors or
otherwise, and shall not limit in any way any right which the corporation may
have to make different or further indemnification with respect to the same or
different persons or classes of persons.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Cova Life Sales Company is the principal underwriter for the following
investment companies (other than Registrant):
Cova Variable Annuity Account Five
Cova Variable Life Account One
Cova Variable Life Account Five
First Cova Variable Annuity Account One
Cova Variable Annuity Account Four
(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 Vice President and Chief Compliance Officer
William C. Mair Director
Philip A. Haley Vice President
Frances S. Cook Assistant 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 18th day of February, 1999.
COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /s/FRANCES S. COOK
_________________________________________
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
Depositor
By: /s/FRANCES S. COOK
________________________________________
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 2/18/99
- ---------------------- --------
Lorry J. Stensrud Date
- ---------------------- Director --------
Leonard M. Rubenstein Date
Director
- ---------------------- --------
J. Robert Hopson Date
William C. Mair* Controller and Director 2/18/99
- ---------------------- --------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 2/18/99
- ---------------------- --------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 2/18/99
- ---------------------- --------
Matthew P. McCauley Date
John W. Barber* Director 2/18/99
- ---------------------- --------
John W. Barber Date
/s/MARK E. REYNOLDS Director 2/22/99
- ---------------------- --------
Mark E. Reynolds Date
*By: /s/LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
(To be filed by amendment)
