File Nos. 333-90405
811-5200
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 37 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT ONE
__________________________________
(Exact Name of Registrant)
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
_______________________________________________
(Name of Depositor)
One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644
______________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 831-5433
Name and Address of Agent for Service
Lorry J. Stensrud, President
Cova Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 523-1661
Copies to:
Judith A. Hasenauer and Bernard J. Spaulding
Blazzard, Grodd & Hasenauer, P.C. Senior Vice President,
P.O Box 5108 General Counsel and Secretary
Westport, CT 06881 Cova Financial Services
(203) 226-7866 Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Title of Securities Registered:
Individual Variable Annuity Contracts
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------------------------------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Summary
Item 4. Condensed Financial Information . . . Not Applicable
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Investment
Options
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Annuity Contract
Item 8. Annuity Period . . . . . . . . . . . . Income Phase
Item 9. Death Benefit. . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . Table of Contents of the
Statement of Additional
Information
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -----------------------
PART B
Item 15. Cover Page . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . Company
Item 18. Services . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . Financial Statements
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PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
THE SERIES A FIXED AND VARIABLE ANNUITY
ISSUED BY
COVA VARIABLE ANNUITY ACCOUNT ONE
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
This prospectus describes the Series A Fixed and Variable Annuity Contract
offered by Cova Financial Services Life Insurance Company (Cova).
The annuity contract has 19 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 18 investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios (except as noted).
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES:
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Small Cap Investments Fund
Franklin Growth Investments Fund*
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton International Fund
Templeton Stock Fund
Templeton Bond Fund
* Effective December 15, 1999, the fund's name changed to Franklin Large Cap
Growth Investments Fund.
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Cova Fixed and Variable
Annuity Contract.
To learn more about the Cova Series A Fixed and Variable Annuity Contract, you
can obtain a copy of the Statement of Additional Information (SAI) dated
February ___, 2000. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is legally a part of the prospectus. The SEC maintains a
Website (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.
February ___, 2000
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds, Inc.
Cova Series Trust
General American Capital Company
Templeton Variable Products Series Fund
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Sales Charge
Reduction or Elimination of the Sales Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
Cova
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Suspension of Payments or Transfers
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX - Performance Information
INDEX OF SPECIAL TERMS
Because of the complex nature of the contract, we have used certain words or
terms in this Prospectus which may need an explanation. We have identified the
following as some of these words or terms. The page that is indicated here is
where we believe you will find the best explanation for the word or term. These
words and terms are in italics on the indicated page.
Page
Accumulation Phase.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Date.............................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Fixed Account............................................................
Income Phase.............................................................
Investment Portfolios....................................................
Joint Owner..............................................................
Non-Qualified............................................................
Owner....................................................................
Purchase Payment (including Gross Purchase Payment and
Net Purchase Payment).................................................
Qualified................................................................
Tax Deferral.............................................................
SUMMARY
The sections in this summary correspond to sections in this prospectus which
discuss the topics in more detail.
THE ANNUITY CONTRACT. The fixed and variable annuity contract offered by Cova is
a contract between you, the owner, and Cova, an insurance company. The contract
provides a means for investing on a tax-deferred basis. The contract is intended
for retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
This contract offers 18 investment portfolios. These portfolios are designed to
offer a better return than the fixed account. However, this is NOT guaranteed.
You can also lose your money.
The contract also offers a fixed account with an interest rate that is
guaranteed by Cova. While your money is in the fixed account, we guarantee the
interest your money will earn as well as your principal.
You can put money into any or all of the investment portfolios (except as noted)
and the fixed account. You can transfer between accounts up to 12 times a year
without charge or tax implications. After 12 transfers, the charge is $25.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
ANNUITY PAYMENTS (THE INCOME PHASE). If you want to receive regular income from
your annuity, you can choose one of three payment plans (we call them annuity
options). Once you begin receiving regular payments, you cannot change your
annuity option.
PURCHASE. You can buy this contract with $5,000 or more under most
circumstances. You can add $500 or more any time you like during the
accumulation phase. We will not issue a contract to someone over age 90. Your
registered representative can help you complete the proper forms.
INVESTMENT OPTIONS. You can put your money in any or all of the investment
portfolios which are described in the prospectuses for the funds.
Depending upon market conditions and the performance of the portfolio(s) you
select, you can make or lose money in any of these portfolios.
EXPENSES. The contract has insurance and investment features. There are costs
related to each.
Each year Cova deducts a $30 contract maintenance charge from your contract.
During the accumulation phase, Cova currently waives this charge if the value of
your contract is at least $50,000.
Cova also deducts a mortality and expense risk charge which is equivalent,
on an annual basis, to .85% of the average daily value of your contract
allocated to the investment portfolios.
Cova will deduct a sales charge from each purchase payment you make before
it allocates your money to the investment portfolios and/or the fixed account.
The amount of the sales charge varies depending upon the amount of the purchase
payments you make and the value of your contract at the time Cova receives your
purchase payment. Cova will also take into account the amount of purchase
payments which you represent in writing will be made during a 13-month period.
The larger your purchase payments and contract value are, the less your sales
charge will be. The charge ranges from 5.75% to 1.00%.
When you begin receiving regular income payments from your annuity, Cova
may assess a state premium tax charge which ranges from 0%-4%, depending upon
the state.
There are also investment charges which currently range from .205% to 1.30%
of the average daily value of the investment portfolio depending upon the
investment portfolio.
TAXES. Your earnings are not taxed until you take them out. If you take money
out during the accumulation phase, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on the earnings. Payments during the income
phase are considered partly a return of your original investment. That part of
each payment is not taxable as income.
ACCESS TO YOUR MONEY. You can take money out at any time during the accumulation
phase. Of course, you may also have to pay income tax and a tax penalty on any
money you take out.
DEATH BENEFIT. If you die before moving to the income phase, the person you have
chosen as your beneficiary will receive a death benefit.
OTHER INFORMATION.
Free Look. If you cancel the contract within 10 days after receiving it (or
whatever period is required in your state), we will send your money back. Cova
will refund the value of your contract plus the sales charge determined as of
the business day that the refund is made. In certain states, or if you buy the
contract as an IRA, we may be required to refund the gross purchase payment.
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
Who should purchase the Contract? This contract is designed for people
seeking long-term tax-deferred accumulation of assets, generally for retirement
or other long-term purposes. The tax-deferred feature is most attractive to
people in high federal and state income tax brackets. You should not buy this
contract if you are looking for a short-term investment or if you cannot take
the risk of getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
Systematic Withdrawal Program - You can arrange to have money automatically
sent to you each month while your contract is still in the accumulation phase.
Of course, you may have to pay taxes on money you receive.
Dollar Cost Averaging Program - You can arrange to have a regular amount of
money automatically invested in investment portfolios each month, theoretically
giving you a lower average cost per unit over time than a single one time
purchase.
Automatic Rebalancing - You can arrange to automatically readjust the money
between investment portfolios periodically to keep the blend you select.
These features may not be suitable for your particular situation.
INQUIRIES. If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
Service Office
P.O. Box 10366
Des Moines, IA 50306-0366
800-343-8496
For Express Mail Only:
4700 Westown Parkway, Suite 200
West Des Moines, IA 50266-6718
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract. The Fee Table reflects expenses
of the separate account as well as the investment portfolios.
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OWNER TRANSACTION EXPENSES
Sales Charge (See Note 1 below)
(as a percentage of gross purchase payment)
Owner's Investment Sales Charge
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Less than $50,000 5.75%
$50,000-$99,999.99 4.50%
$100,000 - $249,999.99 3.50%
$250,000-$499,999.99 2.50%
$500,000-$999,999.99 2.00%
$1,000,000 or greater 1.00%
Transfer Fee (see Note 2 below) No charge for first 12 transfers in a
contract year; thereafter, the fee is
$25 per transfer.
CONTRACT MAINTENANCE CHARGE (see Note 3 below) $30 per contract per year
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SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge .85%
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Total Separate Account Annual Expenses .85%
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INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an investment portfolio)
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Other Expenses
(after expense
Management reimbursement for Total Annual
Fees certain Portfolios) Portfolio Expenses
----------- ---------------------- ------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund .62% .05% .67%
AIM V.I. Value Fund .61% .05% .66%
COVA SERIES TRUST(a)
Managed by J.P. Morgan Investment Management Inc.
Select Equity Portfolio .68% .18% .86%
Small Cap Stock Portfolio .85% .27% 1.12%
International Equity Portfolio .80% .28% 1.08%
Quality Bond Portfolio .55% .10% .65%
Large Cap Stock Portfolio .65% .10% .75%
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio .75% .10% .85%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
Large Cap Research Portfolio 1.00% .30% 1.30%
Developing Growth Portfolio .90% .30% 1.20%
Lord Abbett Growth and Income Portfolio (b) .65% .07% .72%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset
Management Company
Money Market Fund .125% .08% .205%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund (c) .15% .85% 1.00%
Franklin Growth Investments Fund (d) .00% 1.00% 1.00%
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund .69% .17% .86%
Templeton Stock Fund .70% .19% .89%
Templeton Bond .50% .23% .73%
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(a) Since May 1, 1996, Cova has been reimbursing the investment portfolios
of Cova Series Trust for all operating expenses (exclusive of the management
fees) in excess of approximately .10%. Beginning May 1, 1999, Cova has
discontinued this reimbursement arrangement for the Select Equity, Small Cap
Stock and International Equity Portfolios. Therefore, the amounts shown above
under "Other Expenses" have been restated to reflect the actual expenses for
these Portfolios for the year ended December 31, 1998. Also effective May 1,
1999, Cova began reimbursing the Mid-Cap Value, Large Cap Research and
Developing Growth Portfolios for all operating expenses (exclusive of the
management fees) in excess of approximately .30%,instead of .10%. This change is
reflected above under "Other Expenses" for these three Portfolios. Absent the
expense reimbursement, the percentages shown for total annual portfolio expenses
for the year ended December 31, 1998 would have been .86% for the Quality Bond
Portfolio, .94% for the Large Cap Stock Portfolio, .93% for the Bond Debenture
Portfolio, 1.68% for the Mid-Cap Value Portfolio, 1.95% for the Large Cap
Research Portfolio, and 1.70% for the Developing Growth Portfolio.
(b) Estimated. The Portfolio commenced investment operations on January 8,
1999.
(c) Figures reflect expenses from the Fund's inception on May 1, 1998,
which have been annualized for the management fees and estimated for other
expenses. The investment manager agreed in advance to limit management fees and
make certain payments to reduce Fund expenses as necessary so that Total Annual
Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets in
1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were .75%, 1.00% and 1.75% for the Franklin Small Cap
Investments Fund.
(d) Figures reflect expenses from the Fund's inception on May 1, 1998,
which have been annualized for the management fees and estimated for other
expenses. The investment manager agreed in advance to limit management fees and
make certain payments to reduce Fund expenses as necessary so that Total Annual
Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets in
1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were .60%, 4.08% and 4.68% for the Franklin Growth
Investments Fund.
EXAMPLES:
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets regardless of whether you surrender your contract at the
end of each time period:
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Time Periods
1 year 3 years 5 years 10 years
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund $74.02 $108.57 $145.24 $247.19
AIM V.I. Value Fund $73.92 $108.28 $144.75 $246.17
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity Portfolio $75.82 $114.05 $154.50 $266.26
Small Cap Stock Portfolio $78.29 $121.50 $167.01 $291.73
International Equity Portfolio $77.91 $120.36 $165.10 $287.86
Quality Bond Portfolio $73.83 $107.99 $144.26 $245.16
Large Cap Stock Portfolio $74.78 $110.88 $149.15 $255.27
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio $75.73 $113.76 $154.01 $265.27
Mid-Cap Value Portfolio $79.99 $126.62 $175.58 $308.94
Large Cap Research Portfolio $79.99 $126.62 $175.58 $308.94
Developing Growth Portfolio $79.04 $123.78 $170.83 $299.42
Lord Abbett Growth and Income Portfolio $74.49 $110.01 $147.69 $252.24
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market Fund $69.59 $ 95.01 $122.20 $198.80
TEMPLETON VARIABLE PRODUCTS SERIES FUND,
CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund $77.15 $118.07 $161.26 $280.06
Franklin Growth Investments Fund $77.15 $118.07 $161.26 $280.06
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund $75.82 $114.05 $154.50 $266.26
Templeton Stock Fund $76.11 $114.91 $155.95 $269.24
Templeton Bond Fund $74.59 $110.30 $148.17 $253.25
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EXPLANATION OF FEE TABLE
1. You may be entitled to a reduced sales charge if: 1) you indicate in
writing that you will make additional purchase payments to your contract during
a 13-month period; and 2) if the amount of the owner's investment (purchase
payment plus contract value) falls within certain dollar ranges. See "Expenses"
for a discussion of how the sales charge is determined.
2. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is under the Dollar Cost Averaging or
Automatic Rebalancing Programs.
3. During the accumulation phase, Cova will not charge the contract
maintenance charge if the value of your contract is $50,000 or more, although,
if you make a complete withdrawal, Cova will charge the contract maintenance
charge.
4. Premium taxes are not reflected. Premium taxes may apply depending on
the state where you live.
THE ANNUITY CONTRACT
This Prospectus describes the Series A Fixed and Variable Annuity Contract
offered by Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case Cova), where the insurance company promises to pay an income to you,
in the form of annuity payments, beginning on a designated date that is at least
one month after we issue your contract. Until you decide to begin receiving
annuity payments, your annuity is in the accumulation phase. Once you begin
receiving annuity payments, your contract switches to the income phase.
The contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your contract until you take
money out of your contract.
The contract is called a variable annuity because you can choose among the
investment portfolios and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends upon the investment performance of the investment
portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by Cova. Cova guarantees that the interest rate credited
to the fixed account will not be less than 3% per year. If you select the fixed
account, your money will be placed with the other general account assets of
Cova. If you select the fixed account, the amount of money you are able to
accumulate in your contract during the accumulation phase depends upon the total
interest credited to your contract. The amount of the annuity payments you
receive during the income phase from the fixed account portion of the contract
will remain level for the entire income phase.
As owner of the contract, you exercise all rights under the contract. You can
change the owner at any time by notifying Cova in writing. You and your spouse
can be named joint owners. We have described more information on this under
"Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Selecting an Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one month after you buy the contract.
Annuity payments must begin by the first day of a calendar month following the
annuitant's 85th birthday or 10 years from the date the contract was issued,
whichever is later.
Annuity Payments
Unless you designate another person to receive the annuity payments, Cova will
pay you the annuity payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from:
the fixed account (fixed annuity payout);
the investment portfolio(s) (variable annuity payout); or
a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the assumed investment rate used in the annuity table for the contract,
and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the assumed investment rate (AIR), your
annuity payments will increase. Similarly, if the performance is less than the
AIR, your annuity payments will decrease. Currently, the AIR is 3%. Cova may
change the AIR or add AIRs in the future.
Annuity payments will be paid in monthly installments or at any frequency
acceptable to Cova. Each annuity payment will be reduced by a pro-rata portion
of the contract maintenance charge. (See "Expenses").
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. In that case, Cova may pay your annuity payment in a single
lump sum. Likewise, if your annuity payments would be less than $100 a month,
Cova has the right to change the frequency of payments so that your annuity
payments are at least $100.
Selecting an Annuity Option
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. If you do not choose an
annuity option at the time you purchase the contract, we will assume that you
selected Option 2 which provides a life annuity with 10 years of guaranteed
payments. You can change the annuity option at any time before the annuity date
with 30 days notice to us.
You can choose one of the following annuity options or any other annuity option
acceptable to Cova. After annuity payments begin, you cannot change the annuity
option.
OPTION 1. LIFE ANNUITY. Under this option, we will make periodic annuity
payments so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
OPTION 2. LIFE ANNUITY WITH 5, 10 OR 20 YEARS GUARANTEED. Under this option, we
will make periodic annuity payments so long as the annuitant is alive. However,
if, when the annuitant dies, we have made annuity payments for less than the
selected guaranteed period, we will then continue to make annuity payments for
the rest of the guaranteed period. If you do not want to receive annuity
payments, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
periodic annuity payments so long as the annuitant and a second person are both
alive. When either of these people dies, we will continue to make annuity
payments so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you give us to purchase the contract. When you
make a purchase payment (we call this the "gross purchase payment"), we will
deduct the sales charge and any applicable premium taxes before we allocate it
to the investment portfolio(s) and/or the fixed account (we call this the "net
purchase payment"). See "Expenses" for a discussion of the sales charge.
The minimum gross purchase payment we will accept is $5,000 when the contract is
purchased as a non-qualified contract. If you are purchasing the contract as
part of an IRA (Individual Retirement Annuity), 401(k) or other qualified plan,
the minimum gross purchase payment we will accept is $2,000. The maximum gross
purchase payments we accept are $1 million without our prior approval. You can
make additional gross purchase payments of $500 or more to any type of contract
any time during the accumulation phase.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your net purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise. Currently, you may
allocate your money to any of the investment portfolios. Cova reserves the right
to limit the number of investment portfolios you may invest in at any one time
in the future. There is a $500 minimum allocation requirement for the fixed
account and for each investment portfolio.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within 2 business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 p.m. Eastern time.
Free Look
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it (or the period required in your state). Cova will refund
the contract value plus the sales charge determined as of the business day that
the refund is made, which may be less than your gross purchase payment. In
certain states, or if you have purchased the contract as an IRA, we may be
required to refund your gross purchase payment if you decide to cancel your
contract within 10 days after receiving it (or whatever period is required in
your state).
ACCUMULATION UNITS
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every business day we determine the value of an accumulation unit for each of
the investment portfolios. We do this by:
1. determining the total amount of money invested in the particular
investment portfolio;
2. subtracting from that amount the mortality and expense risk charge and
any other charges such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from business day to
business day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the net purchase payment allocated to an investment portfolio by the
value of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
EXAMPLE:
On Monday we receive an additional purchase payment from you. The amount of the
net purchase payment is $5,000. You have told us you want this to go to the
Quality Bond Portfolio. When the New York Stock Exchange closes on that Monday,
we determine that the value of an accumulation unit for the Quality Bond
Portfolio is $13.90. We then divide $5,000 by $13.90 and credit your contract on
Monday night with 359.71 accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The contract offers 18 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
The investment objectives and policies of certain investment portfolios are
similar to the investment objectives and policies of other mutual funds that
certain of the investment advisers manage. Although the objectives and policies
may be similar, the investment results of the investment portfolios may be
higher or lower than the results of such other mutual funds. The investment
advisers cannot guarantee, and make no representation, that the investment
results of similar funds will be comparable even though the funds have the same
investment advisers.
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
Cova may enter into certain arrangements under which it is reimbursed by the
investment portfolios' advisers, distributors and/or affiliates for the
administrative services that it provides to the portfolios.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is a management investment company with
multiple portfolios. A I M Advisors, Inc. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. Each investment portfolio has a different investment
objective. Cova Advisory has engaged sub-advisers to provide investment advice
for the individual investment portfolios. The following investment portfolios
are available under the contract:
J.P. MORGAN INVESTMENT MANAGEMENT INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Templeton Variable Products Series Fund issues two classes of shares
- - Class 1 and Class 2. Only shares of Class 1 are available under your contract.
Franklin Advisers, Inc. is the investment manager of the Franklin Growth
Investments Fund and the Franklin Small Cap Investments Fund. Templeton
Investment Counsel, Inc. is the investment manager of the Templeton
International Fund, the Templeton Bond Fund and the Templeton Stock Fund. The
following portfolios are available under the contract:
Franklin Small Cap Investments Fund
Franklin Growth Investments Fund *
Templeton International Fund
Templeton Stock Fund
Templeton Bond Fund
* Effective December 15, 1999 the fund's name changed to Franklin Large Cap
Growth Investments Fund and its principal strategies and risks were restated
to those of investing primarily in large cap growth companies.
TRANSFERS
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described below.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The fee is $25 per transfer. The following apply to any
transfer during the accumulation phase:
1. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio or fixed account. The minimum amount which must
remain in an investment portfolio and/or the fixed account after a transfer is
$500.
2. Your request for transfer must clearly state which investment
portfolio(s) or the fixed account are involved in the transfer.
3. Your request for transfer must clearly state how much the transfer is
for.
4. We will process your transfer as of the end of the business day when our
Service Office receives an acceptable transfer request which contains all
required information (including the amount which is to be transferred and the
investment portfolio(s) and/or fixed account involved in the transfer).
5. Neither Cova nor its Service Office is liable for a transfer made in
accordance with your instructions.
6. Cova reserves the right to restrict the number of transfers per year and
to restrict transfers from being made on consecutive business days.
7. Your right to make transfers is subject to modification if Cova
determines, in Cova's sole opinion, that the exercise of the right by one or
more owners is or would be to the disadvantage of other owners. Restrictions may
be applied in any manner reasonably designed to prevent any use of the transfer
right which is considered by Cova to be to the disadvantage of other owners. A
modification could be applied to transfers to or from one or more of the
investment portfolios and could include, but not be limited to:
the requirement of a minimum time period between each transfer;
not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one owner; or
limiting the dollar amount that may be transferred between the investment
portfolios by an owner at any one time.
8. During the income phase you can only make transfers between the
investment portfolios once each year. We measure a year from the anniversary of
the day we issued your contract. You cannot transfer from a fixed annuity payout
to a variable annuity payout, but you can transfer from a variable annuity
payout to a fixed annuity payout at any time.
Telephone Transfers
You and/or your registered representative on your behalf can make transfers by
telephone. Telephone transfers will be automatically permitted unless you tell
us otherwise. If you own the contract with a joint owner, unless Cova is
instructed otherwise, Cova will accept instructions from either you or the other
owner. Cova will use reasonable procedures to confirm that instructions given us
by telephone are genuine. If Cova fails to use such procedures, we may be liable
for any losses due to unauthorized or fraudulent instructions. Cova tape records
all telephone instructions.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund or the fixed account to any of the
other investment portfolio(s). By allocating amounts on a regular schedule as
opposed to allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations. The Dollar Cost Averaging
Program is available only during the accumulation phase.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program.
Cova reserves the right, without notice, to modify, terminate or suspend the
Dollar Cost Averaging Program. Cova does not currently charge for participating
in this program.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
AUTOMATIC REBALANCING PROGRAM
Once your money has been allocated to the investment portfolios, the performance
of each portfolio may cause your allocation to shift. You can direct us to
automatically rebalance your contract to return to your original percentage
allocations by selecting our Automatic Rebalancing Program. You can tell us
whether to rebalance quarterly, semi-annually or annually. We will measure these
periods from the anniversary of the date we issued your contract. The transfer
date will be the 1st business day after the end of the period you selected. The
Automatic Rebalancing Program is available only during the accumulation phase.
Cova does not currently charge for participating in this program.
If you participate in the Automatic Rebalancing Program, the transfers made
under the program are not taken into account in determining any transfer fee.
EXAMPLE:
Assume that you want your initial purchase payment split between 2 investment
portfolios. You want 40% to be in the Quality Bond Portfolio and 60% to be in
the Select Equity Portfolio. Over the next 2 1/2 months the bond market does
very well while the stock market performs poorly. At the end of the first
quarter, the Quality Bond Portfolio now represents 50% of your holdings because
of its increase in value. If you had chosen to have your holdings rebalanced
quarterly, on the first business day of the next quarter, Cova would sell some
of your units in the Quality Bond Portfolio to bring its value back to 40% and
use the money to buy more units in the Select Equity Portfolio to increase those
holdings to 60%.
VOTING RIGHTS
Cova is the legal owner of the investment portfolio shares. However, Cova
believes that when an investment portfolio solicits proxies in conjunction with
a vote of shareholders, it is required to obtain from you and other affected
owners instructions as to how to vote those shares. When we receive those
instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that Cova owns on its own
behalf. Should Cova determine that it is no longer required to comply with the
above, we will vote the shares in our own right.
SUBSTITUTION
Cova may be required to substitute one or more of the investment portfolios you
have selected with another portfolio. We would not do this without the prior
approval of the Securities and Exchange Commission. We will give you notice of
our intent to do this. Cova may limit further purchases in an investment
portfolio if it deems the investment inappropriate.
EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
MORTALITY AND EXPENSE RISK CHARGE
This charge is equivalent, on an annual basis, to .85% 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. This charge is
also for administrative expenses. Cova may use any profits it makes from this
charge to pay for the costs of distributing the contract.
CONTRACT MAINTENANCE CHARGE
During the accumulation phase, every year on the anniversary of the date when
your contract was issued, Cova deducts $30 from your contract as a contract
maintenance charge. This charge is for administrative expenses (see above).
This charge cannot be increased.
Cova will not deduct this charge during the accumulation phase if when the
deduction is to be made, the value of your contract is $50,000 or more. Cova may
some time in the future discontinue this practice and deduct the charge.
If you make a complete withdrawal from your contract, the contract maintenance
charge will also be deducted. A pro rata portion of the charge will be deducted
if the annuity date is other than an anniversary. After the annuity date, the
charge will be collected out of each annuity payment.
SALES CHARGE
Cova deducts a sales charge from a gross purchase payment before the payment is
allocated to an investment portfolio and/or the fixed account. The amount of the
sales charge depends on the "owner's investment." The owner's investment for the
initial purchase payment equals the amount of the initial gross purchase
payment. The owner's investment for subsequent purchase payments equals the
amount the subsequent gross purchase payment and the value of your contract on
the day Cova receives the subsequent gross purchase payment. The charge is:
<TABLE>
<CAPTION>
<S> <C>
Sales Charge (as a
percentage of gross
Owner's Investment purchase payment)
- -------------------- --------------------
Less than $50,000 5.75%
$50,000-$99,999.99 4.50%
$100,000-$249,999.99 3.50%
$250,000-$499,999.99 2.50%
$500,000-$999,999.99 2.00%
$1,000,000 or greater 1.00%
</TABLE>
HOW TO REDUCE THE SALES CHARGE
You may be able to lower the sales charge you pay by indicating in writing
the amount of gross purchase payments you intend to make during a 13 month
period. You have 13 months from the date Cova receives the written indication to
make the purchase payments you chose as your goal. We will deduct the sales
charge based on the total of the purchase payments intended to be made plus the
value of your contract on the date the first purchase payment is made. You are
not obligated to reach your purchase payment goal. If you do not make the amount
of purchase payments you indicated during the 13-month period, we will deduct an
additional charge from your contract in the 14th month based on: (1) the actual
gross purchase payments made during the 13 months; plus (2) the value of the
contract on the date the first gross purchase payment was made. Any additional
sales charge will be deducted during the 14th month from the investment
portfolios and the fixed account in the ratio that they bear to the value of
your contract. Cova reserves the right to modify, suspend or terminate this
feature at any time.
In addition, Cova will reduce or eliminate the amount of the sales charge when
the contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the contract or a prospective purchaser already had a relationship with Cova.
Cova may not deduct a sales charge under a contract issued to an officer,
director or employee of Cova or any of its affiliates.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is Cova's current practice to not charge anyone for these
taxes until annuity payments begin. Cova may some time in the future discontinue
this practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 4%, depending on the state.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 per transfer. We will deduct the transfer fee from the
investment portfolio and/or the fixed account from which the transfer is made or
from the amount transferred if the entire amount in the investment portfolio
and/or the fixed account is transferred.
If the transfer is part of the Dollar Cost Averaging Program or the Automatic
Rebalancing Program, it will not count in determining the transfer fee.
INCOME TAXES
Cova will deduct from the contract for any income taxes which it incurs because
of the contract. At the present time, we are not making any such deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the fund prospectuses.
TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included in the Statement of Additional Information an additional discussion
regarding taxes.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,corporation
or certain other entities other than a trust holding the contract as an agent
for a natural person), the contract will generally not be treated as an annuity
for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts),
and pension and profit-sharing plans, which include 401(k) plans and H.R. 10
plans.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of amounts attributable to purchase payments made
under a salary reduction agreement by owners from Tax-Sheltered Annuities.
Withdrawals can only be made when an owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Cova believes that the investment portfolios are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Cova would be
considered the owner of the shares of the investment portfolios. If you are
considered the owner of the shares, it will result in the loss of the favorable
tax treatment for the contract. It is unknown to what extent owners are
permitted to select investment portfolios, to make transfers among the
investment portfolios or the number and type of investment portfolios owners may
select from without being considered the owner of the shares. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as the
owner of the contract, could be treated as the owner of the investment
portfolios.
Due to the uncertainty in this area, Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
by making a withdrawal (either a partial or a complete withdrawal);
by electing to receive annuity payments; or
when a death benefit is paid to your beneficiary.
Under most circumstances, withdrawals can only be made during the accumulation
phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal, less any contract maintenance charge. Cova
will pay the amount of a withdrawal from the investment portfolios within 7 days
of the withdrawal request unless the Suspension of Payments or Transfers
provision is in effect (see below).
Unless you instruct Cova in advance otherwise, any partial withdrawal will be
made pro rata from all the investment portfolios and the fixed account. Under
most circumstances, the amount of any partial withdrawal must be for at least
$500. Cova requires that after a partial withdrawal is made you keep at least
$500 in any selected investment portfolio or the fixed account.
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan. For a more complete explanation see "Taxes" and the
discussion in the Statement of Additional Information.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
SUSPENSION OF PAYMENTS OR TRANSFERS
Cova may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or Cova cannot reasonably
value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
Cova has reserved the right to defer payment for a withdrawal or transfer from
the fixed account for the period permitted by law but not for more than six
months.
SYSTEMATIC WITHDRAWAL PROGRAM
You may use the Systematic Withdrawal Program. This program provides automatic
monthly payments to you. Cova does not charge for participation in this program,
but reserves the right to charge in the future.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
PERFORMANCE
Cova periodically advertises performance of the various investment portfolios.
Cova will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that unit
by the value of the accumulation unit at the beginning of the period. This
performance number reflects the deduction of the mortality and expense risk
charge and the operating expenses of the portfolios. It does not reflect the
deduction of any applicable contract maintenance charge and sales charge. The
deduction of any applicable contract maintenance charge and sales charge would
reduce the percentage increase or make greater any percentage decrease. Any
advertisement will also include total return figures which reflect the deduction
of the sales charge, mortality and expense risk charge, contract maintenance
charge and the operating expenses of the portfolios.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios performance may be shown for the
period commencing from the inception date of the investment portfolio.
Cova may, from time to time, include in its advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
Appendix B contains performance information that you may find informative. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and the results shown are not necessarily
representative of future results.
DEATH BENEFIT
UPON YOUR DEATH
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). Joint owners must be spouses. The surviving joint owner
will be treated as the beneficiary.
If you, or a joint owner, who is not the annuitant, die during the income phase,
any remaining payments under the annuity option elected will continue at least
as rapidly as under the method of distribution in effect at your death. If you
die during the income phase, the beneficiary will become the owner of the
contract.
At the time you buy the contract, you can select the Annual Step-Up Option or
the Five Year Step-Up with 4% Accumulation Option. If you do not choose a death
benefit option on the forms provided by Cova, the Annual Step-Up Option will be
your death benefit.
The death benefits are described below. If you have a joint owner, the death
benefit is determined based on the age of the oldest joint owner and the death
benefit is payable on the death of the first joint owner.
ANNUAL STEP-UP OPTION:
The death benefit will be the greatest of:
1. Gross purchase payments less any withdrawals; or
2. The value of your contract determined on the business day following the
day when Cova receives both due proof of death and an election for payment; or
3. The greatest contract value (as explained below).
The greatest contract value is evaluated at each contract anniversary prior to
the date of your or your joint owner's death. On the contract anniversary, if
the current contract value exceeds the greatest contract value, the greatest
contract value will be increased to the current value of your contract. If a
purchase payment is made, the amount of the gross purchase payment will increase
the greatest contract value. If a withdrawal is made, the greatest contract
value will be reduced by the amount withdrawn.
After you or your joint owner attains age 80, the greatest contract value is
evaluated at each contract anniversary on or before your, or your joint owner's,
80th birthday. On the contract anniversary on or before your, or your joint
owner's, 80th birthday, if the current contract value exceeds the greatest
contract value, the greatest contract value will be increased to the current
contract value. If a purchase payment is made, the amount of the gross purchase
payment will increase the greatest contract value. If a withdrawal is made, the
greatest contract value will be reduced by the amount withdrawn.
FIVE YEAR STEP-UP WITH 4% ACCUMULATION OPTION:
The death benefit will be the greatest of:
1. Gross purchase payments, less any withdrawals made on or before you or
your joint owner's 80th birthday, accumulated at an effective annual rate of 4%
until the owner's or joint owner's 80th birthday or death; plus any subsequent
gross purchase payments less any subsequent withdrawals made subsequent to the
owner's or a joint owner's 80th birthday; or
2. The value of your contract determined on the business day following the
day when Cova receives both due proof of death and an election for payment; or
3. The greatest of the values of your contract resulting from taking the
contract value on any 5 year contract anniversary while the owner, or a joint
owner is living, on or before your, or your joint owner's 80th birthday, plus
any gross purchase payments you made subsequent to that contract anniversary,
less any withdrawals subsequent to that contract anniversary.
In certain states, one or both of the death benefit options described above may
not be available. Check your contract for your applicable death benefit
provision.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name at the then current value. If a lump sum payment is elected and
all the necessary requirements are met, the payment will be made within 7 days.
The amount of the death benefit is determined as of the end of the business day
during which Cova receives both due proof of death and an election for the
payment option. The death benefit amount remains in the investment portfolios
and/or the fixed account until distribution begins. From the time we determine
the death benefit until we make a complete distribution, any amount in an
investment portfolio will be subject to investment risk which is borne by the
beneficiary.
DEATH OF ANNUITANT
If the annuitant, not an owner or joint owner, dies during the accumulation
phase, you, as the owner automatically become the annuitant. You can name a new
annuitant, subject to Cova's administrative rules then in effect. If the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant during the income phase, the death benefit, if
any, will be as provided for in the annuity option selected and will be paid at
least as rapidly as under the method of distribution in effect at the
annuitant's death.
OTHER INFORMATION
COVA
Cova Financial Services Life Insurance Company (Cova) was incorporated on August
17, 1981 as Assurance Life Company, a Missouri corporation, and changed its name
to Xerox Financial Services Life Insurance Company in 1985. On June 1, 1995, a
wholly-owned subsidiary of General American Life Insurance Company (General
American Life) purchased Cova which on that date changed its name to Cova
Financial Services Life Insurance Company. On January 6, 2000, Metropolitan
Life Insurance Company (MetLife) acquired GenAmerica Corporation, the ultimate
parent company of General American Life. The acquisition of GenAmerica
Corporation does not affect policy benefits or any other terms or conditions
under your contract. MetLife, headquartered in New York City since 1868, is a
leading provider of insurance and financial products and services to individual
and group customers.
Cova is licensed to do business in the District of Columbia and all states
except California, Maine, New Hampshire, New York and Vermont.
THE SEPARATE ACCOUNT
Cova has established a separate account, Cova Variable Annuity Account One
(Separate Account), to hold the assets that underlie the contracts (except the
assets allocated to the fixed account). The Board of Directors of Cova adopted a
resolution to establish the Separate Account under Missouri insurance law on
February 24, 1987. We have registered the Separate Account with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940. The Separate Account is divided into sub-accounts.
The assets of the Separate Account are held in Cova's name on behalf of the
Separate Account and legally belong to Cova. However, those assets that underlie
the contracts are not chargeable with liabilities arising out of any other
business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts Cova may issue.
DISTRIBUTOR
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the contracts. Life
Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions ranging up to 5.0% of purchase payments,
depending on the size of the purchase payment. Commissions are reduced once
certain breakpoints in purchase payments and/or contract value are achieved for
a contract. In addition, broker-dealers will be paid annual trail commissions in
the amount of .25% of purchase payments, beginning in year 2. Additional
compensation will be paid through a marketing fee and asset-based fee
arrangements.
OWNERSHIP
OWNER. You, as the owner of the contract, have all the interest and rights under
the contract. The owner is as designated at the time the contract is issued,
unless changed. You can change the owner at any time. A change will
automatically revoke any prior designation of an owner.
The change must be:
made in writing; and
received at Cova's Service Office.
The change will become effective as of the date when the written request is
signed. A new designation of owner will not apply to any payment Cova makes or
action it takes before it receives the change.
JOINT OWNER. The contract can be owned by joint owners. Any joint owner must be
the spouse of the other owner (except in states which do not allow this
limitation on joint owners). Upon the death of either joint owner, the surviving
joint owner will be the primary beneficiary. Any other beneficiary designation
at the time the contract was issued or as may have been later changed will be
treated as a contingent beneficiary unless otherwise indicated. Joint owners
must both authorize exercising any ownership rights (except telephone transfers)
unless Cova permits otherwise.
ANNUITANT
The annuitant is the person whose life we look to when we make annuity payments.
You may change the annuitant at any time prior to the annuity date unless the
contract is owned by a non-natural person (e.g. a corporation). On or after the
annuity date, any reference to the annuitant includes any joint annuitant.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before you die by written request at
Cova's Service Office. The change is effective as of the date you signed the
notice.
ASSIGNMENT
You can assign the contract at any time before the annuity date. Cova will not
be bound by the assignment until it receives the written notice of the
assignment at its Service Office. Cova will not be liable for any payment or
other action we take in accordance with the contract before we receive notice of
the assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be limitations
on your ability to assign the contract.
FINANCIAL STATEMENTS
The consolidated financial statements of Cova and the Separate Account have been
included in the Statement of Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Company
Experts
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
APPENDIX
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
PART 1 SEPARATE ACCOUNT PERFORMANCE
Column A presents performance figures for the accumulation units which
reflect the mortality and expense risk charge, the contract maintenance
charge, the sales charge, and the fees and expenses of the investment
portfolio. The performance shown in Column A is standardized average
annual total return performance calculated according to SEC requirements.
Column B presents performance figures for the accumulation units which
reflect the mortality and expense risk charge as well as the expenses of
the investment portfolio.
The inception dates shown below reflect the dates the Separate Account
first invested in the Portfolio. The performance returns for accumulation
units investing in the portfolios in existence for less than one year are
not annualized.
<TABLE>
<CAPTION>
PART 1 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Column A Unit Performance
(reflects Column B
all charges (reflects mortality
and expense risk charge
and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
AIM VI Value Fund 12/31/97 30.68% 18.84% 38.76% 23.05%
AIM VI Capital
Appreciation Fund 12/31/97 23.21% 9.78% 30.82% 13.68%
</TABLE>
PART 1 COVA SERIES TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
Select Equity Portfolio 5/1/96 10.03% 13.52% 16.83% 15.63%
Small Cap Stock Portfolio 5/1/96 14.93% 5.76% 22.03% 7.72%
International Equity
Portfolio 5/1/96 20.59% 7.86% 28.04% 9.86%
Quality Bond Portfolio 5/1/96 -8.15% 3.41% -2.48% 5.33%
Large Cap Stock Portfolio 5/1/96 20.37% 21.11% 27.80% 23.36%
Bond Debenture Portfolio 5/1/96 -2.33% 6.95% 3.70% 8.93%
Mid-Cap Value Portfolio 8/20/97 8.82% .60% 15.54% 3.59%
Large Cap Research Portfolio 8/20/97 22.07% 9.61% 29.61% 12.87%
Developing Growth Portfolio 8/20/97 28.36% 6.23% 36.29% 9.39%
Lord Abbett Growth and
Income Portfolio 1/8/99 - -5.59% - 0.24%
</TABLE>
PART 1 GENERAL AMERICAN CAPITAL COMPANY
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
Money Market Fund 6/3/96 -1.85% 2.62% 4.21% 4.58%
</TABLE>
<TABLE>
<CAPTION>
PART 1 TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
Franklin Small Cap 3/1/99 - 19.76% - 27.18%
Investments Fund
Franklin Growth 3/1/99 9.60% - 16.38%
Investments Fund
Templeton International
Fund 5/1/98 16.26% -4.70% 23.44% -0.52%
Templeton Stock Fund 1/19/99 1.47% - 7.75%
Templeton Bond Fund 3/1/99 -7.65% -1.94%
</TABLE>
PART 2 HISTORICAL FUND PERFORMANCE
Shares of certain portfolios have been offered prior to the time the Separate
Account first invested in them and therefore have an investment performance
history. In order to show how investment performance of certain portfolios
affect accumulation unit values, we have developed performance information.
The chart below shows the investment performance of the portfolio and the
accumulation unit performance calculated by assuming that accumulation units
were invested in the portfolio for the same periods.
The performance figures in Column A for the portfolio reflect the fees and
expenses paid by the portfolio.
Column B presents performance figures for the accumulation units which
reflect the mortality and expense risk charge, the contract maintenance
charge, the sales charge and the expenses of the portfolio.
Column C presents performance figures for the accumulation units which
reflect the mortality and expense risk charge as well as the fees and
expenses of the portfolio.
<TABLE>
<CAPTION>
PART 2
AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects mortality and
Portfolio charges and expense risk charge and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
AIM V.I. Value Fund 5/5/93 40.15% 22.94% 20.96% 30.68% 20.81% 19.09% 38.76% 22.09% 20.11%
AIM V.I. Capital
Appreciation Fund 5/5/93 32.11% 18.15% 17.56% 23.21% 16.02% 15.69% 30.82% 17.30% 16.71%
</TABLE>
PART 2 GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects mortality and
Portfolio charges and expense risk charge and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Money Market Fund 10/1/87 5.12% 5.57% 5.44% -1.85% 3.44% 3.90% 4.21% 4.72% 4.59%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects mortality and
Portfolio charges and expense risk charge and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Templeton
International Fund 5/1/92 24.62% 13.30% 13.95% 16.26% 11.17% 12.20% 23.44% 12.45% 13.10%
Templeton Stock Fund 8/24/88 27.47% 12.79% 11.76% 20.77% 10.66% 10.22% 26.62% 11.94% 10.91%
Templeton Bond Fund 8/24/88 -1.94% 5.62% 6.31% -8.64% 3.49% 4.77% -2.79% 4.77% 5.46%
Franklin Small Cap
Investments 5/1/98 51.70% - 10.65% 45.00% - 5.61% 50.85% - 9.80%
Franklin Growth
Investments 5/1/98 37.81% - 21.98% 31.11% - 16.94% 36.96% - 21.13%
</TABLE>
- ---------------------------
- --------------------------- STAMP
- ---------------------------
Cova Financial Services Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
Please send me, at no charge, the Statement of Additional Information dated
February ___, 2000 for the Series A Annuity Contract issued by Cova.
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
issued by
COVA VARIABLE ANNUITY ACCOUNT ONE
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED FEBRUARY ___, 2000 FOR THE
SERIES A INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS
DESCRIBED HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644,
(800) 831-5433.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED FEBRUARY ___, 2000.
TABLE OF CONTENTS
Page
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTION
REDUCTION OR ELIMINATION OF SALES CHARGE
CALCULATION OF PERFORMANCE INFORMATION
Total Return
Historical Unit Values
Reporting Agencies
FEDERAL TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other than Natural Persons
Tax Treatment of Assignments
Death Benefits
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations
ANNUITY PROVISIONS
Variable Annuity
Fixed Annuity
Annuity Unit
Net Investment Factor
Mortality and Expense Guarantee
FINANCIAL STATEMENTS
COMPANY
Cova Financial Services Life Insurance Company (the "Company") was originally
incorporated on August 17, 1981 as Assurance Life Company, a Missouri
corporation and changed its name to Xerox Financial Services Life Insurance
Company in 1985. On June 1, 1995 a wholly-owned subsidiary of General American
Life Insurance Company ("General American Life") purchased the Company from
Xerox Financial Services, Inc. The Company changed its name to Cova Financial
Services Life Insurance Company. On January 6, 2000, Metropolitan Life Insurance
Company (MetLife) acquired GenAmerica Corporation, the ultimate parent company
of General American Life. The acquisition of GenAmerica Corporation does not
affect policy benefits or any other terms or conditions under your contract.
MetLife, headquartered in New York City since 1868, is a leading provider of
insurance and financial products and services to individual and group customers.
The Company presently is licensed to do business in the District of Columbia and
all states except California, Maine, New Hampshire, New York and Vermont.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1998 and 1997,
and the related consolidated statements of income, shareholder's equity, and
cash flows for each of the years in the three-year period ended December 31,
1998, and the statement of assets and liabilities of the Separate Account as of
December 31, 1998, and the related statement of operations for the year then
ended and the statements of changes in net assets for the two years then ended,
have been included herein in reliance upon the reports of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
DISTRIBUTION
Cova Life Sales Company ("Life Sales") acts as the distributor. Prior to June 1,
1995, Cova Life Sales Company was known as Xerox Life Sales Company. Life Sales
is an affiliate of the Company. The offering is on a continuous basis.
REDUCTION OR ELIMINATION OF THE SALES CHARGE
The amount of the Sales Charge on the Contracts may be reduced or eliminated
when sales of the Contracts are made to individuals or to a group of individuals
in a manner that results in savings of sales expenses. The entitlement to
reduction of the Sales Charge will be determined by the Company after
examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Contracts
with fewer sales contacts.
2. The total amount of purchase payments to be received will be considered.
Per Contract sales expenses are likely to be less on larger purchase payments
than on smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract with fewer
sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Sales Charge.
The Sales Charge may be eliminated when the Contracts are issued to an officer,
director or employee of the Company or any of its affiliates. In no event will
any reduction or elimination of the Sales Charge be permitted where the
reduction or elimination of the Sales Charge will be unfairly discriminatory to
any person.
CALCULATION OF PERFORMANCE INFORMATION
Total Return
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a .95% Mortality and Expense Risk Charge, the Sales Charge and the
expenses for the underlying investment portfolio being advertised and any
applicable Contract Maintenance Charge.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charge and any Sales Charge to arrive at the ending
hypothetical value. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:
n
P (1 + T) = ERV
<TABLE>
<CAPTION>
<S> <C> <C>
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods
used (or fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the time
periods used.
</TABLE>
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of the
Sales Charge. The deduction of any Sales Charge would reduce any percentage
increase or make greater any percentage decrease.
You should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what your total return may be in any future period.
Historical Unit Values
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
Reporting Agencies
The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
FEDERAL TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment or as annuity payments under the Annuity
Option selected. For a lump sum payment received as a total withdrawal (total
surrender), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
DEATH BENEFITS
Any death benefit paid under the Contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered herein are designed to be suitable for use under various
types of Qualified Plans. Taxation of participants in each Qualified Plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations" below.) Employee loans are not allowable under the
Contracts. Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-
employed individuals, to establish various types of retirement plans for
employees. These retirement plans may permit the purchase of the Contracts to
provide benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all Plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Pension or Profit
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b)(Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been rolled over to an IRA or to another eligible Qualified Plan, no
tax penalty will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Owner or Annuitant (as applicable) reaches age 59 1/2; (b) distributions
following the death or disability of the Owner or Annuitant (as applicable)(for
this purpose disability is as defined in Section 72(m) (7) of the Code); (c)
after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the Owner or Annuitant (as applicable) or the joint lives
(or joint life expectancies) of such Owner or Annuitant (as applicable) and his
or her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (g) distributions from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8)of
the Code.) The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect transfers between Tax-Sheltered Annuity Plans. Owners should consult
their own tax counsel or other tax adviser regarding any distributions.
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account. At the
Annuity Date, the Contract Value in each investment portfolio will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. On the Annuity Date, a fixed number of Annuity Units will
be purchased as follows:
The first Annuity Payment is equal to A divided first by B then multiplied by C
where:
A. is the Variable Annuity Value.
B. is $1,000.
C. is the appropriate Annuity Payment amount for each $1,000 of Variable
Annuity Value for the Annuity Option elected.
Each Annuity Payment will be reduced by a pro rata portion of the annual
Contract Maintenance Charge. In each Subaccount, the fixed number of Annuity
Units is determined by dividing the amount of the initial Annuity Payment
determined for each Subaccount by the Annuity Unit value on the Annuity Date.
Thereafter, the number of Annuity Units in each Subaccount remains unchanged
unless you elect a transfer between Subaccounts. All calculations will
appropriately reflect the Annuity Payment frequency selected.
On the date of each subsequent Annuity Payment, the total Annuity Payment is the
sum of the Annuity Payments for each Subaccount reduced by the Contract
Maintenance Charge. The Annuity Payment in each Subaccount is determined by
multiplying the number of Annuity Units then allocated to such Subaccount by the
Annuity Unit value for that Subaccount.
The dollar amount of Variable Annuity Payments for each applicable Subaccount
after the first is determined as follows:
1) the dollar amount of the first Variable Annuity Payment is divided by the
Annuity Unit Value for each applicable Subaccount as of the Annuity Date.
2) the established number of Annuity Units per payment in each Subaccount is
multiplied by the Annuity Unit value for that Subaccount for the last business
day of the month preceding the month for which the payment is due. This result
is the dollar amount of the payment for each applicable Subaccount.
ANNUITY UNIT
The value of an Annuity Unit for each sub-account was arbitrarily set initially.
This was done when the first investment portfolio shares were purchased. The
Subaccount Annuity Unit value at the end of any subsequent business day is
determined by multiplying the Subaccount Annuity Unit value for the immediately
preceding business day by the net investment factor for the day for which the
Annuity Unit Value is being calculated; and dividing the result by the factor
equivalent to the Assumed Investment Rate for the period from the immediately
preceding business day to the current business day. The Assumed Investment Rate
is 3%.
NET INVESTMENT FACTOR
The net investment factor for any Subaccount of the Variable Account for any
business day is determined by dividing:
1) the Accumulation Unit Value as of the close of the current business day; by
2) the Accumulation Unit Value as of the close of the immediately preceding
business day.
The net investment factor may be greater or less than one, as the Annuity Unit
Value may increase or decrease.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. Each Annuity Payment will be reduced by a pro rata
portion of the annual contract maintenance charge. The first monthly Annuity
Payment will be based upon the Annuity Option elected and the appropriate
Annuity Option Table.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Assets:
Investments:
Cova Series Trust (Cova):
<S> <C> <C> <C>
Lord Abbett Growth and Income Portfolio 34,710,269 shares at a net asset value of $21.791180 per share $ 756,378
Bond Debenture Portfolio 12,700,140 shares at a net asset value of $12.007691 per share 152,499
Developing Growth Portfolio 1,862,800 shares at a net asset value of $12.276121 per share 22,868
Large Cap Research Portfolio 1,957,808 shares at a net asset value of $13.050142 per share 25,549
Mid-Cap Value Portfolio 2,304,555 shares at a net asset value of $10.901244 per share 25,122
Quality Bond Portfolio 8,340,250 shares at a net asset value of $10.670452 per share 88,994
Small Cap Stock Portfolio 5,618,663 shares at a net asset value of $12.783032 per share 71,824
Large Cap Stock Portfolio 10,649,772 shares at a net asset value of $18.449313 per share 196,481
Select Equity Portfolio 13,725,991 shares at a net asset value of $14.233562 per share 195,369
International Equity Portfolio 7,581,605 shares at a net asset value of $13.710082 per share 103,945
Balanced Portfolio 626,854 shares at a net asset value of $11.581133 per share 7,260
Small Cap Equity Portfolio 20,851 shares at a net asset value of $10.199962 per share 213
Equity Income Portfolio 461,420 shares at a net asset value of $11.769962 per share 5,431
Growth and Income Portfolio 1,054,379 shares at a net asset value of $12.445634 per share 13,122
General American Capital Company (GACC):
Money Market Fund 2,200,301 shares at a net asset value of $19.971255 per share 43,943
Russell Insurance Funds (Russell):
Multi-Style Equity Fund 2,937,396 shares at a net asset value of $15.32 per share 45,001
Aggressive Equity Fund 637,516 shares at a net asset value of $11.80 per share 7,523
Non-US Fund 1,426,141 shares at a net asset value of $12.19 per share 17,385
Core Bond Fund 2,488,867 shares at a net asset value of $10.06 per share 25,038
Real Estate Securities Fund 32,940 shares at a net asset value of $8.96 per share 295
AIM Variable Insurance Funds, Inc. (AIM):
AIM V.I. Value Fund 885,819 shares at a net asset value of $28.96 per share 25,653
AIM V.I. Capital Appreciation Fund 295,664 shares at a net asset value of $26.84 per share 7,936
AIM V.I. International Equity Fund 149,646 shares at a net asset value of $21.44 per share 3,208
Alliance Variable Products Series
Fund, Inc. (Alliance):
Premier Growth Portfolio 809,846 shares at a net asset value of $33.27 per share 26,944
Real Estate Investment Portfolio 355,135 shares at a net asset value of $8.95 per share 3,179
Liberty Variable Investment Trust (Liberty):
Newport Tiger Fund, Variable Series 167,733 shares at a net asset value of $1.96 per share 329
Goldman Sachs Variable Insurance
Trust (Goldman Sachs):
Growth and Income Fund 587,743 shares at a net asset value of $10.13 per share 5,954
International Equity Fund 218,731 shares at a net asset value of $12.90 per share 2,822
Global Income Fund 28,628 shares at a net asset value of $10.18 per share 291
Kemper Variable Series (Kemper):
Kemper Dreman High Return Equity Portfolio 162,042 shares at a net asset value of $0.933740 per share 151
Kemper Small Cap Growth Portfolio 670,101 shares at a net asset value of $2.026570 per share 1,358
Kemper Small Cap Value Portfolio 3,899,838 shares at a net asset value of $1.037000 per share 4,044
Kemper Government Securities Portfolio 1,792,960 shares at a net asset value of $1.158070 per share 2,076
MFS Variable Insurance Trust (MFS):
MFS Bond Series 15,757 shares at a net asset value of $10.97 per share 173
MFS Research Series 626,173 shares at a net asset value of $19.15 per share 11,991
MFS Growth with Income Series 725,923 shares at a net asset value of $19.28 per share 13,996
MFS Emerging Growth Series 677,799 shares at a net asset value of $24.47 per share 16,586
MFS/Foreign & Colonial Emerging
Markets Equity Series 18,536 shares at a net asset value of $6.32 per share 117
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Assets, continued:
Investments, continued:
<S> <C> <C> <C>
MFS High Income Series 345,291 shares at a net asset value of $11.20 per share 3,867
MFS Global Governments Series 6,531 shares at a net asset value of $10.13 per share 66
Oppenheimer Variable Account
Funds (Oppenheimer):
Oppenheimer Capital Appreciation Fund 127,652 shares at a net asset value of $38.79 per share 4,952
Oppenheimer Main Street Growth &
Income Fund 229,567 shares at a net asset value of $22.04 per share 5,060
Oppenheimer High Income Fund 188,666 shares at a net asset value of $10.55 per share 1,990
Oppenheimer Bond Fund 819,488 shares at a net asset value of $11.47 per share 9,400
Oppenheimer Strategic Bond Fund 545,478 shares at a net asset value of $4.85 per share 2,646
Putnam Variable Trust (Putnam)
Putnam VT Growth and Income Fund 871,363 shares at a net asset value of $26.22 per share 22,847
Putnam VT New Value Fund 49,146 shares at a net asset value of $11.67 per share 574
Putnam VT Vista Fund 237,692 shares at a net asset value of $15.93 per share 3,786
Putnam VT International Growth Fund 867,070 shares at a net asset value of $15.99 per share 13,864
Putnam VT International New
Opportunities Fund 86,052 shares at a net asset value of $14.83 per share 1,276
Templeton Variable Products Series
Fund (Templeton):
Templeton Bond Fund 25,875 shares at a net asset value of $10.05 per share 260
Franklin Small Cap Investments Fund 38,326 shares at a net asset value of $11.29 per share 433
Templeton Stock Fund 13,328 shares at a net asset value of $20.78 per share 277
Templeton International Fund 340,528 shares at a net asset value of $19.59 per share 6,671
Templeton Developing Markets Fund 402,364 shares at a net asset value of $6.16 per share 2,479
Mutual Shares Investments Fund 207,207 shares at a net asset value of $10.04 per share 2,080
Franklin Growth Investments Fund 31,734 shares at a net asset value of $13.17 per share 418
Variable Insurance Products Fund, Fund II
and Fund III (Fidelity):
VIP Growth Portfolio 25,563 shares at a net asset value of $44.47 per share 1,137
VIP II Contrafund Portfolio 53,597 shares at a net asset value of $24.84 per share 1,331
VIP III Growth Opportunities Portfolio 24,437 shares at a net asset value of $21.75 per share 531
VIP III Growth & Income Portfolio 128,627 shares at a net asset value of $15.98 per share 2,055
VIP Equity-Income Portfolio 44,205 shares at a net asset value of $24.88 per share 1,100
---------------
Total assets $ 2,020,148
===============
Liabilities:
Oppenheimer Bond $ 1
Templeton International 1
---------------
Total liabilities $ 2
===============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Net assets:
Accumulation units:
<S> <C> <C> <C>
Cova Lord Abbett Growth and Income 21,060,691 accumulation units at $35.846830 per unit $ 754,959
Cova Bond Debenture 11,441,628 accumulation units at $13.296993 per unit 152,139
Cova Developing Growth 1,911,350 accumulation units at $11.961743 per unit 22,863
Cova Large Cap Research 1,996,490 accumulation units at $12.785625 per unit 25,526
Cova Mid-Cap Value 2,357,806 accumulation units at $10.653208 per unit 25,118
Cova Quality Bond 7,651,844 accumulation units at $11.609274 per unit 88,832
Cova Small Cap Stock 5,389,463 accumulation units at $13.321364 per unit 71,795
Cova Large Cap Stock 9,714,999 accumulation units at $20.192796 per unit 196,173
Cova Select Equity 11,977,632 accumulation units at $16.298247 per unit 195,214
Cova International Equity 7,498,140 accumulation units at $13.850862 per unit 103,856
Cova Balanced 612,550 accumulation units at $11.851579 per unit 7,260
Cova Small Cap Equity 20,939 accumulation units at $10.156919 per unit 213
Cova Equity Income 443,470 accumulation units at $12.246348 per unit 5,431
Cova Growth and Income Equity 1,041,023 accumulation units at $12.605306 per unit 13,122
Cova U.S. Government Securities - accumulation units at $10.030619 per unit -
Cova Stock - accumulation units at $10.027736 per unit -
GACC Money Market 3,839,619 accumulation units at $11.405605 per unit 43,793
Russell Multi-Style Equity 3,462,236 accumulation units at $12.995416 per unit 44,993
Russell Aggressive Equity 817,920 accumulation units at $9.195572 per unit 7,521
Russell Non-US 1,417,127 accumulation units at $12.264216 per unit 17,380
Russell Core Bond 2,402,548 accumulation units at $10.419921 per unit 25,034
Russell Real Estate Securities 32,140 accumulation units at $9.182981 per unit 295
AIM V.I. Value 1,799,150 accumulation units at $14.258572 per unit 25,653
AIM V.I. Capital Appreciation 639,656 accumulation units at $12.406066 per unit 7,936
AIM V.I. International Equity 260,451 accumulation units at $12.318620 per unit 3,208
Alliance Premier Growth 1,714,126 accumulation units at $15.718552 per unit 26,944
Alliance Real Estate Investment 419,940 accumulation units at $7.568838 per unit 3,179
Liberty Newport Tiger Fund, Variable 28,833 accumulation units at $11.401543 per unit 329
Goldman Sachs Growth and Income 626,367 accumulation units at $9.504979 per unit 5,954
Goldman Sachs International Equity 230,849 accumulation units at $12.222446 per unit 2,822
Goldman Sachs Global Income 27,690 accumulation units at $10.524675 per unit 291
Kemper Dreman High Return Equity 15,755 accumulation units at $9.603380 per unit 151
Kemper Small Cap Growth 114,381 accumulation units at $11.872260 per unit 1,358
Kemper Small Cap Value 475,170 accumulation units at $8.510588 per unit 4,044
Kemper Government Securities 197,147 accumulation units at $10.531690 per unit 2,076
MFS Bond 16,851 accumulation units at $10.257883 per unit 173
MFS Research 978,047 accumulation units at $12.260366 per unit 11,991
MFS Growth with Income 1,214,225 accumulation units at $11.526519 per unit 13,996
MFS Emerging Growth 1,111,251 accumulation units at $14.925278 per unit 16,586
MFS/Foreign & Colonial Emerging Markets Equity 16,816 accumulation units at $6.966288 per unit 117
MFS High Income 382,561 accumulation units at $10.108867 per unit 3,867
MFS Global Governments 6,363 accumulation units at $10.397577 per unit 66
Oppenheimer Capital Appreciation 371,009 accumulation units at $13.345832 per unit 4,951
Oppenheimer Main Street Growth & Income 454,609 accumulation units at $11.129275 per unit 5,060
Oppenheimer High Income 198,070 accumulation units at $10.048704 per unit 1,990
Oppenheimer Bond 919,642 accumulation units at $10.220461 per unit 9,399
Oppenheimer Strategic Bond 262,444 accumulation units at $10.080105 per unit 2,646
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Net assets, continued:
Accumulation units, continued:
<S> <C> <C> <C>
Putnam VT Growth and Income 2,040,806 accumulation units at $11.195156 per unit $ 22,847
Putnam VT New Value 56,035 accumulation units at $10.235447 per unit 574
Putnam VT Vista 299,995 accumulation units at $12.621681 per unit 3,786
Putnam VT International Growth 1,011,877 accumulation units at $13.701718 per unit 13,864
Putnam VT International New Opportunities 87,590 accumulation units at $14.569627 per unit 1,276
Templeton Bond 26,603 accumulation units at $9.774435 per unit 260
Franklin Small Cap Investments 34,109 accumulation units at $12.685545 per unit 433
Templeton Stock 25,794 accumulation units at $10.736878 per unit 277
Templeton International 677,301 accumulation units at $9.848936 per unit 6,671
Templeton Developing Markets 271,892 accumulation units at $9.115638 per unit 2,478
Templeton Mutual Shares Investments 210,770 accumulation units at $9.869908 per unit 2,080
Franklin Growth Investments 36,008 accumulation units at $11.606240 per unit 418
Fidelity VIP Growth 78,943 accumulation units at $14.399380 per unit 1,137
Fidelity VIP II Contrafund 102,821 accumulation units at $12.947769 per unit 1,331
Fidelity VIP III Growth Opportunities 46,689 accumulation units at $11.383464 per unit 532
Fidelity VIP III Growth & Income 168,801 accumulation units at $12.176369 per unit 2,055
Fidelity VIP Equity-Income 101,641 accumulation units at $10.820348 per unit 1,100
---------------
2,017,423
Annuity units:
Cova Lord Abbett Growth and Income 52,883 annuity units at $26.827451 per unit 1,419
Cova Bond Debenture 30,041 annuity units at $11.987368 per unit 360
Cova Developing Growth 435 annuity units at $11.236623 per unit 5
Cova Large Cap Research 1,940 annuity units at $12.010570 per unit 23
Cova Mid-Cap Value 431 annuity units at $10.007412 per unit 4
Cova Quality Bond 15,468 annuity units at $10.465878 per unit 162
Cova Small Cap Stock 2,377 annuity units at $12.009342 per unit 29
Cova Large Cap Stock 16,919 annuity units at $18.204012 per unit 308
Cova Select Equity 10,573 annuity units at $14.693048 per unit 155
Cova International Equity 7,105 annuity units at $12.486685 per unit 89
GACC Money Market 14,472 annuity units at $10.337381 per unit 150
Russell Multi-Style 624 annuity units at $12.340869 per unit 8
Russell Aggressive Equity 166 annuity units at $8.732415 per unit 2
Russell Non-US 404 annuity units at $11.646487 per unit 5
Russell Core Bond 368 annuity units at $9.895103 per unit 4
---------------
Total net assets $ 2,020,146
===============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
-------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money High Stock and and Bond
Income (1) Market (1) Yield (1) Index (1) Income (1) Income Debenture
---------- --------- ---------- ----------- ------------ ------------ ------------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 1,404 7 1,324 576 331 - 2,999
---------- --------- ---------- ----------- ------------ ------------ ------------
Expenses:
Mortality and expense risk 11 2 8 27 14 7,109 1,391
Administrative fee 1 1 1 3 2 853 167
---------- --------- ---------- ----------- ------------ ------------ ------------
Total expenses 12 3 9 30 16 7,962 1,558
---------- --------- ---------- ----------- ------------ ------------ ------------
Net investment income (loss) 1,392 4 1,315 546 315 (7,962) 1,441
---------- --------- ---------- ----------- ------------ ------------ ------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares (520) - (955) 18,079 6,587 1,165 102
Realized gain distributions - - - 9,833 5,025 - 972
---------- --------- ---------- ----------- ------------ ------------ ------------
Net realized gain (loss) (520) - (955) 27,912 11,612 1,165 1,074
---------- --------- ---------- ----------- ------------ ------------ ------------
Change in unrealized appreciation (1,308) - (174) (25,838) (11,521) 5,941 (5,068)
---------- --------- ---------- ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets from operations $ (436) 4 186 2,620 406 (856) (2,553)
========== ========= ========== =========== ============ ============ ============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
-----------------------------------------------------------------------------------
Large Small Large
Developing Cap Mid-Cap Quality Cap Cap Select
Growth Research Value Bond Stock Stock Equity
------------ ---------- ---------- --------- ---------- --------- ----------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ - 40 32 980 201 273 528
------------ ---------- ---------- --------- ---------- --------- ----------
Expenses:
Mortality and expense risk 182 190 209 797 644 1,784 1,877
Administrative fee 22 23 25 96 77 214 226
------------ ---------- ---------- --------- ---------- --------- ----------
Total expenses 204 213 234 893 721 1,998 2,103
------------ ---------- ---------- --------- ---------- --------- ----------
Net investment income (loss) (204) (173) (202) 87 (520) (1,725) (1,575)
------------ ---------- ---------- --------- ---------- --------- ----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 57 5 17 11 16 1,932 235
Realized gain distributions - - - 490 - 5,964 17,924
------------ ---------- ---------- --------- ---------- --------- ----------
Net realized gain (loss) 57 5 17 501 16 7,896 18,159
------------ ---------- ---------- --------- ---------- --------- ----------
Change in unrealized appreciation 1,411 1,430 600 (2,625) 4,513 (3,925) (25,710)
------------ ---------- ---------- --------- ---------- --------- ----------
Net increase (decrease) in net
assets from operations $ 1,264 1,262 415 (2,037) 4,009 2,246 (9,126)
============ ========== ========== ========= ========== ========= ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
---------------------------------------------------------------------------------------
Growth
Small and U.S.
International Cap Equity Income Government
Equity Balanced Equity Income Equity Securities Stock
------------- ---------- -------- --------- ----------- ------------ ---------
Income:
<S> <C> <C> <C> <C> <C> <C>
Dividends $ 509 1 - - - - -
------------- ---------- -------- --------- ----------- ------------ ---------
Expenses:
Mortality and expense risk 931 52 14 44 103 - -
Administrative fee 112 6 2 5 13 - -
------------- ---------- -------- --------- ----------- ------------ ---------
Total expenses 1,043 58 16 49 116 - -
------------- ---------- -------- --------- ----------- ------------ ---------
Net investment income (loss) (534) (57) (16) (49) (116) - -
------------- ---------- -------- --------- ----------- ------------ ---------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 756 41 72 27 36 1 -
Realized gain distributions 1,361 10 - 69 94 -
------------- ---------- -------- --------- ----------- ------------ ---------
Net realized gain (loss) 2,117 51 72 96 130 1 -
------------- ---------- -------- --------- ----------- ------------ ---------
Change in unrealized appreciation 5,621 (33) (29) (44) 145 - -
------------- ---------- -------- --------- ----------- ------------ ---------
Net increase (decrease) in net
assets from operations $ 7,204 (39) 27 3 159 1 -
============= ========== ======== ========= =========== ============ =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
GACC Lord Abbett Russell
--------- ------------ -------------------------------------------------------------
Growth Multi- Real
Money and Style Aggressive Core Estate
Market Income (1) Equity Equity Non-US Bond Securities
--------- ------------ --------- ----------- ---------- --------- ------------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ - - 163 12 128 727 -
--------- ------------ --------- ----------- ---------- --------- ------------
Expenses:
Mortality and expense risk 339 186 368 61 129 201 1
Administrative fee 40 22 44 8 16 24 -
--------- ------------ --------- ----------- ---------- --------- ------------
Total expenses 379 208 412 69 145 225 1
--------- ------------ --------- ----------- ---------- --------- ------------
Net investment income (loss) (379) (208) (249) (57) (17) 502 (1)
--------- ------------ --------- ----------- ---------- --------- ------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 627 145,466 121 (10) 42 (62) -
Realized gain distributions - - 2,262 10 - 334 -
--------- ------------ --------- ----------- ---------- --------- ------------
Net realized gain (loss) 627 145,466 2,383 - 42 272 -
--------- ------------ --------- ----------- ---------- --------- ------------
Change in unrealized appreciation 701 (114,453) (2,036) (409) 1,334 (1,104) (12)
--------- ------------ --------- ----------- ---------- --------- ------------
Net increase (decrease) in net
assets from operations $ 949 30,805 98 (466) 1,359 (330) (13)
========= ============ ========= =========== ========== ========= ============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
AIM Alliance Liberty Goldman Sachs
----------------------------------------- ---------------------- ---------- ------------
Newport
V.I. Real Tiger Growth
V.I. Capital International Premier Estate Fund, and
V.I. Value Appreciation Equity Growth Investment Variable Income
----------- ------------- ------------- --------- ----------- ---------- -----------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ - - - - 137 - -
----------- ------------- ------------- --------- ----------- ---------- -----------
Expenses:
Mortality and expense risk 142 41 27 181 25 3 53
Administrative fee 17 5 3 22 3 1 6
----------- ------------- ------------- --------- ----------- ---------- -----------
Total expenses 159 46 30 203 28 4 59
----------- ------------- ------------- --------- ----------- ---------- -----------
Net investment income (loss) (159) (46) (30) (203) 109 (4) (59)
----------- ------------- ------------- --------- ----------- ---------- -----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 16 13 222 44 (13) 131 (1)
Realized gain distributions - - - 279 - - -
----------- ------------- ------------- --------- ----------- ---------- -----------
Net realized gain (loss) 16 13 222 323 (13) 131 (1)
----------- ------------- ------------- --------- ----------- ---------- -----------
Change in unrealized appreciation 668 225 93 476 (229) (50) (259)
----------- ------------- ------------- --------- ----------- ---------- -----------
Net increase (decrease) in net
assets from operations $ 525 192 285 596 (133) 77 (319)
=========== ============= ============= ========= =========== ========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Goldman Sachs Kemper MFS
----------------------- ------------------------------------------------ --------
Dreman
High Small Small
International Global Return Cap Cap Government
Equity Income Equity Growth Value Securities Bond
------------- --------- ---------- --------- --------- ------------- --------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ - - 1 - 33 69 4
------------- --------- ---------- --------- --------- ------------- --------
Expenses:
Mortality and expense risk 18 2 1 11 31 13 2
Administrative fee 2 1 - 1 4 2 -
------------- --------- ---------- --------- --------- ------------- --------
Total expenses 20 3 1 12 35 15 2
------------- --------- ---------- --------- --------- ------------- --------
Net investment income (loss) (20) (3) - (12) (2) 54 2
------------- --------- ---------- --------- --------- ------------- --------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 122 - - 20 (12) - -
Realized gain distributions - - 1 - - - -
------------- --------- ---------- --------- --------- ------------- --------
Net realized gain (loss) 122 - 1 20 (12) - -
------------- --------- ---------- --------- --------- ------------- --------
Change in unrealized appreciation 79 (3) (15) 33 (10) (55) (6)
------------- --------- ---------- --------- --------- ------------- --------
Net increase (decrease) in net
assets from operations $ 181 (6) (14) 41 (24) (1) (4)
============= ========= ========== ========= ========= ============= ========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
MFS Oppenheimer
----------------------------------------------------------------------------- -------------
F&C
Growth Emerging
with Emerging Markets High Global Capital
Research Income Growth Equity Income Governments Appreciation
----------- --------- ----------- ----------- --------- -------------- -------------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 16 35 - - 210 3 7
----------- --------- ----------- ----------- --------- -------------- -------------
Expenses:
Mortality and expense risk 82 105 110 3 30 1 29
Administrative fee 10 13 13 - 3 - 3
----------- --------- ----------- ----------- --------- -------------- -------------
Total expenses 92 118 123 3 33 1 32
----------- --------- ----------- ----------- --------- -------------- -------------
Net investment income (loss) (76) (83) (123) (3) 177 2 (25)
----------- --------- ----------- ----------- --------- -------------- -------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 17 13 39 (13) (2) - 5
Realized gain distributions 86 42 - - - - 78
----------- --------- ----------- ----------- --------- -------------- -------------
Net realized gain (loss) 103 55 39 (13) (2) - 83
----------- --------- ----------- ----------- --------- -------------- -------------
Change in unrealized appreciation (180) (740) 1,394 84 (137) (3) 67
----------- --------- ----------- ----------- --------- -------------- -------------
Net increase (decrease) in net
assets from operations $ (153) (768) 1,310 68 38 (1) 125
=========== ========= =========== =========== ========= ============== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Oppenheimer Putnam
----------------------------------------------- --------------------------------------
Main Street
Growth VT Growth
and High Strategic and VT New
Income Income Bond Bond Income Value VT Vista
------------ --------- ---------- ---------- ------------- ----------- ----------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 15 72 286 84 240 - -
------------ --------- ---------- ---------- ------------- ----------- ----------
Expenses:
Mortality and expense risk 37 13 66 18 180 6 27
Administrative fee 5 2 8 2 22 1 3
------------ --------- ---------- ---------- ------------- ----------- ----------
Total expenses 42 15 74 20 202 7 30
------------ --------- ---------- ---------- ------------- ----------- ----------
Net investment income (loss) (27) 57 212 64 38 (7) (30)
------------ --------- ---------- ---------- ------------- ----------- ----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 19 (1) (4) (4) 6 (4) 18
Realized gain distributions 26 - 28 - 1,199 9 -
------------ --------- ---------- ---------- ------------- ----------- ----------
Net realized gain (loss) 45 (1) 24 (4) 1,205 5 18
------------ --------- ---------- ---------- ------------- ----------- ----------
Change in unrealized appreciation 210 (61) (456) (74) (2,160) (39) 163
------------ --------- ---------- ---------- ------------- ----------- ----------
Net increase (decrease) in net
assets from operations $ 228 (5) (220) (14) (917) (41) 151
============ ========= ========== ========== ============= =========== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Putnam Templeton
----------------------------- ----------------------------------------------------------------
VT
VT International Franklin
International New Small Cap Developing
Growth Opportunities Bond Investments Stock International Markets
------------- ------------- -------- -------------- -------- ------------- -------------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ - - - - - 57 13
------------- ------------- -------- -------------- -------- ------------- -------------
Expenses:
Mortality and expense risk 99 8 1 1 1 40 17
Administrative fee 12 1 - - - 5 2
------------- ------------- -------- -------------- -------- ------------- -------------
Total expenses 111 9 1 1 1 45 19
------------- ------------- -------- -------------- -------- ------------- -------------
Net investment income (loss) (111) (9) (1) (1) (1) 12 (6)
------------- ------------- -------- -------------- -------- ------------- -------------
Net realized gain (loss) on
investments:
Realized gain (loss) on sale
of fund shares 322 163 - 1 - 94 59
Realized gain distributions - - - - - 198 -
------------- ------------- -------- -------------- -------- ------------- -------------
Net realized gain (loss) 322 163 - 1 - 292 59
------------- ------------- -------- -------------- -------- ------------- -------------
Change in unrealized appreciation 1,479 84 (2) 31 (4) (14) 149
------------- ------------- -------- -------------- -------- ------------- -------------
Net increase (decrease) in
net assets from
operations $ 1,690 238 (3) 31 (5) 290 202
============= ============= ======== ============== ======== ============= =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Templeton Fidelity
----------------------------- ----------------------------------------------------------------
Mutual Franklin VIP III VIP III VIP
Shares Growth VIP VIP II Growth Growth & Equity-
Investments Investments Growth Contrafund Opportunities Income Income
------------- ------------- --------- ------------- ------------- --------- ----------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 3 - 1 2 1 7 6
------------- ------------- --------- ------------- ------------- --------- ----------
Expenses:
Mortality and expense risk 16 1 6 7 3 14 7
Administrative fee 2 - 1 1 - 2 1
------------- ------------- --------- ------------- ------------- --------- ----------
Total expenses 18 1 7 8 3 16 8
------------- ------------- --------- ------------- ------------- --------- ----------
Net investment income (loss) (15) (1) (6) (6) (2) (9) (2)
------------- ------------- --------- ------------- ------------- --------- ----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 8 4 2 6 1 3 1
Realized gain distributions - - 32 17 3 13 12
------------- ------------- --------- ------------- ------------- --------- ----------
Net realized gain (loss) 8 4 34 23 4 16 13
------------- ------------- --------- ------------- ------------- --------- ----------
Change in unrealized appreciation (12) (1) (2) (13) (24) (44) (38)
------------- ------------- --------- ------------- ------------- --------- ----------
Net increase (decrease) in net
assets from operations $ (19) 2 26 4 (22) (37) (27)
============= ============= ========= ============= ============= ========= ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Total
-------------
Income:
<S> <C>
Dividends $ 11,537
-------------
Expenses:
Mortality and expense risk 18,152
Administrative fee 2,182
-------------
Total expenses 20,334
-------------
Net investment income (loss) (8,797)
-------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 175,143
Realized gain distributions 46,371
-------------
Net realized gain (loss) 221,514
-------------
Change in unrealized appreciation (171,989)
-------------
Net increase (decrease) in net
assets from operations $ 40,728
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
-------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money High Stock and and Bond
Income (1) Market (1) Yield (1) Index (1) Income (1) Income Debenture
----------- ----------- ---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ 1,392 4 1,315 546 315 (7,962) 1,441
Net realized gain (loss) (520) - (955) 27,912 11,612 1,165 1,074
Change in unrealized appreciation (1,308) - (174) (25,838) (11,521) 5,941 (5,068)
----------- ----------- ---------- ----------- ------------ ------------ -----------
Net increase (decrease) from
operations (436) 4 186 2,620 406 (856) (2,553)
----------- ----------- ---------- ----------- ------------ ------------ -----------
Contract transactions:
Cova payments
Cova redemptions
Payments received from contract
owners (1) - 2 5 - 19,120 6,648
Transfers between sub-accounts
(including fixed account), net (38,617) (7,850) (28,916) (99,953) (51,641) 799,148 50,129
Transfers for contract benefits and
terminations (36) (45) (72) (259) (76) (61,034) (12,196)
----------- ----------- ---------- ----------- ------------ ------------ -----------
Net increase (decrease) in net
assets from contract
transactions (38,654) (7,895) (28,986) (100,207) (51,717) 757,234 44,581
----------- ----------- ---------- ----------- ------------ ------------ -----------
Net increase (decrease) in net
assets (39,090) (7,891) (28,800) (97,587) (51,311) 756,378 42,028
Net assets at beginning of period 39,090 7,891 28,800 97,587 51,311 - 110,471
----------- ----------- ---------- ----------- ------------ ------------ -----------
Net assets as end of period $ - - - - - 756,378 152,499
=========== =========== ========== =========== ============ ============ ===========
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
-----------------------------------------------------------------------------------------
Large Small Large
Developing Cap Mid-Cap Quality Cap Cap Select
Growth Research Value Bond Stock Stock Equity
------------ ----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (204) (173) (202) 87 (520) (1,725) (1,575)
Net realized gain (loss) 57 5 17 501 16 7,896 18,159
Change in unrealized appreciation 1,411 1,430 600 (2,625) 4,513 (3,925) (25,710)
------------ ----------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) from
operations 1,264 1,262 415 (2,037) 4,009 2,246 (9,126)
------------ ----------- ---------- ---------- ---------- ---------- -----------
Contract transactions:
Cova payments
Cova redemptions
Payments received from contract
owners 2,081 3,038 2,706 5,774 1,989 12,886 7,504
Transfers between sub-accounts
(including fixed account), net 5,271 9,120 5,956 57,758 634 119,436 26,265
Transfers for contract benefits and
terminations (603) (839) (1,100) (12,139) (4,453) (19,456) (8,584)
------------ ----------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) in net
assets from contract
transactions 6,749 11,319 7,562 51,393 (1,830) 112,866 25,185
------------ ----------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) in net
assets 8,013 12,581 7,977 49,356 2,179 115,112 16,059
Net assets at beginning of period 14,855 12,968 17,145 39,638 69,645 81,369 179,310
------------ ----------- ---------- ---------- ---------- ---------- -----------
Net assets as end of period $ 22,868 25,549 25,122 88,994 71,824 196,481 195,369
============ =========== ========== ========== ========== ========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
-----------------------------------------------------------------------------------------
Growth
Small and U.S.
International Cap Equity Income Government
Equity Balanced Equity Income Equity Securities Stock
------------- ---------- --------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (534) (57) (16) (49) (116) - -
Net realized gain (loss) 2,117 51 72 96 130 1 -
Change in unrealized appreciation 5,621 (33) (29) (44) 145 - -
------------- ---------- --------- --------- ---------- ------------- -----------
Net increase (decrease) from
operations 7,204 (39) 27 3 159 1 -
------------- ---------- --------- --------- ---------- ------------- -----------
Contract transactions:
Cova payments 200 100
Cova redemptions (201) (100)
Payments received from contract
owners 1,856 1,344 166 921 1,944 - -
Transfers between sub-accounts
(including fixed account), net 5,886 2,690 (1,266) 1,146 3,475 - -
Transfers for contract benefits and
terminations (5,246) (107) (41) (102) (279) - -
------------- ---------- --------- --------- ---------- ------------- -----------
Net increase (decrease) in net
assets from contract
transactions 2,496 3,927 (1,141) 1,965 5,140 (1) -
------------- ---------- --------- --------- ---------- ------------- -----------
Net increase (decrease) in net
assets 9,700 3,888 (1,114) 1,968 5,299 - -
Net assets at beginning of period 94,245 3,372 1,327 3,463 7,823 - -
------------- ---------- --------- --------- ---------- ------------- -----------
Net assets as end of period $ 103,945 7,260 213 5,431 13,122 - -
============= ========== ========= ========= ========== ============= ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
GACC Lord Abbett Russell
---------- ----------- ------------------------------------------------------------
Growth Multi- Real
Money and Style Aggressive Core Estate
Market Income (1) Equity Equity Non-US Bond Securities
---------- ----------- --------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (379) (208) (249) (57) (17) 502 (1)
Net realized gain (loss) 627 145,466 2,383 - 42 272 -
Change in unrealized appreciation 701 (114,453) (2,036) (409) 1,334 (1,104) (12)
---------- ----------- --------- ----------- ---------- --------- -----------
Net increase (decrease) from
operations 949 30,805 98 (466) 1,359 (330) (13)
---------- ----------- --------- ----------- ---------- --------- -----------
Contract transactions:
Cova payments -
Cova redemptions -
Payments received from contract
owners 2,579 672 7,835 1,352 2,356 2,657 108
Transfers between sub-accounts
(including fixed account), net 36,728 (699,899) 8,895 1,449 3,787 6,160 209
Transfers for contract benefits and
terminations (12,777) (781) (1,386) (155) (433) (499) (9)
---------- ----------- --------- ----------- ---------- --------- -----------
Net increase (decrease) in net
assets from contract
transactions 26,530 (700,008) 15,344 2,646 5,710 8,318 308
---------- ----------- --------- ----------- ---------- --------- -----------
Net increase (decrease) in net
assets 27,479 (669,203) 15,442 2,180 7,069 7,988 295
Net assets at beginning of period 16,464 669,203 29,559 5,343 10,316 17,050 -
---------- ----------- --------- ----------- ---------- --------- -----------
Net assets as end of period $ 43,943 - 45,001 7,523 17,385 25,038 295
========== =========== ========= =========== ========== ========= ===========
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
AIM Alliance Liberty Goldman Sachs
--------------------------------------- ---------------------- ---------- -------------
Newport
V.I. Real Tiger Growth
V.I. Capital International Premier Estate Fund, and
V.I. Value Appreciation Equity Growth Investment Variable Income
---------- ------------- ------------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (159) (46) (30) (203) 109 (4) (59)
Net realized gain (loss) 16 13 222 323 (13) 131 (1)
Change in unrealized appreciation 668 225 93 476 (229) (50) (259)
---------- ------------- ------------- --------- ----------- ---------- -------------
Net increase (decrease) from
operations 525 192 285 596 (133) 77 (319)
---------- ------------- ------------- --------- ----------- ---------- -------------
Contract transactions:
Cova payments
Cova redemptions
Payments received from contract
owners 8,165 2,493 309 11,328 1,370 48 630
Transfers between sub-accounts
(including fixed account), net 11,260 3,314 372 6,056 495 (84) 1,215
Transfers for contract benefits and
terminations (1,113) (223) (83) (784) (82) (7) (206)
---------- ------------- ------------- --------- ----------- ---------- -------------
Net increase (decrease) in net
assets from contract
transactions 18,312 5,584 598 16,600 1,783 (43) 1,639
---------- ------------- ------------- --------- ----------- ---------- -------------
Net increase (decrease) in net
assets 18,837 5,776 883 17,196 1,650 34 1,320
Net assets at beginning of period 6,816 2,160 2,325 9,748 1,529 295 4,634
---------- ------------- ------------- --------- ----------- ---------- -------------
Net assets as end of period $ 25,653 7,936 3,208 26,944 3,179 329 5,954
========== ============= ============= ========= =========== ========== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Goldman Sachs Kemper MFS
------------------------- ------------------------------------------------- ----------
Dreman
High Small Small
International Global Return Cap Cap Government
Equity Income Equity Growth Value Securities Bond
------------- --------- ---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (20) (3) - (12) (2) 54 2
Net realized gain (loss) 122 - 1 20 (12) - -
Change in unrealized appreciation 79 (3) (15) 33 (10) (55) (6)
------------- --------- ---------- ---------- ---------- ------------- ----------
Net increase (decrease) from
operations 181 (6) (14) 41 (24) (1) (4)
------------- --------- ---------- ---------- ---------- ------------- ----------
Contract transactions:
Cova payments
Cova redemptions - -
Payments received from contract
owners 418 31 15 376 1,563 687 2
Transfers between sub-accounts
(including fixed account), net 1,042 66 53 125 464 775 1
Transfers for contract benefits and
terminations (106) (3) - (77) (104) (15) -
------------- --------- ---------- ---------- ---------- ------------- ----------
Net increase (decrease) in net
assets from contract
transactions 1,354 94 68 424 1,923 1,447 3
------------- --------- ---------- ---------- ---------- ------------- ----------
Net increase (decrease) in net
assets 1,535 88 54 465 1,899 1,446 (1)
Net assets at beginning of period 1,287 203 97 893 2,145 630 174
------------- --------- ---------- ---------- ---------- ------------- ----------
Net assets as end of period $ 2,822 291 151 1,358 4,044 2,076 173
============= ========= ========== ========== ========== ============= ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
MFS Oppenheimer
-------------------------------------------------------------------------- -------------
F&C
Growth Emerging
with Emerging Markets High Global Capital
Research Income Growth Equity Income Governments Appreciation
---------- ---------- --------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (76) (83) (123) (3) 177 2 (25)
Net realized gain (loss) 103 55 39 (13) (2) - 83
Change in unrealized appreciation (180) (740) 1,394 84 (137) (3) 67
---------- ---------- --------- ----------- -------- ------------- -------------
Net increase (decrease) from
operations (153) (768) 1,310 68 38 (1) 125
---------- ---------- --------- ----------- -------- ------------- -------------
Contract transactions:
Cova payments
Cova redemptions -
Payments received from contract
owners 3,593 4,410 5,701 1 759 5 1,400
Transfers between sub-accounts
(including fixed account), net 3,253 3,841 2,862 (412) 1,005 40 2,423
Transfers for contract benefits and
terminations (360) (503) (429) (21) (93) - (186)
---------- ---------- --------- ----------- -------- ------------- -------------
Net increase (decrease) in net
assets from contract
transactions 6,486 7,748 8,134 (432) 1,671 45 3,637
---------- ---------- --------- ----------- -------- ------------- -------------
Net increase (decrease) in net
assets 6,333 6,980 9,444 (364) 1,709 44 3,762
Net assets at beginning of period 5,658 7,016 7,142 481 2,158 22 1,189
---------- ---------- --------- ----------- -------- ------------- -------------
Net assets as end of period $ 11,991 13,996 16,586 117 3,867 66 4,951
========== ========== ========= =========== ======== ============= =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Oppenheimer Putnam
---------------------------------------------- -------------------------------------
Main Street
Growth VT Growth
and High Strategic and VT New
Income Income Bond Bond Income Value VT Vista
------------ --------- --------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (27) 57 212 64 38 (7) (30)
Net realized gain (loss) 45 (1) 24 (4) 1,205 5 18
Change in unrealized appreciation 210 (61) (456) (74) (2,160) (39) 163
------------ --------- --------- ---------- ------------ --------- -----------
Net increase (decrease) from
operations 228 (5) (220) (14) (917) (41) 151
------------ --------- --------- ---------- ------------ --------- -----------
Contract transactions:
Cova payments
Cova redemptions
Payments received from contract
owners 1,066 585 2,773 690 5,723 101 986
Transfers between sub-accounts
(including fixed account), net 1,000 678 2,868 937 5,958 119 1,076
Transfers for contract benefits and
terminations (175) (45) (256) (62) (616) (46) (212)
------------ --------- --------- ---------- ------------ --------- -----------
Net increase (decrease) in net
assets from contract
transactions 1,891 1,218 5,385 1,565 11,065 174 1,850
------------ --------- --------- ---------- ------------ --------- -----------
Net increase (decrease) in net
assets 2,119 1,213 5,165 1,551 10,148 133 2,001
Net assets at beginning of period 2,941 777 4,234 1,095 12,699 441 1,785
------------ --------- --------- ---------- ------------ --------- -----------
Net assets as end of period $ 5,060 1,990 9,399 2,646 22,847 574 3,786
============ ========= ========= ========== ============ ========= ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Putnam Templeton
----------------------------- -----------------------------------------------------------
VT
VT International Franklin
International New Small Cap Developing
Growth Opportunities Bond Investments Stock International Markets
------------- -------------- ------- ------------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (111) (9) (1) (1) (1) 12 (6)
Net realized gain (loss) 322 163 - 1 - 292 59
Change in unrealized appreciation 1,479 84 (2) 31 (4) (14) 149
------------- -------------- ------- ------------- ------- ------------- --------------
Net increase (decrease) from
operations 1,690 238 (3) 31 (5) 290 202
------------- -------------- ------- ------------- ------- ------------- --------------
Contract transactions:
Cova payments - - -
Cova redemptions - - -
Payments received from contract
owners 4,383 177 36 54 97 2,962 1,006
Transfers between sub-accounts
(including fixed account), net 2,013 314 231 370 185 2,027 645
Transfers for contract benefits and
terminations (428) (55) (4) (22) - (115) (54)
------------- -------------- ------- ------------- ------- ------------- --------------
Net increase (decrease) in net
assets from contract
transactions 5,968 436 263 402 282 4,874 1,597
------------- -------------- ------- ------------- ------- ------------- --------------
Net increase (decrease) in net
assets 7,658 674 260 433 277 5,164 1,799
Net assets at beginning of period 6,206 602 - - - 1,507 679
------------- -------------- ------- ------------- ------- ------------- --------------
Net assets as end of period $ 13,864 1,276 260 433 277 6,671 2,478
============= ============== ======= ============= ======= ============= ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Templeton Fidelity
--------------------------- -------------------------------------------------------------
Mutual Franklin VIP III VIP III VIP
Shares Growth VIP VIP II Growth Growth & Equity-
Investments Investments Growth Contrafund Opportunities Income Income
------------ ------------- ---------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (15) (1) (6) (6) (2) (9) (2)
Net realized gain (loss) 8 4 34 23 4 16 13
Change in unrealized appreciation (12) (1) (2) (13) (24) (44) (38)
------------ ------------- ---------- ----------- ------------- ---------- -----------
Net increase (decrease) from
operations (19) 2 26 4 (22) (37) (27)
------------ ------------- ---------- ----------- ------------- ---------- -----------
Contract transactions:
Cova payments -
Cova redemptions -
Payments received from contract
owners 433 90 370 292 104 251 222
Transfers between sub-accounts
(including fixed account), net 697 437 680 712 361 1,039 681
Transfers for contract benefits and
terminations (52) (111) (27) (77) (23) (50) (32)
------------ ------------- ---------- ----------- ------------- ---------- -----------
Net increase (decrease) in net
assets from contract
transactions 1,078 416 1,023 927 442 1,240 871
------------ ------------- ---------- ----------- ------------- ---------- -----------
Net increase (decrease) in net
assets 1,059 418 1,049 931 420 1,203 844
Net assets at beginning of period 1,021 - 88 400 112 852 256
------------ ------------- ---------- ----------- ------------- ---------- -----------
Net assets as end of period $ 2,080 418 1,137 1,331 532 2,055 1,100
============ ============= ========== =========== ============= ========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
Total
---------------
Increase (decrease) in net assets
from operations:
<S> <C>
Net investment income (loss) $ (8,797)
Net realized gain (loss) 221,514
Change in unrealized appreciation (171,989)
---------------
Net increase (decrease) from
operations 40,728
---------------
Contract transactions:
Cova payments 300
Cova redemptions (301)
Payments received from contract
owners 151,247
Transfers between sub-accounts
(including fixed account), net 277,194
Transfers for contract benefits and
terminations (149,564)
---------------
Net increase (decrease) in net
assets from contract
transactions 278,876
---------------
Net increase (decrease) in net
assets 319,604
Net assets at beginning of period 1,700,542
---------------
Net assets as end of period $ 2,020,146
===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
-----------------------------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income (1) Debenture Growth
---------- ---------- ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,737 583 923 (803) (390) 1,149 (99)
Net realized gain (loss) 455 - 135 21,907 7,127 899 (10)
Change in unrealized appreciation 6 - (668) 838 634 1,565 883
---------- ---------- ---------- ---------- ------------ ----------- -------------
Net increase (decrease) from
operations 2,198 583 390 21,942 7,371 3,613 774
---------- ---------- ---------- ---------- ------------ ----------- -------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - (112)
Payments received from contract
owners 21 6 55 69 39 21,396 6,348
Transfers between sub-accounts
(including fixed account), net (3,399) (10,098) (1,392) 3,960 1,244 38,789 6,481
Transfers for contract benefits and
terminations (8,833) (4,210) (3,514) (17,021) (3,490) (4,147) (201)
---------- ---------- ---------- ---------- ------------ ----------- -------------
Net increase (decrease) in net
assets from contract
transactions (12,211) (14,302) (4,851) (12,992) (2,207) 56,038 12,516
---------- ---------- ---------- ---------- ------------ ----------- -------------
Net increase (decrease) in net
assets (10,013) (13,719) (4,461) 8,950 5,164 59,651 13,290
Net assets at beginning of period 49,103 21,610 33,261 88,637 46,147 50,820 1,565
---------- ---------- ---------- ---------- ------------ ----------- -------------
Net assets as end of period $ 39,090 7,891 28,800 97,587 51,311 110,471 14,855
========== ========== ========== ========== ============ =========== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova
---------------------------------------------------------------------------------------
Large Small Large
Cap Mid-Cap Quality Cap Cap Select International
Research Value Bond Stock Stock Equity Equity
----------- ---------- ---------- --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (66) (109) 192 (791) (530) (1,491) 307
Net realized gain (loss) 5 (3) 36 2,068 412 8,442 328
Change in unrealized appreciation 1,278 120 1,412 (6,177) 13,680 20,065 7,969
----------- ---------- ---------- --------- --------- ---------- --------------
Net increase (decrease) from
operations 1,217 8 1,640 (4,900) 13,562 27,016 8,604
----------- ---------- ---------- --------- --------- ---------- --------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions (102) (107) - - - - -
Payments received from contract
owners 6,104 7,924 9,698 8,193 18,801 21,003 8,143
Transfers between sub-accounts
(including fixed account), net 4,750 7,602 14,372 15,607 29,039 38,783 18,076
Transfers for contract benefits and
terminations (234) (317) (2,058) (2,424) (2,022) (4,555) (2,949)
----------- ---------- ---------- --------- --------- ---------- --------------
Net increase (decrease) in net
assets from contract
transactions 10,518 15,102 22,012 21,376 45,818 55,231 23,270
----------- ---------- ---------- --------- --------- ---------- --------------
Net increase (decrease) in net
assets 11,735 15,110 23,652 16,476 59,380 82,247 31,874
Net assets at beginning of period 1,233 2,035 15,986 53,169 21,989 97,063 62,371
----------- ---------- ---------- --------- --------- ---------- --------------
Net assets as end of period $ 12,968 17,145 39,638 69,645 81,369 179,310 94,245
=========== ========== ========== ========= ========= ========== ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Cova GACC Lord Abbett Russell
--------------------------------------------- ----------- ------------- ------------
Growth
Small and Growth Multi-
Cap Equity Income Money and Style
Balanced Equity Income Equity Market Income Equity
---------- -------- --------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 23 (10) 11 (30) (161) 1,761 (129)
Net realized gain (loss) 40 11 80 167 436 33,820 40
Change in unrealized appreciation 173 39 49 548 185 26,592 3,199
---------- -------- --------- ---------- ----------- ------------- ------------
Net increase (decrease) from
operations 236 40 140 685 460 62,173 3,110
---------- -------- --------- ---------- ----------- ------------- ------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,408 442 1,820 3,014 35,352 55,721 21,870
Transfers between sub-accounts
(including fixed account), net 1,373 588 988 2,913 (19,753) 102,796 4,748
Transfers for contract benefits and
terminations (46) (15) (42) (98) (2,913) (38,987) (169)
---------- -------- --------- ---------- ----------- ------------- ------------
Net increase (decrease) in net
assets from contract
transactions 2,735 1,015 2,766 5,829 12,686 119,530 26,449
---------- -------- --------- ---------- ----------- ------------- ------------
Net increase (decrease) in net
assets 2,971 1,055 2,906 6,514 13,146 181,703 29,559
Net assets at beginning of period 401 272 557 1,309 3,318 487,500 -
---------- -------- --------- ---------- ----------- ------------- ------------
Net assets as end of period $ 3,372 1,327 3,463 7,823 16,464 669,203 29,559
========== ======== ========= ========== =========== ============= ============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Russell AIM Alliance
--------------------------------- ------------------------------------------- -----------
V.I.
Aggressive Core V.I. Capital International Premier
Equity Non-US Bond V.I. Value Appreciation Equity Growth
------------ ----------- -------- ------------ --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (31) (54) 178 (8) (11) (1) (45)
Net realized gain (loss) (18) 5 7 250 50 (3) (4)
Change in unrealized appreciation 75 412 268 668 164 81 1,522
------------ ----------- -------- ------------ --------------- ------------- -----------
Net increase (decrease) from
operations 26 363 453 910 203 77 1,473
------------ ----------- -------- ------------ --------------- ------------- -----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 4,296 8,107 13,098 4,061 1,431 1,648 6,485
Transfers between sub-accounts
(including fixed account), net 1,041 1,920 3,732 2,030 609 609 1,828
Transfers for contract benefits and
terminations (20) (74) (233) (185) (83) (9) (38)
------------ ----------- -------- ------------ --------------- ------------- -----------
Net increase (decrease) in net
assets from contract
transactions 5,317 9,953 16,597 5,906 1,957 2,248 8,275
------------ ----------- -------- ------------ --------------- ------------- -----------
Net increase (decrease) in net
assets 5,343 10,316 17,050 6,816 2,160 2,325 9,748
Net assets at beginning of period - - - - - - -
------------ ----------- -------- ------------ --------------- ------------- -----------
Net assets as end of period $ 5,343 10,316 17,050 6,816 2,160 2,325 9,748
============ =========== ======== ============ =============== ============= ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Alliance Liberty Goldman Sachs Kemper
------------- ---------- ------------------------------------- ---------------------
Newport Dreman
Real Tiger Growth High Small
Estate Fund, and International Global Return Cap
Investment Variable Income Equity Income Equity Growth
------------- ---------- --------- -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1 4 12 (7) 6 - (5)
Net realized gain (loss) 3 (30) (12) 10 3 - (3)
Change in unrealized appreciation (170) 54 (207) 56 (1) 1 107
------------- ---------- --------- -------------- --------- --------- ---------
Net increase (decrease) from
operations (166) 28 (207) 59 8 1 99
------------- ---------- --------- -------------- --------- --------- ---------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,193 159 3,067 979 125 - 630
Transfers between sub-accounts
(including fixed account), net 514 108 1,826 255 84 96 162
Transfers for contract benefits and
terminations (12) - (52) (6) (14) - 2
------------- ---------- --------- -------------- --------- --------- ---------
Net increase (decrease) in net
assets from contract
transactions 1,695 267 4,841 1,228 195 96 794
------------- ---------- --------- -------------- --------- --------- ---------
Net increase (decrease) in net
assets 1,529 295 4,634 1,287 203 97 893
Net assets at beginning of period - - - - - - -
------------- ---------- --------- -------------- --------- --------- ---------
Net assets as end of period $ 1,529 295 4,634 1,287 203 97 893
============= ========== ========= ============== ========= ========= =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Kemper MFS
------------------------ -----------------------------------------------------------
F&C
Small Growth Emerging
Cap Government with Emerging Markets
Value Securities Bond Research Income Growth Equity
--------- ------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (13) - - (28) (38) (37) 3
Net realized gain (loss) 8 - - 16 - (2) (97)
Change in unrealized appreciation (155) 9 1 481 574 985 (94)
--------- ------------- --------- ---------- ---------- ---------- -----------
Net increase (decrease) from
operations (160) 9 1 469 536 946 (188)
--------- ------------- --------- ---------- ---------- ---------- -----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,656 503 3 3,760 4,624 5,018 421
Transfers between sub-accounts
(including fixed account), net 670 120 170 1,530 1,901 1,216 252
Transfers for contract benefits and
terminations (21) (2) - (101) (45) (38) (4)
--------- ------------- --------- ---------- ---------- ---------- -----------
Net increase (decrease) in net
assets from contract
transactions 2,305 621 173 5,189 6,480 6,196 669
--------- ------------- --------- ---------- ---------- ---------- -----------
Net increase (decrease) in net
assets 2,145 630 174 5,658 7,016 7,142 481
Net assets at beginning of period - - - - - - -
--------- ------------- --------- ---------- ---------- ---------- -----------
Net assets as end of period $ 2,145 630 174 5,658 7,016 7,142 481
========= ============= ========= ========== ========== ========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
MFS Oppenheimer
-------------------------- --------------------------------------------------------------
Main Street
Growth
High Global Capital and High Strategic
Income Governments Appreciation Income Income Bond Bond
---------- -------------- -------------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 5 - (6) (19) (1) (19) (3)
Net realized gain (loss) 3 - 7 2 3 5 2
Change in unrealized appreciation (34) 1 134 (28) (15) 95 3
---------- -------------- -------------- ------------ -------- -------- ----------
Net increase (decrease) from
operations (26) 1 135 (45) (13) 81 2
---------- -------------- -------------- ------------ -------- -------- ----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 1,634 4 838 2,140 517 3,298 725
Transfers between sub-accounts
(including fixed account), net 570 17 220 859 281 889 371
Transfers for contract benefits and
terminations (20) - (4) (13) (8) (34) (3)
---------- -------------- -------------- ------------ -------- -------- ----------
Net increase (decrease) in net
assets from contract
transactions 2,184 21 1,054 2,986 790 4,153 1,093
---------- -------------- -------------- ------------ -------- -------- ----------
Net increase (decrease) in net
assets 2,158 22 1,189 2,941 777 4,234 1,095
Net assets at beginning of period - - - - - - -
---------- -------------- -------------- ------------ -------- -------- ----------
Net assets as end of period $ 2,158 22 1,189 2,941 777 4,234 1,095
========== ============== ============== ============ ======== ======== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Putnam Templeton
----------------------------------------------------------------- ---------------------------
VT
VT Growth VT International
and VT New International New Developing
Income Value VT Vista Growth Opportunities International Markets
------------- -------- ---------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (46) 2 (9) (17) (4) (6) (3)
Net realized gain (loss) 192 2 (1) (39) 24 8 (4)
Change in unrealized appreciation 660 6 173 353 40 48 44
------------- -------- ---------- -------------- -------------- ------------- ------------
Net increase (decrease) from
operations 806 10 163 297 60 50 37
------------- -------- ---------- -------------- -------------- ------------- ------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 8,705 173 1,241 4,444 423 1,261 509
Transfers between sub-accounts
(including fixed account), net 3,257 259 385 1,511 127 201 139
Transfers for contract benefits and
terminations (69) (1) (4) (46) (8) (5) (6)
------------- -------- ---------- -------------- -------------- ------------- ------------
Net increase (decrease) in net
assets from contract
transactions 11,893 431 1,622 5,909 542 1,457 642
------------- -------- ---------- -------------- -------------- ------------- ------------
Net increase (decrease) in net
assets 12,699 441 1,785 6,206 602 1,507 679
Net assets at beginning of period - - - - - - -
------------- -------- ---------- -------------- -------------- ------------- ------------
Net assets as end of period $ 12,699 441 1,785 6,206 602 1,507 679
============= ======== ========== ============== ============== ============= ============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
<TABLE>
<CAPTION>
Templeton Fidelity
------------- ------------------------------------------------------------
Mutual VIP III VIP III VIP
Shares VIP VIP II Growth Growth & Equity-
Investments Growth Contrafund Opportunities Income Income Total
------------- -------- ------------ --------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (5) - (2) - (5) (1) 1,864
Net realized gain (loss) - (3) (2) (2) (5) (3) 76,767
Change in unrealized appreciation 32 12 48 13 94 17 78,917
------------- -------- ------------ --------------- ----------- --------- -------------
Net increase (decrease) from
operations 27 9 44 11 84 13 157,548
------------- -------- ------------ --------------- ----------- --------- -------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - (321)
Payments received from contract
owners 584 86 330 114 435 195 316,347
Transfers between sub-accounts
(including fixed account), net 415 (5) 24 (13) 333 51 288,031
Transfers for contract benefits and
terminations (5) (2) 2 - - (3) (99,409)
------------- -------- ------------ --------------- ----------- --------- -------------
Net increase (decrease) in net
assets from contract
transactions 994 79 356 101 768 243 504,648
------------- -------- ------------ --------------- ----------- --------- -------------
Net increase (decrease) in net
assets 1,021 88 400 112 852 256 662,196
Net assets at beginning of period - - - - - - 1,038,346
------------- -------- ------------ --------------- ----------- --------- -------------
Net assets as end of period $ 1,021 88 400 112 852 256 1,700,542
============= ======== ============ =============== =========== ========= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(1) ORGANIZATION
Cova Variable Annuity Account One (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by Cova Financial Life Services Insurance Company
(Cova) and exists in accordance with the regulations of the Missouri
Department of Insurance. The Separate Account is a funding vehicle for
variable annuity contracts issued by Cova.
The Separate Account is divided into sub-accounts with the assets of each
sub-account invested in corresponding portfolios of the following
investment companies. Each investment company is a diversified, open-end,
management investment company registered under the Investment Company Act
of 1940 as amended. The sub-accounts available for investment may vary
between variable annuity contracts offered for sale by Cova.
<S> <C>
Cova Series Trust (Cova) 16 portfolios
General American Capital Company (GACC) 1 portfolio
Russell Insurance Funds (Russell) 5 portfolios
AIM Variable Insurance Funds, Inc. (AIM) 3 portfolios
Alliance Variable Products Series Fund, Inc. (Alliance) 2 portfolios
Liberty Variable Investment Trust (Liberty) 1 portfolio
Goldman Sachs Variable Insurance Trust (Goldman Sachs) 3 portfolios
Investors Fund Series (Kemper) 4 portfolios
MFS Variable Insurance Trust (MFS) 7 portfolios
Oppenheimer Variable Account Funds (Oppenheimer) 5 portfolios
Putnam Variable Trust (Putnam) 5 portfolios
Templeton Variable Products Series Fund (Templeton) 7 portfolios
Variable Insurance Products Fund, Fund II and Fund III (Fidelity) 5 portfolios
</TABLE>
<TABLE>
<CAPTION>
The following sub-accounts commenced operations during the period:
<S> <C>
Cova Lord Abbett Growth and Income January 8, 1999
Cova U.S. Government Securities August 5, 1999
Cova Stock August 5, 1999
Russell Real Estate Securities July 1, 1999
Templeton Bond March 1, 1999
Franklin Small Cap Investments March 1, 1999
Templeton Stock January 19, 1999
Franklin Growth Investments March 1, 1999
The Cova U.S. Government Securities and Stock sub-accounts were not
available to contract owners until November 2, 1999.
The following sub-accounts ceased operations during the period:
Cova Quality Income January 8, 1999
Cova Money Market January 8, 1999
Cova High Yield January 8, 1999
Cova Stock Index January 8, 1999
Cova VKAC Growth and Income January 8, 1999
Lord Abbett Growth and Income January 8, 1999
The Cova Small Cap Equity sub-account ceased operations on
October 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the sale
of portfolio shares owned by the sub-accounts. Income from dividends
and gains from realized capital gain distributions are recorded on
the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and gains
from realized gain distributions are reinvested in additional shares
of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment income
and realized capital gains are deemed to pass through to the Separate
Account. As a result, GACC does not distribute dividends and realized
capital gains. During December of each year, the accumulated net
investment income and realized capital gains of the GACC Money Market
Fund are allocated to the Separate Account by increasing the cost
basis and recognizing a gain in the Separate Account.
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the federal
income tax return of Cova which is taxed as a Life Insurance Company
under the provisions of the Internal Revenue Code (IRC). Under
current IRC provisions, Cova believes it will be treated as the owner
of the Separate Account assets for federal income tax purposes and
does not expect to incur federal income taxes on the earnings of the
Separate Account to the extent the earnings are credited to the
variable annuity contracts. Based on this, no charge has been made to
the Separate Account for federal income taxes. A charge may be made
in future years for any federal income taxes that would be
attributable to the variable annuity contracts.
(D) ANNUITY RESERVES
Annuity reserves are computed for contracts in the payout stage
according to the 1983a Mortality Table. The assumed investment return
is 3%. The mortality risk is borne by Cova and may result in
additional transfers to the Separate Account. Conversely, if reserves
exceed amounts required, transfers may be made from the Separate
Account to Cova.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of each Separate Account
sub-account equivalent to an annual rate of 1.25% for the assumption of
mortality and expense risks and 0.15% for administrative expenses. The
mortality risks assumed by Cova arise from its contractual obligation to
make annuity payments after the annuity date for the life of the annuitant
and to waive the withdrawal fee in the event of the death of the contract
owner. The administrative fees cover the cost of establishing and
maintaining the variable annuity contracts and the Separate Account.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at the
time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee is imposed on withdrawals of contract values
attributable to purchase payments within five years after receipt and is
equal to 5% of the purchase payment withdrawn. After the first contract
anniversary, provided the contract value exceeds $5,000, the contract
owner may make one withdrawal each contract year of up to 10% of the
aggregate purchase payments (on deposit for more than one year) without
incurring a surrender fee. During the nine months ending September 30,
1999, surrender fees of $1.426 million were deducted.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the Separate Account sub-accounts
and the fixed rate account to which the contract value is allocated.
Subject to certain restrictions, the contract owner may transfer all or a
part of the accumulated value of the contract among the available
sub-accounts and the fixed rate account. If more than 12 transfers have
been made in the contract year, a transfer fee of $25 per transfer or, if
less, 2% of the amount transferred, may be deducted from the contract
value. Transfers made in a dollar cost averaging program are not subject
to the transfer fee.
During the nine months ending September 30, 1999, contract maintenance and
transfer fees of $474 thousand were deducted.
Currently, Cova advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes at the time annuity
payments begin. Cova reserves the right to deduct premium taxes when
incurred.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(5) COST BASIS OF INVESTMENTS
The cost basis of each sub-account's investment follows:
<S> <C> <C> <C>
Cova Lord Abbett Growth and Income $ 750,437 Kemper Small Cap Value $ 4,209
Cova Bond Debenture 154,044 Kemper Government Securities 2,122
Cova Developing Growth 20,567 MFS Bond 178
Cova Large Cap Research 22,835 MFS Research 11,690
Cova Mid-Cap Value 24,362 MFS Growth with Income 14,162
Cova Quality Bond 90,021 MFS Emerging Growth 14,207
Cova Small Cap Stock 66,965 MFS/F&C Emerging Markets Equity 127
Cova Large Cap Stock 183,871 MFS High Income 4,038
Cova Select Equity 187,494 MFS Global Governments 68
Cova International Equity 89,046 Oppenheimer Capital Appreciation 4,751
Cova Balanced 7,120 Oppenheimer Main Street Growth & Income 4,878
Cova Small Cap Equity 208 Oppenheimer High Income 2,066
Cova Equity Income 5,405 Oppenheimer Bond 9,761
Cova Growth and Income Equity 12,411 Oppenheimer Strategic Bond 2,717
GACC Money Market 43,011 Putnam VT Growth and Income 24,347
Russell Multi-Style Equity 43,838 Putnam VT New Value 607
Russell Aggressive Equity 7,857 Putnam VT Vista 3,450
Russell Non-US 15,639 Putnam VT International Growth 12,032
Russell Core Bond 25,874 Putnam VT International New Opportunities 1,152
Russell Real Estate Securities 307 Templeton Bond 262
AIM V.I. Value 24,317 Franklin Small Cap Investments 402
AIM V.I. Capital Appreciation 7,547 Templeton Stock 281
AIM V.I. International Equity 3,034 Templeton International 6,637
Alliance Premier Growth 24,946 Templeton Developing Markets 2,286
Alliance Real Estate Investment 3,578 Templeton Mutual Shares Investments 2,060
Liberty Newport Tiger Fund, Variable 325 Franklin Growth Investments 419
Goldman Sachs Growth and Income 6,420 Fidelity VIP Growth 1,127
Goldman Sachs International Equity 2,687 Fidelity VIP II Contrafund 1,296
Goldman Sachs Global Income 295 Fidelity VIP III Growth Opportunities 542
Kemper Dreman High Return Equity 165 Fidelity VIP III Growth & Income 2,005
Kemper Small Cap Growth 1,218 Fidelity VIP Equity-Income 1,121
------------------
$ 1,960,844
==================
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
Commenced Accumulation Unit Value
-----------------------------------------------------------------
Operations 9/30/99 12/31/98 12/31/97 12/31/96
--------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 $ 35.846830 - - -
Cova Bond Debenture 5/1/96 13.296993 13.496500 12.881792 11.294930
Cova Developing Growth 8/20/97 11.961743 11.067854 10.527554 -
Cova Large Cap Research 8/20/97 12.785625 11.825550 9.899560 -
Cova Mid-Cap Value 8/20/97 10.653208 10.437949 10.467957 -
Cova Quality Bond 5/1/96 11.609274 11.914489 11.155126 10.368764
Cova Small Cap Stock 5/1/96 13.321364 12.582860 13.491466 11.308419
Cova Large Cap Stock 5/1/96 20.192796 19.428499 14.889462 11.334979
Cova Select Equity 5/1/96 16.298247 16.987204 14.053502 10.838053
Cova International Equity 5/1/96 13.850862 12.889315 11.462435 10.967004
Cova Balanced 7/1/97 11.851579 11.767845 10.531920 -
Cova Small Cap Equity 7/1/97 10.156919 10.238676 10.418047 -
Cova Equity Income 7/1/97 12.246348 12.068849 11.194166 -
Cova Growth and Income Equity 7/1/97 12.605306 12.188331 10.756082 -
Cova U.S. Government Securities 8/5/99 10.030619 - - -
Cova Stock 8/5/99 10.027736 - - -
GACC Money Market 6/3/96 11.405605 11.109943 10.667011 10.233546
Russell Multi-Style Equity 12/31/97 12.995416 12.694810 10.000000 -
Russell Aggressive Equity 12/31/97 9.195572 9.963254 10.000000 -
Russell Non-US 12/31/97 12.264216 11.142092 10.000000 -
Russell Core Bond 12/31/97 10.419921 10.591175 10.000000 -
Russell Real Estate Securities 7/1/99 9.182981 - - -
AIM V.I. Value 12/31/97 14.258572 13.060203 10.000000 -
AIM V.I. Capital Appreciation 12/31/97 12.406066 11.770729 10.000000 -
AIM V.I. International Equity 12/31/97 12.318620 11.391449 10.000000 -
Alliance Premier Growth 12/31/97 15.718552 14.595485 10.000000 -
Alliance Real Estate Investment 12/31/97 7.568838 7.988435 10.000000 -
Liberty Newport Tiger Fund, Variable 12/31/97 11.401543 9.228765 10.000000 -
Goldman Sachs Growth and Income 1/29/98 9.504979 9.908613 - -
Goldman Sachs International Equity 1/29/98 12.222446 11.402925 - -
Goldman Sachs Global Income 1/29/98 10.524675 10.781765 - -
Kemper Dreman High Return Equity 5/15/98 9.603380 10.487302 - -
Kemper Small Cap Growth 12/31/97 11.872260 11.676086 10.000000 -
Kemper Small Cap Value 12/31/97 8.510588 8.753222 10.000000 -
Kemper Government Securities 12/31/97 10.531690 10.556498 10.000000 -
MFS Bond 5/15/98 10.257883 10.491811 - -
MFS Research 12/31/97 12.260366 12.172796 10.000000 -
MFS Growth with Income 12/31/97 11.526519 12.066568 10.000000 -
MFS Emerging Growth 12/31/97 14.925278 13.233235 10.000000 -
MFS/F&C Emerging Markets Equity 12/31/97 6.966288 6.571830 10.000000 -
MFS High Income 12/31/97 10.108867 9.845193 10.000000 -
MFS Global Governments 12/31/97 10.397577 10.669943 10.000000 -
Oppenheimer Capital Appreciation 12/31/97 13.345832 12.232731 10.000000 -
Oppenheimer Main Street Growth & Income 12/31/97 11.129275 10.326519 10.000000 -
Oppenheimer High Income 12/31/97 10.048704 9.893828 10.000000 -
Oppenheimer Bond 12/31/97 10.220461 10.533011 10.000000 -
Oppenheimer Strategic Bond 12/31/97 10.080105 10.151332 10.000000 -
Putnam VT Growth and Income 12/31/97 11.195156 11.382650 10.000000 -
Putnam VT New Value 12/31/97 10.235447 10.483517 10.000000 -
Putnam VT Vista 12/31/97 12.621681 11.785702 10.000000 -
Putnam VT International Growth 12/31/97 13.701718 11.707003 10.000000 -
Putnam VT International New Opportunities 12/31/97 14.569627 11.402252 10.000000 -
Templeton Bond 3/1/99 9.774435 - - -
Franklin Small Cap Investments 3/1/99 12.685545 - - -
Templeton Stock 1/19/99 10.736878 - - -
Templeton International 5/1/98 9.848936 9.144522 - -
Templeton Developing Markets 5/1/98 9.115638 7.552448 - -
Templeton Mutual Shares Investments 5/1/98 9.869908 9.630622 - -
Franklin Growth Investments 3/1/99 11.606240 - - -
Fidelity VIP Growth 2/17/98 14.399380 13.077878 - -
Fidelity VIP II Contrafund 2/17/98 12.947769 12.357373 - -
Fidelity VIP III Growth Opportunities 2/17/98 11.383464 11.742360 - -
Fidelity VIP III Growth & Income 2/17/98 12.176369 12.202502 - -
Fidelity VIP Equity-Income 2/17/98 10.820348 10.626607 - -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED:
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
Commenced Net Assets (in thousands)
-----------------------------------------------------------------
Operations 9/30/99 12/31/98 12/31/97 12/31/96
--------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 $ 756,378 - - -
Cova Bond Debenture 5/1/96 152,499 110,471 50,820 7,451
Cova Developing Growth 8/20/97 22,868 14,855 1,565 -
Cova Large Cap Research 8/20/97 25,549 12,968 1,233 -
Cova Mid-Cap Value 8/20/97 25,122 17,145 2,035 -
Cova Quality Bond 5/1/96 88,994 39,638 15,986 5,276
Cova Small Cap Stock 5/1/96 71,824 69,645 53,169 13,993
Cova Large Cap Stock 5/1/96 196,481 81,369 21,989 15,751
Cova Select Equity 5/1/96 195,369 179,310 97,063 22,159
Cova International Equity 5/1/96 103,945 94,245 62,371 14,333
Cova Balanced 7/1/97 7,260 3,372 401 -
Cova Small Cap Equity 7/1/97 213 1,327 272 -
Cova Equity Income 7/1/97 5,431 3,463 557 -
Cova Growth and Income Equity 7/1/97 13,122 7,823 1,309 -
Cova U.S. Government Securities 8/5/99 - - - -
Cova Stock 8/5/99 - - - -
GACC Money Market 6/3/96 43,943 16,464 3,318 358
Russell Multi-Style Equity 12/31/97 45,001 29,559 - -
Russell Aggressive Equity 12/31/97 7,523 5,343 - -
Russell Non-US 12/31/97 17,385 10,316 - -
Russell Core Bond 12/31/97 25,038 17,050 - -
Russell Real Estate Securities 7/1/99 295 - - -
AIM V.I. Value 12/31/97 25,653 6,816 - -
AIM V.I. Capital Appreciation 12/31/97 7,936 2,160 - -
AIM V.I. International Equity 12/31/97 3,208 2,325 - -
Alliance Premier Growth 12/31/97 26,944 9,748 - -
Alliance Real Estate Investment 12/31/97 3,179 1,529 - -
Liberty Newport Tiger Fund, Variable 12/31/97 329 295 - -
Goldman Sachs Growth and Income 1/29/98 5,954 4,634 - -
Goldman Sachs International Equity 1/29/98 2,822 1,287 - -
Goldman Sachs Global Income 1/29/98 291 203 - -
Kemper Dreman High Return Equity 5/15/98 151 97 - -
Kemper Small Cap Growth 12/31/97 1,358 893 - -
Kemper Small Cap Value 12/31/97 4,044 2,145 - -
Kemper Government Securities 12/31/97 2,076 630 - -
MFS Bond 5/15/98 173 174 - -
MFS Research 12/31/97 11,991 5,658 - -
MFS Growth with Income 12/31/97 13,996 7,016 - -
MFS Emerging Growth 12/31/97 16,586 7,142 - -
MFS/F&C Emerging Markets Equity 12/31/97 117 481 - -
MFS High Income 12/31/97 3,867 2,158 - -
MFS Global Governments 12/31/97 66 22 - -
Oppenheimer Capital Appreciation 12/31/97 4,951 1,189 - -
Oppenheimer Main Street Growth & Income 12/31/97 5,060 2,941 - -
Oppenheimer High Income 12/31/97 1,990 777 - -
Oppenheimer Bond 12/31/97 9,399 4,234 - -
Oppenheimer Strategic Bond 12/31/97 2,646 1,095 - -
Putnam VT Growth and Income 12/31/97 22,847 12,699 - -
Putnam VT New Value 12/31/97 574 441 - -
Putnam VT Vista 12/31/97 3,786 1,785 - -
Putnam VT International Growth 12/31/97 13,864 6,206 - -
Putnam VT International New Opportunities 12/31/97 1,276 602 - -
Templeton Bond 3/1/99 260 - - -
Franklin Small Cap Investments 3/1/99 433 - - -
Templeton Stock 1/19/99 277 - - -
Templeton International 5/1/98 6,671 1,507 - -
Templeton Developing Markets 5/1/98 2,478 679 - -
Templeton Mutual Shares Investments 5/1/98 2,080 1,021 - -
Franklin Growth Investments 3/1/99 418 - - -
Fidelity VIP Growth 2/17/98 1,137 88 - -
Fidelity VIP II Contrafund 2/17/98 1,331 400 - -
Fidelity VIP III Growth Opportunities 2/17/98 532 112 - -
Fidelity VIP III Growth & Income 2/17/98 2,055 852 - -
Fidelity VIP Equity-Income 2/17/98 1,100 256 - -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED:
Commenced Total Return*
-----------------------------------------------------------------
Operations 1999 1998 1997 1996
--------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 -0.16% - - -
Cova Bond Debenture 5/1/96 -1.48% 4.77% 14.05% 11.86%
Cova Developing Growth 8/20/97 8.08% 5.13% 5.28% -
Cova Large Cap Research 8/20/97 8.12% 19.46% -1.00% -
Cova Mid-Cap Value 8/20/97 2.06% -0.29% 4.68% -
Cova Quality Bond 5/1/96 -2.56% 6.81% 7.58% 4.76%
Cova Small Cap Stock 5/1/96 5.87% -6.74% 19.31% 7.57%
Cova Large Cap Stock 5/1/96 3.93% 30.49% 31.36% 13.32%
Cova Select Equity 5/1/96 -4.06% 20.88% 29.67% 7.48%
Cova International Equity 5/1/96 7.46% 12.45% 4.52% 7.36%
Cova Balanced 7/1/97 0.71% 11.74% 5.32% -
Cova Small Cap Equity 7/1/97 -0.80% -1.72% 4.18% -
Cova Equity Income 7/1/97 1.47% 7.81% 11.94% -
Cova Growth and Income Equity 7/1/97 3.42% 13.32% 7.56% -
Cova U.S. Government Securities 8/5/99 - - - -
Cova Stock 8/5/99 - - - -
GACC Money Market 6/3/96 2.66% 4.15% 4.24% 2.34%
Russell Multi-Style Equity 12/31/97 2.37% 26.95% - -
Russell Aggressive Equity 12/31/97 -7.71% -0.37% - -
Russell Non-US 12/31/97 10.07% 11.42% - -
Russell Core Bond 12/31/97 -1.62% 5.91% - -
Russell Real Estate Securities 7/1/99 -8.17% - - -
AIM V.I. Value 12/31/97 9.18% 30.60% - -
AIM V.I. Capital Appreciation 12/31/97 5.40% 17.71% - -
AIM V.I. International Equity 12/31/97 8.14% 13.91% - -
Alliance Premier Growth 12/31/97 7.70% 45.96% - -
Alliance Real Estate Investment 12/31/97 -5.25% -20.12% - -
Liberty Newport Tiger Fund, Variable 12/31/97 23.54% -7.71% - -
Goldman Sachs Growth and Income 1/29/98 -4.07% -0.91% - -
Goldman Sachs International Equity 1/29/98 7.19% 14.03% - -
Goldman Sachs Global Income 1/29/98 -2.38% 7.82% - -
Kemper Dreman High Return Equity 5/15/98 -8.43% 4.87% - -
Kemper Small Cap Growth 12/31/97 1.68% 16.76% - -
Kemper Small Cap Value 12/31/97 -2.77% -12.47% - -
Kemper Government Securities 12/31/97 -0.24% 5.57% - -
MFS Bond 5/15/98 -2.23% 4.92% - -
MFS Research 12/31/97 0.72% 21.73% - -
MFS Growth with Income 12/31/97 -4.48% 20.67% - -
MFS Emerging Growth 12/31/97 12.79% 32.33% - -
MFS/F&C Emerging Markets Equity 12/31/97 6.00% -34.28% - -
MFS High Income 12/31/97 2.68% -1.55% - -
MFS Global Governments 12/31/97 -2.55% 6.70% - -
Oppenheimer Capital Appreciation 12/31/97 9.10% 22.33% - -
Oppenheimer Main Street Growth & Income 12/31/97 7.77% 3.27% - -
Oppenheimer High Income 12/31/97 1.56% -1.06% - -
Oppenheimer Bond 12/31/97 -2.97% 5.33% - -
Oppenheimer Strategic Bond 12/31/97 -0.70% 1.51% - -
Putnam VT Growth and Income 12/31/97 -1.65% 13.83% - -
Putnam VT New Value 12/31/97 -2.37% 4.83% - -
Putnam VT Vista 12/31/97 7.09% 17.86% - -
Putnam VT International Growth 12/31/97 17.04% 17.07% - -
Putnam VT International New Opportunities 12/31/97 27.78% 14.02% - -
Templeton Bond 3/1/99 -2.26% - - -
Franklin Small Cap Investments 3/1/99 26.86% - - -
Templeton Stock 1/19/99 7.37% - - -
Templeton International 5/1/98 7.70% -8.55% - -
Templeton Developing Markets 5/1/98 20.70% -24.48% - -
Templeton Mutual Shares Investments 5/1/98 2.48% -3.69% - -
Franklin Growth Investments 3/1/99 16.06% - - -
Fidelity VIP Growth 2/17/98 10.11% 30.78% - -
Fidelity VIP II Contrafund 2/17/98 4.78% 23.57% - -
Fidelity VIP III Growth Opportunities 2/17/98 -3.06% 17.42% - -
Fidelity VIP III Growth & Income 2/17/98 -0.21% 22.03% - -
Fidelity VIP Equity-Income 2/17/98 1.82% 6.27% - -
* The total return for sub-accounts that commenced operations during the period is not annualized.
** The expense ratio for sub-accounts that commenced operations during the period is annualized.
*** Sub-accounts commenced operations on 8/5/99 but were not available to contract owners for investment until 11/2/99.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED:
Separate Account Expenses
Commenced As a % of Average Net Assets**
-----------------------------------------------------------------
Operations 1999 1998 1997 1996
--------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 1.40% - - -
Cova Bond Debenture 5/1/96 1.40% 1.40% 1.40% 1.40%
Cova Developing Growth 8/20/97 1.40% 1.40% 1.40% -
Cova Large Cap Research 8/20/97 1.40% 1.40% 1.40% -
Cova Mid-Cap Value 8/20/97 1.40% 1.40% 1.40% -
Cova Quality Bond 5/1/96 1.40% 1.40% 1.40% 1.40%
Cova Small Cap Stock 5/1/96 1.40% 1.40% 1.40% 1.40%
Cova Large Cap Stock 5/1/96 1.40% 1.40% 1.40% 1.40%
Cova Select Equity 5/1/96 1.40% 1.40% 1.40% 1.40%
Cova International Equity 5/1/96 1.40% 1.40% 1.40% 1.40%
Cova Balanced 7/1/97 1.40% 1.40% 1.40% -
Cova Small Cap Equity 7/1/97 1.40% 1.40% 1.40% -
Cova Equity Income 7/1/97 1.40% 1.40% 1.40% -
Cova Growth and Income Equity 7/1/97 1.40% 1.40% 1.40% -
Cova U.S. Government Securities 8/5/99 - - - -
Cova Stock 8/5/99 - - - -
GACC Money Market 6/3/96 1.40% 1.40% 1.40% 1.40%
Russell Multi-Style Equity 12/31/97 1.40% 1.40% - -
Russell Aggressive Equity 12/31/97 1.40% 1.40% - -
Russell Non-US 12/31/97 1.40% 1.40% - -
Russell Core Bond 12/31/97 1.40% 1.40% - -
Russell Real Estate Securities 7/1/99 1.40% - - -
AIM V.I. Value 12/31/97 1.40% 1.40% - -
AIM V.I. Capital Appreciation 12/31/97 1.40% 1.40% - -
AIM V.I. International Equity 12/31/97 1.40% 1.40% - -
Alliance Premier Growth 12/31/97 1.40% 1.40% - -
Alliance Real Estate Investment 12/31/97 1.40% 1.40% - -
Liberty Newport Tiger Fund, Variable 12/31/97 1.40% 1.40% - -
Goldman Sachs Growth and Income 1/29/98 1.40% 1.40% - -
Goldman Sachs International Equity 1/29/98 1.40% 1.40% - -
Goldman Sachs Global Income 1/29/98 1.40% 1.40% - -
Kemper Dreman High Return Equity 5/15/98 1.40% 1.40% - -
Kemper Small Cap Growth 12/31/97 1.40% 1.40% - -
Kemper Small Cap Value 12/31/97 1.40% 1.40% - -
Kemper Government Securities 12/31/97 1.40% 1.40% - -
MFS Bond 5/15/98 1.40% 1.40% - -
MFS Research 12/31/97 1.40% 1.40% - -
MFS Growth with Income 12/31/97 1.40% 1.40% - -
MFS Emerging Growth 12/31/97 1.40% 1.40% - -
MFS/F&C Emerging Markets Equity 12/31/97 1.40% 1.40% - -
MFS High Income 12/31/97 1.40% 1.40% - -
MFS Global Governments 12/31/97 1.40% 1.40% - -
Oppenheimer Capital Appreciation 12/31/97 1.40% 1.40% - -
Oppenheimer Main Street Growth & Income 12/31/97 1.40% 1.40% - -
Oppenheimer High Income 12/31/97 1.40% 1.40% - -
Oppenheimer Bond 12/31/97 1.40% 1.40% - -
Oppenheimer Strategic Bond 12/31/97 1.40% 1.40% - -
Putnam VT Growth and Income 12/31/97 1.40% 1.40% - -
Putnam VT New Value 12/31/97 1.40% 1.40% - -
Putnam VT Vista 12/31/97 1.40% 1.40% - -
Putnam VT International Growth 12/31/97 1.40% 1.40% - -
Putnam VT International New Opportunities 12/31/97 1.40% 1.40% - -
Templeton Bond 3/1/99 1.40% - - -
Franklin Small Cap Investments 3/1/99 1.40% - - -
Templeton Stock 1/19/99 1.40% - - -
Templeton International 5/1/98 1.40% 1.40% - -
Templeton Developing Markets 5/1/98 1.40% 1.40% - -
Templeton Mutual Shares Investments 5/1/98 1.40% 1.40% - -
Franklin Growth Investments 3/1/99 1.40% - - -
Fidelity VIP Growth 2/17/98 1.40% 1.40% - -
Fidelity VIP II Contrafund 2/17/98 1.40% 1.40% - -
Fidelity VIP III Growth Opportunities 2/17/98 1.40% 1.40% - -
Fidelity VIP III Growth & Income 2/17/98 1.40% 1.40% - -
Fidelity VIP Equity-Income 2/17/98 1.40% 1.40% - -
* The total return for sub-accounts that commenced operations during the period is not annualized.
** The expense ratio for sub-accounts that commenced operations during the period is annualized.
*** Sub-accounts commenced operations on 8/5/99 but were not available to contract owners for investment until 11/2/99.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The realized gain (loss) on the sale of fund shares and the change in
unrealized appreciation for each sub-account during the nine months ending
September 30, 1999 and the year ending December 31, 1998 follows:
Realized Gain (Loss)
-----------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Cova Quality Income 1999 $ 38,668 $ 39,188 $ (520)
1998 13,031 12,576 455
Cova Money Market 1999 7,897 7,897 -
1998 14,519 14,519 -
Cova High Yield 1999 28,995 29,950 (955)
1998 6,314 6,179 135
Cova Stock Index 1999 100,241 82,162 18,079
1998 23,196 17,093 6,103
Cova VKAC Growth and Income 1999 51,735 45,148 6,587
1998 6,244 4,804 1,440
Cova Lord Abbett Growth and Income 1999 28,476 27,311 1,165
1998 - - -
Cova Bond Debenture 1999 4,974 4,872 102
1998 9,489 9,470 19
Cova Developing Growth 1999 493 436 57
1998 138 152 (14)
Cova Large Cap Research 1999 45 40 5
1998 161 156 5
Cova Mid-Cap Value 1999 396 379 17
1998 82 85 (3)
Cova Quality Bond 1999 11,796 11,785 11
1998 1,335 1,299 36
Cova Small Cap Stock 1999 5,786 5,770 16
1998 3,113 3,238 (125)
Cova Large Cap Stock 1999 23,248 21,316 1,932
1998 147 131 16
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
-----------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Cova Select Equity 1999 $ 1,697 $ 1,462 $ 235
1998 1,485 1,275 210
Cova International Equity 1999 6,045 5,289 756
1998 4,919 4,609 310
Cova Balanced 1999 467 426 41
1998 30 31 (1)
Cova Small Cap Equity 1999 1,617 1,545 72
1998 39 42 (3)
Cova Equity Income 1999 292 265 27
1998 75 75 -
Cova Growth and Income Equity 1999 287 251 36
1998 211 204 7
Cova U.S. Government Securities 1999 201 200 1
1998 - - -
Cova Stock 1999 100 100 -
1998 - - -
GACC Money Market 1999 41,569 40,942 627
1998 37,059 36,623 436
Lord Abbett Growth and Income 1999 700,973 555,507 145,466
1998 12,298 10,217 2,081
Russell Multi-Style Equity 1999 1,712 1,591 121
1998 62 61 1
Russell Aggressive Equity 1999 564 574 (10)
1998 203 247 (44)
Russell Non-US 1999 577 535 42
1998 92 90 2
Russell Core Bond 1999 2,025 2,087 (62)
1998 523 522 1
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
-----------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Russell Real Estate Securities 1999 $ 6 $ 6 $ -
1998 - - -
AIM V.I. Value 1999 231 215 16
1998 253 263 (10)
AIM V.I. Capital Appreciation 1999 188 175 13
1998 72 75 (3)
AIM V.I. International Equity 1999 8,799 8,577 222
1998 8,246 8,249 (3)
Alliance Premier Growth 1999 523 479 44
1998 54 58 (4)
Alliance Real Estate Investment 1999 248 261 (13)
1998 28 30 (2)
Liberty Newport Tiger Fund, Variable 1999 1,580 1,449 131
1998 416 446 (30)
Goldman Sachs Growth and Income 1999 664 665 (1)
1998 126 138 (12)
Goldman Sachs International Equity 1999 2,696 2,574 122
1998 29 29 -
Goldman Sachs Global Income 1999 5 5 -
1998 17 16 1
Kemper Dreman High Return Equity 1999 8 8 -
1998 - - -
Kemper Small Cap Growth 1999 306 286 20
1998 1,008 1,035 (27)
Kemper Small Cap Value 1999 308 320 (12)
1998 21 25 (4)
Kemper Government Securities 1999 141 141 -
1998 17 17 -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
-----------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
----------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
MFS Bond 1999 $ 13 $ 13 $ -
1998 - - -
MFS Research 1999 239 222 17
1998 120 122 (2)
MFS Growth with Income 1999 228 215 13
1998 28 28 -
MFS Emerging Growth 1999 280 241 39
1998 129 140 (11)
MFS/Foreign & Colonial Emerging Markets Equity 1999 552 565 (13)
1998 1,059 1,156 (97)
MFS High Income 1999 88 90 (2)
1998 61 63 (2)
MFS Global Governments 1999 1 1 -
1998 - - -
Oppenheimer Capital Appreciation 1999 70 65 5
1998 187 188 (1)
Oppenheimer Main Street Growth & Income 1999 297 278 19
1998 326 363 (37)
Oppenheimer High Income 1999 36 37 (1)
1998 31 32 (1)
Oppenheimer Bond 1999 105 109 (4)
1998 49 49 -
Oppenheimer Strategic Bond 1999 155 159 (4)
1998 3 3 -
Putnam VT Growth and Income 1999 198 192 6
1998 294 302 (8)
Putnam VT New Value 1999 167 171 (4)
1998 3 3 -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
-----------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Putnam VT Vista 1999 $ 161 $ 143 $ 18
1998 27 28 (1)
Putnam VT International Growth 1999 3,565 3,243 322
1998 4,315 4,354 (39)
Putnam VT International New Opportunities 1999 2,878 2,715 163
1998 2,989 2,965 24
Templeton Bond 1999 3 3 -
1998 - - -
Franklin Small Cap Investments 1999 12 11 1
1998 - - -
Templeton Stock 1999 - - -
1998 - - -
Templeton International 1999 8,222 8,128 94
1998 6,057 6,049 8
Templeton Developing Markets 1999 974 915 59
1998 357 361 (4)
Templeton Mutual Shares Investments 1999 123 115 8
1998 7 7 -
Franklin Growth Investments 1999 140 136 4
1998 - - -
Fidelity VIP Growth 1999 39 37 2
1998 34 37 (3)
Fidelity VIP II Contrafund 1999 66 60 6
1998 17 19 (2)
Fidelity VIP III Growth Opportunities 1999 22 21 1
1998 24 26 (2)
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
-----------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Fidelity VIP III Growth & Income 1999 $ 44 $ 41 $ 3
1998 69 74 (5)
Fidelity VIP Equity-Income 1999 32 31 1
1998 27 30 (3)
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION:
Unrealized Appreciation (Depreciation)
-----------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
------------ -------------------- -------------------- -------------
<S> <C> <C> <C> <C>
Cova Quality Income 1999 $ - $ 1,308 $ (1,308)
1998 1,308 1,302 6
Cova Money Market 1999 - - -
1998 - - -
Cova High Yield 1999 - 174 (174)
1998 174 842 (668)
Cova Stock Index 1999 - 25,838 (25,838)
1998 25,838 25,000 838
Cova VKAC Growth and Income 1999 - 11,521 (11,521)
1998 11,521 10,887 634
Cova Lord Abbett Growth and Income 1999 5,941 - 5,941
1998 - - -
Cova Bond Debenture 1999 (1,545) 3,523 (5,068)
1998 3,523 1,958 1,565
Cova Developing Growth 1999 2,301 890 1,411
1998 890 7 883
Cova Large Cap Research 1999 2,714 1,284 1,430
1998 1,284 6 1,278
Cova Mid-Cap Value 1999 760 160 600
1998 160 40 120
Cova Quality Bond 1999 (1,027) 1,598 (2,625)
1998 1,598 186 1,412
Cova Small Cap Stock 1999 4,859 346 4,513
1998 346 6,523 (6,177)
Cova Large Cap Stock 1999 12,610 16,535 (3,925)
1998 16,535 2,855 13,680
Cova Select Equity 1999 7,875 33,585 (25,710)
1998 33,585 13,520 20,065
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
-----------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
------------ -------------------- -------------------- -----------
<S> <C> <C> <C> <C>
Cova International Equity 1999 $ 14,899 $ 9,278 $ 5,621
1998 9,278 1,309 7,969
Cova Balanced 1999 140 173 (33)
1998 173 - 173
Cova Small Cap Equity 1999 5 34 (29)
1998 34 (5) 39
Cova Equity Income 1999 26 70 (44)
1998 70 21 49
Cova Growth and Income Equity 1999 711 566 145
1998 566 18 548
Cova U.S. Government Securities 1999 - - -
1998 - - -
Cova Stock 1999 - - -
1998 - - -
GACC Money Market 1999 932 231 701
1998 231 46 185
Lord Abbett Growth and Income 1999 - 114,452 (114,452)
1998 - - -
Russell Multi-Style Equity 1999 1,163 3,199 (2,036)
1998 3,199 - 3,199
Russell Aggressive Equity 1999 (334) 75 (409)
1998 75 - 75
Russell Non-US 1999 1,746 412 1,334
1998 412 - 412
Russell Core Bond 1999 (836) 268 (1,104)
1998 268 - 268
Russell Real Estate Securities 1999 (12) - (12)
1998 - - -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
-----------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
------------ -------------------- -------------------- -----------
<S> <C> <C> <C> <C>
AIM V.I. Value 1999 $ 1,336 $ 668 $ 668
1998 668 - 668
AIM V.I. Capital Appreciation 1999 389 164 225
1998 164 - 164
AIM V.I. International Equity 1999 174 81 93
1998 81 - 81
Alliance Premier Growth 1999 1,998 1,522 476
1998 1,522 - 1,522
Alliance Real Estate Investment 1999 (399) (170) (229)
1998 (170) - (170)
Liberty Newport Tiger Fund, Variable 1999 4 54 (50)
1998 54 - 54
Goldman Sachs Growth and Income 1999 (466) (207) (259)
1998 (207) - (207)
Goldman Sachs International Equity 1999 135 56 79
1998 56 - 56
Goldman Sachs Global Income 1999 (4) (1) (3)
1998 (1) - (1)
Kemper Dreman High Return Equity 1999 (14) 1 (15)
1998 1 - 1
Kemper Small Cap Growth 1999 140 107 33
1998 107 - 107
Kemper Small Cap Value 1999 (165) (155) (10)
1998 (155) - (155)
Kemper Government Securities 1999 (46) 9 (55)
1998 9 - 9
MFS Bond 1999 (5) 1 (6)
1998 1 - 1
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
-----------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
------------ -------------------- -------------------- ------------
<S> <C> <C> <C> <C>
MFS Research 1999 $ 301 $ 481 $ (180)
1998 481 - 481
MFS Growth with Income 1999 (166) 574 (740)
1998 574 - 574
MFS Emerging Growth 1999 2,379 985 1,394
1998 985 - 985
MFS/Foreign & Colonial Emerging Markets Equity 1999 (10) (94) 84
1998 (94) - (94)
MFS High Income 1999 (171) (34) (137)
1998 (34) - (34)
MFS Global Governments 1999 (2) 1 (3)
1998 1 - 1
Oppenheimer Capital Appreciation 1999 201 134 67
1998 134 - 134
Oppenheimer Main Street Growth & Income 1999 182 (28) 210
1998 (28) - (28)
Oppenheimer High Income 1999 (76) (15) (61)
1998 (15) - (15)
Oppenheimer Bond 1999 (361) 95 (456)
1998 95 - 95
Oppenheimer Strategic Bond 1999 (71) 3 (74)
1998 3 - 3
Putnam VT Growth and Income 1999 (1,500) 660 (2,160)
1998 660 - 660
Putnam VT New Value 1999 (33) 6 (39)
1998 6 - 6
Putnam VT Vista 1999 336 173 163
1998 173 - 173
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
(In thousands of dollars)
<TABLE>
<CAPTION>
(7) CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
-----------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
------------ -------------------- -------------------- -----------
<S> <C> <C> <C> <C>
Putnam VT International Growth 1999 $ 1,832 $ 353 $ 1,479
1998 353 - 353
Putnam VT International New Opportunities 1999 124 40 84
1998 40 - 40
Templeton Bond 1999 (2) - (2)
1998 - - -
Franklin Small Cap Investments 1999 31 - 31
1998 - - -
Templeton Stock 1999 (4) - (4)
1998 - - -
Templeton International 1999 34 48 (14)
1998 48 - 48
Templeton Developing Markets 1999 193 44 149
1998 44 - 44
Templeton Mutual Shares Investments 1999 20 32 (12)
1998 32 - 32
Franklin Growth Investments 1999 (1) - (1)
1998 - - -
Fidelity VIP Growth 1999 10 12 (2)
1998 12 - 12
Fidelity VIP II Contrafund 1999 35 48 (13)
1998 48 - 48
Fidelity VIP III Growth Opportunities 1999 (11) 13 (24)
1998 13 - 13
Fidelity VIP III Growth & Income 1999 50 94 (44)
1998 94 - 94
Fidelity VIP Equity-Income 1999 (21) 17 (38)
1998 17 - 17
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8)UNIT TRANSACTIONS
The change in the number of units for each sub-account follows:
Cova
------------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money High Stock and and Bond
Income (1) Market (1) Yield (1) Index (1) Income (1) Income (2) Debenture
------------ ----------- ------------ ----------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 2,931,053 1,742,444 1,409,290 3,547,220 2,198,250 - 3,945,097
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 1,214 491 1,763 2,532 1,131 - 1,632,919
Contract units transferred, net (196,389) (799,477) (59,692) 159,577 54,353 - 2,939,109
Contract units redeemed (512,199) (333,892) (146,202) (616,360) (152,515) - (332,231)
------------ ----------- ------------ ----------- ------------ -------------- -------------
Unit balance at 12/31/98 2,223,679 609,566 1,205,159 3,092,969 2,101,219 - 8,184,894
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased - - 83 187 - 565,232 465,627
Contract units transferred, net (2,215,623) (606,382) (1,202,292) (3,084,953) (2,098,056) 22,204,676 3,694,564
Contract units redeemed (8,056) (3,184) (2,950) (8,203) (3,163) (1,709,217) (903,457)
------------ ----------- ------------ ----------- ------------ -------------- -------------
Unit balance at 9/30/99 - - - - - 21,060,691 11,441,628
============ =========== ============ =========== ============ ============== =============
Annuity units:
Unit balance at 12/31/97 8,069 4,562 2,229 4,097 1,803 - -
Contract units purchased - - 798 - 798 - 272
Contract units redeemed (1,686) (901) (523) (608) (196) - (8)
------------ ----------- ------------ ----------- ------------ -------------- -------------
Unit balance at 12/31/98 6,383 3,661 2,504 3,489 2,405 - 264
Contract units purchased - - - - - 445,498 109,971
Contract units transferred, net (6,225) (3,576) (2,444) (3,431) (2,373) 33,239 -
Contract units redeemed (158) (85) (60) (58) (32) (425,854) (80,194)
------------ ----------- ------------ ----------- ------------ -------------- -------------
Unit balance at 9/30/99 - - - - - 52,883 30,041
============ =========== ============ =========== ============ ============== =============
(1)Sub-account ceased operations on January 8, 1999.
(2)Sub-account commenced operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8)UNIT TRANSACTIONS, CONTINUED:
Cova
----------------------------------------------------------------------------------------------
Large Small Large
Developing Cap Mid-Cap Quality Cap Cap Select
Growth Research Value Bond Stock Stock Equity
------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 148,658 124,559 194,386 1,433,081 3,940,243 1,473,929 6,903,606
Cova units purchased - - - - - - -
Cova units redeemed (10,000) (10,000) (10,000) - - - -
Contract units purchased 596,000 569,392 755,701 833,031 619,802 1,118,109 1,382,912
Contract units transferred, net 630,230 437,664 736,868 1,236,444 1,172,828 1,713,122 2,562,725
Contract units redeemed (22,687) (26,695) (34,402) (179,213) (200,263) (127,125) (304,425)
------------- ----------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/98 1,342,201 1,094,920 1,642,553 3,323,343 5,532,610 4,178,035 10,544,818
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 176,715 242,758 261,274 481,427 163,981 624,654 429,387
Contract units transferred, net 444,459 726,318 556,286 4,888,115 45,279 5,855,049 1,494,578
Contract units redeemed (52,025) (67,506) (102,307) (1,041,041) (352,407) (942,739) (491,151)
------------- ----------- ----------- ----------- ----------- ----------- -------------
Unit balance at 9/30/99 1,911,350 1,996,490 2,357,806 7,651,844 5,389,463 9,714,999 11,977,632
============= =========== =========== =========== =========== =========== =============
Annuity units:
Unit balance at 12/31/97 - - - - 773 3,028 3,237
Contract units purchased - 2,090 - 3,947 1,944 9,187 9,682
Contract units redeemed - (266) - (109) (162) (1,259) (1,203)
------------- ----------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/98 - 1,824 - 3,838 2,555 10,956 11,716
Contract units purchased 479 452 474 28,887 647 12,939 1,428
Contract units transferred, net - - - - 504 - 732
Contract units redeemed (44) (336) (43) (17,257) (1,329) (6,976) (3,303)
------------- ----------- ----------- ----------- ----------- ----------- -------------
Unit balance at 9/30/99 435 1,940 431 15,468 2,377 16,919 10,573
============= =========== =========== =========== =========== =========== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8)UNIT TRANSACTIONS, CONTINUED:
Cova
---------------------------------------------------------------------------------------------
Growth
and U.S.
International Small Cap Equity Income Government
Equity Balanced Equity Income Equity Securities Stock
-------------- ----------- ----------- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 5,440,592 38,079 26,148 49,725 121,673 - -
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 651,488 128,875 44,062 157,967 269,879 - -
Contract units transferred, net 1,460,450 124,051 61,306 83,645 260,136 - -
Contract units redeemed (243,205) (4,494) (1,880) (4,384) (9,899) - -
-------------- ----------- ----------- ---------- ------------ ------------- -----------
Unit balance at 12/31/98 7,309,325 286,511 129,636 286,953 641,789 - -
Cova units purchased - - - - - 20,000 10,000
Cova units redeemed - - - - - (20,000) (10,000)
Contract units purchased 138,318 113,363 16,780 73,869 154,839 - -
Contract units transferred, net 439,583 223,464 (121,271) 91,258 269,119 - -
Contract units redeemed (389,086) (10,788) (4,206) (8,610) (24,724) - -
-------------- ----------- ----------- ---------- ------------ ------------- -----------
Unit balance at 9/30/99 7,498,140 612,550 20,939 443,470 1,041,023 - -
============== =========== =========== ========== ============ ============= ===========
Annuity units:
Unit balance at 12/31/97 790
Contract units purchased 2,208
Contract units redeemed (173)
--------------
Unit balance at 12/31/98 2,825
Contract units purchased 5,663
Contract units transferred, net 559
Contract units redeemed (1,942)
--------------
Unit balance at 9/30/99 7,105
==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
GACC Lord Abbett Russell
------------- ------------- -----------------------------------------------------------------
Growth Multi- Real
Money and Style Aggressive Core Estate
Market Income (1) Equity Equity Non-US Bond Securities
------------- ------------- ---------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 311,051 15,788,404 - - - - -
Cova units purchased - - 10 10 10 10 -
Cova units redeemed - - (10) (10) (10) (10) -
Contract units purchased 3,293,174 1,737,150 1,960,886 438,734 773,431 1,318,370 -
Contract units transferred, net (1,834,605) 3,166,896 416,532 107,823 180,088 360,854 -
Contract units redeemed (295,883) (1,222,057) (48,988) (10,279) (27,727) (69,373) -
------------- ------------- ---------- ------------ ----------- ------------- -----------
Unit balance at 12/31/98 1,473,737 19,470,393 2,328,430 536,278 925,792 1,609,851 -
Cova units purchased - - - - - - 10
Cova units redeemed - - - - - - (10)
Contract units purchased 311,453 21,056 584,238 145,034 204,581 254,831 11,311
Contract units transferred, net 3,272,967 (19,468,292) 653,888 152,975 323,753 587,770 21,755
Contract units redeemed (1,218,538) (23,157) (104,320) (16,367) (36,999) (49,904) (926)
------------- ------------- ---------- ------------ ----------- ------------- -----------
Unit balance at 9/30/99 3,839,619 - 3,462,236 817,920 1,417,127 2,402,548 32,140
============= ============= ========== ============ =========== ============= ===========
Annuity units:
Unit balance at 12/31/97 - 26,046 - - - -
Contract units purchased 9,003 10,428 - - - -
Contract units redeemed (128) (3,208) - - - -
------------- ------------- ---------- ------------ ----------- -------------
Unit balance at 12/31/98 8,875 33,266 - - - -
Contract units purchased 6,080 - 644 171 417 380
Contract units transferred, net - (32,829) - - - -
Contract units redeemed (483) (437) (20) (5) (13) (12)
------------- ------------- ---------- ------------ ----------- -------------
Unit balance at 9/30/99 14,472 - 624 166 404 368
============= ============= ========== ============ =========== =============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
AIM Alliance Liberty Goldman Sachs
----------------------------------------- ------------------------- --------- -------------
Newport
V.I. Real Tiger Growth
V.I. Capital International Premier Estate Fund, and
V.I. Value Appreciation Equity Growth Investment Variable Income
------------- ------------- ------------- ------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10) (10) (10)
Contract units purchased 365,254 134,252 148,215 523,722 136,005 18,873 298,119
Contract units transferred, net 177,976 57,235 57,321 149,553 58,393 13,289 178,567
Contract units redeemed (21,340) (7,999) (1,464) (5,421) (2,987) (226) (9,011)
------------- ------------- ------------- ------------ ------------ --------- -------------
Unit balance at 12/31/98 521,890 183,488 204,072 667,854 191,411 31,936 467,675
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 577,029 207,704 27,514 723,000 177,922 4,183 61,589
Contract units transferred, net 786,930 269,417 36,404 381,393 61,672 (6,806) 117,505
Contract units redeemed (86,699) (20,953) (7,539) (58,121) (11,065) (480) (20,402)
------------- ------------- ------------- ------------ ------------ --------- -------------
Unit balance at 9/30/99 1,799,150 639,656 260,451 1,714,126 419,940 28,833 626,367
============= ============= ============= ============ ============ ========= =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Goldman Sachs Kemper MFS
--------------------------- ---------------------------------------------------- ---------
Dreman
High Small Small
International Global Return Cap Cap Government
Equity Income Equity Growth Value Securities Bond
-------------- ---------- ----------- ---------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) - (10) (10) (10) -
Contract units purchased 89,807 12,114 - 61,682 178,532 48,334 245
Contract units transferred, net 23,575 8,062 9,213 15,201 69,892 11,575 16,283
Contract units redeemed (558) (1,343) - (391) (3,332) (197) -
-------------- ---------- ----------- ---------- ---------- -------------- ---------
Unit balance at 12/31/98 112,824 18,833 9,223 76,492 245,092 59,712 16,538
Cova units purchased - - - - - - -
Cova units redeemed - - (10) - - - (10)
Contract units purchased 36,374 2,899 1,435 33,620 189,291 65,073 207
Contract units transferred, net 90,116 6,244 5,107 10,912 52,825 73,803 116
Contract units redeemed (8,465) (286) - (6,643) (12,038) (1,441) -
-------------- ---------- ----------- ---------- ---------- -------------- ---------
Unit balance at 9/30/99 230,849 27,690 15,755 114,381 475,170 197,147 16,851
============== ========== =========== ========== ========== ============== =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
MFS Oppenheimer
---------------------------------------------------------------------------- ---------------
F&C
Growth Emerging
with Emerging Markets High Global Capital
Research Income Growth Equity Income Governments Appreciation
----------- ---------- ----------- ---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10) - (10)
Contract units purchased 337,107 416,517 438,345 45,159 164,144 423 83,004
Contract units transferred, net 137,437 171,689 106,215 28,739 57,879 1,674 19,949
Contract units redeemed (9,758) (6,772) (4,901) (727) (2,814) (25) (5,792)
----------- ---------- ----------- ---------- ---------- -------------- ---------------
Unit balance at 12/31/98 464,786 581,434 539,659 73,171 219,209 2,082 97,161
Cova units purchased - - - - - - -
Cova units redeemed - - - - - (10) -
Contract units purchased 285,175 361,499 404,165 178 75,216 481 108,078
Contract units transferred, net 258,889 314,363 200,063 (53,550) 98,266 3,830 180,951
Contract units redeemed (30,803) (43,071) (32,636) (2,983) (10,130) (20) (15,181)
----------- ---------- ----------- ---------- ---------- -------------- ---------------
Unit balance at 9/30/99 978,047 1,214,225 1,111,251 16,816 382,561 6,363 371,009
=========== ========== =========== ========== ========== ============== ===============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Oppenheimer Putnam
--------------------------------------------------- -------------------------------------
Main Street
Growth VT Growth
and High Strategic and VT New
Income Income Bond Bond Income Value VT Vista
------------- ----------- ---------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10) (10) (10)
Contract units purchased 211,120 51,949 320,045 71,817 820,015 16,925 116,318
Contract units transferred, net 78,591 27,811 86,123 36,774 304,805 25,293 36,195
Contract units redeemed (4,881) (1,247) (4,178) (722) (9,152) (127) (1,108)
------------- ----------- ---------- ----------- ------------- --------- ----------
Unit balance at 12/31/98 284,830 78,513 401,990 107,869 1,115,668 42,091 151,405
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 96,605 57,560 265,908 68,193 487,731 8,743 80,785
Contract units transferred, net 89,847 66,668 277,127 92,596 497,491 9,460 84,900
Contract units redeemed (16,673) (4,671) (25,383) (6,214) (60,084) (4,259) (17,095)
------------- ----------- ---------- ----------- ------------- --------- ----------
Unit balance at 9/30/99 454,609 198,070 919,642 262,444 2,040,806 56,035 299,995
============= =========== ========== =========== ============= ========= ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Putnam Templeton
------------------------------- ---------------------------------------------------------------
VT
VT International Franklin
International New Small Cap Developing
Growth Opportunities Bond Investments Stock International Markets
-------------- --------------- ------- ------------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 - - - 10 10
Cova units redeemed (10) (10) - - - (10) (10)
Contract units purchased 394,877 38,270 - - - 140,734 72,847
Contract units transferred, net 141,372 14,803 - - - 26,597 18,743
Contract units redeemed (6,194) (264) - - - (2,556) (1,630)
-------------- --------------- ------- ------------- -------- --------------- -------------
Unit balance at 12/31/98 530,055 52,809 - - - 164,775 89,960
Cova units purchased - - 10 10 10 - -
Cova units redeemed - - (10) (10) (10) - -
Contract units purchased 355,507 14,001 3,637 4,681 8,949 315,421 122,238
Contract units transferred, net 160,340 24,945 23,393 31,151 16,859 209,317 65,535
Contract units redeemed (34,025) (4,165) (427) (1,723) (14) (12,212) (5,841)
-------------- --------------- ------- ------------- -------- --------------- -------------
Unit balance at 9/30/99 1,011,877 87,590 26,603 34,109 25,794 677,301 271,892
============== =============== ======= ============= ======== =============== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Templeton Fidelity
---------------------------- -------------------------------------------------------------------
Mutual Franklin VIP III VIP III VIP
Shares Growth VIP VIP II Growth Growth & Equity-
Investments Investments Growth Contrafund Opportunities Income Income
------------- ------------- --------- ----------- ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 - 10 10 10 10 10
Cova units redeemed (10) - (10) (10) (10) (10) (10)
Contract units purchased 61,499 - 8,130 30,391 11,440 53,646 20,381
Contract units transferred, net 45,054 - (1,021) 2,056 (1,406) 30,141 4,635
Contract units redeemed (518) - (361) (93) (511) (13,954) (884)
------------- ------------- --------- ----------- ---------------- ------------ -----------
Unit balance at 12/31/98 106,035 - 6,748 32,354 9,523 69,833 24,132
Cova units purchased - 10 - - - - -
Cova units redeemed - (10) - - - - -
Contract units purchased 42,656 7,819 27,336 22,454 8,784 20,108 20,794
Contract units transferred, net 67,987 38,514 47,496 53,977 30,329 82,864 60,375
Contract units redeemed (5,908) (10,325) (2,637) (5,964) (1,947) (4,004) (3,660)
------------- ------------- --------- ----------- ---------------- ------------ -----------
Unit balance at 9/30/99 210,770 36,008 78,943 102,821 46,689 168,801 101,641
============= ============= ========= =========== ================ ============ ===========
</TABLE>
COVA VARIABLE ANNUITY ACCOUNT ONE
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Contract Owners of Cova Variable Annuity Account One, Board of
Directors and Shareholder of Cova Financial Services Life Insurance
Company:
We have audited the accompanying statements of assets and liabilities of
the Quality Income, Money Market, High Yield, Stock Index, Growth and
Income, Bond Debenture, Developing Growth, Large Cap Research, Mid-Cap
Value, Quality Bond, Small Cap Stock, Large Cap Stock, Select Equity,
International Equity, Balanced, Small Cap Equity, Equity Income, and Growth
and Income Equity sub-accounts (investment options within the Cova Series
Trust); the Growth and Income sub-account (investment option within the
Lord Abbett Series Fund, Inc.); the Money Market sub-account (investment
option within the General American Capital Company); the Multi-Style
Equity, Aggressive Equity, Non-US, and Core Bond sub-accounts (investment
options within the Russell Insurance Funds); the AIM V.I. Value, AIM V.I.
Capital Appreciation, and AIM V.I. International Equity sub-accounts
(investment options within the AIM Variable Insurance Funds, Inc.); the
Premier Growth and Real Estate Investment sub-accounts (investment option
within the Alliance Variable Products Series Fund, Inc.); Newport Tiger
sub-account (investment option within the Liberty Variable Investment
Trust); the Growth and Income, International Equity, and Global Income
sub-accounts (investment options within the Goldman Sachs Variable
Insurance Trust); the Kemper-Dreman High Return Equity, Kemper Small Cap
Growth, Kemper Small Cap Value, and Kemper Government Securities
sub-accounts (investment options within the Investors Fund Series); the MFS
Bond, MFS Research, MFS Growth with Income, MFS Emerging Growth, MFS /
Foreign & Colonial Emerging Markets Equity, MFS High Income, and MFS World
Government sub-accounts (investment options within the MFS Variable
Insurance Trust); the Oppenheimer Growth, Oppenheimer Growth & Income,
Oppenheimer High Income, Oppenheimer Bond, and Oppenheimer Strategic Bond
sub-accounts (investment options within the Oppenheimer Variable Account
Funds); the Putnam Growth and Income, Putnam New Value, Putnam Vista,
Putnam International Growth, and Putnam International New Opportunities
sub-accounts (investment options within the Putnam Variable Trust); the
Templeton International, Templeton Developing Markets, and Mutual Shares
Investments sub-accounts (investment options within the Templeton Variable
Products Series Fund); and the Growth, Contrafund, Growth Opportunities,
Growth & Income, and Equity-Income sub-accounts (investment options within
the Variable Insurance Products Fund, Fund II, and Fund III) of Cova
Variable Annuity Account One of Cova Financial Services Life Insurance
Company (the Separate Account), as of December 31, 1998, and the related
statement of operations for the year then ended and the statements of
changes in net assets for the two years then ended. These financial
statements are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with transfer agents. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the sub-accounts of
Cova Variable Annuity Account One of Cova Financial Services Life Insurance
Company as of December 31, 1998, and the results of their operations and
the changes in their net assets for each of the years presented, in
conformity with generally accepted accounting principles.
Chicago, Illinois
March 1, 1999
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Assets:
Investments:
Cova Series Trust (Trust):
Quality Income Portfolio - 3,558,351 shares at a net asset value of $10.99 per share (cost: $37,784) $ 39,092
Money Market Portfolio - 7,890,611 shares at a net asset value of $1.00 per share (cost: 7,891
$7,891)
High Yield Portfolio - 2,687,415 shares at a net asset value of $10.72 per share (cost: 28,801
$28,627)
Stock Index Portfolio - 4,387,719 shares at a net asset value of $22.24 per share (cost: 97,591
$71,753)
VKAC Growth and Income Portfolio - 2,881,569 shares at a net asset value of $17.81 per share (cost: 51,313
$39,792)
Bond Debenture Portfolio - 8,923,056 shares at a net asset value of $12.38 per share (cost: $106,952) 110,475
Developing Growth Portfolio - 1,321,613 shares at a net asset value of $11.24 per share (cost: $13,966) 14,856
Large Cap Research Portfolio - 1,083,984 shares at a net asset value of $11.96 per share (cost: $11,685) 12,969
Mid-Cap Value Portfolio - 1,620,159 shares at a net asset value of $10.58 per share (cost: $16,986) 17,146
Quality Bond Portfolio - 3,597,178 shares at a net asset value of $11.02 per share (cost: 39,640
$38,042)
Small Cap Stock Portfolio - 5,812,593 shares at a net asset value of $11.98 per share (cost: $69,302) 69,648
Large Cap Stock Portfolio - 4,491,961 shares at a net asset value of $18.12 per share (cost: $64,837) 81,372
Select Equity Portfolio - 11,154,141 shares at a net asset value of $16.08 per share (cost: $145,732) 179,317
International Equity Portfolio - 7,330,424 shares at a net asset value of $12.86 per share (cost: 94,249
$84,971)
Balanced Portfolio - 295,831 shares at a net asset value of $11.40 per share (cost: 3,372
$3,199)
Small Cap Equity Portfolio - 130,453 shares at a net asset value of $10.17 per share 1,327
(cost: $1,293)
Equity Income Portfolio - 297,898 shares at a net asset value of $11.63 per share (cost: 3,463
$3,393)
Growth and Income Equity Portfolio - 652,151 shares at a net asset value of $12.00 per share (cost: 7,823
$7,257)
Lord Abbett Series Fund, Inc. (Lord Abbett):
Growth and Income Portfolio - 32,409,746 shares at a net asset value of $20.65 per share (cost: 669,229
$554,776)
General American Capital Company (GACC):
Money Market Portfolio - 855,290 shares at a net asset value of $19.25 per share (cost: 16,465
$16,234)
Russell Insurance Funds (Russell):
Multi-Style Equity Fund - 1,845,200 shares at a net asset value of $16.02 per share 29,560
(cost: $26,361)
Aggressive Equity Fund - 420,730 shares at a net asset value of $12.70 per share (cost: 5,343
$5,268)
Non-US Fund - 930,176 shares at a net asset value of $11.09 per share (cost: $9,904) 10,316
Core Bond Fund - 1,596,523 shares at a net asset value of $10.68 per share (cost: $16,783) 17,051
AIM Variable Insurance Funds, Inc. (AIM):
AIM V.I. Value Fund - 259,667 shares at a net asset value of $26.25 per share (cost: 6,816
$6,148)
AIM V.I. Capital Appreciation Fund - 85,709 shares at a net asset value of $25.20 per share (cost: 2,160
$1,996)
AIM V.I. International Equity Fund - 118,489 shares at a net asset value of $19.62 per share (cost: 2,325
$2,244)
Alliance Variable Products Series Fund, Inc. (Alliance):
Premier Growth Portfolio - 314,149 shares at a net asset value of $31.03 per share (cost: 9,748
$8,226)
Real Estate Investment Portfolio - 156,353 shares at a net asset value of $9.78 per share (cost: $1,699) 1,529
Liberty Variable Investment Trust (Liberty):
Newport Tiger Fund, Variable Series - 187,736 shares at a net asset value of $1.57 per share (cost: 295
$241)
Goldman Sachs Variable Insurance Trust (Goldman Sachs):
Growth and Income Fund - 443,463 shares at a net asset value of $10.45 per share (cost: 4,634
$4,841)
International Equity Fund - 108,025 shares at a net asset value of $11.91 per share 1,287
(cost: $1,231)
Global Income Fund - 19,676 shares at a net asset value of $10.32 per share (cost: $204) 203
Investors Fund Series (Kemper):
Kemper Dreman High Return Equity Portfolio - 94,043 shares at a net asset value of $1.03 per share 97
(cost: $96)
Kemper Small Cap Growth Portfolio - 452,858 shares at a net asset value of $1.97 per share (cost: $786) 893
Kemper Small Cap Value Portfolio - 2,013,651 shares at a net asset value of $1.07 per share (cost: 2,145
$2,300)
Kemper Government Securities Portfolio - 521,770 shares at a net asset value of $1.21 per share (cost: 630
$621)
MFS Variable Insurance Trust (MFS):
MFS Bond Series - 15,247 shares at a net asset value of $11.38 per share (cost: $173) 174
MFS Research Series - 297,006 shares at a net asset value of $19.05 per share (cost: 5,658
$5,177)
MFS Growth with Income Series - 348,890 shares at a net asset value of $20.11 per share (cost: $6,442) 7,016
MFS Emerging Growth Series - 332,636 shares at a net asset value of $21.47 per share (cost: $6,157) 7,142
MFS / Foreign & Colonial Emerging Markets Equity Series - 81,505 shares at a net asset value of $5.90 per
share
(cost: $575) 481
MFS High Income Series - 187,184 shares at a net asset value of $11.53 per share (cost: 2,158
$2,192)
MFS World Governments Series - 2,042 shares at a net asset value of $10.88 per share (cost: $21) 22
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Assets, continued:
Investments, continued:
Oppenheimer Variable Account Funds (Oppenheimer):
Oppenheimer Growth Fund - 32,413 shares at a net asset value of $36.67 per share (cost: $ 1,189
$1,055)
Oppenheimer Growth & Income Fund - 143,624 shares at a net asset value of $20.48 per share (cost: 2,941
$2,969)
Oppenheimer High Income Fund - 70,492 shares at a net asset value of $11.02 per share (cost: $792) 777
Oppenheimer Bond Fund - 343,696 shares at a net asset value of $12.32 per share (cost: 4,234
$4,139)
Oppenheimer Strategic Bond Fund - 213,879 shares at a net asset value of $5.12 per share (cost: $1,092) 1,095
Putnam Variable Trust (Putnam):
Putnam Growth and Income Fund - 441,423 shares at a net asset value of $28.77 per share (cost: $12,040) 12,700
Putnam New Value Fund - 36,681 shares at a net asset value of $12.03 per share (cost: 441
$435)
Putnam Vista Fund - 121,228 shares at a net asset value of $14.72 per share (cost: $1,612) 1,785
Putnam International Growth Fund - 458,993 shares at a net asset value of $13.52 per share (cost: 6,206
$5,853)
Putnam International New Opportunities Fund - 52,407 shares at a net asset value of $11.49 per share 602
(cost: $562)
Templeton Variable Products Series Fund (Templeton):
Templeton International Fund - 72,830 shares at a net asset value of $20.69 per share (cost: $1,459) 1,507
Templeton Developing Markets Fund - 132,446 shares at a net asset value of $5.13 per share (cost: $635) 679
Mutual Shares Investments Fund - 105,064 shares at a net asset value of $9.72 per share (cost: $989) 1,021
Variable Insurance Products Fund, Fund II and Fund III (Fidelity):
Growth Portfolio - 1,967 shares at a net asset value of $44.87 per share (cost: $76) 88
Contrafund Portfolio - 16,359 shares at a net asset value of $24.44 per share (cost: $352) 400
Growth Opportunities Portfolio - 4,888 shares at a net asset value of $22.88 per share 112
(cost: $99)
Growth & Income Portfolio - 52,766 shares at a net asset value of $16.15 per share (cost: 852
$758)
Equity-Income Portfolio - 10,089 shares at a net asset value of $25.42 per share (cost: 256
$239)
----------
Total assets $ 1,700,607
==========
Liabilities:
Trust Quality Income $ 2
Trust High Yield 1
Trust Stock Index 4
Trust VKAC Growth and Income 2
Trust Bond Debenture 4
Trust Developing Growth 1
Trust Large Cap Research 1
Trust Mid-Cap Value 1
Trust Quality Bond 2
Trust Small Cap Stock 3
Trust Large Cap Stock 3
Trust Select Equity 7
Trust International Equity 4
Lord Abbett Growth and Income 26
GACC Money Market 1
Russell Multi-Style Equity 1
Russell Core Bond 1
Putnam Growth and Income 1
----------
Total liabilities $ 65
==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Net assets:
Accumulation units:
Trust Quality Income - 2,223,679 accumulation units at $17.539854 per unit $ 39,004
Trust Money Market - 609,566 accumulation units at $12.882171 per unit 7,853
Trust High Yield - 1,205,159 accumulation units at $23.857965 per unit 28,754
Trust Stock Index - 3,092,969 accumulation units at $31.522392 per unit 97,498
Trust VKAC Growth and Income - 2,101,219 accumulation units at $24.396666 per unit 51,263
Trust Bond Debenture - 8,184,894 accumulation units at $13.496500 per unit 110,468
Trust Developing Growth - 1,342,201 accumulation units at $11.067854 per unit 14,855
Trust Large Cap Research - 1,094,920 accumulation units at $11.825550 per unit 12,947
Trust Mid-Cap Value - 1,642,553 accumulation units at $10.437949 per unit 17,145
Trust Quality Bond - 3,323,343 accumulation units at $11.914489 per unit 39,596
Trust Small Cap Stock - 5,532,610 accumulation units at $12.582860 per unit 69,616
Trust Large Cap Stock - 4,178,035 accumulation units at $19.428499 per unit 81,173
Trust Select Equity - 10,544,818 accumulation units at $16.987204 per unit 179,127
Trust International Equity - 7,309,325 accumulation units at $12.889315 per unit 94,212
Trust Balanced - 286,511 accumulation units at $11.767845 per unit 3,372
Trust Small Cap Equity - 129,636 accumulation units at $10.238676 per unit 1,327
Trust Equity Income - 286,953 accumulation units at $12.068849 per unit 3,463
Trust Growth and Income Equity - 641,789 accumulation units at $12.188331 per unit 7,823
Lord Abbett Growth and Income - 19,470,393 accumulation units at $34.325425 per unit 668,329
GACC Money Market - 1,473,737 accumulation units at $11.109943 per unit 16,373
Russell Multi-Style Equity - 2,328,430 accumulation units at $12.694810 per unit 29,559
Russell Aggressive Equity - 536,278 accumulation units at $9.963254 per unit 5,343
Russell Non-US - 925,792 accumulation units at $11.142092 per unit 10,316
Russell Core Bond - 1,609,851 accumulation units at $10.591175 per unit 17,050
AIM Value - 521,890 accumulation units at $13.060203 per unit 6,816
AIM Capital Appreciation - 183,488 accumulation units at $11.770729 per unit 2,160
AIM International Equity - 204,072 accumulation units at $11.391449 per unit 2,325
Alliance Premier Growth - 667,854 accumulation units at $14.595485 per unit 9,748
Alliance Real Estate Investment - 191,411 accumulation units at $7.988435 per unit 1,529
Liberty Newport Tiger - 31,936 accumulation units at $9.228765 per unit 295
Goldman Sachs Growth and Income - 467,675 accumulation units at $9.908613 per unit 4,634
Goldman Sachs International Equity - 112,824 accumulation units at $11.402925 per unit 1,287
Goldman Sachs Global Income - 18,833 accumulation units at $10.781765 per unit 203
Kemper Dreman High Return Equity - 9,223 accumulation units at $10.487302 per unit 97
Kemper Small Cap Growth - 76,492 accumulation units at $11.676086 per unit 893
Kemper Small Cap Value - 245,092 accumulation units at $8.753222 per unit 2,145
Kemper Government Securities - 59,712 accumulation units at $10.556498 per unit 630
MFS Bond - 16,538 accumulation units at $10.491811 per unit 174
MFS Research - 464,786 accumulation units at $12.172796 per unit 5,658
MFS Growth with Income - 581,434 accumulation units at $12.066568 per unit 7,016
MFS Emerging Growth - 539,659 accumulation units at $13.233235 per unit 7,142
MFS / F&C Emerging Markets Equity - 73,171 accumulation units at $6.571830 per unit 481
MFS High Income - 219,209 accumulation units at $9.845193 per unit 2,158
MFS World Governments - 2,082 accumulation units at $10.669943 per unit 22
Oppenheimer Growth - 97,161 accumulation units at $12.232731 per unit 1,189
Oppenheimer Growth & Income - 284,830 accumulation units at $10.326519 per unit 2,941
Oppenheimer High Income - 78,513 accumulation units at $9.893828 per unit 777
Oppenheimer Bond - 401,990 accumulation units at $10.533011 per unit 4,234
Oppenheimer Strategic Bond - 107,869 accumulation units at $10.151332 per unit 1,095
Putnam Growth and Income - 1,115,668 accumulation units at $11.382650 per unit 12,699
Putnam New Value - 42,091 accumulation units at $10.483517 per unit 441
Putnam Vista - 151,405 accumulation units at $11.785702 per unit 1,785
Putnam International Growth - 530,055 accumulation units at $11.707003 per unit 6,206
Putnam International New Opportunities - 52,809 accumulation units at $11.402252 per unit 602
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
(In thousands of dollars)
<S> <C>
Net assets, continued:
Accumulation units, continued:
Templeton International - 164,775 accumulation units at $9.144522 per unit $ 1,507
Templeton Developing Markets - 89,960 accumulation units at $7.552448 per unit 679
Templeton Mutual Shares Investments - 106,035 accumulation units at $9.630622 per unit 1,021
Fidelity VIP Growth - 6,748 accumulation units at $13.077878 per unit 88
Fidelity VIP II Contrafund - 32,354 accumulation units at $12.357373 per unit 400
Fidelity VIP III Growth Opportunities - 9,523 accumulation units at $11.742360 per unit 112
Fidelity VIP III Growth & Income - 69,833 accumulation units at $12.202502 per unit 852
Fidelity VIP Equity-Income - 24,132 accumulation units at $10.626607 per unit 256
Annuitization units:
Trust Quality Income - 6,383 annuity units at $13.420183 per unit 86
Trust Money Market - 3,661 annuity units at $10.319723 per unit 38
Trust High Yield - 2,504 annuity units at $18.254328 per unit 46
Trust Stock Index - 3,489 annuity units at $25.505004 per unit 89
Trust VKAC Growth and Income - 2,405 annuity units at $20.029452 per unit 48
Trust Bond Debenture - 264 annuity units at $12.439290 per unit 3
Trust Large Cap Research - 1,824 annuity units at $11.357085 per unit 21
Trust Quality Bond - 3,838 annuity units at $10.981198 per unit 42
Trust Small Cap Stock - 2,555 annuity units at $11.597212 per unit 29
Trust Large Cap Stock - 10,956 annuity units at $17.906619 per unit 196
Trust Select Equity - 11,716 annuity units at $15.656564 per unit 183
Trust International Equity - 2,825 annuity units at $11.879669 per unit 33
Lord Abbett Growth and Income - 33,266 annuity units at $26.263244 per unit 874
GACC Money Market - 8,875 annuity units at $10.294566 per unit 91
----------
Total net assets $ 1,700,542
==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Trust
-----------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income Debenture Growth
------------------------- -------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 2,356 784 1,365 468 306 2,261 --
------- -------- ------- -------- -------- ----------- ------------
Expenses:
Mortality and expense risk fee 553 179 394 1,135 621 993 89
Administrative fee 66 22 48 136 75 119 10
------- -------- ------- -------- -------- ----------- ------------
Total expenses 619 201 442 1,271 696 1,112 99
------- -------- ------- -------- -------- ----------- ------------
Net investment
income (loss) 1,737 583 923 (803) (390) 1,149 (99)
------- -------- ------- -------- -------- ----------- ------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 455 -- 135 6,103 1,440 19 (14)
Realized gain distributions -- -- -- 15,804 5,687 880 4
------- -------- ------- -------- -------- ----------- ------------
Net realized gain (loss) 455 -- 135 21,907 7,127 899 (10)
------- -------- ------- -------- -------- ----------- ------------
Change in unrealized
appreciation during the year 6 -- (668) 838 634 1,565 883
------- -------- ------- -------- -------- ----------- ------------
Net increase (decrease)
in net assets from
operations $ 2,198 583 390 21,942 7,371 3,613 774
======= ======== ======= ======== ======== =========== ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Trust
--------------------------------------------------------------------
Small Large
Large Cap Mid-Cap Quality Cap Cap Select
Research Value Bond Stock Stock Equity
--------------- --------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 15 13 557 86 120 413
--------------- -------- ------- -------- -------- --------
Expenses:
Mortality and expense risk fee 72 109 326 783 580 1,700
Administrative fee 9 13 39 94 70 204
--------------- --------- ------- -------- -------- --------
Total expenses 81 122 365 877 650 1,904
--------------- --------- ------- -------- -------- --------
Net investment
income (loss) (66) (109) 192 (791) (530) (1,491)
--------------- --------- ------- -------- -------- --------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 5 (3) 36 (125) 16 210
Realized gain distributions -- -- -- 2,193 396 8,232
--------------- --------- ------- -------- -------- --------
Net realized gain (loss) 5 (3) 36 2,068 412 8,442
--------------- --------- ------- -------- -------- --------
Change in unrealized
appreciation during the year 1,278 120 1,412 (6,177) 13,680 20,065
--------------- --------- ------- -------- -------- --------
Net increase (decrease)
in net assets from
operations $ 1,217 8 1,640 (4,900) 13,562 27,016
=============== ========= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Trust
--------------------------------------------------------
Growth
Small and
International Cap Equity Income
Equity Balanced Equity Income Equity
------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ 1,435 46 - 37 29
------------- ---------- ------- -------- --------
Expenses:
Mortality and expense risk fee 1,007 20 9 23 53
Administrative fee 121 3 1 3 6
------------- ---------- ------- -------- --------
Total expenses 1,128 23 10 26 59
------------- ---------- ------- -------- --------
Net investment
income (loss) 307 23 (10) 11 (30)
------------- ---------- ------- -------- --------
Net realized gain (loss)
on investments:
Realized gain (loss) on
sale of fund shares 310 (1) (3) - 7
Realized gain distributions 18 41 14 80 160
------------- ---------- ------- -------- --------
Net realized gain (loss) 328 40 11 80 167
------------- ---------- ------- -------- --------
Change in unrealized
appreciation during the year 7,969 173 39 49 548
------------- ---------- ------- -------- --------
Net increase (decrease)
in net assets from
operations $ 8,604 236 40 140 685
============= ========== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Lord Abbett
------------
Growth GACC Russell
----------- ----------------------------------------------
and Money Multi-Style Aggressive Core
Income Market Equity Equity Non-US Bond
-------- ----------- ----------- ------------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 9,871 -- 54 2 10 294
-------- ----------- ----------- ------------ ---------- -------
Expenses:
Mortality and expense risk fee 7,241 144 164 30 57 103
Administrative fee 869 17 19 3 7 13
-------- ----------- ----------- ------------ ---------- -------
Total expenses 8,110 161 183 33 64 116
-------- ----------- ----------- ------------ ---------- -------
Net investment
income (loss) 1,761 (161) (129) (31) (54) 178
-------- ----------- ----------- ------------ ---------- -------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 2,081 436 1 (44) 2 1
Realized gain distributions 31,739 -- 39 26 3 6
-------- ----------- ----------- ------------ ---------- -------
Net realized gain (loss) 33,820 436 40 (18) 5 7
-------- ----------- ----------- ------------ ---------- -------
Change in unrealized
appreciation during the year 26,592 185 3,199 75 412 268
-------- ----------- ----------- ------------ ---------- -------
Net increase (decrease)
in net assets from
operations $ 62,173 460 3,110 26 363 453
======== =========== =========== ============ ========== =======
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
AIM Alliance
--------------------------------------- -------------------------
Capital International Premier Real Estate
Value Appreciation Equity Growth Investment
------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ 29 3 18 3 11
--------- ------------- ------------- ----------- -----------
Expenses:
Mortality and expense risk fee 33 12 17 43 9
Administrative fee 4 2 2 5 1
--------- ------------- ------------- ----------- -----------
Total expenses 37 14 19 48 10
--------- ------------- ------------- ----------- -----------
Net investment
income (loss) (8) (11) (1) (45) 1
--------- ------------- ------------- ----------- -----------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (10) (3) (3) (4) (2)
Realized gain distributions 260 53 -- -- 5
--------- ------------- ------------- ----------- -----------
Net realized gain (loss) 250 50 (3) (4) 3
--------- ------------- ------------- ----------- -----------
Change in unrealized
appreciation during the year 668 164 81 1,522 (170)
--------- ------------- ------------- ----------- -----------
Net increase (decrease)
in net assets from
operations $ 910 203 77 1,473 (166)
========= ============= ============= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Goldman Sachs
------------------------------------
Liberty
--------- Growth
Newport and International Global
Tiger Income Equity Income
--------- ------------ ------------- -------
<S> <C> <C> <C> <C>
Income -
dividends $ 6 41 -- 7
--------- ------------ ------------- -------
Expenses:
Mortality and expense risk fee 2 26 6 1
Administrative fee -- 3 1 --
--------- ------------ ------------- -------
Total expenses 2 29 7 1
--------- ------------ ------------- -------
Net investment
income (loss) 4 12 (7) 6
--------- ------------ ------------- -------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (30) (12) -- 1
Realized gain distributions -- -- 10 2
--------- ------------ ------------- -------
Net realized gain (loss) (30) (12) 10 3
--------- ------------ ------------- -------
Change in unrealized
appreciation during the year 54 (207) 56 (1)
--------- ------------ ------------- -------
Net increase (decrease)
in net assets from
operations $ 28 (207) 59 8
========= ============ ============= =======
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
MFS
----------------------------
Kemper
---------------------------------------------------- Growth
Dreman High Small Cap Small Cap Government with
Return Equity Growth Value Securities Bond Research Income
-------------------------- ---------- ------------ ------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ -- -- -- 2 -- 1 --
-------------- ---------- ---------- ------------ ------- ------------------
Expenses:
Mortality and expense risk fee -- 4 12 2 -- 26 34
Administrative fee -- 1 1 -- -- 3 4
-------------- ---------- ---------- ------------ ------- ------------------
Total expenses -- 5 13 2 -- 29 38
-------------- ---------- ---------- ------------ ------- ------------------
Net investment
income (loss) -- (5) (13) -- -- (28) (38)
-------------- ---------- ---------- ------------ ------- ------------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares -- (27) (4) -- -- (2) --
Realized gain distributions -- 24 12 -- -- 18 --
-------------- ---------- ---------- ------------ ------- ------------------
Net realized gain (loss) -- (3) 8 -- -- 16 --
-------------- ---------- ---------- ------------ ------- ------------------
Change in unrealized
appreciation during the year 1 107 (155) 9 1 481 574
-------------- ---------- ---------- ------------ ------- ------------------
Net increase (decrease)
in net assets from
operations $ 1 99 (160) 9 1 469 536
============== ========== ========== ============ ======= ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
MFS
--------------------------------------------------
F&C
Emerging
Emerging Markets High World
Growth Equity Income Governments
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Income -
dividends $ -- 8 16 --
---------- ---------- ---------- --------------
Expenses:
Mortality and expense risk fee 33 4 10 --
Administrative fee 4 1 1 --
---------- ---------- ---------- --------------
Total expenses 37 5 11 --
---------- ---------- ---------- --------------
Net investment
income (loss) (37) 3 5 --
---------- ---------- ---------- --------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (11) (97) (2) --
Realized gain distributions 9 -- 5 --
---------- ---------- ---------- --------------
Net realized gain (loss) (2) (97) 3 --
---------- ---------- ---------- --------------
Change in unrealized
appreciation during the year 985 (94) (34) 1
---------- ---------- ---------- --------------
Net increase (decrease)
in net assets from
operations $ 946 (188) (26) 1
========== ========== ========== ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
OPPENHEIMER
-----------------------------------------------------
GROWTH
AND HIGH STRATEGIC
GROWTH INCOME INCOME BOND BOND
---------- ---------- ----------- ----- --------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ 1 2 4 5 3
---------- ---------- ----------- ----- --------
Expenses:
Mortality and expense risk fee 6 19 5 22 5
Administrative fee 1 2 -- 2 1
---------- ---------- ----------- ----- --------
Total expenses 7 21 5 24 6
---------- ---------- ----------- ----- --------
Net investment
income (loss) (6) (19) (1) (19) (3)
---------- ---------- ----------- ----- --------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (1) (37) (1) -- --
Realized gain distributions 8 39 4 5 2
---------- -------- ----------- ----- --------
Net realized gain (loss) 7 2 3 5 2
---------- ---------- ----------- ----- --------
Change in unrealized
appreciation during the year 134 (28) (15) 95 3
---------- ---------- ----------- ----- --------
Net increase (decrease)
in net assets from
operations $ 135 (45) (13) 81 2
========== ========== =========== ===== ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Putnam
---------------------------------------------------------------------
Growth International
and New International New
Income Value Vista Growth Opportunities
---------- ---------- ---------- -------------- -----------------
<S> <C> <C> <C>
Income -
dividends $ 30 5 -- 20 --
---------- ---------- ---------- -------------- -----------------
Expenses:
Mortality and expense risk fee 68 3 8 33 4
Administrative fee 8 -- 1 4 --
---------- ---------- ---------- -------------- -----------------
Total expenses 76 3 9 37 4
---------- ---------- ---------- -------------- -----------------
Net investment
income (loss) (46) 2 (9) (17) (4)
---------- ---------- ---------- -------------- -----------------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (8) -- (1) (39) 24
Realized gain distributions 200 2 -- -- --
---------- ---------- ---------- -------------- -----------------
Net realized gain (loss) 192 2 (1) (39) 24
---------- ---------- ---------- -------------- -----------------
Change in unrealized
appreciation during the year 660 6 173 353 40
---------- ---------- ---------- -------------- -----------------
Net increase (decrease)
in net assets from
operations $ 806 10 163 297 60
========== ========== ========== ============== =================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Templeton Fidelity
----------------------------------------- ------------------------
Mutual
Developing Shares
International Markets Investments Growth Contrafund
------------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ -- -- -- -- --
------------- ------------ ------------ -------- -----------
Expenses:
Mortality and expense risk fee 5 2 4 -- 2
Administrative fee 1 1 1 -- --
------------- ------------ ------------ -------- -----------
Total expenses 6 3 5 -- 2
------------- ------------ ------------ -------- -----------
Net investment
income (loss) (6) (3) (5) -- (2)
------------- ------------ ------------ -------- -----------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares 8 (4) -- (3) (2)
Realized gain distributions -- -- -- -- --
------------- ------------ ------------ -------- -----------
Net realized gain (loss) 8 (4) -- (3) (2)
------------- ------------ ------------ -------- -----------
Change in unrealized
appreciation during the year 48 44 32 12 48
------------- ------------ ------------ -------- -----------
Net increase (decrease)
in net assets from
operations $ 50 37 27 9 44
============= ============ ============ ======== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
(In thousands of dollars)
Fidelity
------------------------------------
Growth Growth & Equity-
Opportunities Income Income Total
-------------- ---------- --------------------
<S> <C> <C> <C> <C>
Income -
dividends $ -- -- -- 20,737
-------------- ---------- -------- ---------
Expenses:
Mortality and expense risk fee -- 4 1 16,850
Administrative fee -- 1 -- 2,023
-------------- ---------- -------- ---------
Total expenses -- 5 1 18,873
-------------- ---------- -------- ---------
Net investment
income (loss) -- (5) (1) 1,864
-------------- ---------- -------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) on
sale of fund shares (2) (5) (3) 10,787
Realized gain distributions -- -- -- 65,980
-------------- ---------- -------- ---------
Net realized gain (loss) (2) (5) (3) 76,767
-------------- ---------- -------- ---------
Change in unrealized
appreciation during the year 13 94 17 78,917
-------------- ---------- -------- ---------
Net increase (decrease)
in net assets from
operations $ 11 84 13 157,548
============== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Trust
----------------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income Debenture Growth
-------- -------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 1,737 583 923 (803) (390) 1,149 (99)
Net realized gain (loss) 455 -- 135 21,907 7,127 899 (10)
Change in unrealized
appreciation during
the year 6 -- (668) 838 634 1,565 883
-------- -------- --------- -------- --------- --------- -----------
Net increase (decrease)
in net assets from
operations 2,198 583 390 21,942 7,371 3,613 774
-------- -------- --------- -------- --------- --------- -----------
Contract transactions:
Cova payments -- -- -- -- -- -- --
Cova transfers -- -- -- -- -- -- (112)
Payments received from contract
owners 21 6 55 69 39 21,396 6,348
Transfers between sub-accounts
(including fixed account), net (3,399) (10,098) (1,392) 3,960 1,244 38,789 6,481
Transfers for contract benefits
and terminations (8,833) (4,210) (3,514) (17,021) (3,490) (4,147) (201)
-------- -------- --------- -------- --------- --------- -----------
Net increase (decrease) in
net assets from
contract transactions (12,211) (14,302) (4,851) (12,992) (2,207) 56,038 12,516
-------- -------- --------- -------- --------- --------- -----------
Net increase (decrease)
in net assets (10,013) (13,719) (4,461) 8,950 5,164 59,651 13,290
Net assets at beginning of period 49,103 21,610 33,261 88,637 46,147 50,820 1,565
-------- -------- --------- -------- --------- --------- -----------
Net assets at end of period $ 39,090 7,891 28,800 97,587 51,311 110,471 14,855
======== ======== ========= ======== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Trust
----------------------------------------------------------------------------
Small Large
Large Cap Mid-Cap Quality Cap Cap Select
Research Value Bond Stock Stock Equity
------------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (66) (109) 192 (791) (530) (1,491)
Net realized gain (loss) 5 (3) 36 2,068 412 8,442
Change in unrealized
appreciation during
the year 1,278 120 1,412 (6,177) 13,680 20,065
------------- ----------- ---------- ---------- ---------- -----------
Net increase (decrease)
in net assets from
operations 1,217 8 1,640 (4,900) 13,562 27,016
------------- ----------- ---------- ---------- ---------- -----------
Contract transactions:
Cova payments -- -- -- -- -- --
Cova transfers (102) (107) -- -- -- --
Payments received from contract
owners 6,104 7,924 9,698 8,193 18,801 21,003
Transfers between sub-accounts
(including fixed account), net 4,750 7,602 14,372 15,607 29,039 38,783
Transfers for contract benefits
and terminations (234) (317) (2,058) (2,424) (2,022) (4,555)
------------- ----------- ---------- ---------- ---------- -----------
Net increase (decrease) in
net assets from
contract transactions 10,518 15,102 22,012 21,376 45,818 55,231
------------- ----------- ---------- ---------- ---------- -----------
Net increase (decrease)
in net assets 11,735 15,110 23,652 16,476 59,380 82,247
Net assets at beginning of period 1,233 2,035 15,986 53,169 21,989 97,063
------------- ----------- ---------- ---------- ---------- -----------
Net assets at end of period $ 12,968 17,145 39,638 69,645 81,369 179,310
============= =========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
-----------------------------------------------------------------
Growth
Small and
International Cap Equity Income
Equity Balanced Equity Income Equity
--------------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 307 23 (10) 11 (30)
Net realized gain (loss) 328 40 11 80 167
Change in unrealized
appreciation during
the year 7,969 173 39 49 548
--------------- ----------- --------- --------- ---------
Net increase (decrease)
in net assets from
operations 8,604 236 40 140 685
--------------- ----------- --------- --------- ---------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 8,143 1,408 442 1,820 3,014
Transfers between sub-accounts
(including fixed account), net 18,076 1,373 588 988 2,913
Transfers for contract benefits
and terminations (2,949) (46) (15) (42) (98)
--------------- ----------- --------- --------- ---------
Net increase (decrease) in
net assets from
contract transactions 23,270 2,735 1,015 2,766 5,829
--------------- ----------- --------- ---------------------
Net increase (decrease)
in net assets 31,874 2,971 1,055 2,906 6,514
Net assets at beginning of period 62,371 401 272 557 1,309
--------------- ----------- --------- --------- ---------
Net assets at end of period $ 94,245 3,372 1,327 3,463 7,823
=============== =========== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Lord Abbett
----------------
GACC Russell
Growth ---------- -------------------------------------------------
and Money Multi-Style Aggressive Core
Income Market Equity Equity Non-US Bond
---------------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,761 (161) (129) (31) (54) 178
Realized gain (loss) 33,820 436 40 (18) 5 7
Change in unrealized
appreciation during
the year 26,592 185 3,199 75 412 268
---------------- ---------- ----------- ---------- --------- ----------
Net increase (decrease)
in net assets from
operations 62,173 460 3,110 26 363 453
---------------- ---------- ----------- ---------- --------- ----------
Contract transactions:
Cova payments -- -- -- -- -- --
Cova transfers -- -- -- -- -- --
Payments received from contract
owners 55,721 35,352 21,870 4,296 8,107 13,098
Transfers between sub-accounts
(including fixed account), net 102,796 (19,753) 4,748 1,041 1,920 3,732
Transfers for contract benefits
and terminations (38,987) (2,913) (169) (20) (74) (233)
---------------- ---------- ----------- ---------- --------- ----------
Net increase (decrease) in
net assets from
contract transactions 119,530 12,686 26,449 5,317 9,953 16,597
---------------- ---------- ----------- ---------- --------- ----------
Net increase (decrease)
in net assets 181,703 13,146 29,559 5,343 10,316 17,050
Net assets at beginning of period 487,500 3,318 -- -- -- --
---------------- ---------- ----------- ---------- --------- ----------
Net assets at end of period $ 669,203 16,464 29,559 5,343 10,316 17,050
================ ========== =========== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
AIM Alliance
------------------------------------------------- ------------------------------
Capital International Premier Real Estate
Value Appreciation Equity Growth Investment
---------- ---------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (8) (11) (1) (45) 1
Realized gain (loss) 250 50 (3) (4) 3
Change in unrealized
appreciation during
the year 668 164 81 1,522 (170)
---------- ---------------- ---------------- -------------- --------------
Net increase (decrease)
in net assets from
operations 910 203 77 1,473 (166)
---------- ---------------- ---------------- -------------- --------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 4,061 1,431 1,648 6,485 1,193
Transfers between sub-accounts
(including fixed account), net 2,030 609 609 1,828 514
Transfers for contract benefits
and terminations (185) (83) (9) (38) (12)
---------- ---------------- ---------------- -------------- --------------
Net increase (decrease) in
net assets from
contract transactions 5,906 1,957 2,248 8,275 1,695
---------- ------------- ---------------- -------------- --------------
Net increase (decrease)
in net assets 6,816 2,160 2,325 9,748 1,529
Net assets at beginning of period -- -- -- -- --
---------- ---------------- ---------------- -------------- --------------
Net assets at end of period $ 6,816 2,160 2,325 9,748 1,529
========== ================ ================ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Goldman Sachs
-----------------------------------------
Liberty Growth
---------------
Newport and International Global
Tiger Income Equity Income
--------------- ----------------------------- ----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 4 12 (7) 6
Realized gain (loss) (30) (12) 10 3
Change in unrealized
appreciation during
the year 54 (207) 56 (1)
--------------- ----------- ---------------- ----------
Net increase (decrease)
in net assets from
operations 28 (207) 59 8
--------------- ----------- ---------------- ----------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- --
Payments received from contract
owners 159 3,067 979 125
Transfers between sub-accounts
(including fixed account), net 108 1,826 255 84
Transfers for contract benefits
and terminations -- (52) (6) (14)
--------------- ----------- ---------------- ----------
Net increase (decrease) in
net assets from
contract transactions 267 4,841 1,228 195
--------------- ----------- ---------------- ----------
Net increase (decrease)
in net assets 295 4,634 1,287 203
Net assets at beginning of period -- -- -- --
--------------- ----------- ---------------- ----------
Net assets at end of period $ 295 4,634 1,287 203
=============== =========== ================ ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
MFS
-----------------------
Kemper
-------------- ---------------------------------------
Dreman High Small Cap Small Cap Government
Return Equity Growth Value Securities Bond Research
-------------- ------------ ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ -- (5) (13) -- -- (28)
Realized gain (loss) -- (3) 8 -- -- 16
Change in unrealized
appreciation during
the year 1 107 (155) 9 1 481
-------------- ------------ ------------ ----------- --------- ------------
Net increase (decrease)
in net assets from
operations 1 99 (160) 9 1 469
-------------- ------------ ------------ ----------- --------- ------------
Contract transactions:
Cova payments -- -- -- -- -- --
Cova transfers -- -- -- -- -- --
Payments received from contract
owners -- 630 1,656 503 3 3,760
Transfers between sub-accounts
(including fixed account), net 96 162 670 120 170 1,530
Transfers for contract benefits
and terminations -- 2 (21) (2) -- (101)
-------------- ------------ ------------ ----------- --------- ------------
Net increase (decrease) in
net assets from
contract transactions 96 794 2,305 621 173 5,189
-------------- ------------ ------------ ----------- --------- ------------
Net increase (decrease)
in net assets 97 893 2,145 630 174 5,658
Net assets at beginning of period -- -- -- -- -- --
-------------- ------------ ------------ ----------- --------- ------------
Net assets at end of period $ 97 893 2,145 630 174 5,658
============== ============ ============ =========== ========= ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
MFS
-------------------------------------------------------------------------
F&C
Growth Emerging
with Emerging Markets High World
Income Growth Equity Income Governments
----------------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (38) (37) 3 5 --
Realized gain (loss) -- (2) (97) 3 --
Change in unrealized
appreciation during
the year 574 985 (94) (34) 1
-------- ------------ ------------ ------------ -----------------
Net increase (decrease)
in net assets from
operations 536 946 (188) (26) 1
-------- ------------ ------------ ------------ -----------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 4,624 5,018 421 1,634 4
Transfers between sub-accounts
(including fixed account), net 1,901 1,216 252 570 17
Transfers for contract benefits
and terminations (45) (38) (4) (20) --
-------- ------------ ------------ ------------ -----------------
Net increase (decrease) in
net assets from
contract transactions 6,480 6,196 669 2,184 21
-------- ------------ ------------ ------------ -----------------
Net increase (decrease)
in net assets 7,016 7,142 481 2,158 22
Net assets at beginning of period -- -- -- -- --
-------- ------------ ------------ ------------ -----------------
Net assets at end of period $ 7,016 7,142 481 2,158 22
======== ============ ============ ============ =================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
OPPENHEIMER
--------------------------------------------------------------------
GROWTH
AND HIGH STRATEGIC
GROWTH INCOME INCOME BOND BOND
------------- ------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (6) (19) (1) (19) (3)
Realized gain (loss) 7 2 3 5 2
Change in unrealized
appreciation during
the year 134 (28) (15) 95 3
------------- ------------ ------------ --------- -------------
Net increase (decrease)
in net assets from
operations 135 (45) (13) 81 2
------------- ------------ ------------ --------- -------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 838 2,140 517 3,298 725
Transfers between sub-accounts
(including fixed account), net 220 859 281 889 371
Transfers for contract benefits
and terminations (4) (13) (8) (34) (3)
------------- ------------ ------------ --------- -------------
Net increase (decrease) in
net assets from
contract transactions 1,054 2,986 790 4,153 1,093
------------- ------------ ------------ --------- -------------
Net increase (decrease)
in net assets 1,189 2,941 777 4,234 1,095
Net assets at beginning of period -- -- -- -- --
------------- ------------ ------------ --------- -------------
Net assets at end of period $ 1,189 2,941 777 4,234 1,095
============= ============ ============ ========= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Putnam
---------------------------------------------------------------------------
Growth International
and New International New
Income Value Vista Growth Opportunities
------------- ------------ ---------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (46) 2 (9) (17) (4)
Net realized gain (loss) 192 2 (1) (39) 24
Change in unrealized
appreciation during
the year 660 6 173 353 40
------------- ------------ ---------- --------------- ------------------
Net increase (decrease)
in net assets from
operations 806 10 163 297 60
------------- ------------ ---------- --------------- ------------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 8,705 173 1,241 4,444 423
Transfers between sub-accounts
(including fixed account), net 3,257 259 385 1,511 127
Transfers for contract benefits
and terminations (69) (1) (4) (46) (8)
------------- ------------ ---------- --------------- ------------------
Net increase (decrease) in
net assets from
contract transactions 11,893 431 1,622 5,909 542
------------- ------------ ---------- --------------- ------------------
Net increase (decrease)
in net assets 12,699 441 1,785 6,206 602
Net assets at beginning of period -- -- -- -- --
------------- ------------ ---------- --------------- ------------------
Net assets at end of period $ 12,699 441 1,785 6,206 602
============= ============ ========== =============== ==================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Templeton Fidelity
-------------------------------------------- ----------------------
Mutual
Developing Shares
International Markets Investments Growth Contrafund
------------- ------------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (6) (3) (5) -- (2)
Net realized gain (loss) 8 (4) -- (3) (2)
Change in unrealized
appreciation during
the year 48 44 32 12 48
------------- ------------- -------------- -------- -------------
Net increase (decrease)
in net assets from
operations 50 37 27 9 44
------------- ------------- -------------- -------- -------------
Contract transactions:
Cova payments -- -- -- -- --
Cova transfers -- -- -- -- --
Payments received from contract
owners 1,261 509 584 86 330
Transfers between sub-accounts
(including fixed account), net 201 139 415 (5) 24
Transfers for contract benefits
and terminations (5) (6) (5) (2) 2
------------- ------------- -------------- -------- -------------
Net increase (decrease) in
net assets from
contract transactions 1,457 642 994 79 356
------------- ------------- -------------- -------- -------------
Net increase (decrease)
in net assets 1,507 679 1,021 88 400
Net assets at beginning of period -- -- -- -- --
------------- ------------- -------------- -------- -------------
Net assets at end of period $ 1,507 679 1,021 88 400
============= ============= ============== ======== =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
(In thousands of dollars)
Fidelity
----------------------------------------------
Growth Growth & Equity-
Opportunities Income Income Total
---------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ -- (5) (1) 1,864
Net realized gain (loss) (2) (5) (3) 76,767
Change in unrealized
appreciation during
the year 13 94 17 78,917
---------------- ------------ ------------- -------------
Net increase (decrease)
in net assets from
operations 11 84 13 157,548
---------------- ------------ ------------- -------------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- (321)
Payments received from contract
owners 114 435 195 316,347
Transfers between sub-accounts
(including fixed account), net (13) 333 51 288,031
Transfers for contract benefits
and terminations -- -- (3) (99,409)
---------------- ------------ ------------- -------------
Net increase (decrease) in
net assets from
contract transactions 101 768 243 504,648
---------------- ------------ ------------- -------------
Net increase (decrease)
in net assets 112 852 256 662,196
Net assets at beginning of period -- -- -- 1,038,346
---------------- ------------ ------------- -------------
Net assets at end of period $ 112 852 256 1,700,542
================ ============ ============= =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1997
(In thousands of dollars)
Trust
-------------------------------------------------------------------------------------
VKAC
Growth
Quality Money High Stock and Bond Developing
Income Market Yield Index Income Debenture Growth
---------- ----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income
(loss) $ 2,586 1,851 2,603 (73) (22) 1,266 (2)
Net realized gain (loss) 503 -- 835 15,992 1,404 35 --
Change in unrealized
appreciation during
the year 367 -- 351 4,729 6,685 1,687 7
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net increase (decrease)
in net assets
from operations 3,456 1,851 3,789 20,648 8,067 2,988 5
---------- ----------- ----------- ----------- ----------- ---------- -----------
Contract transactions:
Cova payments -- -- -- -- -- -- 100
Cova transfers -- -- -- -- -- -- --
Payments received from
contract owners 504 45,236 795 2,638 2,541 8,751 503
Transfers between sub-
accounts (including fixed
account), net 3,092 (48,066) (11,222) (9,170) 5,116 32,608 959
Transfers for contract
benefits and terminations (9,775) (8,119) (2,972) (14,588) (1,993) (978) (2)
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net increase
(decrease) in net
assets from contract
transactions (6,179) (10,949) (13,399) (21,120) 5,664 40,381 1,560
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net increase
(decrease) in net
assets (2,723) (9,098) (9,610) (472) 13,731 43,369 1,565
Net assets at beginning of period 51,826 30,708 42,871 89,109 32,416 7,451 --
---------- ----------- ----------- ----------- ----------- ---------- -----------
Net assets at end of period $ 49,103 21,610 33,261 88,637 46,147 50,820 1,565
========== =========== =========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1997
(In thousands of dollars)
TRUST
--------------------------------------------------------------------------------------
Small Large
Large Cap Mid-Cap Quality Cap Cap Select International
Research Value Bond Stock Stock Equity Equity
---------- --------- ---------- --------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income
(loss) $ 1 -- 439 (260) (59) (342) (18)
Net realized gain (loss) -- -- 116 135 2,865 331 51
Change in unrealized
appreciation during
the year 6 40 156 5,990 1,324 12,310 513
--------- --------- ---------- --------- ----------- ---------- ---------------
Net increase (decrease)
in net assets
from operations 7 40 711 5,865 4,130 12,299 546
--------- --------- ---------- --------- ----------- ---------- ---------------
Contract transactions:
Cova payments 100 100 -- -- -- -- --
Cova transfers -- -- (2,144) -- (15,455) -- --
Payments received from
contract owners 359 463 2,671 9,550 7,691 19,507 11,213
Transfers between sub-
accounts (including fixed
account), net 769 1,460 10,203 24,982 10,293 44,654 37,503
Transfers for contract
benefits and terminations (2) (28) (731) (1,221) (421) (1,556) (1,224)
--------- --------- ---------- --------- ----------- ---------- ---------------
Net increase
(decrease) in net
assets from contract
transactions 1,226 1,995 9,999 33,311 2,108 62,605 47,492
--------- --------- ---------- --------- ----------- ---------- ---------------
Net increase
(decrease) in net
assets 1,233 2,035 10,710 39,176 6,238 74,904 48,038
Net assets at beginning of period -- -- 5,276 13,993 15,751 22,159 14,333
--------- --------- ---------- --------- ----------- ---------- ---------------
Net assets at end of period $ 1,233 2,035 15,986 53,169 21,989 97,063 62,371
========= ========= ========== ========= =========== ========== ===============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1997
(In thousands of dollars)
Trust
---------------------------------------------
Growth Lord Abbett
---------------------
Small and GACC
Growth ----------
Cap Equity Income and Global Money
Balanced Equity Income Equity Income Equity Market Total
-------------------- --------- ----------- --------- ------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income
(loss) $ 4 (1) 2 (1) 2,366 (9) (24) 10,307
Net realized gain (loss) 4 2 7 11 31,083 (36) 55 53,393
Change in unrealized
appreciation during
the year -- (5) 21 18 41,372 (1) 40 75,610
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net increase (decrease)
in net assets
from operations 8 (4) 30 28 74,821 (46) 71 139,310
-------- ---------- --------- ----------- --------- ------- -------- -------------
Contract transactions:
Cova payments 1 1 1 1 -- -- -- 304
Cova transfers (1) (1) (1) (1) -- -- -- (17,603)
Payments received from
contract owners 184 116 219 679 47,264 5 5,197 166,086
Transfers between sub-
accounts (including fixed
account), net 235 160 309 646 94,311 (2,228) (1,996) 194,618
Transfers for contract
benefits and terminations (26) -- (1) (44) (23,254) (114) (312) (67,361)
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net increase
(decrease) in net
assets from contract
transactions 393 276 527 1,281 118,321 (2,337) 2,889 276,044
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net increase
(decrease) in net
assets 401 272 557 1,309 193,142 (2,383) 2,960 415,354
Net assets at beginning of period -- -- -- -- 294,358 2,383 358 622,992
-------- ---------- --------- ----------- --------- ------- -------- -------------
Net assets at end of period $ 401 272 557 1,309 487,500 -- 3,318 1,038,346
======== ========== ========= =========== ========= ======= ======== =============
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(1) ORGANIZATION
Cova Variable Annuity Account One (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by Cova Financial Services Life Insurance
Company (Cova) and exists in accordance with the regulations of the
Missouri Department of Insurance. The Separate Account is a funding
vehicle for variable annuity contracts issued by Cova.
<TABLE>
<CAPTION>
The Separate Account is divided into sub-accounts with the assets of
each sub-account invested in the corresponding portfolios of the
following investment companies:
<S> <C>
Cova Series Trust (Trust) 18 portfolios
Lord Abbett Series Fund, Inc. (Lord Abbett) 1 portfolio
General American Capital Company (GACC) 1 portfolio
Russell Insurance Funds (Russell) 4 portfolios
AIM Variable Insurance Funds, Inc. (AIM) 3 portfolios
Alliance Variable Products Series Fund, Inc. (Alliance) 2 portfolios
Liberty Variable Investment Trust (Liberty) 1 portfolio
Goldman Sachs Variable Insurance Trust (Goldman Sachs) 3 portfolios
Investors Fund Series (Kemper) 4 portfolios
MFS Variable Insurance Trust (MFS) 7 portfolios
Oppenheimer Variable Account Funds (Oppenheimer) 5 portfolios
Putnam Variable Trust (Putnam) 5 portfolios
Templeton Variable Products Series Fund (Templeton) 3 portfolios
Variable Insurance Products Fund, Fund II, and Fund III (Fidelity) 5 portfolios
</TABLE>
Each investment company is a diversified, open-end, management
investment company registered under the Investment Company Act of 1940
as amended. Not all sub-accounts are available for investment depending
upon the terms of the variable annuity contracts offered for sale by
Cova.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the
sale of portfolio shares owned by the sub-accounts. Income from
dividends and gains from realized gain distributions are recorded
on the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in
additional shares of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment
income and realized capital gains are deemed to pass through to
the Separate Account. As a result, GACC does not distribute
dividends and realized gains. During December of each year, the
accumulated net investment income and realized capital gains of
the GACC Money Market Fund are allocated to the Separate Account
by increasing the cost basis and recognizing a capital gain in
the Separate Account.
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the federal
income tax return of Cova, which is taxed as a Life Insurance
Company under the provisions of the Internal Revenue Code (IRC).
Under current IRC provisions, Cova believes it will be treated as
the owner of the Separate Account assets for federal income tax
purposes and does not expect to incur federal income taxes on the
earnings of the Separate Account to the extent the earnings are
credited to the variable annuity contracts. Based on this, no
charge is being made currently to the Separate Account for federal
income taxes. A charge may be made in future years for any federal
income taxes that would be attributable to the contracts.
(D) ANNUITY RESERVES
Annuity reserves are computed for contracts in the payout stage
according to the 1983a Mortality Table. The assumed investment
return is 3%. The mortality risk is borne by Cova and may result
in additional transfers to the Separate Account. Conversely, if
reserves exceed amounts required, transfers may be made from the
Separate Account to Cova. The charges were not material in 1998.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of the Separate Account
equivalent to an annual rate of 1.25% for the assumption of mortality
and expense risks and 0.15% for administrative expenses. The mortality
risks assumed by Cova arise from its contractual obligation to make
annuity payments after the annuity date for the life of the annuitant
and to waive the withdrawal fee in the event of the death of the
contract owner. The administrative fees cover the cost of establishing
and maintaining the variable annuity contracts and the Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at
the time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee is imposed on withdrawals of contract values
attributable to purchase payments within five years after receipt and is
equal to 5% of the purchase payment withdrawn. After the first contract
anniversary, provided the contract value exceeds $5,000, the contract
owner may make one withdrawal each contract year of up to 10% of the
aggregate purchase payments (on deposit for more than one year) without
incurring a surrender fee. In 1998, surrender fees of $436 thousand were
deducted from the contract values in the Separate Account.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their policy
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the sub-accounts and the fixed
rate account to which the contract value is allocated.
Subject to certain restrictions, the contract owner may transfer all or
a part of the accumulated value of the contract among the available
sub-accounts of the Separate Account and the fixed rate account offered
by Cova. If more than 12 transfers have been made in the contract year,
a transfer fee of $25 per transfer or, if less, 2% of amount
transferred, may be deducted from the contract account value. Transfers
made in the Dollar Cost Averaging program are not subject to the
transfer fee.
In 1998, contract maintenance and transfer fees of $478 thousand were
deducted from the contract values in the Separate Account.
Cova currently advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes from the contract value
at the time annuity payments begin. Cova reserves the right to deduct
premium taxes when incurred.
(5) SUBSEQUENT EVENT
On January 8, 1999, the five sub-accounts investing in the Trust
portfolios managed by Van Kampen American Capital Advisory Corp. (VKAC)
- Quality Income, Money Market, High Yield, Stock Index, and VKAC Growth
and Income portfolios - ceased operations and their assets were
transferred to one new and four existing sub-accounts in accordance with
the substitution order issued by the Securities and Exchange Commission.
On January 8, 1999, the Lord Abbett Growth and Income sub-account ceased
operations and its assets were transferred to the Trust Lord Abbett
Growth and Income sub-account which commenced operations on January 8,
1999. The Trust Lord Abbett Growth and Income sub-account invests in the
Trust Lord Abbett Growth and Income Portfolio which commenced operations
on January 8, 1999. The Trust Lord Abbett Growth and Income Portfolio is
managed by Lord Abbett who also manages the Lord Abbett Growth and
Income Portfolio.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
COMMENCED ACCUMULATION UNIT VALUE
-----------------------------------------------------------------
operations 1998 1997 1996 1995 1994
-------------- ------------ ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Trust Quality Income* 12/11/89 $ 17.539854 16.716329 15.540273 15.331971 13.170448
Trust Money Market* 06/28/91 12.882171 12.375226 11.879722 11.425133 10.896621
Trust High Yield* 12/11/89 23.857965 23.571992 21.422784 19.522535 16.977032
Trust Stock Index* 10/31/91 31.522392 24.963514 19.036956 15.773906 11.679303
Trust VKAC Growth and Income* 05/02/92 24.396666 20.978325 17.008151 14.608904 11.195845
Trust Bond Debenture 05/01/96 13.496500 12.881792 11.294930 -- --
Trust Developing Growth 08/20/97 11.067854 10.527554 -- -- --
Trust Large Cap Research 08/20/97 11.825550 9.899560 -- -- --
Trust Mid-Cap Value 08/20/97 10.437949 10.467957 -- -- --
Trust Quality Bond 05/01/96 11.914489 11.155126 10.368764 -- --
Trust Small Cap Stock 05/01/96 12.582860 13.491466 11.308419 -- --
Trust Large Cap Stock 05/01/96 19.428499 14.889462 11.334979 -- --
Trust Select Equity 05/01/96 16.987204 14.053502 10.838053 -- --
Trust International Equity 05/01/96 12.889315 11.462435 10.967004 -- --
Trust Balanced 07/01/97 11.767845 10.531920 -- -- --
Trust Small Cap Equity 07/01/97 10.238676 10.418047 -- -- --
Trust Equity Income 07/01/97 12.068849 11.194166 -- -- --
Trust Growth and Income Equity 07/01/97 12.188331 10.756082 -- -- --
Lord Abbett Growth and Income* 12/11/89 34.325425 30.837057 25.089525 21.306277 16.642028
GACC Money Market 06/03/96 11.109943 10.667011 10.233546 -- --
Russell Multi-Style Equity 12/31/97 12.694810 10.000000 -- -- --
Russell Aggressive Equity 12/31/97 9.963254 10.000000 -- -- --
Russell Non-US 12/31/97 11.142092 10.000000 -- -- --
Russell Core Bond 12/31/97 10.591175 10.000000 -- -- --
AIM Value 12/31/97 13.060203 10.000000 -- -- --
AIM Capital Appreciation 12/31/97 11.770729 10.000000 -- -- --
AIM International Equity 12/31/97 11.391449 10.000000 -- -- --
Alliance Premier Growth 12/31/97 14.595485 10.000000 -- -- --
Alliance Real Estate Investment 12/31/97 7.988435 10.000000 -- -- --
Liberty Newport Tiger 12/31/97 9.228765 10.000000 -- -- --
Goldman Sachs Growth and Income 01/29/98 9.908613 -- -- -- --
Goldman Sachs International Equity 01/29/98 11.402925 -- -- -- --
Goldman Sachs Global Income 01/29/98 10.781765 -- -- -- --
Kemper Dreman High Return Equity 05/15/98 10.487302 -- -- -- --
Kemper Small Cap Growth 12/31/97 11.676086 10.000000 -- -- --
Kemper Small Cap Value 12/31/97 8.753222 10.000000 -- -- --
Kemper Government Securities 12/31/97 10.556498 10.000000 -- -- --
MFS Bond 05/15/98 10.491811 -- -- -- --
MFS Research 12/31/97 12.172796 10.000000 -- -- --
MFS Growth with Income 12/31/97 12.066568 10.000000 -- -- --
MFS Emerging Growth 12/31/97 13.233235 10.000000 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 6.571830 10.000000 -- -- --
MFS High Income 12/31/97 9.845193 10.000000 -- -- --
MFS World Governments 12/31/97 10.669943 10.000000 -- -- --
Oppenheimer Growth 12/31/97 12.232731 10.000000 -- -- --
Oppenheimer Growth & Income 12/31/97 10.326519 10.000000 -- -- --
Oppenheimer High Income 12/31/97 9.893828 10.000000 -- -- --
Oppenheimer Bond 12/31/97 10.533011 10.000000 -- -- --
Oppenheimer Strategic Bond 12/31/97 10.151332 10.000000 -- -- --
Putnam Growth and Income 12/31/97 11.382650 10.000000 -- -- --
Putnam New Value 12/31/97 10.483517 10.000000 -- -- --
Putnam Vista 12/31/97 11.785702 10.000000 -- -- --
Putnam International Growth 12/31/97 11.707003 10.000000 -- -- --
Putnam International New Opportunities 12/31/97 11.402252 10.000000 -- -- --
Templeton International 05/01/98 9.144522 -- -- -- --
Templeton Developing Markets 05/01/98 7.552448 -- -- -- --
Templeton Mutual Shares Investments 05/01/98 9.630622 -- -- -- --
Fidelity VIP Growth 02/17/98 13.077878 -- -- -- --
Fidelity VIP II Contrafund 02/17/98 12.357373 -- -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 11.742360 -- -- -- --
Fidelity VIP III Growth & Income 02/17/98 12.202502 -- -- -- --
Fidelity VIP Equity-Income 02/17/98 10.626607 -- -- -- --
============ =========== =========== =========== ==============
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
NET ASSETS (IN 000'S)
-------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* $ 39,090 49,103 51,826 41,253 33,933
Trust Money Market* 7,891 21,610 30,708 34,128 75,878
Trust High Yield* 28,800 33,261 42,871 36,512 19,653
Trust Stock Index* 97,587 88,637 89,109 85,762 36,807
Trust VKAC Growth and Income* 51,311 46,147 32,416 19,617 10,941
Trust Bond Debenture 110,471 50,820 7,451 -- --
Trust Developing Growth 14,855 1,565 -- -- --
Trust Large Cap Research 12,968 1,233 -- -- --
Trust Mid-Cap Value 17,145 2,035 -- -- --
Trust Quality Bond 39,638 15,986 5,276 -- --
Trust Small Cap Stock 69,645 53,169 13,993 -- --
Trust Large Cap Stock 81,369 21,989 15,751 -- --
Trust Select Equity 179,310 97,063 22,159 -- --
Trust International Equity 94,245 62,371 14,333 -- --
Trust Balanced 3,372 401 -- -- --
Trust Small Cap Equity 1,327 272 -- -- --
Trust Equity Income 3,463 557 -- -- --
Trust Growth and Income Equity 7,823 1,309 -- -- --
Lord Abbett Growth and Income* 669,203 487,500 294,358 190,630 114,416
GACC Money Market 16,464 3,318 358 -- --
Russell Multi-Style Equity 29,559 -- -- -- --
Russell Aggressive Equity 5,343 -- -- -- --
Russell Non-US 10,316 -- -- -- --
Russell Core Bond 17,050 -- -- -- --
AIM Value 6,816 -- -- -- --
AIM Capital Appreciation 2,160 -- -- -- --
AIM International Equity 2,325 -- -- -- --
Alliance Premier Growth 9,748 -- -- -- --
Alliance Real Estate Investment 1,529 -- -- -- --
Liberty Newport Tiger 295 -- -- -- --
Goldman Sachs Growth and Income 4,634 -- -- -- --
Goldman Sachs International Equity 1,287 -- -- -- --
Goldman Sachs Global Income 203 -- -- -- --
Kemper Dreman High Return Equity 97 -- -- -- --
Kemper Small Cap Growth 893 -- -- -- --
Kemper Small Cap Value 2,145 -- -- -- --
Kemper Government Securities 630 -- -- -- --
MFS Bond 174 -- -- -- --
MFS Research 5,658 -- -- -- --
MFS Growth with Income 7,016 -- -- -- --
MFS Emerging Growth 7,142 -- -- -- --
MFS / F&C Emerging Markets Equity 481 -- -- -- --
MFS High Income 2,158 -- -- -- --
MFS World Governments 22 -- -- -- --
Oppenheimer Growth 1,189 -- -- -- --
Oppenheimer Growth & Income 2,941 -- -- -- --
Oppenheimer High Income 777 -- -- -- --
Oppenheimer Bond 4,234 -- -- -- --
Oppenheimer Strategic Bond 1,095 -- -- -- --
Putnam Growth and Income 12,699 -- -- -- --
Putnam New Value 441 -- -- -- --
Putnam Vista 1,785 -- -- -- --
Putnam International Growth 6,206 -- -- -- --
Putnam International New Opportunities 602 -- -- -- --
Templeton International 1,507 -- -- -- --
Templeton Developing Markets 679 -- -- -- --
Templeton Mutual Shares Investments 1,021 -- -- -- --
Fidelity VIP Growth 88 -- -- -- --
Fidelity VIP II Contrafund 400 -- -- -- --
Fidelity VIP III Growth Opportunities 112 -- -- -- --
Fidelity VIP III Growth & Income 852 -- -- -- --
Fidelity VIP Equity-Income 256 -- -- -- --
=========== =========== =========== =========== ===========
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
TOTAL RETURN**
--------------------------------------------------------
1998 1997 1996 1995 1994
--------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 4.93 % 7.57 1.36 16.41 (5.70)
Trust Money Market* 4.10 4.17 3.98 4.85 2.70
Trust High Yield* 1.21 10.03 9.73 14.99 (5.79)
Trust Stock Index* 26.27 31.13 20.69 35.06 (1.58)
Trust VKAC Growth and Income* 16.30 23.34 16.42 30.49 (6.07)
Trust Bond Debenture 4.77 14.05 11.86 -- --
Trust Developing Growth 5.13 5.28 -- -- --
Trust Large Cap Research 19.46 (1.00) -- -- --
Trust Mid-Cap Value (0.29) 4.68 -- -- --
Trust Quality Bond 6.81 7.58 4.76 -- --
Trust Small Cap Stock (6.74) 19.31 7.57 -- --
Trust Large Cap Stock 30.49 31.36 13.32 -- --
Trust Select Equity 20.88 29.67 7.48 -- --
Trust International Equity 12.45 4.52 7.36 -- --
Trust Balanced 11.74 5.32 -- -- --
Trust Small Cap Equity (1.72) 4.18 -- -- --
Trust Equity Income 7.81 11.94 -- -- --
Trust Growth and Income Equity 13.32 7.56 -- -- --
Lord Abbett Growth and Income* 11.31 22.91 17.76 28.03 1.32
GACC Money Market 4.15 4.24 2.34 -- --
Russell Multi-Style Equity 26.95 -- -- -- --
Russell Aggressive Equity (0.37) -- -- -- --
Russell Non-US 11.42 -- -- -- --
Russell Core Bond 5.91 -- -- -- --
AIM Value 30.60 -- -- -- --
AIM Capital Appreciation 17.71 -- -- -- --
AIM International Equity 13.91 -- -- -- --
Alliance Premier Growth 45.96 -- -- -- --
Alliance Real Estate Investment (20.12) -- -- -- --
Liberty Newport Tiger (7.71) -- -- -- --
Goldman Sachs Growth and Income (0.91) -- -- -- --
Goldman Sachs International Equity 14.03 -- -- -- --
Goldman Sachs Global Income 7.82 -- -- -- --
Kemper Dreman High Return Equity 4.87 -- -- -- --
Kemper Small Cap Growth 16.76 -- -- -- --
Kemper Small Cap Value (12.47) -- -- -- --
Kemper Government Securities 5.57 -- -- -- --
MFS Bond 4.92 -- -- -- --
MFS Research 21.73 -- -- -- --
MFS Growth with Income 20.67 -- -- -- --
MFS Emerging Growth 32.33 -- -- -- --
MFS / F&C Emerging Markets Equity (34.28) -- -- -- --
MFS High Income (1.55) -- -- -- --
MFS World Governments 6.70 -- -- -- --
Oppenheimer Growth 22.33 -- -- -- --
Oppenheimer Growth & Income 3.27 -- -- -- --
Oppenheimer High Income (1.06) -- -- -- --
Oppenheimer Bond 5.33 -- -- -- --
Oppenheimer Strategic Bond 1.51 -- -- -- --
Putnam Growth and Income 13.83 -- -- -- --
Putnam New Value 4.83 -- -- -- --
Putnam Vista 17.86 -- -- -- --
Putnam International Growth 17.07 -- -- -- --
Putnam International New Opportunities 14.02 -- -- -- --
Templeton International (8.55) -- -- -- --
Templeton Developing Markets (24.48) -- -- -- --
Templeton Mutual Shares Investments (3.69) -- -- -- --
Fidelity VIP Growth 30.78 -- -- -- --
Fidelity VIP II Contrafund 23.57 -- -- -- --
Fidelity VIP III Growth Opportunities 17.42 -- -- -- --
Fidelity VIP III Growth & Income 22.03 -- -- -- --
Fidelity VIP Equity-Income 6.27 -- -- -- --
========= ========== ========== ========== =========
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
SEPARATE ACCOUNT EXPENSES
TO AVERAGE NET ASSETS**
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 1.40 1.40 1.40 1.40 1.40
Trust Money Market* 1.40 1.40 1.40 1.40 1.40
Trust High Yield* 1.40 1.40 1.40 1.40 1.40
Trust Stock Index* 1.40 1.40 1.40 1.40 1.40
Trust VKAC Growth and Income* 1.40 1.40 1.40 1.40 1.40
Trust Bond Debenture 1.40 1.40 1.40 -- --
Trust Developing Growth 1.40 1.40 -- -- --
Trust Large Cap Research 1.40 1.40 -- -- --
Trust Mid-Cap Value 1.40 1.40 -- -- --
Trust Quality Bond 1.40 1.40 1.40 -- --
Trust Small Cap Stock 1.40 1.40 1.40 -- --
Trust Large Cap Stock 1.40 1.40 1.40 -- --
Trust Select Equity 1.40 1.40 1.40 -- --
Trust International Equity 1.40 1.40 1.40 -- --
Trust Balanced 1.40 1.40 -- -- --
Trust Small Cap Equity 1.40 1.40 -- -- --
Trust Equity Income 1.40 1.40 -- -- --
Trust Growth and Income Equity 1.40 1.40 -- -- --
Lord Abbett Growth and Income* 1.40 1.40 1.40 1.40 1.40
GACC Money Market 1.40 1.40 1.40 -- --
Russell Multi-Style Equity 1.40 -- -- -- --
Russell Aggressive Equity 1.40 -- -- -- --
Russell Non-US 1.40 -- -- -- --
Russell Core Bond 1.40 -- -- -- --
AIM Value 1.40 -- -- -- --
AIM Capital Appreciation 1.40 -- -- -- --
AIM International Equity 1.40 -- -- -- --
Alliance Premier Growth 1.40 -- -- -- --
Alliance Real Estate Investment 1.40 -- -- -- --
Liberty Newport Tiger 1.40 -- -- -- --
Goldman Sachs Growth and Income 1.40 -- -- -- --
Goldman Sachs International Equity 1.40 -- -- -- --
Goldman Sachs Global Income 1.40 -- -- -- --
Kemper Dreman High Return Equity 1.40 -- -- -- --
Kemper Small Cap Growth 1.40 -- -- -- --
Kemper Small Cap Value 1.40 -- -- -- --
Kemper Government Securities 1.40 -- -- -- --
MFS Bond 1.40 -- -- -- --
MFS Research 1.40 -- -- -- --
MFS Growth with Income 1.40 -- -- -- --
MFS Emerging Growth 1.40 -- -- -- --
MFS / F&C Emerging Markets Equity 1.40 -- -- -- --
MFS High Income 1.40 -- -- -- --
MFS World Governments 1.40 -- -- -- --
Oppenheimer Growth 1.40 -- -- -- --
Oppenheimer Growth & Income 1.40 -- -- -- --
Oppenheimer High Income 1.40 -- -- -- --
Oppenheimer Bond 1.40 -- -- -- --
Oppenheimer Strategic Bond 1.40 -- -- -- --
Putnam Growth and Income 1.40 -- -- -- --
Putnam New Value 1.40 -- -- -- --
Putnam Vista 1.40 -- -- -- --
Putnam International Growth 1.40 -- -- -- --
Putnam International New Opportunities 1.40 -- -- -- --
Templeton International 1.40 -- -- -- --
Templeton Developing Markets 1.40 -- -- -- --
Templeton Mutual Shares Investments 1.40 -- -- -- --
Fidelity VIP Growth 1.40 -- -- -- --
Fidelity VIP II Contrafund 1.40 -- -- -- --
Fidelity VIP III Growth Opportunities 1.40 -- -- -- --
Fidelity VIP III Growth & Income 1.40 -- -- -- --
Fidelity VIP Equity-Income 1.40 -- -- -- --
======== ======== ======== ======== ========
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Total returns for sub-accounts that commenced operations during the year
are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The table below summarizes the realized gain (loss) on the sale of fund
shares and the change in unrealized appreciation for each sub-account
during the year.
1998 1997
-------------- -------------
(in thousands of dollars)
<S> <C> <C>
Realized gain (loss) on sale of fund shares:
Trust Quality Income:
Aggregate proceeds from sales of fund shares $ 13,031 33,851
Aggregate cost of fund shares redeemed 12,576 33,348
-------------- -------------
Realized gain (loss) $ 455 503
============== =============
Trust Money Market:
Aggregate proceeds from sales of fund shares $ 14,519 63,852
Aggregate cost of fund shares redeemed 14,519 63,852
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Trust High Yield:
Aggregate proceeds from sales of fund shares $ 6,314 27,472
Aggregate cost of fund shares redeemed 6,179 26,637
-------------- -------------
Realized gain (loss) $ 135 835
============== =============
Trust Stock Index:
Aggregate proceeds from sales of fund shares $ 23,196 55,951
Aggregate cost of fund shares redeemed 17,093 40,242
-------------- -------------
Realized gain (loss) $ 6,103 15,709
============== =============
Trust VKAC Growth and Income:
Aggregate proceeds from sales of fund shares $ 6,244 4,135
Aggregate cost of fund shares redeemed 4,804 3,229
-------------- -------------
Realized gain (loss) $ 1,440 906
============== =============
Trust Bond Debenture:
Aggregate proceeds from sales of fund shares $ 9,489 646
Aggregate cost of fund shares redeemed 9,470 619
-------------- -------------
Realized gain (loss) $ 19 27
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Trust Developing Growth:
Aggregate proceeds from sales of fund shares $ 138 --
Aggregate cost of fund shares redeemed 152 --
-------------- -------------
Realized gain (loss) $ (14) --
============== =============
Trust Large Cap Research:
Aggregate proceeds from sales of fund shares $ 161 1
Aggregate cost of fund shares redeemed 156 1
-------------- -------------
Realized gain (loss) $ 5 --
============== =============
Trust Mid-Cap Value:
Aggregate proceeds from sales of fund shares $ 82 --
Aggregate cost of fund shares redeemed 85 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
Trust Quality Bond:
Aggregate proceeds from sales of fund shares $ 1,335 3,837
Aggregate cost of fund shares redeemed 1,299 3,786
-------------- -------------
Realized gain (loss) $ 36 51
============== =============
Trust Small Cap Stock:
Aggregate proceeds from sales of fund shares $ 3,113 513
Aggregate cost of fund shares redeemed 3,238 467
-------------- -------------
Realized gain (loss) $ (125) 46
============== =============
Trust Large Cap Stock:
Aggregate proceeds from sales of fund shares $ 147 7,686
Aggregate cost of fund shares redeemed 131 6,018
-------------- -------------
Realized gain (loss) $ 16 1,668
============== =============
Trust Select Equity:
Aggregate proceeds from sales of fund shares $ 1,485 305
Aggregate cost of fund shares redeemed 1,275 275
-------------- -------------
Realized gain (loss) $ 210 30
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Trust International Equity:
Aggregate proceeds from sales of fund shares $ 4,919 616
Aggregate cost of fund shares redeemed 4,609 601
-------------- -------------
Realized gain (loss) $ 310 15
============== =============
Trust Balanced:
Aggregate proceeds from sales of fund shares $ 30 38
Aggregate cost of fund shares redeemed 31 37
-------------- -------------
Realized gain (loss) $ (1) 1
============== =============
Trust Small Cap Equity:
Aggregate proceeds from sales of fund shares $ 39 2
Aggregate cost of fund shares redeemed 42 2
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
Trust Equity Income:
Aggregate proceeds from sales of fund shares $ 75 3
Aggregate cost of fund shares redeemed 75 3
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Trust Growth and Income Equity:
Aggregate proceeds from sales of fund shares $ 211 34
Aggregate cost of fund shares redeemed 204 33
-------------- -------------
Realized gain (loss) $ 7 1
============== =============
Lord Abbett Growth and Income:
Aggregate proceeds from sales of fund shares $ 12,298 3,701
Aggregate cost of fund shares redeemed 10,217 2,859
-------------- -------------
Realized gain (loss) $ 2,081 842
============== =============
GACC Money Market:
Aggregate proceeds from sales of fund shares $ 37,059 2,883
Aggregate cost of fund shares redeemed 36,623 2,828
-------------- -------------
Realized gain (loss) $ 436 55
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Russell Multi-Style Equity:
Aggregate proceeds from sales of fund shares $ 62 --
Aggregate cost of fund shares redeemed 61 --
-------------- -------------
Realized gain (loss) $ 1 --
============== =============
Russell Aggressive Equity:
Aggregate proceeds from sales of fund shares $ 203 --
Aggregate cost of fund shares redeemed 247 --
-------------- -------------
Realized gain (loss) $ (44) --
============== =============
Russell Non-US:
Aggregate proceeds from sales of fund shares $ 92 --
Aggregate cost of fund shares redeemed 90 --
-------------- -------------
Realized gain (loss) $ 2 --
============== =============
Russell Core Bond:
Aggregate proceeds from sales of fund shares $ 523 --
Aggregate cost of fund shares redeemed 522 --
-------------- -------------
Realized gain (loss) $ 1 --
============== =============
AIM Value:
Aggregate proceeds from sales of fund shares $ 253 --
Aggregate cost of fund shares redeemed 263 --
-------------- -------------
Realized gain (loss) $ (10) --
============== =============
AIM Capital Appreciation:
Aggregate proceeds from sales of fund shares $ 72 --
Aggregate cost of fund shares redeemed 75 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
AIM International Equity:
Aggregate proceeds from sales of fund shares $ 8,246 --
Aggregate cost of fund shares redeemed 8,249 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Alliance Premier Growth:
Aggregate proceeds from sales of fund shares $ 54 --
Aggregate cost of fund shares redeemed 58 --
-------------- -------------
Realized gain (loss) $ (4) --
============== =============
Alliance Real Estate:
Aggregate proceeds from sales of fund shares $ 28 --
Aggregate cost of fund shares redeemed 30 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
Liberty Newport Tiger:
Aggregate proceeds from sales of fund shares $ 416 --
Aggregate cost of fund shares redeemed 446 --
-------------- -------------
Realized gain (loss) $ (30) --
============== =============
Goldman Sachs Growth and Income:
Aggregate proceeds from sales of fund shares $ 126 --
Aggregate cost of fund shares redeemed 138 --
-------------- -------------
Realized gain (loss) $ (12) --
============== =============
Goldman Sachs International:
Aggregate proceeds from sales of fund shares $ 29 --
Aggregate cost of fund shares redeemed 29 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Goldman Sachs Global Income:
Aggregate proceeds from sales of fund shares $ 17 --
Aggregate cost of fund shares redeemed 16 --
-------------- -------------
Realized gain (loss) $ 1 --
============== =============
Kemper Dreman High Return Equity:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Kemper Small Cap Growth:
Aggregate proceeds from sales of fund shares $ 1,008 --
Aggregate cost of fund shares redeemed 1,035 --
-------------- -------------
Realized gain (loss) $ (27) --
============== =============
Kemper Small Cap Value:
Aggregate proceeds from sales of fund shares $ 21 --
Aggregate cost of fund shares redeemed 25 --
-------------- -------------
Realized gain (loss) $ (4) --
============== =============
Kemper Government Securities:
Aggregate proceeds from sales of fund shares $ 17 --
Aggregate cost of fund shares redeemed 17 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
MFS Bond:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
MFS Research:
Aggregate proceeds from sales of fund shares $ 120 --
Aggregate cost of fund shares redeemed 122 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
MFS Growth with Income:
Aggregate proceeds from sales of fund shares $ 28 --
Aggregate cost of fund shares redeemed 28 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
MFS Emerging Growth:
Aggregate proceeds from sales of fund shares $ 129 --
Aggregate cost of fund shares redeemed 140 --
-------------- -------------
Realized gain (loss) $ (11) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued: MFS / F&C
Emerging Markets Equity:
Aggregate proceeds from sales of fund shares $ 1,059 --
Aggregate cost of fund shares redeemed 1,156 --
-------------- -------------
Realized gain (loss) $ (97) --
============== =============
MFS High Income:
Aggregate proceeds from sales of fund shares $ 61 --
Aggregate cost of fund shares redeemed 63 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
MFS World Governments:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Oppenheimer Growth:
Aggregate proceeds from sales of fund shares $ 187 --
Aggregate cost of fund shares redeemed 188 --
-------------- -------------
Realized gain (loss) $ (1) --
============== =============
Oppenheimer Growth & Income:
Aggregate proceeds from sales of fund shares $ 326 --
Aggregate cost of fund shares redeemed 363 --
-------------- -------------
Realized gain (loss) $ (37) --
============== =============
Oppenheimer High Income:
Aggregate proceeds from sales of fund shares $ 31 --
Aggregate cost of fund shares redeemed 32 --
-------------- -------------
Realized gain (loss) $ (1) --
============== =============
Oppenheimer Bond:
Aggregate proceeds from sales of fund shares $ 49 --
Aggregate cost of fund shares redeemed 49 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Oppenheimer Strategic Bond:
Aggregate proceeds from sales of fund shares $ 3 --
Aggregate cost of fund shares redeemed 3 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Putnam Growth and Income:
Aggregate proceeds from sales of fund shares $ 294 --
Aggregate cost of fund shares redeemed 302 --
-------------- -------------
Realized gain (loss) $ (8) --
============== =============
Putnam New Value:
Aggregate proceeds from sales of fund shares $ 3 --
Aggregate cost of fund shares redeemed 3 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Putnam Vista:
Aggregate proceeds from sales of fund shares $ 27 --
Aggregate cost of fund shares redeemed 28 --
-------------- -------------
Realized gain (loss) $ (1) --
============== =============
Putnam International Growth:
Aggregate proceeds from sales of fund shares $ 4,315 --
Aggregate cost of fund shares redeemed 4,354 --
-------------- -------------
Realized gain (loss) $ (39) --
============== =============
Putnam International New Opportunities:
Aggregate proceeds from sales of fund shares $ 2,989 --
Aggregate cost of fund shares redeemed 2,965 --
-------------- -------------
Realized gain (loss) $ 24 --
============== =============
Templeton International:
Aggregate proceeds from sales of fund shares $ 6,057 --
Aggregate cost of fund shares redeemed 6,049 --
-------------- -------------
Realized gain (loss) $ 8 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Realized gain (loss) on sale of fund shares, continued:
Templeton Developing Markets:
Aggregate proceeds from sales of fund shares $ 357 --
Aggregate cost of fund shares redeemed 361 --
-------------- -------------
Realized gain (loss) $ (4) --
============== =============
Templeton Mutual Shares Investments:
Aggregate proceeds from sales of fund shares $ 7 --
Aggregate cost of fund shares redeemed 7 --
-------------- -------------
Realized gain (loss) $ -- --
============== =============
Fidelity Growth:
Aggregate proceeds from sales of fund shares $ 34 --
Aggregate cost of fund shares redeemed 37 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
Fidelity Contrafund:
Aggregate proceeds from sales of fund shares $ 17 --
Aggregate cost of fund shares redeemed 19 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
Fidelity Growth Opportunities:
Aggregate proceeds from sales of fund shares $ 24 --
Aggregate cost of fund shares redeemed 26 --
-------------- -------------
Realized gain (loss) $ (2) --
============== =============
Fidelity Growth & Income:
Aggregate proceeds from sales of fund shares $ 69 --
Aggregate cost of fund shares redeemed 74 --
-------------- -------------
Realized gain (loss) $ (5) --
============== =============
Fidelity Equity-Income:
Aggregate proceeds from sales of fund shares $ 27 --
Aggregate cost of fund shares redeemed 30 --
-------------- -------------
Realized gain (loss) $ (3) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation):
Trust Quality Income:
Appreciation (Depreciation), end of period $ 1,308 1,302
Appreciation (Depreciation), beginning of period 1,302 935
-------------- -------------
Unrealized appreciation (depreciation) $ 6 367
============== =============
Trust Money Market:
Appreciation (Depreciation), end of period $ -- --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ -- --
============== =============
Trust High Yield:
Appreciation (Depreciation), end of period $ 174 842
Appreciation (Depreciation), beginning of period 842 491
-------------- -------------
Unrealized appreciation (depreciation) $ (668) 351
============== =============
Trust Stock Index:
Appreciation (Depreciation), end of period $ 25,838 25,000
Appreciation (Depreciation), beginning of period 25,000 20,271
-------------- -------------
Unrealized appreciation (depreciation) $ 838 4,729
============== =============
Trust VKAC Growth & Income:
Appreciation (Depreciation), end of period $ 11,521 10,887
Appreciation (Depreciation), beginning of period 10,887 4,202
-------------- -------------
Unrealized appreciation (depreciation) $ 634 6,685
============== =============
Trust Bond Debenture:
Appreciation (Depreciation), end of period $ 3,523 1,958
Appreciation (Depreciation), beginning of period 1,958 271
-------------- -------------
Unrealized appreciation (depreciation) $ 1,565 1,687
============== =============
Trust Developing Growth:
Appreciation (Depreciation), end of period $ 890 7
Appreciation (Depreciation), beginning of period 7 --
-------------- -------------
Unrealized appreciation (depreciation) $ 883 7
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Trust Large Cap Research:
Appreciation (Depreciation), end of period $ 1,284 6
Appreciation (Depreciation), beginning of period 6 --
-------------- -------------
Unrealized appreciation (depreciation) $ 1,278 6
============== =============
Trust Mid-Cap Value:
Appreciation (Depreciation), end of period $ 160 40
Appreciation (Depreciation), beginning of period 40 --
-------------- -------------
Unrealized appreciation (depreciation) $ 120 40
============== =============
Trust Quality Bond:
Appreciation (Depreciation), end of period $ 1,598 186
Appreciation (Depreciation), beginning of period 186 30
-------------- -------------
Unrealized appreciation (depreciation) $ 1,412 156
============== =============
Trust Small Cap Stock:
Appreciation (Depreciation), end of period $ 346 6,523
Appreciation (Depreciation), beginning of period 6,523 533
-------------- -------------
Unrealized appreciation (depreciation) $ (6,177) 5,990
============== =============
Trust Large Cap Stock:
Appreciation (Depreciation), end of period $ 16,535 2,855
Appreciation (Depreciation), beginning of period 2,855 1,531
-------------- -------------
Unrealized appreciation (depreciation) $ 13,680 1,324
============== =============
Trust Select Equity:
Appreciation (Depreciation), end of period $ 33,585 13,520
Appreciation (Depreciation), beginning of period 13,520 1,210
-------------- -------------
Unrealized appreciation (depreciation) $ 20,065 12,310
============== =============
Trust International Equity:
Appreciation (Depreciation), end of period $ 9,278 1,309
Appreciation (Depreciation), beginning of period 1,309 796
-------------- -------------
Unrealized appreciation (depreciation) $ 7,969 513
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Trust Balanced:
Appreciation (Depreciation), end of period $ 173 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 173 --
============== =============
Trust Small Cap Equity:
Appreciation (Depreciation), end of period $ 34 (5)
Appreciation (Depreciation), beginning of period (5) --
-------------- -------------
Unrealized appreciation (depreciation) $ 39 (5)
============== =============
Trust Equity Income:
Appreciation (Depreciation), end of period $ 70 21
Appreciation (Depreciation), beginning of period 21 --
-------------- -------------
Unrealized appreciation (depreciation) $ 49 21
============== =============
Trust Growth and Income Equity:
Appreciation (Depreciation), end of period $ 566 18
Appreciation (Depreciation), beginning of period 18 --
-------------- -------------
Unrealized appreciation (depreciation) $ 548 18
============== =============
Lord Abbett Growth and Income:
Appreciation (Depreciation), end of period $ 114,453 87,861
Appreciation (Depreciation), beginning of period 87,861 46,489
-------------- -------------
Unrealized appreciation (depreciation) $ 26,592 41,372
============== =============
GACC Money Market:
Appreciation (Depreciation), end of period $ 231 46
Appreciation (Depreciation), beginning of period 46 6
-------------- -------------
Unrealized appreciation (depreciation) $ 185 40
============== =============
Russell Multi-Style Equity:
Appreciation (Depreciation), end of period $ 3,199 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 3,199 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Russell Aggressive Equity:
Appreciation (Depreciation), end of period $ 75 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 75 --
============== =============
Russell Non-US:
Appreciation (Depreciation), end of period $ 412 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 412 --
============== =============
Russell Core Bond:
Appreciation (Depreciation), end of period $ 268 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 268 --
============== =============
AIM Value:
Appreciation (Depreciation), end of period $ 668 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 668 --
============== =============
AIM Capital Appreciation:
Appreciation (Depreciation), end of period $ 164 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 164 --
============== =============
AIM International Equity:
Appreciation (Depreciation), end of period $ 81 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 81 --
============== =============
Alliance Premier Growth:
Appreciation (Depreciation), end of period $ 1,522 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1,522 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Alliance Real Estate Investment:
Appreciation (Depreciation), end of period $ (170) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (170) --
============== =============
Liberty Newport Tiger:
Appreciation (Depreciation), end of period $ 54 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 54 --
============== =============
Goldman Sachs Growth and Income:
Appreciation (Depreciation), end of period $ (207) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (207) --
============== =============
Goldman Sachs International:
Appreciation (Depreciation), end of period $ 56 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 56 --
============== =============
Goldman Sachs Global Income:
Appreciation (Depreciation), end of period $ (1) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (1) --
============== =============
Kemper Dreman High Return Equity:
Appreciation (Depreciation), end of period $ 1 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1 --
============== =============
Kemper Small Cap Growth:
Appreciation (Depreciation), end of period $ 107 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 107 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Kemper Small Cap Value:
Appreciation (Depreciation), end of period $ (155) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (155) --
============== =============
Kemper Government Securities:
Appreciation (Depreciation), end of period $ 9 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 9 --
============== =============
MFS Bond:
Appreciation (Depreciation), end of period $ 1 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1 --
============== =============
MFS Research:
Appreciation (Depreciation), end of period $ 481 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 481 --
============== =============
MFS Growth with Income:
Appreciation (Depreciation), end of period $ 574 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 574 --
============== =============
MFS Emerging Growth:
Appreciation (Depreciation), end of period $ 985 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 985 --
============== =============
MFS / F&C Emerging Markets Equity:
Appreciation (Depreciation), end of period $ (94) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (94) --
============== =============
MFS High Income:
Appreciation (Depreciation), end of period $ (34) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (34) --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
MFS World Governments:
Appreciation (Depreciation), end of period $ 1 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 1 --
============== =============
Oppenheimer Growth:
Appreciation (Depreciation), end of period $ 134 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 134 --
============== =============
Oppenheimer Growth & Income:
Appreciation (Depreciation), end of period $ (28) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (28) --
============== =============
Oppenheimer High Income:
Appreciation (Depreciation), end of period $ (15) --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ (15) --
============== =============
Oppenheimer Bond:
Appreciation (Depreciation), end of period $ 95 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 95 --
============== =============
Oppenheimer Strategic Bond:
Appreciation (Depreciation), end of period $ 3 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 3 --
============== =============
Putnam Growth and Income:
Appreciation (Depreciation), end of period $ 660 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 660 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Putnam New Value:
Appreciation (Depreciation), end of period $ 6 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 6 --
============== =============
Putnam Vista:
Appreciation (Depreciation), end of period $ 173 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 173 --
============== =============
Putnam International Growth:
Appreciation (Depreciation), end of period $ 353 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 353 --
============== =============
Putnam International New Opportunities:
Appreciation (Depreciation), end of period $ 40 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 40 --
============== =============
Templeton International:
Appreciation (Depreciation), end of period $ 48 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 48 --
============== =============
Templeton Developing Markets:
Appreciation (Depreciation), end of period $ 44 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 44 --
============== =============
Templeton Mutual Shares Investments:
Appreciation (Depreciation), end of period $ 32 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 32 --
============== =============
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
-------------- -------------
(in thousands of dollars)
Unrealized appreciation (depreciation), continued:
Fidelity Growth:
Appreciation (Depreciation), end of period $ 12 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 12 --
============== =============
Fidelity Contrafund:
Appreciation (Depreciation), end of period $ 48 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 48 --
============== =============
Fidelity Growth Opportunities:
Appreciation (Depreciation), end of period $ 13 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 13 --
============== =============
Fidelity Growth & Income:
Appreciation (Depreciation), end of period $ 94 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 94 --
============== =============
Fidelity Equity-Income:
Appreciation (Depreciation), end of period $ 17 --
Appreciation (Depreciation), beginning of period -- --
-------------- -------------
Unrealized appreciation (depreciation) $ 17 --
============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of units is as follows:
TRUST
-------------------------------------------------------------------------------------
VKAC
Quality Money High Stock Growth and Bond
Income Market Yield Index Income Debenture
------------- ------------ ----------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 3,334,960 2,584,926 2,001,184 4,680,855 1,905,896 659,663
Cova units purchased -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- --
Contract units purchased 33,059 3,712,455 36,057 125,947 130,796 715,126
Contract units transferred, net 186,523 (3,871,127) (492,448) (604,754) 262,932 2,650,173
Contract units redeemed (623,489) (683,810) (135,503) (654,828) (101,374) (79,865)
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/97 2,931,053 1,742,444 1,409,290 3,547,220 2,198,250 3,945,097
Cova units purchased -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- --
Contract units purchased 1,214 491 1,763 2,532 1,131 1,632,919
Contract units transferred, net (196,389) (799,477) (59,692) 159,577 54,353 2,939,109
Contract units redeemed (512,199) (333,892) (146,202) (616,360) (152,515) (332,231)
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/98 2,223,679 609,566 1,205,159 3,092,969 2,101,219 8,184,894
============= ============ =========== =========== ================ ===============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- -- --
Units purchased 8,913 4,793 2,641 4,293 1,875 --
Units redeemed (844) (231) (412) (196) (72) --
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/97 8,069 4,562 2,229 4,097 1,803 --
Units purchased -- -- 798 -- 798 272
Units redeemed (1,686) (901) (523) (608) (196) (8)
------------- ------------ ----------- ----------- ---------------- ---------------
Unit balance at 12/31/98 6,383 3,661 2,504 3,489 2,405 264
============= ============ =========== =========== ================ ===============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of units is as follows:
Trust
----------------------------------------------------------------------
Developing Large Cap Mid-Cap Quality
Growth Research Value Bond
---------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- 508,830
Cova units purchased 10,000 10,000 10,000 --
Cova units redeemed -- -- -- (205,846)
Contract units purchased 47,968 36,718 45,300 256,670
Contract units transferred, net 91,012 78,115 141,816 940,454
Contract units redeemed (322) (274) (2,730) (67,027)
---------------- ------------- ------------- ------------
Unit balance at 12/31/97 148,658 124,559 194,386 1,433,081
Cova units purchased -- -- -- --
Cova units redeemed (10,000) (10,000) (10,000) --
Contract units purchased 596,000 569,392 755,701 833,031
Contract units transferred, net 630,230 437,664 736,868 1,236,444
Contract units redeemed (22,687) (26,695) (34,402) (179,213)
---------------- ------------- ------------- ------------
Unit balance at 12/31/98 1,342,201 1,094,920 1,642,553 3,323,343
================ ============= ============= ============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
---------------- ------------- ------------- ------------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- 2,090 -- 3,947
Units redeemed -- (266) -- (109)
---------------- ------------- ------------- ------------
Unit balance at 12/31/98 -- 1,824 -- 3,838
================ ============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of units is as follows:
Trust
---------------------------------------------------------------------------
Small Cap Large Cap Select International
Stock Stock Equity Equity
-------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 1,237,405 1,389,606 2,044,523 1,306,892
Cova units purchased -- -- -- --
Cova units redeemed -- (1,132,414) -- --
Contract units purchased 786,201 538,054 1,538,506 974,793
Contract units transferred, net 2,007,064 715,241 3,437,076 3,266,860
Contract units redeemed (90,427) (36,558) (116,499) (107,953)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/97 3,940,243 1,473,929 6,903,606 5,440,592
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased 619,802 1,118,109 1,382,912 651,488
Contract units transferred, net 1,172,828 1,713,122 2,562,725 1,460,450
Contract units redeemed (200,263) (127,125) (304,425) (243,205)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/98 5,532,610 4,178,035 10,544,818 7,309,325
============== ============== ============== ==================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased 804 3,384 3,617 822
Units redeemed (31) (356) (380) (32)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/97 773 3,028 3,237 790
Units purchased 1,944 9,187 9,682 2,208
Units redeemed (162) (1,259) (1,203) (173)
-------------- -------------- -------------- ------------------
Unit balance at 12/31/98 2,555 10,956 11,716 2,825
============== ============== ============== ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
TRUST LORD ABBETT GACC
------------------------------------------------------ --------------- --------------
Growth and Growth
Small Cap Equity Income and Money
Balanced Equity Income Equity Income Market
------------ ------------- ----------- ------------ ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- 11,732,301 34,964
Cova units purchased 100 100 100 100 -- --
Cova units redeemed (100) (100) (100) (100) -- --
Contract units purchased 17,711 10,694 17,814 46,324 1,642,859 509,800
Contract units transferred, net 22,818 15,454 31,967 79,433 3,230,021 (204,185)
Contract units redeemed (2,450) -- (56) (4,084) (816,777) (29,528)
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/97 38,079 26,148 49,725 121,673 15,788,404 311,051
Cova units purchased -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- --
Contract units purchased 128,875 44,062 157,967 269,879 1,737,150 3,293,174
Contract units transferred, net 124,051 61,306 83,645 260,136 3,166,896 (1,834,605)
Contract units redeemed (4,494) (1,880) (4,384) (9,899) (1,222,057) (295,883)
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/98 286,511 129,636 286,953 641,789 19,470,393 1,473,737
============ ============= =========== ============ ================== ==============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- -- --
Units purchased -- -- -- -- 28,068 --
Units redeemed -- -- -- -- (2,022) --
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/97 -- -- -- -- 26,046 --
Units purchased -- -- -- -- 10,428 9,003
Units redeemed -- -- -- -- (3,208) (128)
------------ ------------- ----------- ------------ ------------------ --------------
Unit balance at 12/31/98 -- -- -- -- 33,266 8,875
============ ============= =========== ============ ================== ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
RUSSELL AIM
-------------------------------------------------------------- -------------
Multi-Style Aggressive Core
Equity Equity Non-US Bond Value
--------------- ----------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- --
Cova units purchased -- -- -- -- --
Cova units redeemed -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/97 -- -- -- -- --
Cova units purchased 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10)
Contract units purchased 1,960,886 438,734 773,431 1,318,370 365,254
Contract units transferred, net 416,532 107,823 180,088 360,854 177,976
Contract units redeemed (48,988) (10,279) (27,727) (69,373) (21,340)
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/98 2,328,430 536,278 925,792 1,609,851 521,890
=============== ================= =========== ============= ===========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/97 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
--------------- ----------------- ----------- ------------- -----------
Unit balance at 12/31/98 -- -- -- -- --
=============== ================= =========== ============= ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
AIM ALLIANCE
------------------------------------- -----------------------------
Capital International Premier Real Estate
Appreciation Equity Growth Investment
---------------- ----------------- ------------ ----------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 134,252 148,215 523,722 136,005
Contract units transferred, net 57,235 57,321 149,553 58,393
Contract units redeemed (7,999) (1,464) (5,421) (2,987)
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/98 183,488 204,072 667,854 191,411
================ ================= ============ ================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
---------------- ----------------- ------------ ----------------
Unit balance at 12/31/98 -- -- -- --
================ ================= ============ ================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
LIBERTY GOLDMAN SACHS KEMPER
------------ ---------------------------------------------------- ------------------
Growth
Newport and Global Dreman High
Tiger Income International Income Return Equity
----------- ------------------ ------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- --
Cova units purchased -- -- -- -- --
Cova units redeemed -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/97 -- -- -- -- --
Cova units purchased 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) --
Contract units purchased 18,873 298,119 89,807 12,114 --
Contract units transferred, net 13,289 178,567 23,575 8,062 9,213
Contract units redeemed (226) (9,011) (558) (1,343) --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/98 31,936 467,675 112,824 18,833 9,223
=========== ================== ================== =========== ==================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/97 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
----------- ------------------ ------------------ ----------- ------------------
Unit balance at 12/31/98 -- -- -- -- --
=========== ================== ================== =========== ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
KEMPER MFS
------------------------------------------------- -----------------------------
Small Cap Small Cap Government
Growth Value Securities Bond Research
------------- ------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- --
Cova units purchased -- -- -- -- --
Cova units redeemed -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/97 -- -- -- -- --
Cova units purchased 10 10 10 10 10
Cova units redeemed (10) (10) (10) -- (10)
Contract units purchased 61,682 178,532 48,334 245 337,107
Contract units transferred, net 15,201 69,892 11,575 16,283 137,437
Contract units redeemed (391) (3,332) (197) -- (9,758)
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/98 76,492 245,092 59,712 16,538 464,786
============= ============= ================ ========== ============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/97 -- -- -- -- --
Units purchased -- -- -- -- --
Units redeemed -- -- -- -- --
------------- ------------- ---------------- ---------- ------------
Unit balance at 12/31/98 -- -- -- -- --
============= ============= ================ ========== ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
MFS
-----------------------------------------------------------
F&C
Growth Emerging
with Emerging Markets High
Income Growth Equity Income
----------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------- -------------- -------------- -----------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 416,517 438,345 45,159 164,144
Contract units transferred, net 171,689 106,215 28,739 57,879
Contract units redeemed (6,772) (4,901) (727) (2,814)
----------- -------------- -------------- -----------
Unit balance at 12/31/98 581,434 539,659 73,171 219,209
=========== ============== ============== ===========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- -------------- -------------- -----------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- -------------- -------------- -----------
Unit balance at 12/31/98 -- -- -- --
=========== ============== ============== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
MFS Oppenheimer Putnam
------------- -------------------------------------------------------------- -------------
Growth Growth
World and High Strategic and
Governments Growth Income Income Bond Bond Income
------------- ---------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- -- -- -- --
Cova units purchased -- -- -- -- -- -- --
Cova units redeemed -- -- -- -- -- -- --
Contract units purchased -- -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- -- --
------------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/97 -- -- -- -- -- -- --
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed -- (10) (10) (10) (10) (10) (10)
Contract units purchased 423 83,004 211,120 51,949 320,045 71,817 820,015
Contract units transferred, net 1,674 19,949 78,591 27,811 86,123 36,774 304,805
Contract units redeemed (25) (5,792) (4,881) (1,247) (4,178) (722) (9,152)
------------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/98 2,082 97,161 284,830 78,513 401,990 107,869 1,115,668
============= ========== =========== =========== =========== =========== =============
Annuitization phase:
Unit balance at 12/31/96 -- -- -- -- -- -- --
Units purchased -- -- -- -- -- -- --
Units redeemed -- -- -- -- -- -- --
--------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/97 -- -- -- -- -- -- --
Units purchased -- -- -- -- -- -- --
Units redeemed -- -- -- -- -- -- --
------------- ---------- ----------- ----------- ----------- ----------- -------------
Unit balance at 12/31/98 -- -- -- -- -- -- --
============= ========== =========== =========== =========== =========== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
Putnam
----------------------------------------------------------------------
International
New International New
Value Vista Growth Opportunities
----------- ----------- -------------------- ------------------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------- ----------- -------------------- ------------------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 16,925 116,318 394,877 38,270
Contract units transferred, net 25,293 36,195 141,372 14,803
Contract units redeemed (127) (1,108) (6,194) (264)
----------- ----------- -------------------- ------------------
Unit balance at 12/31/98 42,091 151,405 530,055 52,809
=========== =========== ==================== ==================
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- ----------- -------------------- ------------------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------- ----------- -------------------- ------------------
Unit balance at 12/31/98 -- -- -- --
=========== =========== ==================== ==================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
TEMPLETON FIDELITY
------------------------------------------------------- ----------
Mutual
Developing Shares
International Markets Investments Growth
----------------- -------------- ----------------- ----------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------------- -------------- ----------------- ----------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased 140,734 72,847 61,499 8,130
Contract units transferred, net 26,597 18,743 45,054 (1,021)
Contract units redeemed (2,556) (1,630) (518) (361)
----------------- -------------- ----------------- ----------
Unit balance at 12/31/98 164,775 89,960 106,035 6,748
================= ============== ================= ==========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------------- -------------- ----------------- ----------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
----------------- -------------- ----------------- ----------
Unit balance at 12/31/98 -- -- -- --
================= ============== ================= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
FIDELITY
---------------------------------------------------------------
Growth Growth & Equity-
Contrafund Opportunities Income Income
-------------------------------------------------- ----------
<S> <C> <C> <C> <C>
Accumulation phase:
Unit balance at 12/31/96 -- -- -- --
Cova units purchased -- -- -- --
Cova units redeemed -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
--------------- ------------------ ------------ ----------
Unit balance at 12/31/97 -- -- -- --
Cova units purchased 10 10 10 10
Cova units redeemed (10) (10) (10) (10)
Contract units purchased, net 30,391 11,440 53,646 20,381
Contract units transferred 2,056 (1,406) 30,141 4,635
Contract units redeemed (93) (511) (13,954) (884)
--------------- ------------------ ------------ ----------
Unit balance at 12/31/98 32,354 9,523 69,833 24,132
=============== ================== ============ ==========
Annuitization phase:
Unit balance at 12/31/96 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
--------------- ------------------ ------------ ----------
Unit balance at 12/31/97 -- -- -- --
Units purchased -- -- -- --
Units redeemed -- -- -- --
--------------- ------------------ ------------ ----------
Unit balance at 12/31/98 -- -- -- --
=============== ================== ============ ==========
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
<TABLE>
<CAPTION>
Balance Sheets
(In thousands)
SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
ASSETS ------------- ------------
Investments:
<S> <C> <C>
Debt securities available for sale at fair value
(cost of $1,434,132 in 1999 and $1,375,198 in 1998) $1,378,777 $1,371,513
Equity securities, at fair value 9,339 9,037
Mortgage loans, net of allowance for potential loan loss 341,011 312,865
Other invested assets 4,625 -
Policy loans 26,973 26,295
------ ------
Total investments 1,760,725 1,719,710
--------- ---------
Cash and cash equivalents - interest bearing 80,487 94,770
Cash - non-interest bearing 7,221 5,008
Accrued investment income 24,123 21,505
Deferred policy acquisition costs 187,214 131,973
Present value of future profits 43,207 42,230
Goodwill 17,736 18,585
Federal and state income tax recoverable 6,547 -
Deferred tax benefits, net 10,044 4,786
Receivable from OakRe 427,954 720,904
Due from affiliates 215,812 246,198
Other assets 3,064 6,674
Separate account assets 2,186,815 1,832,396
--------- ---------
Total assets $4,970,949 $4,844,739
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
<TABLE>
<CAPTION>
Balance Sheets, (Continued)
(In thousands)
SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------ ------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
<S> <C> <C>
Policyholder deposits $2,383,976 $2,643,124
Future policy benefits 58,998 54,336
Payable on return of collateral on loaned securities 40,242 25,923
Payable on purchase of securities 7,158 1,040
Federal and state income taxes payable 1,419 446
Accounts payable and other liabilities 19,967 18,714
Future purchase price payable to OakRe 4,952 6,976
Guaranty fund assessments 9,700 9,700
Separate account liabilities 2,186,811 1,832,394
--------- ---------
Total liabilities 4,713,223 4,592,653
--------- ---------
Shareholder's equity:
Common stock 5,799 5,799
Additional paid-in capital 240,491 220,491
Retained earnings 23,662 26,410
Accumulated other comprehensive loss, net of tax (12,226) (614)
-------- -----
Total shareholder's equity 257,726 252,086
------- -------
Total liabilities and shareholder's equity $4,970,949 $4,844,739
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
<TABLE>
<CAPTION>
Statements of Income (Unaudited)
(In thousands)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------ ------------------------
Revenues:
<S> <C> <C> <C> <C>
Premiums $7,337 $17,133 $ (2,418) $8,349
Net investment income 98,332 94,222 32,304 32,414
Net realized investment gains (losses) (15,695) (221) (10,901) 1,533
Separate account fees 22,437 14,865 8,111 5,432
Other income 7,837 5,424 3,051 3,733
----- ----- ----- -----
Total revenues 120,248 131,423 30,147 51,461
------- ------- ------ ------
Benefits and expenses:
Interest on policyholder deposits 75,818 69,048 26,122 23,386
Current and future policy benefits 11,021 18,051 (897) 8,355
Operating and other expenses 29,448 22,583 11,308 8,882
Amortization of purchased intangible assets 2,881 2,970 970 962
Amortization of deferred acquisition costs 8,397 6,626 2,946 3,176
----- ----- ----- -----
Total benefits and expenses 127,565 119,278 40,449 44,761
------- ------- ------ ------
Income (loss)before income taxes (7,317) 12,145 (10,302) 6,700
------- ------ -------- -----
Income tax expense(benefit):
Current (5,563) 1,857 (5,357) 3,169
Deferred 994 1,050 239 (2,430)
------- ----- ------ -------
Total income tax expense (benefit) (4,569) 2,907 (5,118) 739
------- ----- ------- ---
Net income (loss) $ (2,748) $9,238 $(5,184) $5,961
======== ====== ======== ======
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
<TABLE>
<CAPTION>
Statements of Shareholder's Equity (Unaudited)
(In thousands)
FOR THE PERIODS ENDED
9/30/99 12/31/98
--------- ---------
<S> <C> <C>
Common stock, at beginning and end of period $5,799 $5,799
------ ------
Additional paid-in capital:
Balance at beginning of period 220,491 191,491
Capital contribution 20,000 29,000
------ ------
Balance at end of period 240,491 220,491
------- -------
Retained earnings:
Balance at beginning of period 26,410 12,516
Net income (loss) (2,748) 13,894
------- ------
Balance at end of period 23,662 26,410
------ ------
Accumulated other comprehensive income:
Balance at beginning of period (614) 2,732
Change in unrealized depreciation of debt and
equity securities (51,671) (14,571)
Change in deferred acquisition costs
attributable to unrealized depreciation 31,099 6,996
Change in present value of future profits
attributable to unrealized depreciation 2,708 2,428
Change in deferred federal income taxes impact 6,252 1,801
----- -----
Balance at end of period (12,226) (614)
-------- -----
Total shareholder's equity $257,726 $252,086
======== ========
Total comprehensive income (loss):
Net income (loss) $(2,748) $13,894
Other comprehensive loss (change in
unrealized depreciation on
debt and equity securities) (11,612) (3,346)
-------- -------
Total comprehensive income(loss) $(14,360) $10,548
========= =======
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
<TABLE>
<CAPTION>
Statements of Cash Flows (Unaudited)
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
----------------------------
Reconciliation of net income to net cash
provided by operating activities:
<S> <C> <C>
Net income (loss) $(2,748) $9,238
Adjustments to reconcile to net cash
provided by operating activities:
Increase in future policy benefits 4,662 11,652
Increase (decrease) in payables and accrued liabilities 1,253 3,434
Increase in accrued investment income (2,618) (2,878)
Amortization of intangible assets 11,278 9,596
Recapture commission paid to OakRe (2,024) (4,384)
Net realized investment losses 15,695 221
Interest accumulated on policyholder deposits 75,818 69,048
Increase (decrease) in current and deferred
federal income taxes (4,285) 232
Commissions and expenses deferred (32,538) (36,888)
Other (830) (12,986)
----- --------
Net cash provided by operating activities 63,663 46,285
------ ------
Cash flows from investing activities:
Cash used in the purchase of investment
securities (517,747) (457,682)
Proceeds from investment securities sold
and matured 419,220 422,077
Other (1,834) (1,210)
------- -------
Net cash used in investing activities (100,361) (36,815)
--------- --------
</TABLE>
See accompanying notes to unaudited financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
<TABLE>
<CAPTION>
Statements of Cash Flows, (Unaudited) (Continued)
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
-------------------------------------
Cash flows from financing activities:
<S> <C> <C>
Policyholder deposits $615,574 $783,679
Transfers from OakRe 341,348 646,804
Transfer to separate accounts (320,870) (627,741)
Return of policyholder deposits (686,524) (652,764)
Proceeds from security collateral on
Securities lending 14,319 -
Transfers from(to) RGA 40,781 (68,392)
Capital contribution received 20,000 -
------ ------
Net cash provided by financing activities 24,628 81,586
------ ------
Increase(decrease) in cash and cash
equivalents (12,070) 91,056
-------- ------
Cash and cash equivalents - beginning of period 99,778 16,576
------ ------
Cash and cash equivalents - end of period $87,708 $107,632
======= ========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
Notes to Interim Financial Statements - (Unaudited)
September 30, 1999 and 1998
(1) BASIS OF PRESENTATION
The interim consolidated financial statements for Cova Financial Services Life
Insurance Company (the Company) have been prepared on the basis of generally
accepted accounting principles and, in the opinion of management, reflect all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation or results for such periods. The results of operations and cash
flows for any interim period are not necessarily indicative of results for the
full year. These financial statements should be read in conjunction with the
financial statements as of December 31, 1998 and December 31, 1997, and for each
of the years in the three-year period ended December 31, 1998 and related notes
thereto, presented elsewhere herein. Interim financial data presented herein are
unaudited.
(2) INVESTMENTS
The Company's investments in debt and equity securities are considered available
for sale and carried at estimated fair value, with the aggregate unrealized
appreciation or depreciation being recorded as other comprehensive income. The
carrying value and amortized cost of investments at September 30, 1999 were as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
---------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
----------- ----- --------- --------- --------
(in thousands)
Debt securities:
<S> <C> <C> <C> <C> <C>
U.S. Government treasuries $28,215 $70 $(2,068) $26,217 $26,217
Government agency obligations 37,844 287 (133) 37,998 37,998
Corporate securities 981,037 1,828 (44,963) 937,902 937,902
Mortgage-backed securities 186,334 210 (3,883) 182,661 182,661
Asset-backed securities 200,702 846 (7,549) 193,999 193,999
----------- ----- --------- --------- --------
Total debt securities 1,434,132 3,241 (58,596) 1,378,777 1,378,777
Equity securities 9,339 - - 9,339 9,339
Mortgage loans(net) 341,011 8,510 - 349,521 341,011
Other invested assets 4,625 - - 4,625 4,625
Policy loans 26,973 - - 26,973 26,973
----------- ----- --------- --------- --------
Total investments $1,816,080 $11,751 ($58,596) $1,769,235 $1,760,725
========== ======= ========= ========== ==========
Company's beneficial interest in
Separate accounts $4 -- -- $4 $4
== == == == ==
</TABLE>
As of September 30, 1999, the Company had eight nonincome producing debt
securities totaling $9,344,232. The Company's valuation allowance for potential
losses on mortgage loans is $930,000 at September 30, 1999.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
Notes to Interim Financial Statements - (Unaudited)
The amortized cost and estimated fair value of debt securities at September
30, 1999, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties. Maturities
of mortgage-backed securities will be substantially shorter than their
contractual maturity because they require monthly principal installments and
mortgagees may prepay principal.
<TABLE>
<CAPTION>
September 30, 1999
---------------------------------------
Estimated
Amortized Fair
Cost Value
-------------- ------------
(in thousands )
<S> <C> <C>
Less than one year $66,103 $66,568
Due after one years through five years 449,620 434,297
Due after five years through ten years 457,775 434,164
Due after ten years 274,300 261,087
Mortgage-backed securities 186,334 182,661
------- -------
Total $1,434,132 $1,378,777
========== ==========
</TABLE>
At September 30, 1999, approximately 92.2% of the Company's debt securities are
investment grade or are non-rated but considered to be of investment grade. Of
the 7.8% non-investment grade debt securities, 5.3% are rated as BB, 1.7% are
rated as B and .8% are rated as CCC and treated as impaired.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
Notes to Interim Financial Statements - (Unaudited)
The components of net investment income, net realized capital gains (losses) and
unrealized appreciation (depreciation) were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
----------------------- -------------------------
(in thousands )
<S> <C> <C> <C> <C>
Income on debt securities $75,708 $70,356 $24,859 $24,238
Income on short-term investments 1,853 2,073 840 868
Income on equity securities 422 - 141 -
Income on mortgage loans 20,123 21,762 6,457 7,262
Income on policy loans 1,587 1,469 544 504
Miscellaneous interest 304 92 21 31
--- -- -- --
Total investment income 99,997 95,752 32,862 32,903
Investment expenses (1,665) (1,530) (558) (489)
------- ------- ----- -----
Net investment income $98,332 $94,222 $32,304 $32,414
======= ======= ======= =======
Net realized capital gains(losses) - debt
securities $(15,695) $(221) $(10,901) $1,533
========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED:
SEPTEMBER 30,
1999 1998
----------------------------
(in thousands)
Unrealized appreciation (depreciation) are as follows:
<S> <C> <C>
Debt securities $(51,671) $7,331
Effects on deferred acquisition costs
amortization 31,099 (3,379)
Effects on present value of future
profits amortization 2,708 (1,207)
----- -------
Unrealized depreciation before income taxes (17,864) 2,745
Unrealized income tax benefit 6,252 (961)
----- -----
Net change in comprehensive income(loss) $(11,612) $1,784
========= ======
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Corporation)
Notes to Interim Financial Statements - (Unaudited)
(3) SECURITIES GREATER THAN 10% OF SHAREHOLDER'S EQUITY
As of September 30, 1999 the Company does not have any individual security that
exceeds 10% of shareholder's equity.
(4) STATUTORY SURPLUS
As of September 30, 1999, the Company's statutory capital and surplus was
$109,374,575. The Company's statutory net losses for the periods ended September
30, 1999 and 1998 were $20,700,478 and $14,694,439, respectively.
(5) RELATED-PARTY TRANSACTIONS
The Company has entered into management, operations, and servicing agreements
with its affiliated companies. The affiliated companies are Cova Life Management
Company, which provides management services and the employees necessary to
conduct the activities of the Company; and Conning Asset Management, which
provides investment advice. Additionally, a portion of overhead and other
corporate expenses are allocated by the Company's ultimate parent, General
American Life Insurance Company. Cova Life Administrative Service Company
provides various services for the Company including underwriting, claims, and
administrative functions. Expenses and fees paid to affiliated companies as of
September 30, 1999 and 1998 were $17,453,991 and $16,348,203, respectively.
(6) REINSURANCE
Effective in July 1999, the Company entered into a modified coinsurance
agreement with Metropolitan Life Insurance Company (MetLife). Under the
agreement, the company will cede the general account's new business and
recapture business from OakRe to MetLife. There was no transfer of assets
between the Company and MetLife from this agreement. In substance, the agreement
represents a guarantee by MetLife of new business and recapture business by the
Company during the period.
(7) SUBSEQUENT EVENT
On August 26, 1999, the Company's ultimate parent, General American Life
Insurance Company (GALIC), entered into a definitive agreement, whereby MetLife
will acquire GALIC's parent company GenAmerica Corporation for $1.2 billion in
cash. The purchase was approved by the Missouri Director of Insurance on
November 10, 1999. The purchase was completed on January 6, 2000.
On November 18, 1999, CLMC purchased the remaining 51% interest in CLASC from
another affiliate, Navisys Incorporated, for $1,184,414.
(8) OTHER
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
COVA FINANCIAL SERVICES
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Financial Statements
December 31, 1998, 1997, and 1996
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
Cova Financial Services Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Cova
Financial Services Life Insurance Company and subsidiaries (a wholly owned
subsidiary of Cova Corporation) (the Company) as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholder's
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cova
Financial Services Life Insurance Company and subsidiaries as of December
31, 1998 and 1997, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
March 4, 1999
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets
December 31, 1998 and 1997
ASSETS 1998 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Investments:
Debt securities available-for-sale, at fair value (cost of
$1,375,198 in 1998 and $1,269,362 in 1997) $ 1,371,513 1,280,247
Equity securities, at fair value 9,037 --
Mortgage loans, net of allowance for potential loan loss
of $510 in 1998 and $237 in 1997 312,865 348,206
Policy loans 26,295 24,228
------------- -------------
Total investments 1,719,710 1,652,681
Cash and cash equivalents - interest-bearing 94,770 12,910
Cash - noninterest-bearing 5,008 3,666
Receivable from sale of securities 5,845 1,870
Accrued investment income 21,505 20,602
Deferred policy acquisition costs 131,973 84,326
Present value of future profits 42,230 41,486
Goodwill 18,585 19,717
Deferred tax asset, net 4,786 7,933
Receivable from OakRe 720,904 1,426,261
Due from affiliates 246,198 127,599
Other assets 829 2,184
Separate account assets 1,832,396 1,108,125
------------- -------------
Total assets $ 4,844,739 4,509,360
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets, Continued
December 31, 1998 and 1997
LIABILITIES AND SHAREHOLDER'S EQUITY 1998 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Liabilities:
Policyholder deposits $ 2,643,124 3,098,287
Future policy benefits 54,336 38,361
Payable on return of collateral on loaned securities 25,923 --
Payable on purchase of securities 1,040 7,261
Federal and state income taxes payable 446 1,312
Accounts payable and other liabilities 18,714 21,912
Future purchase price payable to OakRe 6,976 12,173
Guaranty fund assessments 9,700 9,700
Separate account liabilities 1,832,394 1,107,816
------------ -------------
Total liabilities 4,592,653 4,296,822
------------ -------------
Shareholder's equity:
Common stock, $2 par value. (Authorized
5,000,000 shares; issued and outstanding
2,899,466 shares in 1998 and 1997) 5,799 5,799
Additional paid-in capital 220,491 191,491
Retained earnings 26,410 12,516
Accumulated other comprehensive
income - net of tax (614) 2,732
------------ -------------
Total shareholder's equity 252,086 212,538
------------ -------------
Total liabilities and shareholder's equity $ 4,844,739 4,509,360
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Income
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
----------- ----------- ----------
(in thousands)
<S> <C> <C> <C>
Revenues:
Premiums $ 23,875 9,368 3,154
Net investment income 127,812 111,661 70,629
Net realized gains (losses) on sales
of investments (1,600) 563 472
Separate account fees 20,820 12,455 7,205
Other income 5,372 4,950 3,304
----------- ----------- ----------
Total revenues 176,279 138,997 84,764
----------- ----------- ----------
Benefits and expenses:
Interest on policyholder deposits 93,759 81,129 50,100
Current and future policy benefits 25,225 11,496 5,130
Operating and other expenses 27,190 21,758 16,557
Amortization of purchased
intangible assets 3,445 3,668 2,332
Amortization of deferred policy
acquisition costs 9,393 6,307 4,389
----------- ----------- ----------
Total benefits and expenses 159,012 124,358 78,508
----------- ----------- ----------
Income before income taxes 17,267 14,639 6,256
----------- ----------- ----------
Income tax expense (benefit):
Current (1,576) 1,951 1,740
Deferred 4,949 3,710 915
----------- ----------- ----------
Total income tax expense 3,373 5,661 2,655
----------- ----------- ----------
Net income $ 13,894 8,978 3,601
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Common stock, balance at beginning
and end of period $ 5,799 5,799 5,799
----------- ----------- -----------
Additional paid-in capital:
Balance at beginning of period 191,491 166,491 129,586
Capital contribution 29,000 25,000 36,905
----------- ----------- -----------
Balance at end of period 220,491 191,491 166,491
----------- ----------- -----------
Retained earnings (deficit):
Balance at beginning of period 12,516 3,538 (63)
Net income 13,894 8,978 3,601
----------- ----------- -----------
Balance at end of period 26,410 12,516 3,538
----------- ----------- -----------
Accumulated other comprehensive income:
Balance at beginning of period 2,732 (784) 2,764
Change in unrealized appreciation
(depreciation) of debt and equity
securities (14,571) 14,077 (13,915)
Deferred federal income tax impact 1,801 (1,893) 1,910
Change in deferred policy acquisition costs attributable
to unrealized depreciation (appreciation) 6,996 (5,342) 1,561
Change in present value of future profits
attributable to unrealized depreciation (appreciation) 2,428 (3,326) 6,896
----------- ----------- -----------
Balance at end of period (614) 2,732 (784)
----------- ----------- -----------
Total shareholder's equity $ 252,086 212,538 175,044
=========== =========== ===========
Total comprehensive income:
Net income $ 13,894 8,978 3,601
Other comprehensive income (change in net unrealized
appreciation (depreciation) of debt and equity securities) (3,346) 3,516 (3,548)
----------- ----------- -----------
Total comprehensive income $ 10,548 12,494 53
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------- ------------ ------------
(in thousands)
<S> <C> <C> <C>
Reconciliations of net income to net cash provided by
operating activities:
Net income $ 13,894 8,978 3,601
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in future policy benefits 15,975 6,019 680
Increase (decrease) in payables and
accrued liabilities (3,198) (1,194) 2,900
Increase in accrued investment income (903) (5,591) (4,778)
Amortization of intangible assets and 12,838 9,975 6,721
deferred policy acquisition costs
Amortization and accretion of securities
premiums and discounts (1,767) 1,664 2,751
Recapture commissions paid to OakRe (5,197) (4,837) (4,483)
Net realized loss (gain) on sale of investments 1,600 (563) (472)
Interest accumulated on policyholder deposits 93,759 81,129 50,100
Increase (decrease) in current and
deferred federal income taxes 2,281 5,917 (351)
Separate account net income (12) (2,637) (2,008)
Commissions and expenses deferred (50,044) (46,142) (34,803)
Other (3,566) (3,537) (578)
------------- ------------ ------------
Net cash provided by operating activities 75,660 49,181 19,280
------------- ------------ ------------
Cash flows from investing activities:
Cash used in the purchase of investment securities (733,049) (809,814) (715,274)
Proceeds from investment securities sold and matured 642,481 382,783 262,083
Other (1,159) 15,400 (14,166)
------------- ------------ ------------
Net cash used in investing activities $ (91,727) (411,631) (467,357)
------------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows, Continued
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------- ------------ ------------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Policyholder deposits $ 1,014,075 841,174 446,784
Transfers from OakRe 812,520 637,168 574,010
Transfer to separate accounts (789,872) (450,303) (126,797)
Return of policyholder deposits (889,202) (597,425) (491,025)
Proceeds from security collaterals on securities lending 25,923 -- --
Transfers to RGA (103,175) (120,411) --
Capital contributions received 29,000 25,000 20,000
------------- ------------ ------------
Net cash provided by financing activities 99,269 335,203 422,972
------------- ------------ ------------
Increase (decrease) in cash and
cash equivalents 83,202 (27,247) (25,105)
Cash and cash equivalents at beginning of period 16,576 43,823 62,256
CFLIC contributed cash (note 9) -- -- 6,672
------------- ------------ ------------
Cash and cash equivalents at end of period $ 99,778 16,576 43,823
============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1998, 1997, and 1996
(1) NATURE OF BUSINESS AND ORGANIZATION
NATURE OF THE BUSINESS
Cova Financial Services Life Insurance Company (CFSLIC) and
subsidiaries (the Company) market and service single premium
deferred annuities, immediate annuities, variable annuities, term
life, single premium variable universal life, and single premium
whole life insurance policies. The Company is licensed to do
business in 47 states and the District of Columbia. Most of the
policies issued present no significant mortality nor longevity
risk to the Company, but rather represent investment deposits by
the policyholders. Single premium whole life insurance policies
provide policy beneficiaries with mortality benefits amounting to
a multiple, which declines with age, of the original premium.
Under the deferred fixed annuity contracts, interest rates
credited to policyholder deposits are guaranteed by the Company
for periods from one to ten years, but in no case may renewal
rates be less than 3%. The Company may assess surrender fees
against amounts withdrawn prior to scheduled rate reset and adjust
account values based on current crediting rates. Policyholders
also may incur certain federal income tax penalties on
withdrawals.
Under the variable annuity contracts, policyholder deposits are
allocated to various separate account sub-accounts or the general
accounts. A sub-account is valued at the sum of market values of
the securities in its underlying investment portfolio. The
contract value allocated to a sub-account will fluctuate based on
the performance of the sub-accounts. The contract value allocated
to the general accounts is credited with a fixed interest rate for
a specified period. The Company may assess surrender fees against
amounts withdrawn prior to the end of the withdrawal charge
period. Policyholders also may incur certain federal income tax
penalties on withdrawals.
Under the single premium variable life contracts, policyholder
deposits are allocated to various separate account sub-accounts.
The account value allocated to a sub-account will fluctuate based
on the performance of the sub-accounts. The Company guarantees a
minimum death benefit to be paid to the beneficiaries upon the
death of the insured. The Company may assess surrender fees
against amounts withdrawn prior to the end of the surrender charge
period. A deferred premium tax may also be assessed against
amounts withdrawn in the first ten years. Policyholders may also
incur certain federal income tax penalties on withdrawals.
Under the term life insurance policies, policyholders pay a level
premium over a certain period of time to guarantee a death benefit
will be paid to the beneficiaries upon the death of the insured.
This policy has no cash accumulation available to the
policyholder.
Although the Company markets its products through numerous
distributors, including regional brokerage firms, national
brokerage firms, and banks, approximately 89%, 73%, and 66% of the
Company's sales have been through two specific brokerage firms, A.
G. Edwards & Sons, Incorporated and Edward Jones & Company in
1998, 1997, and 1996, respectively.
ORGANIZATION
CFSLIC, formerly Xerox Financial Services Life Insurance Company
(XFSLIC), is a wholly owned subsidiary of Cova Corporation, a
subsidiary of General American Life Insurance Company (GALIC), a
Missouri domiciled life insurance company. When Cova Corporation
purchased CSFLIC from Xerox Financial Services, Inc. (XFSI), a
wholly owned subsidiary of Xerox Corporation, it entered into a
financing reinsurance transaction with OakRe Life Insurance
Company (OakRe), a subsidiary of XFSLIC, to assume the economic
benefits and risks of the existing single premium deferred annuity
deposits (SPDAs) of CFSLIC. Ownership of OakRe was retained by
XFSI subsequent to the sale of XFSLIC and other affiliates. The
receivable from OakRe to the Company that was created by this
transaction will be liquidated over the remaining crediting rate
guaranty periods which will be substantially expired by the end of
the year 2000, from the transfer of cash in the amount of the then
current account value, less a recapture commission fee to OakRe on
policies retained beyond their 30-day-no-fee surrender window by
the Company, upon the next crediting rate reset date of each
annuity policy. The Company may then reinvest that cash for those
policies that are retained and thereafter assume the benefits and
risks of those deposits.
In the event that both OakRe and XFSI default on the receivable,
the Company may draw funds from a standby bank irrevocable letter
of credit established by XFSI in the amount of $500 million. No
funds were drawn on this letter of credit during the periods ended
December 31, 1998 and 1997.
In substance, terms of the agreement have allowed the seller,
XFSI, to retain substantially all of the existing financial
benefits and risks of the existing business, while the purchaser,
GALIC, obtained the corporate operating and product licenses,
marketing, and administrative capabilities of the Company and
access to the retention of the policyholder deposit base that
persists beyond the next crediting rate reset date.
The Company owns 100% of the outstanding shares of First Cova Life
Insurance Company (a New York domiciled insurance company) (FCLIC)
and Cova Financial Life Insurance Company (a California domiciled
insurance company) (CFLIC). Ownership of CFLIC was obtained on
December 31, 1996 as the result of a capital contribution by Cova
Corporation. The Company has presented the consolidated financial
position and results of operations for its subsidiaries from the
dates of actual ownership (see note 9).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEBT SECURITIES
Investments in all debt securities with readily determinable
market values are classified into one of three categories: held to
maturity, trading, or available-for-sale. Classification of
investments is based on management's current intent. All debt
securities at December 31, 1998 and 1997 were classified as
available-for-sale. Securities available-for-sale are carried at
fair value, with unrealized holding gains and losses reported as
accumulated other comprehensive income in the shareholder's
equity, net of deferred effects of income tax and related effects
on deferred acquisition costs and present value of future profits.
Amortization of the discount or premium from the purchase of
mortgage-backed bonds is recognized using a level-yield method
which considers the estimated timing and amount of prepayments of
the underlying mortgage loans. Actual prepayment experience is
periodically reviewed and effective yields are recalculated when
differences arise between the prepayments previously anticipated
and the actual prepayments received and currently anticipated.
When such a difference occurs, the net investment in the
mortgage-backed bond is adjusted to the amount that would have
existed had the new effective yield been applied since the
acquisition of the bond, with a corresponding charge or credit to
interest income (the "retrospective method").
A realized loss is recognized and charged against income if the
Company's carrying value in a particular investment in the
available-for-sale category has experienced a significant decline
in fair value that is deemed to be other than temporary.
Investment income is recorded when earned. Realized capital gains
and losses on the sale of investments are determined on the basis
of specific costs of investments and are credited or charged to
income. Gains or losses on financial future or option contracts
which qualify as hedges of investments are treated as basis
adjustments and are recognized in income over the life of the
hedged investments.
EQUITY SECURITIES
Equity securities represent investments in nonredeemable preferred
stock and common stock warrants. These securities are carried at
fair value, which is determined primarily through published quotes
of trading values. Changes to adjust the carrying value are
reported directly in shareholder's equity. Other-than-temporary
declines below cost are recorded as realized losses.
MORTGAGE LOANS AND POLICY LOANS
Mortgage loans and policy loans are carried at their unpaid
principal balances. An allowance for mortgage loan losses is
established based on an evaluation of the mortgage loan portfolio,
past credit loss experience, and current economic conditions.
Reserves for loans are established when the Company determines
that collection of all amounts due under the contractual terms is
doubtful and are calculated in conformity with Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan -Income
Recognition and Disclosures.
The Company had no impaired loans, and the valuation allowance for
potential losses on mortgage loans was $510,000 and $237,000, at
December 31, 1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency and demand deposits in
banks, U.S. Treasury bills, money market accounts, and commercial
paper with maturities under 90 days, which are not otherwise
restricted.
SEPARATE ACCOUNT ASSETS
Separate accounts contain segregated assets of the Company that
are specifically assigned to variable annuity or life
policyholders in the separate accounts and are not available to
other creditors of the Company. The earnings of separate account
investments are also assigned to the policyholders in the separate
accounts, and are not guaranteed or supported by the other general
investments of the Company. The Company earns mortality and
expense risk fees from the separate account and assesses
withdrawal charges in the event of early withdrawals. Separate
account assets are carried at fair value.
In order to provide for optimum policyholder returns and to allow
for the replication of the investment performance of existing
"cloned" mutual funds, the Company has periodically transferred
capital to the separate account to provide for the initial
purchase of investments in new portfolios. As additional funds
have been received through policyholder deposits, the Company has
periodically reduced its capital investment in the separate
accounts. The Company's capital investment in the separate
accounts as of December 31, 1998 and 1997, is presented in note 3.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business which vary with and are
directly related to the production of new business, principally
commissions, premium taxes, sales costs, and certain policy
issuance and underwriting costs, are deferred. These deferred
costs are amortized in proportion to estimated future gross
profits derived from investment income, realized gains and losses
on sales of securities, unrealized securities gains and losses,
interest credited to accounts, surrender fees, mortality costs,
and policy maintenance expenses. The estimated gross profit
streams are periodically reevaluated and the unamortized balance
of deferred policy acquisition costs is adjusted to the amount
that would have existed had the actual experience and revised
estimates been known and applied from the inception of the
policies and contracts. The amortization and adjustments resulting
from unrealized gains and losses are not recognized currently in
income but as an offset to the accumulated other comprehensive
income component of shareholder's equity. The amortization period
is the remaining life of the policies, which is estimated to be 20
years from the date of original policy issue.
<TABLE>
<CAPTION>
The components of deferred policy acquisition costs are shown
below. The effects on deferred policy acquisition costs of the
consolidation of CFLIC (see note 9) with the Company are presented
separately.
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred policy acquisition costs, beginning of period $ 84,326 49,833 14,468
Commissions and expenses deferred 50,044 46,142 34,803
Amortization (9,393) (6,307) (4,389)
Deferred policy acquisition costs attributable to
unrealized depreciation (appreciation) 6,996 (5,342) 1,561
Effects on deferred policy acquisition costs of CFLIC
consolidation -- -- 3,390
------------ ------------ -------------
Deferred policy acquisition costs, end of period $ 131,973 84,326 49,833
============ ============ =============
</TABLE>
PURCHASE-RELATED INTANGIBLE ASSETS AND LIABILITIES
In accordance with the purchase method of accounting for business
combinations, two intangible assets and a future payable related
to accrued purchase price consideration were established as of the
purchase date.
Present Value of Future Profits
The Company established an intangible asset which represents
the present value of future profits (PVFP) to be derived from
both the purchased and transferred blocks of business. Certain
estimates were utilized in the computation of this asset
including estimates of future policy retention, investment
income, interest credited to policyholders, surrender fees,
mortality costs, and policy maintenance costs discounted at a
pretax rate of 18% (12% net after tax).
In addition, as the Company has the option of retaining its
SPDA policies after they reach their next interest rate reset
date and are recaptured from OakRe, a component of this asset
represents estimates of future profits on recaptured business.
This asset will be amortized in proportion to estimated future
gross profits derived from investment income, realized gains
and losses on sales of securities, unrealized securities
appreciation and depreciation, interest credited to accounts,
surrender fees, mortality costs, and policy maintenance
expenses. The estimated gross profit streams are periodically
reevaluated and the unamortized balance of present value of
future profits will be adjusted to the amount that would have
existed had the actual experience and revised estimates been
known and applied from inception. The amortization and
adjustments resulting from unrealized appreciation and
depreciation are not recognized currently in income but as an
offset to the accumulated other comprehensive income reflected
as a separate component of shareholder's equity. The
amortization period is the remaining life of the policies,
which is estimated to be 20 years from the date of original
policy issue.
Based on current assumptions, amortization of the original
in-force PVFP asset, expressed as a percentage of the original
in-force asset, is projected to be 4.8%, 6.2%, 6.9%, 7.3%, and
7.1% for the years ended December 31, 1999 through 2003,
respectively. Actual amortization incurred during these years
may be more or less as assumptions are modified to incorporate
actual results.
During 1996, the Company adjusted its original purchase
accounting to include a revised estimate of the ultimate
renewal (recapture) rate. This adjustment resulted in a
reallocation of the net purchased intangible asset between
PVFP, goodwill, and the future payable. This final allocation
and the resulting impact on inception to date amortization was
recorded, in its entirety, in 1996.
<TABLE>
<CAPTION>
The components of PVFP are shown below. The effects on PVFP of
the consolidation of CFLIC (see note 9) with the Company are
presented separately.
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
PVFP - beginning of period $ 41,486 46,389 38,155
Net amortization (1,684) (1,577) (473)
Present value of future profits attributable to unrealized
depreciation (appreciation) 2,428 (3,326) 6,896
Adjustment due to revised push-down purchase accounting
-- -- 698
Effects on present value of future profits of CFLIC
consolidation -- -- 1,113
------------ ------------ -------------
PVFP - end of period $ 42,230 41,486 46,389
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
Goodwill
Under the push-down method of purchase accounting, the excess of purchase price
over the fair value of tangible and intangible assets and liabilities acquired
is established as an asset and referred to as goodwill. The Company has elected
to amortize goodwill on the straight-line basis over a 20-year period. The
components of goodwill are shown below. The effects on goodwill of the
consolidation of CFLIC (see note 9) with the Company are presented separately.
1998 1997 1996
----------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill - beginning of period $ 19,717 20,849 23,358
Amortization (1,132) (1,132) (916)
Adjustment due to revised push-down purchase accounting
-- -- (3,626)
Effects on goodwill of CFLIC consolidation -- -- 2,033
----------- ------------ ------------
Goodwill - end of period $ 18,585 19,717 20,849
=========== ============ ============
</TABLE>
Future Payable
Pursuant to the financial reinsurance agreement with OakRe,
the receivable from OakRe becomes due in installments when the
SPDA policies reach their next crediting rate reset date. For
any recaptured policies that continue in force into the next
guarantee period, the Company will pay a commission to OakRe
of 1.75% up to 40% of policy account values originally
reinsured and 3.50% thereafter. On policies that are
recaptured and subsequently exchanged to a variable annuity
policy, the Company will pay a commission to OakRe of 0.50%.
The Company has recorded a future payable that represents the
present value of the anticipated future commission payments
payable to OakRe over the remaining life of the financial
reinsurance agreement discounted at an estimated borrowing
rate of 6.50%. This liability represents a contingent purchase
price payable for the policies transferred to OakRe on the
purchase date and has been pushed down to the Company through
the financial reinsurance agreement. The Company expects that
this payable will be substantially extinguished by the end of
the year 2000.
<TABLE>
<CAPTION>
The components of this future payable are shown below. The effects on the future
payable on the consolidation of CFLIC (see note 9) with the Company are
presented separately.
1998 1997 1996
----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future payable - beginning of period $ 12,173 16,051 23,967
Interest added 629 959 943
Payments to OakRe (5,826) (4,837) (4,483)
Adjustment due to revised push-down purchase
accounting -- -- (5,059)
Effects on goodwill of CFLIC consolidation -- -- 683
----------- ------------ -----------
Future payable - end of period $ 6,976 12,173 16,051
=========== ============ ===========
</TABLE>
DEFERRED TAX ASSETS AND LIABILITIES
XFSI and GALIC agreed to file an election to treat the acquisition
of the Company as an asset acquisition under the provisions of
Internal Revenue Code Section 338(h)(10). As a result of that
election, the tax basis of the Company's assets as of the date of
acquisition was revalued based upon fair market values. The
principal effect of the election was to establish a tax asset on
the tax-basis consolidated balance sheet of approximately $37.9
million for the value of the business acquired that is amortizable
for tax purposes over ten to fifteen years.
POLICYHOLDER DEPOSITS
The Company recognizes its liability for policy amounts that are
not subject to policyholder mortality nor longevity risk at the
stated contract value, which is the sum of the original deposit
and accumulated interest, less any withdrawals. The average
weighted interest crediting rate on the Company's policyholder
deposits as of December 31, 1998 was 5.86%.
FUTURE POLICY BENEFITS
Reserves are held for future policy benefits that subject the
Company to risks to make payments contingent upon the continued
survival of an individual or couple (longevity risk). These
reserves are valued at the present value of estimated future
benefits discounted for interest, expenses, and mortality. The
assumed mortality is the 1983 Individual Annuity Mortality Tables
discounted at 5.50% to 8.50%, depending upon year of issue.
Current mortality benefits payable are recorded for reported
claims and estimates of amounts incurred but not reported.
PREMIUM REVENUE
The Company recognizes premium revenue at the time of issue on
annuity policies that subject it to longevity risks. Amounts
collected on annuity policies not subject to longevity risk are
recorded as increases in the policyholder deposits liability. For
term and single premium variable life products, premiums are
recognized as revenue when due.
OTHER INCOME
Other income consists primarily of policy surrender charges,
servicing fee from OakRe for administrating their policies, and
advisory fees received from GALIC for advisory services rendered
on their individual annuity products.
FEDERAL INCOME TAXES
The Company files a consolidated income tax return with its
subsidiaries. Allocations of federal income taxes are based upon
separate return calculations.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the
consolidated financial statement carrying amount of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
RISKS AND UNCERTAINTIES
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period.
Actual results could differ significantly from those estimates.
The following elements of the consolidated financial statements
are most affected by the use of estimates and assumptions:
- Investment valuation
- Amortization of deferred policy acquisition costs
- Amortization of present value of future profits
- Recoverability of goodwill
The fair value of the Company's investments is subject to the risk
that interest rates will change and cause a temporary increase or
decrease in the liquidation value of debt securities. To the
extent that fluctuations in interest rates cause the cash flows of
assets and liabilities to change, the Company might have to
liquidate assets prior to their maturity and recognize a gain or
loss. Interest rate exposure for the investment portfolio is
managed through asset/liability management techniques which
attempt to control the risks presented by differences in the
probable cash flows and reinvestment of assets with the timing of
crediting rate changes in the Company's policies and contracts.
Changes in the estimated prepayments of mortgage-backed securities
also may cause retrospective changes in the amortization period of
securities and the related recognition of income.
The amortization of deferred policy acquisition costs is based on
estimates of long-term future gross profits from existing
policies. These gross profits are dependent upon policy retention
and lapses, the spread between investment earnings and crediting
rates, and the level of maintenance expenses. Changes in
circumstances or estimates may cause retrospective adjustment to
the periodic amortization expense and the carrying value of the
deferred expense.
In a similar manner, the amortization of PVFP is based on
estimates of long-term future profits from existing policies when
the Company was purchased by GALIC and policies recaptured from
OakRe. These gross profits are dependent upon policy retention and
lapses, the spread between investment earnings and crediting
rates, and the level of maintenance expenses. Changes in
circumstances or estimates may cause retrospective adjustment to
the periodic amortization expense and the carrying value of the
asset.
The Company has considered the recoverability of goodwill and has
concluded that no circumstances have occurred which would give
rise to impairment of goodwill at December 31, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, applies fair value disclosure practices with regard
to financial instruments, both assets and liabilities, for which
it is practical to estimate fair value. In cases where quoted
market prices are not readily available, fair values are based on
estimates that use present value or other valuation techniques.
These techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash
flows. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in
assumptions could cause these estimates to vary materially. In
that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many
cases, might not be realized in the immediate settlement of the
instruments. SFAS No. 107 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements.
Because of this, and further because the value of a business is
also based upon its anticipated earning power, the aggregate fair
value amounts represented do not present the underlying value of
the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents, Short-term Investments,
and Accrued Investment Income
The carrying value amounts reported in the consolidated
balance sheets for these instruments approximate their fair
values. Short-term debt securities are considered
available-for-sale.
Investment Securities and Mortgage Loans
(Including Mortgage-backed Securities)
Fair values of debt securities are based on quoted market
prices, where available. For debt securities not actively
traded, fair value estimates are obtained from independent
pricing services. In some cases, such as private placements,
certain mortgage-backed securities, and mortgage loans, fair
values are estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit
quality, and maturity of the investments (see note 3 for fair
value disclosures).
Policy Loans
Fair values of policy loans approximate carrying value as the
interest rates on the majority of policy loans are reset
periodically and, therefore, approximate current interest
rates.
Interest Rate Swaps and Financial Futures Contracts
The fair value of interest rate swaps and financial futures
contracts are the amounts the Company would receive or pay to
terminate the contracts at the reporting date, thereby taking
into account the current unrealized gains or losses of open
contracts. Amounts are based on quoted market prices or
pricing models or formulas using current assumptions (see note
5 for fair value disclosures).
Investment Contracts
The Company's policy contracts require the beneficiaries to
commence receipt of payments by the later of age 85 or 10
years after purchase, and substantially all permit earlier
surrenders, generally subject to fees and adjustments. Fair
values for the Company's liabilities for investment type
contracts (policyholder deposits) are estimated as the amount
payable on demand. As of December 31, 1998 and 1997, the cash
surrender value of policyholder deposits was approximately
$103.2 million and $151.5 million less than their stated
carrying value. Of the contracts permitting surrender,
substantially all provide the option to surrender without fee
or adjustment during the 30 days following reset of guaranteed
crediting rates. The Company has not determined a practical
method to determine the present value of this option.
All of the Company's deposit obligations are fully guaranteed
by the acquirer, GALIC, and the receivable from OakRe equal to
the SPDA obligations is guaranteed by OakRe's parent, XFSI.
REINSURANCE
Effective in December 1998, the Company entered into a financing
reinsurance agreement with GALIC. The reinsurance agreement
provides that the Company will reinsurance a block of annuity
business issued by GALIC on a 36% coinsurance basis. The Company
recognized income and a corresponding receivable for $1.6 million
related to the reinsurance agreement.
The financing reinsurance agreement entered into with OakRe as a
condition to the purchase of the Company does not meet the
conditions for reinsurance accounting under generally accepted
accounting principles (GAAP). The net assets initially transferred
to OakRe were established as a receivable and are subsequently
increased as interest is accrued on the underlying liabilities and
decreased as funds are transferred back to the Company when
policies reach their crediting rate reset date or benefits are
claimed.
During 1997, the Company entered into a financing reinsurance
agreement with RGA Reinsurance Company (RGA), an affiliate,
related to certain of the Company's single premium deferred
annuity products. The agreement contains recapture provisions, at
the option of the Company, beginning in 1999 at a rate of 20% per
year. Deposits recorded under the contract were approximately $219
million and $120 million and are reflected as policyholder
deposits in the consolidated balance sheets at December 31, 1998
and 1997, respectively.
RECENTLY ADOPTED ACCOUNTING STANDARDS
On January 1, 1998, SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,
became fully effective. Previously, the Financial Accounting
Standards Board (the FASB) had deferred until that date certain
provisions of SFAS No. 125 pertaining to repurchase agreements,
securities lending, and similar financing transactions. As a
result of adopting the deferred provisions of SFAS No. 125, the
Company has recognized on its December 31, 1998 consolidated
balance sheet cash of approximately $25,923,000 related to
collateral controlled on securities lending transactions and a
corresponding obligation to return such collateral at the
termination of such transactions. Restatement of prior period
financial statements is not permitted.
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income
and its components in the financial statements. SFAS No. 130 is
effective for the fiscal year beginning after December 15, 1997.
Reclassification of financial statements for earlier periods
provided is required for comparative purposes. The Company has
elected to adopt SFAS No. 130 in 1998. The adoption of SFAS No.
130 has no impact on the Company's consolidated net income or
shareholder's equity. The Company's only component of accumulated
other comprehensive income relates to unrealized appreciation and
depreciation on debt and equity securities.
RECENTLY ISSUED ACCOUNTING STANDARD
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued in June 1998. SFAS No. 133 requires all
derivative instruments to be recorded on the balance sheet at
estimated fair value. The Company's present accounting policies
would apply such accounting treatment only to marketable
securities as defined under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and to off-balance
sheet derivative instruments. SFAS No. 133 will broaden the
definition of derivative instruments to include all classes of
financial assets and liabilities. It also will require separate
disclosure of identifiable derivative instruments embedded in
hybrid securities. Change in the fair value of derivative
instruments is to be recorded each period either in current
earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it
is, on the type of hedge transaction.
SFAS No. 133 is effective for the Company beginning January 1,
2000. The Company's management is currently evaluating the impact
of SFAS No. 133; at present, the management does not believe it
will have a material effect on the Company's consolidated
financial position or results of operations.
OTHER
Certain 1997 and 1996 amounts have been reclassified to conform to
the 1998 presentation.
<TABLE>
<CAPTION>
(3) INVESTMENTS
The Company's investments in debt and equity securities are considered
available-for-sale and carried at estimated fair value, with the
aggregate unrealized appreciation or depreciation being recorded as a
separate component of shareholder's equity. The amortized cost, estimated
fair value, and carrying value of investments at December 31, 1998 and
1997, are as follows:
1998
-----------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
-------------- -------------- --------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 28,288 249 (84) 28,453 28,453
Collateralized mortgage
obligations 303,577 3,067 (1,571) 305,073 305,073
Corporate, state,
municipalities, and
political subdivisions 1,043,333 19,736 (25,082) 1,037,987 1,037,987
-------------- -------------- --------------- --------------- --------------
Total debt securities 1,375,198 23,052 (26,737) 1,371,513 1,371,513
Equity securities 9,037 -- -- 9,037 9,037
Mortgage loans (net) 312,865 17,500 -- 330,365 312,865
Policy loans 26,295 -- -- 26,295 26,295
-------------- -------------- --------------- --------------- --------------
Total investments $ 1,723,395 40,552 (26,737) 1,737,210 1,719,710
============== ============== =============== =============== ==============
Company's beneficial interest
in separate accounts
$ 2 -- -- 2 2
============== ============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
-------------- -------------- --------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 8,067 121 -- 8,188 8,188
Collateralized mortgage
obligations 370,802 4,504 (524) 374,782 374,782
Corporate, state,
municipalities, and
political subdivisions 890,493 14,867 (8,083) 897,277 897,277
-------------- -------------- --------------- --------------- --------------
Total debt securities 1,269,362 19,492 (8,607) 1,280,247 1,280,247
Mortgage loans (net) 348,206 24,346 -- 372,552 348,206
Policy loans 24,228 -- -- 24,228 24,228
-------------- -------------- --------------- --------------- --------------
Total investments $ 1,641,796 43,838 (8,607) 1,677,027 1,652,681
============== ============== =============== =============== ==============
Company's beneficial interest
in separate accounts
$ 300 9 -- 309 309
============== ============== =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of debt securities at December 31,
1998, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties. Maturities of
mortgage-backed securities will be substantially shorter than their contractual
maturity because they require monthly principal installments and mortgagees may
prepay principal.
1998
------------------------------
ESTIMATED
AMORTIZED FAIR
COST VALUE
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Less than one year $ 55,653 54,942
Due after one year through five years 504,712 498,469
Due after five years through ten years 390,086 392,828
Due after ten years 121,170 120,201
Mortgage-backed securities 303,577 305,073
-------------- --------------
Total $ 1,375,198 1,371,513
============== ==============
</TABLE>
At December 31, 1998, approximately 89.8% of the Company's debt
securities are investment grade or are nonrated but considered to be of
investment grade. Of the 10.2% noninvestment grade debt securities, 7.4%
are rated as BB, 2.4% are rated as B, and 0.4% are rated C and treated
as impaired.
The Company participates in a securities lending program whereby certain
securities are loaned to third parties, primarily major brokerage firms.
The agreement with a custodian bank facilitating such lending requires a
minimum of 102% of the initial market value of the domestic loaned
securities to be maintained in a collateral pool. To further minimize
the credit risk related to this lending program, the Company monitors
the financial condition of the counterparties to these agreements.
Securities loaned at December 31, 1998 had market values totaling
$25,247,750. Cash of $25,923,295 was held as collateral to secure this
agreement.
Income on the Company's security lending program in 1998 was immaterial.
The Company had two impaired debt securities, of which one became
nonincome producing on December 31, 1998. All debt securities were
income producing at December 31, 1997.
<TABLE>
<CAPTION>
The components of investment income, realized capital gains (losses), and
unrealized appreciation (depreciation) are as follows:
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income on debt securities $ 94,876 84,203 53,632
Income on short-term investments 2,720 2,265 2,156
Income on interest rate swaps 71 43 --
Income on policy loans 1,980 1,852 1,454
Interest on mortgage loans 28,650 24,890 13,633
Income on separate account investments 13 2,637 772
Loss on derivatives -- (2,035) (1,640)
Miscellaneous interest 1,644 (258) 1,773
------------ ------------ -------------
Total investment income 129,954 113,597 71,780
Investment expenses (2,142) (1,936) (1,151)
------------ ------------ -------------
Net investment income $ 127,812 111,661 70,629
Net realized capital gains (losses) are as follows:
Debt securities $ (1,600) 537 469
Mortgage loans -- 27 4
Short-term investments -- (1) (1)
------------ ------------ -------------
Net realized gains (losses) on investments $ (1,600) 563 472
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized appreciation (depreciation) are as follows:
Debt securities $ (3,685) 10,885 (3,192)
Effects on deferred acquisition costs
amortization 3,215 (3,781) 1,561
Effects on PVFP amortization (473) (2,901) 425
------------ ------------ -------------
Unrealized appreciation (depreciation)
before income tax (943) 4,203 (1,206)
Unrealized income tax benefit (expense) 329 (1,471) 422
------------ ------------ -------------
Net unrealized appreciation (depreciation)
on investments $ (614) 2,732 (784)
============ ============ =============
</TABLE>
Proceeds from sales, redemptions, and paydowns of investments in debt
securities during 1998 were $486,264,174. Gross gains of $5,102,040 and
gross losses of $6,601,099 were realized on those sales. Included in
these amounts were $1,002,539 of gross gains and $6,011,305 of gross
losses realized on the sale of noninvestment grade securities. Net
realized losses include a 1998 impairment adjustment totaling
approximately $100,000 related to two debt securities held by the
Company.
Proceeds from sales, redemptions, and paydowns of investments in debt
securities during 1997 were $358,658,091. Gross gains of $1,765,242 and
gross losses of $254,493 were realized on those sales. Included in these
amounts were $681,159 of gross gains and $122,480 of gross losses
realized on the sale of noninvestment grade securities. Net realized
gains include a 1997 impairment adjustment totaling approximately
$974,000 related to one debt security held by the Company.
Proceeds from sales, redemptions, and paydowns of investments in debt
securities during 1996 were $223,430,495. Gross gains of $1,158,518 and
gross losses of $687,126 were realized on those sales. Included in these
amounts were $28,969 of gross gains realized on the sale of
noninvestment grade securities.
Securities with a carrying value of approximately $6,400,000 at
December 31, 1998 were deposited with government authorities as
required by law.
(4) SECURITIES GREATER THAN 10% OF SHAREHOLDER'S EQUITY
The Company does not have any individual security that exceeds 10% of
shareholder's equity at December 31, 1998 and 1997.
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
A derivative financial instrument, in very general terms, refers to a
security whose value is derived from the value of an underlying asset,
reference rate, or index.
The Company has a variety of reasons to use derivative instruments, such
as to attempt to protect the Company against possible changes in the
market value of its portfolio and to manage the portfolio's effective
yield, maturity, and duration. All of the Company's holdings are marked
to fair value monthly with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when the disposition closes a hedge. In
this instance, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or futures contract.
Summarized below are the specific types of derivative instruments used
by the Company.
INTEREST RATE SWAPS
At December 31, 1998, the Company had two outstanding interest
rate swap agreements which expire at 2002 and 2003. Under the
agreements, the Company receives a fixed rate of 6.63% and 6.70%
on a notional amount of $7 and $8 million, respectively, and pays
a floating rate based on London Interbank Offered Rate (LIBOR).
The estimated fair value of the agreements at December 31, 1998
was a net unrealized gain of approximately $0.6 million which is
recognized in the accompanying consolidated balance sheet.
At December 31, 1997, the Company has one outstanding interest
rate swap agreement which expires in 2002. Under the agreement,
the Company receives a fixed rate of 6.63% on $7.0 million and
pays a floating rate based on LIBOR. At December 31, 1997, the
estimated fair value of the agreement was immaterial.
Under interest rate swaps, the Company agrees with counterparties
to exchange, at specific intervals, the payments between floating
and fixed-rate interest amounts calculated by reference to
notional amounts. Net interest payments are recognized within net
investment income in the consolidated statement of income.
FUTURES
In order to limit exposure to market fluctuations related to
temporary seed money invested within the separate account, the
Company entered into financial futures contracts during 1997 and
1996. No financial futures contracts were held during 1998. The
Company recorded $-0-, $2,035,309, and $1,639,717 of losses from
terminated contracts as a component of net investment income
during 1998, 1997 and 1996, respectively. The Company also
recorded gains of $-0-, $2,636,999, and $2,007,720 as a component
of net investment income from market appreciation on the
underlying hedged securities within the separate account during
1998, 1997, and 1996, respectively.
A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon
price. The Company utilized futures on the S&P 500 index in 1997.
Upon entering into futures contracts, the Company maintains, in a
segregated account with its custodian, securities with a value
equal to an agreed upon portion of the notional obligation under
the futures contracts. During the period the futures contract is
open, payments are received from or made to the broker daily based
upon changes in the value of the contract with the related income
or loss reflected in the consolidated statement of income as a
contra to changes in fair value of the hedged securities.
The Company is exposed to credit related risk in the event of
nonperformance by counterparties to financial instruments but does
not expect any counterparties to fail to meet their obligations.
It is the Company's policy to deal only with highly rated
companies.
<TABLE>
<CAPTION>
(6) COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income $ 13,894 8,978 3,601
------------ ------------ -------------
Other comprehensive income (loss), before tax -
unrealized appreciation (depreciation) of debt and
equity securities arising during period:
Unrealized holding appreciation (depreciation)
of debt and equity securities (12,971) 13,514 (14,387)
Adjustment to deferred acquisition costs
attributable to unrealized
(appreciation) depreciation 6,228 (5,128) 1,614
Adjustment to PVFP attributable to unrealized
(appreciation) depreciation 2,161 (3,193) 7,130
------------ ------------ -------------
Total unrealized appreciation (depreciation)
arising during period (4,582) 5,193 (5,643)
Less reclassification adjustments for realized (gains) losses
included in net income:
Adjustment for (gains) losses included in
net realized gains (losses) on sales
of investments 1,600 (563) (472)
Adjustment for (gains) losses included in
amortization of PVFP (768) 214 53
Adjustment for (gains) losses included in
amortization of deferred acquisition costs (267) 133 234
------------ ------------ -------------
Total reclassification adjustments for (gains)
losses included in net income 565 (216) (185)
------------ ------------ -------------
Other comprehensive income (loss) before related
income tax expense (benefit) (5,147) 5,409 (5,458)
Related income tax expense (benefit) (1,801) 1,893 (1,910)
------------ ------------ -------------
Other comprehensive income (loss), net of tax (3,346) 3,516 (3,548)
------------ ------------ -------------
Comprehensive income $ 10,548 12,494 53
============ ============ =============
</TABLE>
(7) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company has no direct employees and no retired employees. All
personnel used to support the operations of the Company are supplied by
contract by Cova Life Management Company (CLMC), a wholly owned
subsidiary of Cova Corporation. The Company is allocated a portion of
certain health care and life insurance benefits for future retired
employees of CLMC. In 1998, 1997, and 1996, the Company was allocated a
portion of benefit costs including severance pay, accumulated vacations,
and disability benefits. At December 31, 1998, CLMC had no retired
employees nor any employees fully eligible for retirement and had no
disbursements for such benefit commitments. The expense arising from
these obligations is not material.
(8) INCOME TAXES
The Company will file a consolidated federal income tax return with its
wholly owned subsidiaries, CFLIC and FCLIC. Amounts payable or
recoverable related to periods before June 1, 1995 are subject to an
indemnification agreement with XFSI, which has the effect that the
Company is not at risk for any income taxes nor entitled to recoveries
related to those periods, except for approximately $0.2 million of state
income tax recoveries.
<TABLE>
<CAPTION>
Income taxes are recorded in the consolidated statement of income and directly
in certain shareholder's equity accounts. Income tax expense for the years ended
December 31 is allocated as follows:
1998 1997 1996
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Statements of income:
Operating income (excluding realized
investment gains and losses) $ 3,906 5,464 2,493
Realized investment gains (losses) (533) 197 162
------------ ------------ -------------
Income tax expense (benefit)
included in the consolidated
statements of income 3,373 5,661 2,655
Shareholder's equity -
change in deferred federal income
taxes related to unrealized
appreciation (depreciation)
on securities (1,801) 1,893 (1,910)
------------ ------------ -------------
Total income tax expense $ 1,572 7,554 745
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
The actual federal income tax expense differed from the expected tax expense
computed by applying the U.S. federal statutory rate to income before taxes on
income as follows:
1998 1997 1996
------------------ ------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $ 6,043 35.0% $ 5,124 35.0% $ 2,190 35.0%
State income taxes, net (8) -- (33) (0.2) 77 1.2
Amortization of intangible assets 396 2.3 396 2.7 320 5.1
Dividend received deduction - separate
account (3,183) (18.5) -- -- -- --
Other 125 0.7 174 1.2 68 1.1
--------- -------- -------- ---------- --------- ----------
Total $ 3,373 19.5% $ 5,661 38.7% $ 2,655 42.4%
========= ======== ======== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1998 and
1997 follows:
1998 1997
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Policy reserves $ 31,003 25,312
Liability for commissions on recapture 2,896 4,715
Tax basis of intangible assets purchased 5,351 5,791
DAC "Proxy Tax" 20,619 14,594
Other deferred tax assets 2,690 31
----------- ------------
Total deferred tax assets 62,559 50,443
----------- ------------
Deferred tax liabilities:
PVFP 11,013 9,734
Unrealized (depreciation) appreciation on investments (330) 1,472
Deferred policy acquisition costs 46,190 29,514
Other deferred tax liabilities 900 1,790
----------- ------------
Total deferred tax liabilities 57,773 42,510
----------- ------------
Net deferred tax assets $ 4,786 7,933
=========== ============
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. Management
believes the deferred tax assets will be fully realized in the future
based upon expectation of the reversal of existing temporary
differences, anticipated future earnings, and consideration of all other
available evidence. Accordingly, no valuation allowance is established.
(9) RELATED-PARTY TRANSACTIONS
On December 31, 1997, CLMC and Navisys Incorporated, affiliated
companies, purchased certain assets of Johnson & Higgins/Kirke Van
Orsdel, Inc. (J&H/KVI), an unaffiliated Delaware corporation, for
$2,500,000. The purchased assets are the administrative and service
systems that provide the marketing, underwriting, claims, and
administrative functions for the Company's life and annuity products. On
January 1, 1998, the purchased assets of J&H/KVI were merged into Cova
Life Administrative Service Company (CLASC). Navisys Incorporated
purchased 51% of CLASC, the remaining 49% was purchased by CLMC.
The Company has entered into management, operations, and servicing
agreements with its affiliated companies. The affiliated companies are
CLMC, a Delaware corporation, which provides management services and the
employees necessary to conduct the activities of the Company; and
Conning Asset Management, which provides investment advice.
Additionally, a portion of overhead and other corporate expenses are
allocated by the Company's ultimate parent, GALIC. CLASC provides
various services for the Company including underwriting, claims, and
administrative functions. Expenses and fees paid to affiliated companies
in 1998, 1997, and 1996 for the Company were $20,923,330, $9,400,517,
and $6,618,303, respectively.
In 1998 and 1997, the Company received approximately $3.2 million and
$1.1 million, respectively, in advisory fees from GALIC related to
advisory services on GALIC's individual annuity products.
On December 31, 1996, Cova Corporation transferred its ownership of
CFLIC to the Company. The transfer of ownership was recorded as
additional paid-in capital and increased shareholder's equity on the
Company's December 31, 1996 balance sheet by approximately $16.9
million. This change in direct ownership had no effect on the operations
of either the Company or CFLIC as both entities had existed under common
management and control prior to the December 31, 1996 transfer. Although
CFLIC's balance sheet is fully consolidated with the Company's December
31, 1996 balance sheet, CFLIC's 1996 income and cash flows statements
have not been consolidated with the Company's 1996 income or cash flows
statements. However, CFLIC's December 31, 1996 cash balance of $6.7
million is included in the Company's consolidated cash flows statement.
(10) STATUTORY SURPLUS AND DIVIDEND RESTRICTION
GAAP differs in certain respects from the accounting practices
prescribed or permitted by insurance regulatory authorities (statutory
accounting principles).
The major differences arise principally from the immediate expense
recognition of policy acquisition costs and intangible assets for
statutory reporting, determination of policy reserves based on different
discount rates and methods, the recognition of deferred tax under GAAP
reporting, the nonrecognition of financial reinsurance for GAAP
reporting, the establishment of an asset valuation reserve as a
contingent liability based on the credit quality of the Company's
investment securities, and an interest maintenance reserve as an
unearned liability to defer the realized gains and losses of fixed
income investments presumably resulting from changes to interest rates
and amortize them into income over the remaining life of the investment
sold. In addition, adjustments to record the carrying values of debt
securities and certain equity securities at fair value are applied only
under GAAP reporting, and capital contributions in the form of notes
receivable from an affiliated company are not recognized under GAAP
reporting.
Purchase accounting creates another difference as it requires the
restatement of GAAP assets and liabilities to their estimated fair
values and shareholder's equity to the net purchase price. Statutory
accounting does not recognize the purchase method of accounting.
<TABLE>
<CAPTION>
As of December 31, the differences between statutory capital and surplus
and shareholder's equity determined in conformity with GAAP are as
follows:
1998 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Statutory capital and surplus $ 104,740 90,439
Reconciling items:
GAAP investment valuation reserves (510) (237)
Statutory asset valuation reserve 19,206 18,301
Statutory interest maintenance reserve 5,983 3,080
GAAP investment adjustments to fair value (3,685) 10,885
GAAP deferred policy acquisition costs 131,973 84,326
GAAP basis policy reserves (52,305) (39,921)
GAAP deferred federal income taxes (net) 4,786 7,933
GAAP guarantee assessment adjustment (9,700) (9,700)
GAAP goodwill 18,373 19,457
GAAP present value of future profits 42,230 41,486
GAAP future purchase price payable (6,976) (12,173)
Other (2,029) (1,338)
------------- -------------
GAAP shareholder's equity $ 252,086 212,538
============= =============
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1998, 1997, and 1996
Statutory net losses for CFSLIC for the years ended
December 31, 1998, 1997, and 1996 were $2,830,105,
$9,816,357, and $13,575,788, respectively.
The maximum amount of dividends which can be paid by State of Missouri
insurance companies to shareholders without prior approval of the
insurance commissioner is the greater of 10% of statutory earned surplus
or statutory net gain from operations for the preceding year. Due to the
1998 statutory net loss and the Company's negative earned surplus at
December 31, 1998, no dividends are permissible in 1999 without prior
approval of the insurance commissioner.
The National Association of Insurance Commissioners has developed
certain risk based capital (RBC) requirements for life insurers. If
prescribed levels of RBC are not maintained, certain actions may be
required on the part of the Company or its regulators. At December 31,
1998, the Company's total adjusted capital and authorized control level
RBC were $123,947,126 and $27,386,910, respectively. This level of
adjusted capital qualifies under all tests.
(11) GUARANTY FUND ASSESSMENTS
The Company participates with life insurance companies licensed
throughout the United States in associations formed to guarantee
benefits to policyholders of insolvent life insurance companies. Under
state laws, as a condition for maintaining the Company's authority to
issue new business, the Company is contingently liable for its share of
claims covered by the guaranty associations for insolvencies incurred
through 1998, but for which assessments have not yet been determined nor
assessed, to a maximum in each state generally of 2% of statutory
premiums per annum in the given state. Most states then permit recovery
of assets as a credit against premium of other state taxes over, most
commonly, five years.
In November 1998, the National Organization of Life and Health Guaranty
Associations distributed a study of the major outstanding industry
insolvencies, with estimates of future assessments by state. Based on
this study, the Company has accrued a liability for approximately
$9,700,000 in future assessments on insolvencies that occurred before
December 31, 1998. Under the coinsurance agreement between the Company
and OakRe (see note 1), OakRe is required to reimburse the Company for
any future assessments that it pays which relate to insolvencies
occurring prior to June 1, 1995. As such, the Company has recorded a
receivable from OakRe for approximately $9,700,000. The Company paid
approximately $1,500,000, $3,000,000, and $2,000,000 in guaranty fund
assessments in 1998, 1997, and 1996, respectively. These payments were
substantially reimbursed by OakRe. At the same time, the Company is
liable to OakRe for 80% of any future premium tax recoveries that are
realized from any such assessments and may retain the remaining 20%. The
credits retained for 1998 were not material.
(12) SUBSEQUENT EVENT
On January 31, 1999, the Company modified its financing reinsurance
agreement with RGA related to the Company's certain single premium
deferred annuity products. Under the modified financing reinsurance
agreement, the Company will no longer reinsure any new single premium
deferred annuity product policies with RGA.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
---------------------------------------------------------------
The following financial statements of the Separate Account are
included in Part B hereof:
1. Statement of Assets and Liabilities as of September 30, 1999.
2. Statement of Operations for the nine months ended September 30,
1999.
3. Statements of Changes in Net Assets for the nine months ended
September 30, 1999 and the year ended December 31, 1998.
4. Notes to Financial Statements - September 30, 1999.
5. Independent Auditors' Report.
6. Statement of Assets and Liabilities as of December 31, 1998.
7. Statement of Operations for the year ended December 31,
1998.
8. Statements of Changes in Net Assets for the years ended
December 31, 1998 and 1997.
9. Notes to Financial Statements - December 31, 1998 and 1997.
The following financial statements of the Company are included
In Part B hereof.
1. Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998.
2. Consolidated Statements of Income for the three and nine months
ended September 30, 1999 and 1998.
3. Consolidated Statements of Shareholder's Equity for the nine
months ended September 30, 1999 and the year ended December 31,
1998.
4. Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998.
5. Notes to Consolidated Financial Statements - September 30, 1999
and 1998.
6. Independent Auditors' Report.
7. Consolidated Balance Sheets as of December 31, 1998 and 1997.
8. Consolidated Statements of Income for the years ended December
31, 1998, 1997 and 1996.
9. Consolidated Statements of Shareholder's Equity for the years
ended December 31, 1998, 1997 and 1996.
10. Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
11. Notes to Consolidated Financial Statements - December 31,
1998, 1997 and 1996.
b. Exhibits
---------------------------------------------------------------
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account.(1)
2. Not Applicable.
3. Principal Underwriter's Agreement.(2)
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.(1)
5. Application for Variable Annuity.(1)
6.(i) Copy of Articles of Incorporation of the Company.(3)
(ii) Copy of the Bylaws of the Company.(3)
7. Not Applicable.
8.(i) Form of Fund Participation Agreement by and among AIM Variable
Insurance Funds, Inc., A I M Distributors, Inc., Cova Financial
Services Life Insurance Company, on behalf of itself and its
Separate Accounts, and Cova Life Sales Company(4)
(ii) Form of Participation Agreement among Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and Cova
Financial Services Life Insurance Company(5)
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
11. Not Applicable.
12. Agreement Governing Contribution.(1)
13. Not Applicable
14. Company Organizational Chart.
(1) incorporated by reference to Registrant's Form N-4 (File Nos.
333-90405 and 811-5200) as electronically filed on November 5, 1999.
(2) incorporated by reference to Registrant's Amendment No. 24 (File
Nos. 333-34741 and 811-5200) as electronically filed on November 19,
1997.
(3) incorporated by reference to Registrant's Amendment No. 20 to
Form N-4 (File Nos. 33-39100 and 811-5200) as electronically filed
on April 23, 1997.
(4) incorporated by reference to Registrant's Post-Effective Amendment
No. 1 to Form N-4 (File Nos. 333-34741 and 811-5200) as electronically
filed on January 26, 1998.
(5) incorporated by reference to Registrant's Post-Effective Amendment
No. 4 to Form N-4 (File Nos. 333-34741 and 811-5200) as electronically
filed on April 30, 1999.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
Name and Principal Positions and Offices
Business Address with Depositor
_______________________________ ____________________________________
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Connie A. Doern Vice President
4700 Westown Parkway
West Des Moines, IA 50266
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer and Director
700 Market St.
St. Louis, MO 63101
Douglas E. Jacobs Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Lisa O. Kirchner Vice President
4700 Westown Parkway
West Des Moines, IA 50266
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
William C. Mair Vice President
One Tower Lane, Suite 3000 and Director
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market St.
St. Louis, MO 63101
Mark E. Reynolds Executive Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Myron H. Sandberg Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Schaus Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Bernard J. Spaulding Senior Vice President, General
One Tower Lane, Suite 3000 Counsel and Secretary
Oakbrook Terrace, IL 60181-4644
Joann T. Tanaka Senior Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Patricia M. Wersching Assistant Treasurer
700 Market Street
St. Louis, MO 63101
Peter L. Witkewiz Vice President and Controller
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart is filed as Exhibit 14 to this registration
statement.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article IV, Section 1) provide that:
Each person who is or was a director, officer or employee of the corporation or
is or was serving at the request of the corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise (including the heirs, executors, administrators or estate of such
person) shall be indemnified by the corporation as of right to the full extent
permitted or authorized by the laws of the State of Missouri, as now in effect
and as hereafter amended, against any liability, judgment, fine, amount paid in
settlement, cost and expenses (including attorney's fees) asserted or threatened
against and incurred by such person in his capacity as or arising out of his
status as a director, officer or employee of the corporation or if serving at
the request of the corporation, as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnification provided by this bylaw provision shall not be exclusive of any
other rights to which those indemnified may be entitled under any other bylaw or
under any agreement, vote of shareholders or disinterested directors or
otherwise, and shall not limit in any way any right which the corporation may
have to make different or further indemnification with respect to the same or
different persons or classes of persons.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Cova Life Sales Company is the principal underwriter for the following
investment companies (other than Registrant):
Cova Variable Annuity Account Five
Cova Variable Life Account One
Cova Variable Life Account Five
First Cova Variable Annuity Account One
Cova Variable Annuity Account Four
General American Separate Account Twenty-Eight
General American Separate Account Twenty-Nine
(b) Cova Life Sales Company is the principal underwriter for the Contracts.
The following persons are the officers and directors of Cova Life Sales Company.
The principal business address for each officer and director of Cova Life Sales
Company is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
Name and Principal Positions and Offices
Business Address with Underwriter
Lorry J. Stensrud Director
Patricia E. Gubbe President, Chief Compliance Officer and Director
William C. Mair Director
Philip A. Haley Vice President
Shari Ruecker Vice President
Mark E. Reynolds Treasurer
James W. Koeger Assistant Treasurer
Bernard J. Spaulding Secretary
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
William Flory, whose address is One Tower Lane, Suite 3000, Oakbrook Terrace,
Illinois 60181-4644 and Cova Life Administration Services Company, 4700
Westown Parkway, Bldg. 4, Suite 200, West Des Moines, IA 50266 maintain 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 25th day of January, 2000.
COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /S/ BERNARD J. SPAULDING
-------------------------------------------
Senior Vice President, General Counsel and Secretary
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
Depositor
By: /S/ BERNARD J. SPAULDING
-----------------------------------------------------
Senior Vice President, General Counsel and Secretary
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Chairman of the Board and
- ---------------------- Director --------
Richard A. Liddy Date
/S/ LORRY J. STENSRUD President and Director 1/25/00
- ---------------------- --------
Lorry J. Stensrud Date
/S/ J. ROBERT HOPSON Director 1/25/00
- ---------------------- --------
J. Robert Hopson Date
William C. Mair* Director 1/25/00
- ---------------------- --------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 1/25/00
- ---------------------- --------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 1/25/00
- ---------------------- --------
Matthew P. McCauley Date
John W. Barber* Director 1/25/00
- ---------------------- --------
John W. Barber Date
/S/ MARK E. REYNOLDS Director 1/25/00
- ---------------------- --------
Mark E. Reynolds Date
/S/ J. TERRI TANAKA 1/25/00
- --------------------- Director --------
J. Terri Tanaka Date
/S/ PETER L. WITKEWIZ 1/25/00
- ---------------------- Controller --------
Peter L. Witkewiz Date
*By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EX-99.B9 Opinion and Consent of Counsel.
EX-99.B10 Consent of Independent Auditors.
EX-99.B14 Company Organizational Chart.
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
January 31, 2000
Board of Directors
Cova Financial Services Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
RE: Opinion of Counsel - Cova Variable Annuity Account One
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Pre-Effective Amendment to a
Registration Statement on Form N-4 for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts (the "Contracts") to be issued by Cova
Financial Services Life Insurance Company and its separate account, Cova
Variable Annuity Account One.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. Cova Variable Annuity Account One is a Unit Investment Trust as that
term is defined in Section 4(2) of the Investment Company Act of 1940 (the
"Act"), and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by an Owner pursuant to a
Contract issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable law, such an Owner will have a
legally-issued, fully paid, non-assessable contractual interest under such
Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /S/ LYNN KORMAN STONE
_____________________________________
Lynn Korman Stone
Consent of Independent Auditors
The Board of Directors
Cova Financial Services Life Insurance Company
We consent to the use of our reports on the consolidated financial statements of
Cova Financial Services Life Insurance Company and subsidiaries (the Company)
dated March 4, 1999, and on the financial statements of the sub-accounts of Cova
Variable Annuity Account One dated March 1, 1999, and to the reference to our
firm under the heading "Experts" in the Statement of Additional Information in
the Pre-Effective Amendment No. 1 to the Registration Statement (Form N-4, No.
333-90405) of Cova Variable Annuity Account One.
/s/KPMG LLP
KPMG LLP
Chicago, Illinois
February 1, 2000
Cova Corporation, a Missouri corporation, is owned by General American Life
Insurance Company, a Missouri company.
General American Life Insurance Company is owned by GenAmerica Corporation, a
Missouri corporation.
GenAmerica Corporation is owned by Metropolitan Life Insurance Company, a New
York company.
Cova Corporation owns 100% of Cova Financial Services Life Insurance Company,
a Missouri company, and Cova Life Management Company, a Delaware company.
Cova Financial Services Life Insurance Company owns 100% of First Cova Life
Insurance Company, a New York company, and Cova Financial Life Insurance
Company, a California company.
Cova Life Management Company owns 100% of Cova Investment Advisory Corporation,
an Illinois corporation, Cova Investment Allocation Corporation, an Illinois
corporation, and Cova Life Sales Company, a Delaware company.
