<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ X ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)2))
Cova Series Trust
________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
Blazzard, Grodd & Hasenauer, P.C.
________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined):
_______________________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________
5) Total fee paid:
_______________________________________________________________
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_______________________________________________________________
2) Form, Schedule or Registration Statement No.:
_______________________________________________________________
3) Filing Party:
_______________________________________________________________
4) Date Filed:
_______________________________________________________________
<PAGE> 2
COVA SERIES TRUST
ONE TOWER LANE, SUITE 3000
OAKBROOK TERRACE, IL 60181-4644
TELEPHONE (800) 831-LIFE
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 24, 1996
Notice is hereby given to the holders ("Shareholders") of the Money Market
Portfolio, Quality Income Portfolio, High Yield Portfolio, Growth and Income
Portfolio and Stock Index Portfolio (the "Portfolios") of the Cova Series Trust,
formerly Van Kampen Merritt Series Trust, a Massachusetts business trust (the
"Trust"), that a Special Meeting of the Shareholders of the Portfolios (the
"Meeting") will be held at the offices of the Trust, One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois 60181-4644, on Thursday, October 24, 1996, at 9:30
a.m., local time, for the following purpose:
1. To approve or disapprove a new Sub-Advisory Agreement among Cova
Investment Advisory Corporation, Van Kampen American Capital Investment
Advisory Corp. and Cova Series Trust; and
2. To transact such other business as may properly come before the Meeting.
Holders of record of the Shares of the Portfolios at the close of business on
September 5, 1996 are entitled to notice of, and to vote at, the Meeting and any
adjournment thereof.
By order of the Board of Trustees
Jeffery K. Hoelzel,
Senior Vice President and Secretary
September 26, 1996
<PAGE> 3
THE TRUST'S ANNUAL REPORT TO SHAREHOLDERS, WHICH INCLUDES AUDITED FINANCIAL
STATEMENTS OF THE TRUST AS OF DECEMBER 31, 1995 AND THE TRUST'S SEMI-ANNUAL
REPORT TO SHAREHOLDERS WHICH INCLUDES UNAUDITED FINANCIAL STATEMENTS OF THE
TRUST AS OF JUNE 30, 1996, MAY BE OBTAINED WITHOUT CHARGE BY CALLING (800)
831-LIFE OR WRITING TO COVA LIFE AT ONE TOWER LANE, SUITE 3000, OAKBROOK
TERRACE, ILLINOIS 60181-4644.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND
SIGN SUCH PROXY CARD(S), AND RETURN IT (THEM) IN THE ENVELOPE PROVIDED, WHICH IS
ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED
STATES.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT
YOU MAIL YOUR PROXY PROMPTLY.
THE TRUSTEES OF THE TRUST RECOMMEND THAT YOU CAST YOUR VOTE:
FOR APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD(S) PROMPTLY.
<PAGE> 4
PROXY STATEMENT
COVA SERIES TRUST
ONE TOWER LANE, SUITE 3000
OAKBROOK TERRACE, IL 60181-4644
TELEPHONE (800) 831-LIFE
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 24, 1996
This Proxy Statement is furnished in connection with the solicitation by the
Board of Trustees (the "Trustees" or "Board") of the Cova Series Trust (the
"Trust") of which the Money Market Portfolio, Quality Income Portfolio, High
Yield Portfolio, Growth and Income Portfolio and Stock Index Portfolio (referred
to herein collectively as the "Portfolios" or individually as the "Portfolio")
are separate series of the Trust, of proxies to be voted at a Special Meeting of
Shareholders, and at all adjournments thereof (the "Meeting"), to be held at the
offices of the Trust, One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois
60181-4644, on Thursday, October 24, 1996, at 9:30 a.m., local time. The
approximate mailing date of this Proxy Statement and accompanying form of proxy
is September 30, 1996.
The Trustees have fixed the close of business on September 5, 1996 as the
record date (the "Record Date") for the determination of holders of shares of
beneficial interest ("Shares") of the Portfolios ("Shareholders") entitled to
vote at the Meeting. Shareholders on the Record Date will be entitled to one
vote for each full Share held and a fractional vote for each fractional Share.
As of the Record Date, there were 34,691,868.720 Shares of the Money Market
Portfolio, 5,114,770.661 Shares of the Quality Income Portfolio, 3,890,710.046
Shares of the High Yield Portfolio, 2,080,221.994 Shares of the Growth and
Income Portfolio and 5,475,128.323 Shares of the Stock Index Portfolio
outstanding. See page 15 for information concerning the substantial Shareholders
of the Shares of the Trust.
The primary purpose of the Meeting is to permit the Portfolios' Shareholders
to consider a New Sub-Advisory Agreement (defined below) to take effect
following the consummation of the transactions contemplated by an Agreement and
Plan of Merger, dated as of June 21, 1996 (the "Merger Agreement"), among Morgan
Stanley Group Inc. ("Morgan Stanley"), MSAM Holdings II, Inc., MSAM Acquisition
Inc. and VK/AC Holding, Inc. ("VKAC Holding"), the indirect parent corporation
of the Portfolios' sub-adviser, Van Kampen American Capital Investment Advisory
Corp. (the "Sub-Adviser"). Pursuant to the Merger Agreement, the Portfolios'
Sub-Adviser will become an indirect subsidiary of Morgan Stanley. The
shareholder vote on the New Sub-Advisory Agreement is required under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a
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<PAGE> 5
result of Morgan Stanley's contemplated acquisition of the Sub-Adviser. The
Portfolios' New Sub-Advisory Agreement is substantially identical to the
Portfolios' Current Sub-Advisory Agreement (defined below), except for the dates
of execution, effectiveness and termination.
THE TRUST'S ANNUAL REPORT TO SHAREHOLDERS, WHICH INCLUDES AUDITED FINANCIAL
STATEMENTS OF THE TRUST AS OF DECEMBER 31, 1995 AND THE TRUST'S SEMI-ANNUAL
REPORT TO SHAREHOLDERS WHICH INCLUDES UNAUDITED FINANCIAL STATEMENTS OF THE
TRUST AS OF JUNE 30, 1996, MAY BE OBTAINED WITHOUT CHARGE BY CALLING (800)
831-LIFE OR WRITING TO COVA LIFE AT ONE TOWER LANE, SUITE 3000, OAKBROOK
TERRACE, ILLINOIS 60181-4644.
VOTING
Shares which represent interests in a particular Portfolio of the Trust vote
separately on those matters which pertain only to that Portfolio. All Shares of
a Portfolio will vote together as a single class on Proposal 1 and, as
appropriate, any other business which may properly come before the Meeting. With
respect to Proposal 1, a vote of all Shareholders of the Trust may not be
binding on a Portfolio whose Shareholders have not approved such matter. The
voting requirement for passage of a particular proposal depends on the nature of
the particular proposal. With respect to Proposal 1, a "vote of the majority of
the outstanding voting securities" of a Portfolio, which shall mean the lesser
of (i) 67% or more of the Shares of the Portfolio entitled to vote thereon
present in person or by proxy at the Meeting, if holders of more than 50% of the
outstanding Shares of the Portfolio are present in person or represented by
proxy, or (ii) more than 50% of the outstanding Shares of the Portfolio, is
necessary to approve the New Sub-Advisory Agreement (as defined below) among
Cova Investment Advisory Corporation, (the "Adviser" or "Cova Advisory"), the
Sub-Adviser and the Trust. A vote to abstain is effectively a negative vote
since Proposal 1 requires an affirmative vote to be approved.
The Trust was established to be used exclusively as the underlying investment
for certain variable annuity contracts ("Variable Contracts") to be issued by
Cova Financial Life Insurance Company and its insurance company affiliates
("Cova Life"). All Shares of each Portfolio of the Trust are owned by Cova Life.
Pursuant to current interpretations of the Investment Company Act of 1940, as
amended (the "1940 Act"), Cova Life will solicit voting instructions from owners
of Variable Contracts with respect to matters to be acted upon at the Meeting.
All Shares of each Portfolio of the Trust will be voted by Cova Life in
accordance with voting instructions received from such Variable Contract owners.
Cova Life will vote all of the Shares which it is entitled to vote, for, against
or abstaining in the same proportion as the voting instructions given by
Variable Contract owners, on the issues presented, including Shares which are
attributable to Cova Life's interest in
2
<PAGE> 6
the Trust. Cova Life has fixed the close of business on October 21, 1996, as the
last day on which voting instructions will be accepted.
This Proxy is solicited by the Trustees.
THE TRUSTEES RECOMMEND THAT YOU CAST YOUR VOTE FOR THE APPROVAL OF THE NEW
SUB-ADVISORY AGREEMENT.
Any proxy may be revoked at any time prior to its exercise by a written notice
of revocation addressed to and received by the Secretary of the Trust, by
delivering a duly executed proxy bearing a later date, or by attending the
Meeting and voting in person.
The Trust knows of no business other than that described in Proposal 1 of the
Notice which will be presented for consideration at the Meeting. If any other
matters are properly presented, it is the intention of the persons named as
proxies to vote proxies in accordance with their best judgment. In the event a
quorum is present at the Meeting but sufficient votes to approve the Proposal
are not received, the persons named as proxies may propose one or more
adjournments of such Meeting to permit further solicitation of proxies provided
they determine that such an adjournment and additional solicitation is
reasonable and in the interest of Shareholders based on a consideration of all
relevant factors, including the nature of the relevant proposal, the percentage
of votes then cast, the percentage of negative votes then cast, the nature of
the proposed solicitation activities and the nature of the reasons for such
further solicitation.
- ------------------------------------------------------------------------------
PROPOSAL 1: APPROVAL OF NEW SUB-ADVISORY AGREEMENT
- ------------------------------------------------------------------------------
THE SUB-ADVISER
Cova Advisory serves as investment adviser to the portfolios of the Trust
(including the Portfolios) pursuant to an Investment Advisory Agreement, dated
May 1, 1996, which was approved by the Board of Trustees, including a majority
of the non-interested Trustees, on February 9, 1996 (the "Investment Advisory
Agreement") and approved by the shareholders of the Trust on February 9, 1996.
The Adviser's address is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois
60181. The Investment Advisory Agreement provides that the Adviser will supply
investment research and portfolio management (including, without limitation the
selection of securities for each portfolio to purchase, hold or sell and the
selection of brokers through whom such portfolio's transactions are executed, in
accordance with the policies adopted by the Trust and its Board of Trustees).
The Adviser may select, retain and compensate any sub-advisers for investment
management of any of the portfolios of the Trust. The Adviser also administers
the business affairs of each portfolio of the Trust and furnishes offices and
necessary facilities and equipment and provides administrative services to each
portfolio of the Trust.
The Adviser has retained the Sub-Adviser to act as sub-adviser for the
Portfolios pursuant to the Current Sub-Advisory Agreement. From the commencement
of the
3
<PAGE> 7
Trust's operations until April 30, 1996, the Sub-Adviser acted as investment
adviser for the portfolios of the Trust (including the Portfolios). The address
of Morgan Stanley is 1585 Broadway, New York, New York 10036.
The Sub-Adviser currently is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("VKAC"), which is a wholly-owned subsidiary of VKAC Holding,
which in turn is controlled, through the ownership of a substantial majority of
its common stock, by The Clayton & Dubilier Private Equity Fund IV Limited
Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is managed
by Clayton, Dubilier & Rice, Inc., a New York based private investment firm. The
General Partner of C&D L.P. is Clayton & Dubilier Associates IV Limited
Partnership ("C&D Associates L.P."). The general partners of C&D Associates L.P.
are Joseph L. Rice, III, B. Charles Ames, William A. Barbe, Alberto Cribiore,
Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson,
each of whom is a principal of Clayton, Dubilier & Rice, Inc. In addition,
certain officers, directors and employees of VKAC own, in the aggregate,
approximately 6% of the common stock of VKAC Holding and have the right to
acquire, upon the exercise of options (whether or not vested), approximately an
additional 12% of the common stock of VKAC Holding. Currently, and after giving
effect to the exercise of such options, no officer or trustee of the Trust owns
or would own 5% or more of the common stock of VKAC Holding. The addresses of
VKAC Holding, VKAC and the Sub-Adviser are One Parkview Plaza, Oakbrook Terrace,
Illinois 60181 and 2800 Post Oak Blvd., Houston, Texas 77056.
The following individuals are associated with the Sub-Adviser and are the
portfolio managers for the Portfolios as indicated: Pete Papageorgakis is the
portfolio manager for the Stock Index Portfolio of the Trust. James A. Gilligan
is the portfolio manager for the Growth and Income Portfolio of the Trust. Reid
J. Hill is the portfolio manager for the Money Market Portfolio of the Trust.
Robert J. Hickey is the portfolio manager for the Quality Income Portfolio of
the Trust. Anne Lorsung is the portfolio manager for the High Yield Portfolio of
the Trust.
INFORMATION CONCERNING MORGAN STANLEY
Morgan Stanley and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer and investment adviser, and Morgan Stanley
International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange, commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; and global custody, securities clearance
services and securities lending. Morgan Stanley Asset Management Inc. also is a
wholly-owned subsidiary of Morgan Stanley. As of
4
<PAGE> 8
June 30, 1996, Morgan Stanley Asset Management Inc., together with its
affiliated investment advisory companies, had approximately $103.5 billion of
assets under management and fiduciary advice.
THE ACQUISITION
Pursuant to the Merger Agreement, MSAM Acquisition Inc. will be merged with
and into VKAC Holding and VKAC Holding will be the surviving corporation (the
"Acquisition"). Following the Acquisition, VKAC Holding and the Sub-Adviser will
be indirect subsidiaries of Morgan Stanley.
The Sub-Adviser anticipates that the consummation of the Acquisition will
occur by the end of November 1996, provided that a number of conditions set
forth in the Merger Agreement are met or waived. The conditions require, among
other things, that as of the closing the shareholders of certain investment
companies (including the Portfolios) and investors in certain accounts advised
by the Sub-Adviser or its affiliates, which investment companies and accounts
have aggregate assets in excess of a specified minimum amount, have approved new
investment advisory agreements or consented to the assignment of existing
investment advisory agreements. At the closing, MSAM Acquisition Inc. will pay
approximately $740 million (based on VKAC's long-term debt outstanding as of
July 31, 1996) in cash to the stockholders of VKAC Holding (excluding certain
management stockholders), and to persons owning options to purchase stock of
VKAC Holding, subject to certain purchase price adjustments set forth in the
Merger Agreement. As of July 31, 1996, VKAC had long-term debt outstanding of
approximately $410 million. To the extent that pre-tax income of VKAC prior to
the closing of the Acquisition permits the repayment of its long-term debt, the
purchase price for the equity interests in VKAC Holding will be increased by the
amount of long-term debt repaid. The purchase price also is subject to certain
adjustments based, among other things, on assets under management of VKAC and
its subsidiaries at the time of closing. The Sub-Adviser also contemplates that,
as part of the Acquisition, certain officers and directors of VKAC Holding and
its affiliates will contribute to MSAM Holdings II, Inc. their existing shares
of common stock of VKAC Holding in exchange for approximately $25 million of
shares of preferred stock of MSAM Holdings II, Inc. which, in turn, will be
exchangeable into common stock, par value $1.00 per share, of Morgan Stanley at
specified times over a four year period. Such shares of preferred stock will
represent, in the aggregate, 5% of the combined voting power in MSAM Holdings
II, Inc., the remainder of which will be indirectly owned by Morgan Stanley.
VKAC Holding will engage in certain preparatory transactions prior to the
Acquisition, including the distribution to stockholders of VKAC Holding of (i)
all of VKAC Holding's investment in McCarthy, Crisanti & Maffei, Inc., a wholly-
owned subsidiary engaged in the business of distributing research and financial
5
<PAGE> 9
information, (ii) all of VKAC Holding's investment in Hansberger Global
Investors, Inc. ("HGI"), a company in which VKAC Holding made a minority
investment in May 1996, and (iii) certain related cash amounts.
There is no financing condition to the closing of the Acquisition. VKAC has
been advised by Morgan Stanley that as of August 30, 1996, no determination has
been made whether any additional indebtedness will be incurred by Morgan Stanley
and its affiliates or VKAC and its affiliates in connection with the
Acquisition. In addition, the disposition of VKAC's outstanding long-term
indebtedness (including its bank loans and senior notes) in connection with the
Acquisition has not yet been determined.
The operating revenue of VKAC and its subsidiaries for the fiscal year ended
December 31, 1995, less expenses for the same period, was more than adequate to
service VKAC's outstanding debt. VKAC prepaid $80 million of its long-term debt
in 1995, and has continued to make debt prepayments during 1996. VKAC Holding
and VKAC believe, based on the earnings experience of VKAC and its subsidiaries,
that after the Acquisition the operating revenue of VKAC and its subsidiaries
should be more than sufficient to service their debt and that VKAC and its
subsidiaries should be able to conduct their respective operations as now
conducted and as proposed to be conducted.
The Merger Agreement does not contemplate any changes, other than changes in
the ordinary course of business, in the management or operation of the
Sub-Adviser relating to the Portfolio, the personnel managing the Portfolio or
other services or business activities of the Portfolio. The Acquisition is not
expected to result in material changes in the business, corporate structure or
composition of the senior management or personnel of the Sub-Adviser, or in the
manner in which the Sub-Adviser renders services to the Portfolio. Morgan
Stanley has agreed in the Merger Agreement that, for a period of two years from
the date of the Acquisition, it will cause the Sub-Adviser to provide
compensation and employee benefits which are substantially comparable in the
aggregate to those presently provided. The Sub-Adviser does not anticipate that
the Acquisition or any ancillary transactions will cause a reduction in the
quality of services now provided to the Portfolio, or have any adverse effect on
the Sub-Adviser's ability to fulfill its obligations under the New Sub-Advisory
Agreement or to operate its business in a manner consistent with past business
practices.
Certain officers of the Sub-Adviser and its affiliates previously entered into
employment agreements with VKAC Holding which expire from between 1997 and 2000.
Certain officers of the Sub-Adviser also previously entered into retention
agreements with VKAC Holding, which will remain in place for two years following
the consummation of the Acquisition. The Merger Agreement contemplates that
Morgan Stanley will, and will cause VKAC Holding to, honor such employment and
retention agreements. The employment agreements and retention agreements
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<PAGE> 10
are intended to assure that the services of the officers are available to the
Sub-Adviser for a remaining term of two to four years. As described above,
certain officers and employees of VKAC and the Sub-Adviser are expected to
contribute their existing shares of common stock of VKAC Holding to MSAM
Holdings II, Inc. in exchange for approximately $25 million of preferred stock
in MSAM Holdings II, Inc. which, in turn, will be exchangeable into common
stock, par value $1.00 per share, of Morgan Stanley at specified times over a
four year period. Such shares of preferred stock will represent, in the
aggregate, 5% of the combined voting power in MSAM Holdings II, Inc.
THE SUB-ADVISORY AGREEMENTS
Consummation of the Acquisition may constitute an "assignment" (as defined in
the 1940 Act) of the sub-advisory agreement currently in effect among the
Portfolios' Sub-Adviser, the Adviser and the Trust (the "Current Sub-Advisory
Agreement"). As required by the 1940 Act, the Current Sub-Advisory Agreement
provides for its automatic termination in the event of an assignment. See "The
Current Sub-Advisory Agreement" below.
In anticipation of the Acquisition and in order for the Sub-Adviser to
continue to serve as sub-adviser to the Portfolio after consummation of the
Acquisition, a new sub-advisory agreement (the "New Sub-Advisory Agreement")
among the Sub-Adviser, the Adviser and the Trust must be approved (i) by a
majority of the Trustees of the Trust who are not parties to the New
Sub-Advisory Agreement or interested persons of any such party ("Disinterested
Trustees") and (ii) by holders of a majority of the outstanding voting
securities (within the meaning of the 1940 Act) of the Portfolio. See "The New
Sub-Advisory Agreement" below.
THE CURRENT SUB-ADVISORY AGREEMENT. The Current Sub-Advisory Agreement for the
Portfolio was approved by a majority of the Trustees, including a majority of
the Disinterested Trustees, voting in person at a meeting called for that
purpose on February 9, 1996, for an initial period of two years. The Current
Sub-Advisory Agreement was approved by Shareholders of the Portfolios of the
Trust at a meeting held on February 9, 1996.
The Current Sub-Advisory Agreement provides that in accordance with each
Portfolio's investment objective and policies and under the supervision of the
Adviser and the Trustees, the Sub-Adviser is responsible for the day-to-day
investment management of the Portfolios, makes investment decisions for the
Portfolios and places orders on behalf of the Portfolios to effect the
investment decisions made.
The Current Sub-Advisory Agreement provides that the Sub-Advisor shall not be
liable for any error in judgment or of law, or for any loss suffered by the
Trust or any portfolio in connection with the matters to which the Current
Sub-Advisory
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<PAGE> 11
Agreement relates, except (1) a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Advisor in the performance of
its obligations and duties or (2) by reason of its reckless disregard of its
obligations and duties under the Current Sub-Advisory Agreement.
The Sub-Adviser's activities are subject to the review and supervision of the
Adviser and the Board of Trustees to which the Sub-Adviser renders periodic
reports with respect to the Portfolios' investment activities. The Current Sub-
Advisory Agreement may be terminated at any time without the payment of any
penalty, by a majority of the Board of Trustees of the Trust, by a vote of the
majority of the outstanding shares of beneficial interest of any Portfolio or by
the Sub-Adviser on sixty (60) days' written notice to the Adviser. The Current
Sub-Advisory Agreement may not be terminated by the Adviser without the approval
of a majority of the Board of Trustees of the Trust. The Agreement will
terminate automatically in the event of its assignment or in the event of the
termination of the Investment Advisory Agreement.
The net assets of the Portfolios as of August 29, 1996, were as follows: Money
Market Portfolio: $34,985,565; Quality Income Portfolio: $53,241,879; High Yield
Portfolio: $40,995,926; Growth and Income Portfolio: $27,130,731; and Stock
Index Portfolio: $81,246,395.
The table below sets forth the net assets as of August 29, 1996 and the rates
of compensation for advisory services as a percentage of net assets for
investment companies advised by the Sub-Adviser which have similar investment
objectives to the Portfolios as indicated.
<TABLE>
<CAPTION>
NET ASSETS AS OF
FUND NAME AUGUST 29, 1996 FEE SCHEDULE
- ------------------------------- ---------------- ------------------------
<S> <C> <C>
Van Kampen American Capital
Growth and Income Fund....... $687,470,430 First $150 million .500%
(comparable to the Next $100 million .450%
Growth and Income Portfolio) Next $100 million .400%
Over $350 million .350%
Van Kampen American Capital
High Yield Fund.............. $388,061,639 First $500 million .750%
(comparable to the Over $500 million .650%
High Yield Portfolio)
Van Kampen American Capital
Reserve Fund................. $512,901,850 First $150 million .500%
(comparable to the Next $100 million .450%
Money Market Portfolio) Next $100 million .400%
Over $350 million .350%
</TABLE>
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<PAGE> 12
Under the terms of the Current Sub-Advisory Agreement, the Adviser shall pay
to Sub-Adviser, as full compensation for services rendered with respect to the
respective Portfolios, a monthly fee at the annual rate set forth below as a
percentage of the daily net assets of each Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO AVERAGE DAILY NET ASSETS % PER ANNUM
- ---------------------------------- ------------------------ -----------
<S> <C> <C>
Money Market Portfolio............ First $500 million .250 of 1%
Over $500 million .150 of 1%
Quality Income Portfolio.......... First $500 million .250 of 1%
Over $500 million .200 of 1%
High Yield Portfolio.............. First $500 million .500 of 1%
Over $500 million .400 of 1%
Growth and Income Portfolio....... First $500 million .350 of 1%
Over $500 million .250 of 1%
Stock Index Portfolio............. -- .250 of 1%
</TABLE>
THE NEW SUB-ADVISORY AGREEMENT. The Board of Trustees approved a proposed New
Sub-Advisory Agreement among the Sub-Adviser, the Adviser and the Trust on
August 23, 1996. The proposed New Sub-Advisory Agreement which is attached to
this Proxy Statement as Annex A, has been marked to show changes from the
Current Sub-Advisory Agreement. The form of the proposed New Sub-Advisory
Agreement is substantially identical to the Current Sub-Advisory Agreement among
the Sub-Adviser, the Adviser and the Trust, except for the dates of execution,
effectiveness and termination.
The investment sub-advisory fee as a percentage of net assets payable by the
Adviser to the Sub-Adviser will be the same under the New Sub-Advisory Agreement
as under the Current Sub-Advisory Agreement. If the investment sub-advisory fee
under the New Sub-Advisory Agreement had been in effect since commencement of
the Portfolios' investment operations, sub-advisory fees paid to the Sub-Adviser
by the Portfolio would have been identical to those paid under the Current
Sub-Advisory Agreement.
The Board of Trustees of the Trust held a meeting on August 23, 1996, at which
meeting the Trustees, including the Disinterested Trustees, concluded that if
the Acquisition occurs, entry by the Trust into the New Sub-Advisory Agreement
would be in the best interests of the Trust and the Shareholders of the
Portfolios. The Board of Trustees, including the Disinterested Trustees,
unanimously approved the New Sub-Advisory Agreement for the Portfolios and
recommended such agreement be submitted for approval by the Shareholders of the
Portfolios at the Meeting. The New Sub-Advisory Agreement would take effect upon
the later to occur of (i) the obtaining of Shareholder approval or (ii) the
closing of the Acquisition. The New Sub-Advisory Agreement will continue in
effect until
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<PAGE> 13
April 30, 1998 and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
In evaluating the New Sub-Advisory Agreement, the Board of Trustees of the
Trust took into account that the Current Sub-Advisory Agreement and the New
Sub-Advisory Agreement, including the terms relating to the services to be
provided thereunder by the Sub-Adviser and the fees and expenses payable by the
Adviser to the Sub-Adviser, are substantially identical, except for the dates of
execution, effectiveness and termination. The Trustees also considered other
possible benefits to the Sub-Adviser and Morgan Stanley that may result from the
Acquisition, including the continued use, to the extent permitted by law, of
Morgan Stanley & Co. and its affiliates for brokerage services.
The Board of Trustees also considered the terms of the Merger Agreement and
the possible effects of the Acquisition upon VKAC's and the Sub-Adviser's
organization and upon the ability of the Sub-Adviser to provide sub-advisory
services to the Trust. The Board of Trustees considered the skills and
capabilities of the Sub-Adviser and the representations of Morgan Stanley that
no material change was planned in the current management or facilities of the
Sub-Adviser. In this regard, the Board was informed of the resources of Morgan
Stanley to be made available to VKAC and the Sub-Adviser, after giving effect to
the Acquisition, to secure for the Portfolios quality investment research,
investment advice and other client services. The Board considered the financial
resources of Morgan Stanley and Morgan Stanley's representation to the Board
that it will provide sufficient capital to support the operations of the
Sub-Adviser. The Board of Trustees also considered the reputation, expertise and
resources of Morgan Stanley and its affiliates in domestic and international
financial markets. The Board of Trustees considered the continued employment of
members of senior management of the Sub-Adviser and VKAC pursuant to employment
and retention agreements and the incentives provided to such members and other
key employees of the Sub-Adviser and VKAC, to be important to help to assure
continuity of the personnel primarily responsible for maintaining the quality of
investment sub-advisory and other services for the Portfolios.
The Board of Trustees considered the effects on the Trust of the Sub-Adviser
becoming an affiliated person of Morgan Stanley. Following the Acquisition, the
1940 Act will prohibit or impose certain conditions on the ability of the
Portfolios to engage in certain transactions with Morgan Stanley and its
affiliates. For example, absent exemptive relief, the Trust will be prohibited
from purchasing securities from Morgan Stanley & Co., a wholly-owned
broker-dealer subsidiary of Morgan Stanley, in transactions in which Morgan
Stanley & Co. acts as a principal, and the Trust will have to satisfy certain
conditions in order to engage in securities transactions in which Morgan Stanley
& Co. acts as a broker or to purchase securities in an underwritten offering in
which Morgan Stanley & Co. is acting as an
10
<PAGE> 14
underwriter. In this connection, management of the Sub-Adviser represented to
the Board of Trustees that it did not believe these prohibitions or conditions
will have a material effect on the management or performance of the Portfolios.
The Board of Trustees was advised that Section 15(f) of the 1940 Act is
applicable to the Acquisition. Section 15(f) of the 1940 Act permits, in the
context of a change in control of an investment adviser to a registered
investment company, the receipt by such investment adviser, or any of its
affiliated persons, of an amount of benefit in connection with such sale, as
long as two conditions are satisfied. First, an "unfair burden" must not be
imposed on the investment company for which the investment adviser acts in such
capacity as a result of the sale of such interest, or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair
burden," as defined in the 1940 Act, includes any arrangement during the
two-year period after the transaction whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the investment company or its security holders (other than fees for bona
fide investment advisory and other services), or from any person in connection
with the purchase or sale of securities or other property to, from or on behalf
of the investment company (other than ordinary fees for bona fide principal
underwriting services).
Management of the Trust is aware of no circumstances arising from the
Acquisition, preparatory transactions to the Acquisition or any potential
financing that might result in the imposition of an "unfair burden" on the
Trust. Moreover, Morgan Stanley has agreed in the Merger Agreement that, upon
consummation of the Acquisition, it will take no action which would have the
effect, directly or indirectly, of violating any of the provisions of Section
15(f) of the 1940 Act in respect of the Acquisition. In this regard, the Merger
Agreement provides that Morgan Stanley will use its reasonable best efforts to
assure that (i) no "unfair burden" will be imposed on any fund as a result of
the transactions contemplated by the Merger Agreement and (ii) except as
provided in the Merger Agreement, the investment advisory fees paid by the
Portfolios will not be increased for a period of two years from the closing of
the Acquisition and that, during such period, advisory fee waivers shall not be
permitted to expire except in accordance with their terms. The Sub-Adviser may
permit a voluntary fee waiver unilaterally adopted by it to expire at any time
and no assurance can be given that voluntary waivers will not be permitted to
expire during the two year period. During the two year period following the
Acquisition, the Sub-Adviser does not intend to change its policies with respect
to the circumstances under which voluntary fee waivers may be permitted to
expire. Following the Acquisition, to the extent permitted by applicable law,
VKAC anticipates that the Portfolios will continue to use Morgan Stanley & Co.
and its affiliates for brokerage services.
11
<PAGE> 15
The second condition of Section 15(f) is that during the three-year period
immediately following a transaction to which Section 15(f) is applicable, at
least 75% of the subject investment company's board of directors must not be
"interested persons" (as defined in the 1940 Act) of the investment company's
sub-adviser or predecessor sub-adviser. The current composition of the Board of
Trustees of the Trust would be in compliance with such condition subsequent to
the Acquisition.
Based upon its review, the Board of Trustees concluded that the New Sub-
Advisory Agreement is in the best interest of the Trust and the Portfolios'
Shareholders. Accordingly, after consideration of the above factors, and such
other factors and information that it deemed relevant, the Board of Trustees of
the Trust, including the Disinterested Trustees, unanimously approved the New
Sub-Advisory Agreement and voted to recommend its approval to the Shareholders
of the Portfolios.
In the event that Shareholders of the Portfolios do not approve the New Sub-
Advisory Agreement and the Acquisition is consummated, the Board of Trustees of
the Trust would seek to obtain for the Portfolios interim investment advisory
services at the lesser of cost or the current fee rate either from the
Sub-Adviser or from another advisory organization. Thereafter, the Board of
Trustees of the Trust would either negotiate a new sub-advisory agreement with
an advisory organization selected by the Board of Trustees or make appropriate
arrangements, in either event subject to approval of the Shareholders of the
Portfolios. In the event the Acquisition is not consummated, the Sub-Adviser
would continue to serve as sub-adviser of the Portfolios pursuant to the terms
of the Current Sub-Advisory Agreement.
SHAREHOLDER APPROVAL
To become effective, the New Sub-Advisory Agreement must be approved by a
majority of the outstanding voting securities of each Portfolio. The "vote of
the majority of the outstanding voting securities" is defined under "Voting"
above. The New Sub-Advisory Agreement was unanimously approved by the Board of
Trustees after consideration of all factors which they determined to be relevant
to their deliberations, including those discussed above. The Board of Trustees
also unanimously determined to submit the New Sub-Advisory Agreement for
consideration by the Shareholders of the Portfolios. THE BOARD OF TRUSTEES
RECOMMENDS A VOTE "FOR" APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
12
<PAGE> 16
OTHER INFORMATION
DIRECTORS AND OFFICERS OF THE SUB-ADVISER
The following table sets forth certain information concerning the principal
executive officers and directors of the Sub-Adviser.
DIRECTORS AND OFFICERS OF THE SUB-ADVISER
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------------------- ----------------------------------------------
<S> <C>
Don G. Powell............... President, Chief Executive Officer and a
2800 Post Oak Blvd. Director of VKAC Holding and VKAC and
Houston, TX 77056 Chairman, Chief Executive Officer and a
Director of VKAC Distributors, the
Sub-Adviser, Van Kampen American Capital Asset
Management, Inc., Van Kampen American Capital
Management, Inc. and Van Kampen American
Capital Advisors, Inc. Chairman, President and
a Director of Van Kampen American Capital
Exchange Corporation, American Capital
Contractual Services, Inc., Van Kampen Merritt
Equity Holdings Corp., and American Capital
Shareholders Corporation. Chairman and a
Director of ACCESS Investor Services, Inc.
("ACCESS"), Van Kampen Merritt Equity Advisors
Corp., McCarthy, Crisanti & Maffei, Inc., and
Van Kampen American Capital Trust Company.
Chairman, President and a Director of Van
Kampen American Capital Services, Inc. Prior
to July 1996, Chairman and Director of VSM
Inc. and VCJ Inc. Prior to July 1996,
President, Chief Executive Officer and a
Trustee/Director of open-end investment
companies and closed-end investment companies
advised by the Sub-Adviser and Van Kampen
American Capital Asset Management, Inc.
Dennis J. McDonnell......... President, Chief Operating Officer and a
One Parkview Plaza Director of the Sub-Adviser and Van Kampen
Oakbrook Terrace, IL 60181 American Capital Asset Management, Inc., Van
Kampen American Capital Advisors, Inc. and Van
Kampen American Capital Management, Inc.
Executive Vice President and a Director of
VKAC Holding and VKAC. President and Director
of Van Kampen Merritt Equity Advisors Corp.
Director of Van Kampen Merritt Equity Holdings
Corp. and McCarthy, Crisanti & Maffei, S.A.
Chief Executive Officer and Director of
McCarthy, Crisanti & Maffei, Inc. Chairman and
a Director of MCM Asia Pacific Company,
Limited. President and Trustee/Director of
open-end investment companies and closed-end
investment companies advised by the
Sub-Adviser and Van Kampen American Capital
Asset Management, Inc. Prior to July 1996,
President, Chief Operating Officer and
Director of VSM Inc. and VCJ Inc. Prior to
December, 1991, Senior Vice President of Van
Kampen Merritt, Inc.
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------------------- ----------------------------------------------
<S> <C>
Ronald A. Nyberg............ Executive Vice President, General Counsel and
One Parkview Plaza Secretary of VKAC Holding and VKAC. Executive
Oakbrook Terrace, IL 60181 Vice President, General Counsel and a Director
of VKAC Distributors, the Sub-Adviser and Van
Kampen American Capital Asset Management,
Inc., Van Kampen American Capital Management,
Inc., Van Kampen Merritt Equity Advisors
Corp., and Van Kampen Merritt Equity Holdings
Corp. Executive Vice President, General
Counsel and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van Kampen
American Capital Exchange Corporation, ACCESS
Investor Services, Inc., Van Kampen American
Capital Services, Inc. and American Capital
Shareholders Corporation. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen American
Capital Trust Company. General Counsel of
McCarthy, Crisanti & Maffei, Inc. Vice
President and Secretary of open-end investment
companies and closed-end investment companies
advised by the Sub-Adviser and Van Kampen
American Capital Asset Management, Inc.
Director of ICI Mutual Insurance Co., a
provider of insurance to members of the
Investment Company Institute. Prior to July
1996, Executive Vice President and General
Counsel of VSM Inc., and Executive Vice
President, General Counsel and Director of VCJ
Inc.
William R. Rybak............ Executive Vice President and Chief Financial
One Parkview Plaza Officer of VKAC Holding and VKAC since
Oakbrook Terrace, IL 60181 February 1993, and Treasurer of VKAC Holding
through December 1993. Executive Vice
President, Chief Financial Officer and a
Director of VKAC Distributors, the
Sub-Adviser, Van Kampen American Capital Asset
Management, Inc., and Van Kampen American
Capital Management, Inc. Executive Vice
President, Chief Financial Officer, Treasurer
and a Director of Van Kampen Merritt Equity
Advisors Corp. Executive Vice President and
Chief Financial Officer of the Van Kampen
American Capital Advisors, Inc., Van Kampen
American Capital Exchange Corporation, Van
Kampen American Capital Trust Company, ACCESS
Investor Services, Inc., and American Capital
Contractual Services, Inc. Executive Vice
President, Chief Financial Officer and
Treasurer of American Capital Shareholders
Corporation, Van Kampen American Capital
Services, Inc. and Van Kampen Merritt Equity
Holdings Corp. Chief Financial Officer and
Treasurer of McCarthy, Crisanti & Maffei, Inc.
Chairman of the Board of Hinsdale Financial
Corp., a savings and loan holding company.
Prior to July 1996, Executive Vice President,
Chief Financial Officer and a Director of VCJ
Inc., and Executive Vice President and Chief
Financial Officer of VSM Inc.
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------------------- ----------------------------------------------
<S> <C>
Peter W. Hegel.............. Executive Vice President of Van Kampen
One Parkview Plaza American Capital Asset Management, Inc., the
Oakbrook Terrace, IL 60181 Sub-Adviser, Van Kampen American Capital
Advisors, Inc., Van Kampen American Capital
Management, Inc. Executive Vice President and
Director of Sub-Adviser. Director of McCarthy,
Crisanti & Maffei, Inc. Vice President of
open-end investment companies and closed-end
investment companies advised by the Sub-
Adviser and Van Kampen American Capital Asset
Management, Inc. Prior to July 1996, Director
of VSM Inc.
Robert C. Peck, Jr.......... Executive Vice President of the Sub-Adviser
2800 Post Oak Blvd. and Van Kampen American Capital Management,
Houston, TX 77056 Inc. Executive Vice President and Director of
Van Kampen American Capital Asset Management,
Inc. and Van Kampen American Capital Advisors,
Inc. Vice President of open-end investment
companies advised by the Sub-Adviser and Van
Kampen American Capital Asset Management, Inc.
Alan T. Sachtleben.......... Executive Vice President of the Sub-Adviser
2800 Post Oak Blvd. and Van Kampen American Capital Management,
Houston, TX 77056 Inc. Executive Vice President and a Director
of Van Kampen American Capital Asset
Management, Inc. and Van Kampen American
Capital Advisors, Inc. Vice President of
open-end investment companies advised by the
Sub-Adviser and Van Kampen American Capital
Asset Management, Inc.
</TABLE>
There is no individual who serves as a trustee or officer of the Trust who is
also an officer of the Sub-Adviser.
SUBSTANTIAL SHAREHOLDERS
As of the Record Date, Cova Variable Annuity Account One, a separate account
of Cova Financial Services Life Insurance Company, and Cova Variable Annuity
Account Five, a separate account of Cova Financial Life Insurance Company, were
known to the Board of Trustees and the management of the Trust to own of record
100% of the Shares. On that date, the officers and Trustees of the Trust
together owned no Variable Contracts.
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
Cova Life has advised the Trust that as of the Record Date, there are no
persons who own Variable Contracts which will entitle them to instruct Cova Life
with respect to more than 5% of the Shares.
15
<PAGE> 19
- ------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------
VKAC Holding will pay the expense of preparing, printing and mailing the
enclosed form of proxy, the accompanying Notice and this Proxy Statement.
YOU ARE REQUESTED TO FILL IN, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Jeffery K. Hoelzel,
Senior Vice President and Secretary
September 26, 1996
16
<PAGE> 20
ANNEX A
- ------------------------------------------------------------------------------
SUB-ADVISORY AGREEMENT
- ------------------------------------------------------------------------------
This Agreement is made between COVA INVESTMENT ADVISORY CORPORATION, an
Illinois corporation, having its principal place of business in Oakbrook
Terrace, Illinois (hereinafter referred to as the "Adviser"), VAN KAMPEN
AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware corporation, having its
principal place of business in Oakbrook Terrace, Illinois (hereinafter referred
to as the "Sub-Adviser") and COVA SERIES TRUST, a Massachusetts business trust
(hereinafter referred to as the "Trust").
WHEREAS, the Trust, an open-end diversified management investment company, as
that term is defined in the Investment Company Act of 1940, as amended (the
"Act"), that is registered as such with the Securities and Exchange Commission
has appointed Adviser as investment adviser for and to the Quality Income
Portfolio, High Yield Portfolio, Growth and Income Portfolio, Money Market
Portfolio and Stock Index Portfolio, each being a sub-trust of the Trust
(referred to individually as the "Sub-Trust"), pursuant to the terms of an
investment advisory agreement between the Trust and Adviser ("Investment
Advisory Agreement");
WHEREAS, Sub-Adviser is engaged in the business of rendering investment
management services; and
WHEREAS, Adviser desires to retain Sub-Adviser to provide certain investment
management services for the Sub-Trust as more fully described below;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Retention of Sub-Adviser. Adviser hereby retains Sub-Adviser to assist
Adviser in its capacity as investment adviser for the Sub-Trusts. Subject to the
oversight and review of Adviser and the Board of Trustees of the Trust, Sub-
Adviser shall manage the investment and reinvestment of the assets of the Sub-
Trusts. Sub-Adviser will determine in its discretion, subject to the oversight
and review of Adviser, the investments to be purchased or sold, will provide
Adviser with records concerning its activities which Adviser or the Trust is
required to maintain and will render regular reports to Adviser and to officers
and Trustees of the Trust concerning its discharge of the foregoing
responsibilities.
Sub-Adviser, in its supervision of the investments of the Sub-Trusts, will be
guided by each Sub-Trust's investment objectives and policies and the provisions
and restrictions contained in the Declaration of Trust and By-Laws of the Trust
and as set forth in the Registration Statement and exhibits as may be on file
with the Securities and Exchange Commission, all as communicated by Adviser to
Sub-Adviser.
A-1
<PAGE> 21
Sub-Adviser shall be deemed to be an independent contractor under this
Agreement and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Trust or any Sub-Trust in any way or
otherwise be deemed an agent of the Trust or any Sub-Trust.
2. Fee. Adviser shall pay to Sub-Adviser, for all services rendered to the
Sub-Trusts by Sub-Adviser hereunder, the sub-advisory fees set forth in Exhibit
A attached hereto. During the term of this Agreement, Sub-Adviser will bear all
expenses incurred by it in the performance of its duties hereunder.
3. Term. The term of this Agreement shall begin on the date of its execution
and shall remain in effect for two years from that date and from year to year
thereafter, subject to the provisions for termination and all of the other terms
and conditions hereof, if such continuation is specifically approved at least
annually in the manner required by the Act. This Agreement shall be submitted to
the shareholders of the Trust and each Sub-Trust for approval at a shareholders'
meeting and shall automatically terminate if not approved by a majority of the
shares of the Sub-Trust present and voting at such meeting.
4. Termination. This Agreement may be terminated at any time without the
payment of any penalty, by a majority of the Board of Trustees of the Trust, by
a vote of the majority of the outstanding shares of beneficial interest of any
Sub-Trust or by the Sub-Adviser on sixty (60) days written notice to the
Adviser.
This Agreement will terminate automatically in the event of the termination of
the Investment Advisory Agreement.
Notwithstanding any provision of this Agreement, this Agreement may not be
cancelled by the Adviser without the approval of a majority of the Board of
Trustees of the Trust.
This Agreement shall automatically terminate in the event of its assignment.
The Sub-Adviser may employ or contract with any other person, persons,
corporation, or corporations at its own cost and expense as it shall determine
in order to assist it in carrying out its obligations and duties under this
Agreement.
5. Sub-Adviser's Representations. Sub-Adviser represents and warrants that the
Sub-Trusts will at all times be invested in such a manner as to ensure
compliance with Section 817(h) of the Internal Revenue Code of 1986, as amended
and Treasury Regulations, Section 1.817.5 relating to the diversification
requirements for variable annuity endowment, or life insurance contracts and any
amendments or other modifications to such Section or Regulation. Sub-Adviser
will be relieved of this obligation and shall be held harmless when direction
from the Adviser or Trustees causes non-compliance with Section 817(h) and/or
Regulation Section 1.817-5. Sub-Adviser agrees to provide quarterly reports to
Adviser, executed by a duly authorized officer of Sub-Adviser, within seven (7)
days of the close of
A-2
<PAGE> 22
each calendar quarter certifying as to compliance with said Section or
Regulations. In addition to the quarterly reports, Adviser may request and
Sub-Adviser agrees to provide Section 817 diversification compliance reports at
more frequent intervals, as reasonably requested by Adviser.
6. Liability. The Sub-Adviser shall not be liable for any error in judgment or
of law, or for any loss suffered by the Trust or any Sub-Trust in connection
with the matters to which this Agreement relates, except (1) a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Sub-Adviser in the performance of its obligations and duties or (2) by reason of
its reckless disregard of its obligations and duties under this Agreement.
7. Brokerage. The Sub-Adviser shall place all orders for the purchase and sale
of portfolio securities for the accounts of the Sub-Trusts with broker-dealers
selected by the Sub-Adviser. In executing portfolio transactions and selecting
broker-dealers, the Sub-Adviser will use its best efforts to seek best execution
on behalf of the Sub-Trusts. In assessing the best execution available for any
transaction, the Sub-Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Sub-Adviser
may also consider the brokerage and research services (as those terms are used
in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Sub-Trusts and/or other accounts over which the Sub-Adviser or an affiliate of
the Sub-Adviser (to the extent permitted by law) exercises investment
discretion. The Sub-Adviser is authorized to cause the Sub-Trusts to pay a
broker-dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Sub-Trusts which is in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines in good faith that such
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer viewed in terms of that particular
transaction or in terms of all of the accounts over which investment discretion
is so exercised.
8. Amendment. This Agreement may be amended at any time by agreement of the
parties, provided that the amendment shall be approved in the manner required by
the Act.
9. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Illinois.
10. Registration as Investment Adviser. Adviser and Sub-Adviser hereby
acknowledge that it is registered as an investment adviser under the Investment
A-3
<PAGE> 23
Advisers Act of 1940, it will use its reasonable best efforts to maintain such
registration, and it will promptly notify the other if it ceases to be so
registered, if its registration is suspended for any reason, or if it is
notified by any regulatory organization or court of competent jurisdiction that
it should show cause why its registration should not be suspended or terminated.
Witness the due execution hereof this [ ] day of [ ], 1996.
<TABLE>
<S> <C>
COVA INVESTMENT ADVISORY CORPORATION
Attest:
By:
- ------------------------ ------------------------------------
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
Attest:
By:
- ------------------------ ------------------------------------
COVA SERIES TRUST
Attest:
By:
- ------------------------ ------------------------------------
</TABLE>
A-4
<PAGE> 24
EXHIBIT A
TO SUB-ADVISORY AGREEMENT
COVA SERIES TRUST
SUB-ADVISORY COMPENSATION
For all services rendered by Sub-Adviser hereunder, Adviser shall pay to Sub-
Adviser and Sub-Adviser agrees to accept as full compensation for all services
rendered hereunder, fees at the end of each calendar month equal to a percentage
of the average daily net assets of the Sub-Trusts as follows:
<TABLE>
<CAPTION>
PORTFOLIO AVERAGE DAILY NET ASSETS % PER ANNUM
- ---------------------------------- ------------------------ -----------
<S> <C> <C>
Money Market Portfolio............ First $500 million .25 of 1%
Over $500 million .15 of 1%
Quality Income Portfolio.......... First $500 million .25 of 1%
Over $500 million .20 of 1%
High Yield Portfolio.............. First $500 million .50 of 1%
Over $500 million .40 of 1%
Growth and Income Portfolio....... First $500 million .35 of 1%
Over $500 million .25 of 1%
Stock Index Portfolio............. -- .25 of 1%
</TABLE>
A-5
<PAGE> 25
PROXY
MONEY MARKET PORTFOLIO
OF
COVA SERIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
October 24, 1996
KNOW ALL MEN BY THESE PRESENTS that the undersigned shareholder(s) of
the Money Market Portfolio of Cova Series Trust ("Trust") hereby appoints
______________________________________________, or any one of them true and
lawful attorneys, with power of substitution of each, to vote all shares which
the undersigned is entitled to vote, at the Special Meeting of Shareholders of
the Trust to be held on October 24, 1996 at the Offices of the Trust, One Tower
Lane, Suite 3000, Oakbrook Terrace, Illinois at 9:30 a.m., local time, and at
any adjournment thereof ("Meeting"), as follows:
1. To approve a new Sub-Advisory Agreement among Cova Investment Advisory
Corporation, Van Kampen American Capital Investment Advisory Corp. and
Cova Series Trust.
FOR ( ) AGAINST ( ) ABSTAIN ( )
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
Dated: ____________________, 1996
Cova Financial Services Life Insurance Company
___________________________________________________
Name of Insurance Company
___________________________________________________
Name and Title of Authorized Officer
___________________________________________________
Signature of Authorized Officer
MONEY MARKET PORTFOLIO
Name(s) of Separate Account(s)
of the Insurance Company
Owning Shares in this Portfolio:
Cova Variable Annuity Account One
__________________________________
__________________________________
__________________________________
TOTAL SHARES OF THIS PORTFOLIO
OWNED AND BEING VOTED BY THE
INSURANCE COMPANY:
__________________________________
1
<PAGE> 26
PROXY
QUALITY INCOME PORTFOLIO
OF
COVA SERIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
October 24, 1996
KNOW ALL MEN BY THESE PRESENTS that the undersigned shareholder(s) of
the Quality Income Portfolio of Cova Series Trust ("Trust") hereby appoints
______________________________________________, or any one of them true and
lawful attorneys, with power of substitution of each, to vote all shares which
the undersigned is entitled to vote, at the Special Meeting of Shareholders of
the Trust to be held on October 24, 1996 at the Offices of the Trust, One Tower
Lane, Suite 3000, Oakbrook Terrace, Illinois at 9:30 a.m., local time, and at
any adjournment thereof ("Meeting"), as follows:
1. To approve a new Sub-Advisory Agreement among Cova Investment Advisory
Corporation, Van Kampen American Capital Investment Advisory Corp. and
Cova Series Trust.
FOR ( ) AGAINST ( ) ABSTAIN ( )
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
Dated: ____________________, 1996
Cova Financial Services Life Insurance Company
___________________________________________________
Name of Insurance Company
___________________________________________________
Name and Title of Authorized Officer
___________________________________________________
Signature of Authorized Officer
QUALITY INCOME PORTFOLIO
Name(s) of Separate Account(s)
of the Insurance Company
Owning Shares in this Portfolio:
Cova Variable Annuity Account One
__________________________________
__________________________________
__________________________________
TOTAL SHARES OF THIS PORTFOLIO
OWNED AND BEING VOTED BY THE
INSURANCE COMPANY:
__________________________________
2
<PAGE> 27
PROXY
HIGH YIELD PORTFOLIO
OF
COVA SERIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
October 24, 1996
KNOW ALL MEN BY THESE PRESENTS that the undersigned shareholder(s) of
the High Yield Portfolio of Cova Series Trust ("Trust") hereby appoints
______________________________________________, or any one of them true and
lawful attorneys, with power of substitution of each, to vote all shares which
the undersigned is entitled to vote, at the Special Meeting of Shareholders of
the Trust to be held on October 24, 1996 at the Offices of the Trust, One Tower
Lane, Suite 3000, Oakbrook Terrace, Illinois at 9:30 a.m., local time, and at
any adjournment thereof ("Meeting"), as follows:
1. To approve a new Sub-Advisory Agreement among Cova Investment Advisory
Corporation, Van Kampen American Capital Investment Advisory Corp. and
Cova Series Trust.
FOR ( ) AGAINST ( ) ABSTAIN ( )
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
Dated: ____________________, 1996
Cova Financial Services Life Insurance Company
___________________________________________________
Name of Insurance Company
___________________________________________________
Name and Title of Authorized Officer
___________________________________________________
Signature of Authorized Officer
HIGH YIELD PORTFOLIO
Name(s) of Separate Account(s)
of the Insurance Company
Owning Shares in this Portfolio:
Cova Variable Annuity Account One
__________________________________
__________________________________
__________________________________
TOTAL SHARES OF THIS PORTFOLIO
OWNED AND BEING VOTED BY THE
INSURANCE COMPANY:
__________________________________
3
<PAGE> 28
PROXY
GROWTH AND INCOME PORTFOLIO
OF
COVA SERIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
October 24, 1996
KNOW ALL MEN BY THESE PRESENTS that the undersigned shareholder(s) of
the Growth and Income Portfolio of Cova Series Trust ("Trust") hereby appoints
______________________________________________, or any one of them true and
lawful attorneys, with power of substitution of each, to vote all shares which
the undersigned is entitled to vote, at the Special Meeting of Shareholders of
the Trust to be held on October 24, 1996 at the Offices of the Trust, One Tower
Lane, Suite 3000, Oakbrook Terrace, Illinois at 9:30 a.m., local time, and at
any adjournment thereof ("Meeting"), as follows:
1. To approve a new Sub-Advisory Agreement among Cova Investment Advisory
Corporation, Van Kampen American Capital Investment Advisory Corp. and
Cova Series Trust.
FOR ( ) AGAINST ( ) ABSTAIN ( )
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
Dated: ____________________, 1996
Cova Financial Services Life Insurance Company
___________________________________________________
Name of Insurance Company
___________________________________________________
Name and Title of Authorized Officer
___________________________________________________
Signature of Authorized Officer
GROWTH AND INCOME PORTFOLIO
Name(s) of Separate Account(s)
of the Insurance Company
Owning Shares in this Portfolio:
Cova Variable Annuity Account One
__________________________________
__________________________________
__________________________________
TOTAL SHARES OF THIS PORTFOLIO
OWNED AND BEING VOTED BY THE
INSURANCE COMPANY:
__________________________________
4
<PAGE> 29
PROXY
STOCK INDEX PORTFOLIO
OF
COVA SERIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
October 24, 1996
KNOW ALL MEN BY THESE PRESENTS that the undersigned shareholder(s) of
the Stock Index Portfolio of Cova Series Trust ("Trust") hereby appoints
______________________________________________, or any one of them true and
lawful attorneys, with power of substitution of each, to vote all shares which
the undersigned is entitled to vote, at the Special Meeting of Shareholders of
the Trust to be held on October 24, 1996 at the Offices of the Trust, One Tower
Lane, Suite 3000, Oakbrook Terrace, Illinois at 9:30 a.m., local time, and at
any adjournment thereof ("Meeting"), as follows:
1. To approve a new Sub-Advisory Agreement among Cova Investment Advisory
Corporation, Van Kampen American Capital Investment Advisory Corp. and
Cova Series Trust.
FOR ( ) AGAINST ( ) ABSTAIN ( )
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
Dated: ____________________, 1996
Cova Financial Services Life Insurance Company
___________________________________________________
Name of Insurance Company
___________________________________________________
Name and Title of Authorized Officer
___________________________________________________
Signature of Authorized Officer
STOCK INDEX PORTFOLIO
Name(s) of Separate Account(s)
of the Insurance Company
Owning Shares in this Portfolio:
Cova Variable Annuity Account One
__________________________________
__________________________________
__________________________________
TOTAL SHARES OF THIS PORTFOLIO
OWNED AND BEING VOTED BY THE
INSURANCE COMPANY:
__________________________________
5
<PAGE> 30
Money Market Portfolio
INSTRUCTIONS TO COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Services Life Insurance
Company (the "Company") to vote all shares of the Money Market Portfolio of
COVA SERIES TRUST (the "Trust") represented by shares held by the undersigned
at a special meeting of shareholders of the Trust to be held at 9:30 a.m.,
local time, on October 24, 1996, at the offices of the Trust, One Tower Lane,
Suite 3000, Oakbrook Terrace, Illinois and at any adjournment thereof, as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL SERVICES LIFE INSURANCE
COMPANY.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL IF
NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
6
<PAGE> 31
Quality Income Portfolio
INSTRUCTIONS TO COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Services Life Insurance Company
(the "Company") to vote all shares of the Quality Income Portfolio of COVA
SERIES TRUST (the "Trust") represented by shares held by the undersigned at a
special meeting of shareholders of the Trust to be held at 9:30 a.m., local
time, on October 24, 1996, at the offices of the Trust, One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL SERVICES LIFE INSURANCE
COMPANY.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
7
<PAGE> 32
High Yield Portfolio
INSTRUCTIONS TO COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Services Life Insurance Company
(the "Company") to vote all shares of the High Yield Portfolio of COVA SERIES
TRUST (the "Trust") represented by shares held by the undersigned at a special
meeting of shareholders of the Trust to be held at 9:30 a.m., local time,
on October 24, 1996, at the offices of the Trust, One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL SERVICES LIFE INSURANCE
COMPANY.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
8
<PAGE> 33
Growth and Income Portfolio
INSTRUCTIONS TO COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Services Life Insurance Company
(the "Company") to vote all shares of the Growth and Income Portfolio of COVA
SERIES TRUST (the "Trust") represented by shares held by the undersigned at a
special meeting of shareholders of the Trust to be held at 9:30 a.m., local
time, on October 24, 1996, at the offices of the Trust, One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL SERVICES LIFE INSURANCE
COMPANY.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
9
<PAGE> 34
Stock Index Portfolio
INSTRUCTIONS TO COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Services Life Insurance Company
(the "Company") to vote all shares of the Stock Index Portfolio of COVA SERIES
TRUST (the "Trust") represented by shares held by the undersigned at a
special meeting of shareholders of the Trust to be held at 9:30 a.m., local
time, on October 24, 1996, at the offices of the Trust, One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL SERVICES LIFE INSURANCE
COMPANY.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
10
<PAGE> 35
Money Market Portfolio
INSTRUCTIONS TO COVA FINANCIAL LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Life Insurance Company (the
"Company") to vote all shares of the Money Market Portfolio of COVA SERIES
TRUST (the "Trust") represented by shares held by the undersigned at a special
meeting of shareholders of the Trust to be held at 9:30 a.m., local time, on
October 24, 1996, at the offices of the Trust, One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL LIFE INSURANCE COMPANY.
COVA FINANCIAL LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF OF
THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
11
<PAGE> 36
Quality Income Portfolio
INSTRUCTIONS TO COVA FINANCIAL LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Life Insurance Company (the
"Company") to vote all shares of the Quality Income Portfolio of COVA SERIES
TRUST (the "Trust") represented by shares held by the undersigned at a
special meeting of shareholders of the Trust to be held at 9:30 a.m., local
time, on October 24, 1996, at the offices of the Trust, One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL LIFE INSURANCE
COMPANY.
COVA FINANCIAL LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
12
<PAGE> 37
Growth and Income Portfolio
INSTRUCTIONS TO COVA FINANCIAL LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Life Insurance Company (the
"Company") to vote all shares of the Growth and Income Portfolio of COVA
SERIES TRUST (the "Trust") represented by shares held by the undersigned at a
special meeting of shareholders of the Trust to be held at 9:30 a.m., local
time, on October 24, 1996, at the offices of the Trust, One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL LIFE INSURANCE
COMPANY.
COVA FINANCIAL LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
13
<PAGE> 38
Stock Index Portfolio
INSTRUCTIONS TO COVA FINANCIAL LIFE INSURANCE COMPANY
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
COVA SERIES TRUST TO BE HELD ON OCTOBER 24, 1996
INSTRUCTIONS SOLICITED ON BEHALF OF
COVA FINANCIAL LIFE INSURANCE COMPANY
The undersigned hereby instructs Cova Financial Life Insurance Company (the
"Company") to vote all shares of the Stock Index Portfolio of COVA SERIES
TRUST (the "Trust") represented by shares held by the undersigned at a special
meeting of shareholders of the Trust to be held at 9:30 a.m., local time, on
October 24, 1996, at the offices of the Trust, One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois and at any adjournment thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FROM
[ ] [ ] [ ] 1. To approve a new Sub-Advisory Agreement
among Cova Investment Advisory
Corporation, Van Kampen American
Capital Investment Advisory Corp. and Cova Series Trust.
</TABLE>
IMPORTANT: Please sign on the reverse side.
INSTRUCTIONS SOLICITED ON BEHALF OF COVA FINANCIAL LIFE INSURANCE
COMPANY.
COVA FINANCIAL LIFE INSURANCE COMPANY WILL VOTE SHARES HELD ON BEHALF
OF THE CONTRACT OWNER AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL
IF NO CHOICE IS INDICATED.
RECEIPT OF THE NOTICE OF THE SPECIAL MEETING AND THE ACCOMPANYING PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
IF THIS INSTRUCTION FORM IS SIGNED AND RETURNED AND NO SPECIFICATION IS MADE,
THE COMPANY SHALL VOTE FOR ALL PROPOSALS. IF THIS INSTRUCTION CARD IS NOT
RETURNED OR IS RETURNED UNSIGNED, THE COMPANY SHALL VOTE YOUR SHARES IN THE
SAME PROPORTION AS IT VOTES THE SHARES FOR WHICH IT HAS RECEIVED INSTRUCTIONS.
Dated:______________________________________, 1996
__________________________________________________
Signature(s)
__________________________________________________
Signature (of joint owner, if any)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. When signing
as attorney, executor, administrator, trustee, guardian, or as custodian for a
minor, please sign your name and give your full title as such. If signing on
behalf of a corporation, please sign full corporate name and your name and
indicate your title. If you are a partner signing for a partnership, please
sign the partnership name and your name. Joint owners should each sign this
proxy. Please sign, date and return.
14
<PAGE> 39
[COVA LOGO]
Cova Financial Life Insurance Company
Cova Financial Services Life Insurance Company
September 20, 1996
Re: Special Meeting of Shareholders
Cova Series Trust
Dear Contract Owner:
Cova Series Trust is holding a special meeting of shareholders of the Trust
on October 24, 1996, at the offices of the Trust, One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois. As the owner of a Cova Variable Annuity
contract, you may instruct Cova to cast the number of votes to which you are
entitled as shown on the enclosed Voting Instructions Card(s). The Voting
Instructions Card(s) has your name as it appears on your contract and the
total number of shares you owned in each portfolio through Cova Variable
Annuity Account One or Cova Variable Annuity Account Five, in California, as
of September 5, 1996.
The item to be voted upon is listed on the Voting Instructions Card(s). You
may vote for or against, or abstain from voting on the item. You also need
to sign your name exactly as it appears on the Voting Instructions Card(s) and
return it (them) to Cova using the enclosed pre-paid envelope.
The Voting Instructions, if completed in proper form and not revoked, will be
voted by Cova as specified by you. If no choice is specified, each vote
entitled to be directed by you will be cast FOR the proposal referred to
in Item 1 of the Voting Instructions Card(s). Votes for which instructions
have not been received must be voted by Cova in the same proportion as votes
for which instructions have been received. On all other matters that may
properly come before the meeting, the proxies will be voted at the discretion
of those exercising the proxies. The voting instructions may be revoked at
any time before the votes evidenced thereby are voted as indicated in the
enclosed Proxy Statement.
Cova will not accept any Voting Instructions received after the close of
business on October 21, 1996. As your vote is important, we encourage you to
take this opportunity to exercise your voting rights.
Sincerely,
COVA
Enclosures
One Tower Lane * Suite 3000 * Oakbrook Terrace, IL 60181-4644
800-523-1661 * 630-368-6215
15
