File Nos. 33-45223
811-6543
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ ]
Amendment No. 8 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT FOUR
___________________________________
(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, Esq. and Jeffery K. Hoelzel
Blazzard, Grodd & Hasenauer, P.C. Senior Vice President, General
P.O. Box 5108 Counsel and Secretary
Westport, CT 06881 Cova Financial Services
(203) 226-7866 Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois
60181-4644
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 1997 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
____ This Post-Effective Amendment designates a new date for a previously
filed Post-Effective Amendment.
Registrant has declared that it has registered an indefinite number or amount
of securities in accordance with Rule 24f-2 under the Investment Company Act
of 1940. Registrant filed its Rule 24f-2 Notice for the most recent fiscal
year on or about February 28, 1997.
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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.......................... Definitions
Item 3. Synopsis............................. Highlights
Item 4. Condensed Financial Information...... Not Applicable
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies... The Company; The Variable
Account; Cova Series Trust;
Neuberger & Berman Advisers
Management Trust; General
American Capital Company
Item 6. Deductions and Expenses.............. Charges and Deductions
Item 7. General Description of Variable
Annuity Contracts.................... The Contracts
Item 8. Annuity Period....................... Annuity Provisions
Item 9. Death Benefit........................ The Contracts; Annuity
Provisions
Item 10. Purchases and Contract Value......... Purchase Payments and Contract
Value
Item 11. Redemptions.......................... Withdrawals
Item 12. Taxes................................ Tax Status
Item 13. Legal Proceedings.................... Legal Proceedings
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 (CONT'D)
(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...... The Company
Item 18. Services............................. Not Applicable
Item 19. Purchase of Securities Being Offered. Not Applicable
Item 20. Underwriters......................... Distributor
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
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
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Annuity Service Office:
Home Office: P.O. Box 295
One Tower Lane, Suite 3000 400 Locust Street
Oakbrook Terrace, IL 60181-4644 Des Moines, Iowa 50309-0295
(800) 831-LIFE (800) 255-9448
(515) 243-5834
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INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACTS
issued by
COVA VARIABLE ANNUITY ACCOUNT FOUR
and
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
The Individual Flexible Purchase Payment Deferred Variable Annuity Contracts
(the "Contracts") described in this Prospectus provide for accumulation of
Contract Values on a variable basis and payment of monthly annuity payments on
a fixed or variable basis. The Contracts described in this Prospectus are for
use by individuals in connection with fringe benefit plans, including welfare
and pension plans under the Employee Retirement Income Security Act of 1974
("ERISA") and bonus and compensation plans exempt from ERISA. Fringe benefit
plans may or may not qualify for any tax-favored treatment other than the
benefits provided for by annuities depending on the plan. (See "Qualified
Contracts" and "Non-Qualified Contracts" under "Definitions.") The amounts of
the Mortality and Expense Risk Premium, Administrative Expense Charge and
Contract Maintenance Charge under the Contracts will vary depending upon the
total projected purchase payments anticipated from all Contracts sold under
the particular plan during the first five years of plan participation in the
Contracts. (See "Charges and Deductions.")
Purchase payments for the Contracts will be allocated to a segregated
investment account of Cova Financial Services Life Insurance Company (the
"Company") which account has been designated Cova Variable Annuity Account
Four (the "Variable Account"). The Variable Account invests in shares of Cova
Series Trust (see "Cova Series Trust" on Page __); Neuberger & Berman Advisers
Management Trust (see "Neuberger & Berman Advisers Management Trust") or
General American Capital Company (see "General American Capital Company").
Cova Series Trust is a series fund with nineteen portfolios, fifteen of
which are currently available in connection with the Contracts offered
under this Prospectus: Money Market Portfolio, Quality Income Portfolio,
High Yield Portfolio, Stock Index Portfolio, VKAC Growth and Income
Portfolio, Mid-Cap Value Portfolio, Large Cap Research Portfolio, Developing
Growth Portfolio, Lord Abbett Growth & Income Portfolio, Select Equity
Portfolio, Small Cap Portfolio, International Equity Portfolio, Quality Bond
Portfolio, Large Cap Stock Portfolio and Bond Debenture Portfolio. Neuberger
& Berman Advisers Management Trust is a series fund with eight portfolios,
four of which are currently available in connection with the Contracts
offered herein: Liquid Asset Portfolio, Limited Maturity Bond Portfolio,
Growth Portfolio and Balanced Portfolio. General American Capital Company is
an open-end diversified management investment company with five portfolios,
of which only the Money Market Fund is available in connection with the
Contracts offered by this Prospectus. See "Tax Status - Diversification"
for a discussion of Owner control of the underlying investments in a
variable annuity contract.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information which is available at no
charge. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents of the Statement of Additional Information can be found
on Page __ of this Prospectus. For the Statement of Additional Information,
call (800) 831-LIFE or write the Home Office address listed above.
INQUIRIES:
Any inquiries regarding purchasing a Contract can be made by telephone or in
writing to Cova Life Sales Company at (800) 831-LIFE or One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644. All other questions should be
directed to the Annuity Service Office listed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus and the Statement of Additional Information are dated May 1,
1997.
This Prospectus should be kept for future reference.
TABLE OF CONTENTS
PAGE
DEFINITIONS
HIGHLIGHTS
FEE TABLE
THE COMPANY
THE VARIABLE ACCOUNT
Cova Series Trust
Neuberger & Berman Advisers Management Trust
General American Capital Company
Voting Rights
Substitution of Securities
CHARGES AND DEDUCTIONS
Deduction for Withdrawal Charge (Sales Load)
Waiver of Withdrawal Charge
Deduction for Mortality and Expense Risk Premium
Deduction for Administrative Expense Charge
Deduction for Contract Maintenance Charge
Reduction of Charges
Deduction for Premium Taxes
Deduction for Trust and AMT Expenses
Deduction for Transfer Fee
THE CONTRACTS
Ownership
Assignment
Beneficiary
Change of Beneficiary
Transfers of Contract Values During the Accumulation Period
Death of the Annuitant
Death of the Owner
ANNUITY PROVISIONS
Annuity Date and Annuity Option
Change in Annuity Date and Annuity Option
Allocation of Annuity Payments
Transfers During the Annuity Period
Annuity Options
assumed
PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments
Allocation of Purchase Payments
Dollar Cost Averaging
Distributor
Contract Value
Accumulation Unit
WITHDRAWALS
Suspension of Payments or Transfers
PERFORMANCE INFORMATION
Money Market and Liquid Asset Portfolios
Other Portfolios
TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other Than Natural Persons
Tax Treatment of Assignments
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations
FINANCIAL STATEMENTS
LEGAL PROCEEDINGS
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the
Contract Value in a Sub-Account of the Variable Account.
ANNUITANT - The natural person on whose life Annuity Payments are based.
ANNUITY DATE - The date on which Annuity Payments begin.
ANNUITY PAYMENTS - The series of payments made to the Annuitant after the
Annuity Date under the Annuity Option elected.
ANNUITY PERIOD - The period starting on the Annuity Date.
ANNUITY UNIT - An accounting unit of measure used to calculate Variable
Annuity Payments after the Annuity Date.
BENEFICIARY - The person(s) who will receive the Death Benefit.
COMPANY - Cova Financial Services Life Insurance Company at its Annuity
Service Office shown on the cover page of this Prospectus.
CONTRACT ANNIVERSARY - An anniversary of the Issue Date.
CONTRACT VALUE - The sum of the Owner's interest in the Sub-Accounts of the
Variable Account.
CONTRACT YEAR - One year from the Issue Date and from each Contract
Anniversary.
DISTRIBUTOR - Cova Life Sales Company, One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644.
ELIGIBLE INVESTMENT(S) - An investment entity which can be selected by the
Owner to be an underlying investment of the Contract.
FIXED ANNUITY - A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Variable Account.
ISSUE DATE - The date on which the first Contract Year begins.
NON-QUALIFIED CONTRACTS - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 401 or 403(b) of the
Internal Revenue Code.
OWNER - The person or entity named in the Application who/which has all the
rights under the Contract.
PORTFOLIO - A segment of an Eligible Investment which constitutes a separate
and distinct class of shares.
QUALIFIED CONTRACTS - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 401 or 403(b) of the Internal Revenue
Code.
SUB-ACCOUNT - A segment of the Variable Account.
SUB-ACCOUNT VALUE - The Owner's interest in a Sub-Account.
VALUATION DATE - The Variable Account will be valued each day that the New
York Stock Exchange is open for trading which is Monday through Friday, except
for normal business holidays.
VALUATION PERIOD - The period beginning at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate investment account of the Company, designated as
Cova Variable Annuity Account Four, into which purchase payments or Contract
Values may be allocated.
VARIABLE ACCOUNT VALUE - The sum of the Owner's interest in each of the
Sub-Accounts of the Variable Account.
VARIABLE ANNUITY - A series of payments made during the Annuity Period which
vary in amount with the investment experience of each applicable Sub-Account.
WITHDRAWAL VALUE - The Withdrawal Value is:
1) the Contract Value for the Valuation Period next following the
Valuation Period during which a written request for withdrawal is received at
the Company; less
2) any applicable taxes not previously deducted; less
3) the Withdrawal Charge, if any; less
4) the Contract Maintenance Charge, if any.
HIGHLIGHTS
Purchase payments for the Contracts will be allocated to a segregated
investment account of Cova Financial Services Life Insurance Company (the
"Company") which account has been designated Cova Variable Annuity Account
Four (the "Variable Account"). Under certain circumstances, however, purchase
payments may initially be allocated to the Cova Series Trust Money Market
Sub-Account, the Neuberger & Berman Advisers Management Trust Liquid Asset
Sub-Account or the General American Capital Company Money Market Sub-Account
of the Variable Account (see below). The Variable Account invests in shares
of Cova Series Trust (see "Cova Series Trust"), Neuberger & Berman
Advisers Management Trust (see "Neuberger & Berman Advisers Management Trust"
and General American Capital Company (see "General American Capital Company").
Owners bear the investment risk for all amounts allocated to the Variable
Account.
Within ten days (twenty days with respect to Contracts issued in North Dakota)
of the date of receipt of the Contract by the Owner, it may be returned by
delivering or mailing it to the Company at its Annuity Service Office or to
the agent through whom it was purchased. When the Contract is received by the
Company, it will be voided as if it had never been in force. The Company will
refund the Contract Value (which may be more or less than the purchase
payments) computed at the end of the Valuation Period during which the
Contract is received by the Company except in the following circumstances: (a)
in states which require the Company to refund purchase payments, less any
withdrawals; or (b) in the case of Contracts which are deemed by certain
states to be replacing an existing annuity or insurance contract and which
states require that contract owners be given a twenty day right to return the
policy after delivery. With respect to the circumstances described in (a) and
(b) above, the Company will refund the greater of purchase payments, less any
withdrawals, or the Contract Value, and will allocate initial purchase
payments to the Cova Series Trust Money Market Sub-Account, the Neuberger &
Berman Advisers Management Trust Liquid Asset Sub-Account or the General
American Capital Company Money Market Sub-Account, as elected by the Owner,
until the expiration of fifteen days from the Issue Date (or twenty-five
days in the case of Contracts described under (b) above). Upon the expiration
of the fifteen day period (or twenty-five day period with respect to Contracts
described under (b)), the Sub-Account Value of the Cova Series Trust Money
Market Sub-Account, the Neuberger & Berman Advisers Management Trust Liquid
Asset Sub-Account or the General American Capital Company Money Market
Sub-Account will be allocated to the Variable Account in accordance with the
election made by the Owner in the Application.
A Withdrawal Charge (sales load) may be deducted in the event of a withdrawal
of all or a portion of the Contract Value. The Withdrawal Charge is imposed on
withdrawals of Contract Values attributable to purchase payments within five
(5) years after receipt. The Withdrawal Charge, if any, is equal to five
percent (5%) of the purchase payment withdrawn. The Withdrawal Charge does not
apply to a withdrawal equal to: (a) purchase payments held for at least five
(5) years not previously withdrawn; (b) gain; and (c) amounts for which the
waiver of Withdrawal Charge applies. (See "Withdrawals.") A withdrawal of
up to ten percent (10%) of aggregate purchase payments made within the five
years preceding the request for withdrawal may be made free from the
Withdrawal Charge on a noncumulative basis once each Contract Year if the
Contract Value prior to the withdrawal exceeds $5,000. (See "Charges and
Deductions - Deduction for Withdrawal Charge (Sales Load)" and "Charges and
Deductions - Waiver of Withdrawal Charge.")
The Company deducts on each Valuation Date, both prior to the Annuity Date and
during the Annuity Period, a Mortality and Expense Risk Premium, the amount of
which will vary depending upon the total projected purchase payments to be
made over the first five years of plan participation in the Contracts. The
maximum Mortality and Expense Risk Premium is equal, on an annual basis, to
1.25% of the daily net asset value of the Variable Account. This Charge
compensates the Company for assuming the mortality and expense risks under the
Contracts. (See "Charges and Deductions - Deduction for Mortality and Expense
Risk Premium.")
The Company deducts on each Valuation Date, both prior to the Annuity Date and
during the Annuity Period, an Administrative Expense Charge, the amount of
which will vary depending upon the total projected purchase payments to be
made over the first five years of plan participation in the Contracts. The
maximum Administrative Expense Charge is equal, on an annual basis, to .15% of
the daily net asset value of the Variable Account. This Charge compensates the
Company for costs associated with the administration of the Contract and the
Variable Account. (See "Charges and Deductions - Deduction for Administrative
Expense Charge.")
The Company deducts an annual Contract Maintenance Charge from the Contract
Value on each Contract Anniversary. The amount of this charge will vary
depending upon the total projected purchase payments to be made over the first
five years of plan participation in the Contracts. The maximum Contract
Maintenance Charge is $30 each Contract Year. (See "Charges and Deductions -
Deduction for Contract Maintenance Charge.")
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values. (See "Charges and Deductions -
Deduction for Premium Taxes.")
Under certain circumstances, a Transfer Fee may be assessed when an Owner
transfers Contract Values from one Sub-Account to another Sub-Account. (See
"Charges and Deductions - Deduction for Transfer Fee.")
There is a ten percent (10%) federal income tax penalty that may be applied to
the income portion of any distribution from the Contracts.(See "Tax Status -
Tax Treatment of Withdrawals - Non-Qualified Contracts" and "Tax Status - Tax
Treatment of Withdrawals - Qualified Contracts.") For a further discussion of
the taxation of the Contracts, see "Tax Status."
For Contracts purchased in connection with 403(b) plans, withdrawals of amounts
attributable to contributions made pursuant to a salary reduction agreement (as
defined in Section 403(b)(11) of the Code) are limited to circumstances only
when the Owner attains age 59 1/2, separates from service, dies, becomes
disabled (within the meaning of Section 72(m)(7) of the Code) or in the case
of hardship. 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: (1) salary reduction
contributions made after December 31, 1988; (2) income attributable to such
contributions; and (3) income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect rollovers or transfers
between certain Qualified Plans. Tax penalties may also apply. (See "Tax
Status - Tax Treatment of Withdrawals - Qualified Contracts.") Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
(See "Tax Status - Tax-Sheltered Annuities - Withdrawal Limitations.")
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable annuity contract will not be treated as an annuity contract
for tax purposes if the owner of the contract has excessive control over the
investment underlying the contract. The issuance of such guidelines may
require the Company to impose limitations on a Contract Owner's right to
control the investment. It is not known whether any such guidelines would have
a retroactive effect. (See "Tax Status - Diversification.")
COVA VARIABLE ANNUITY ACCOUNT FOUR
FEE TABLE
OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 2 below) 5% of purchase payment withdrawn
Transfer Fee (see Note 4 below) No charge for first 12 transfers
in a contract year; thereafter,
the fee is $25 per transfer or,
if less, 2% of the amount
transferred.
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ANNUAL CONTRACT FEE (see Note 3 below )
Contract Maintenance Charge (if the total purchase payments during the first five years $ 30
of plan participation are projected to be from $50,000 to $999,999.)
Contract Maintenance Charge (if the total purchase payments during the first five years $ 20
of plan participation are projected to be from $1,000,000 to $2,499,999.)
Contract Maintenance Charge (if the total purchase payments during the first five years $ 15
of plan participation are projected to be from $2,500,000 to $4,999,999.)
Contract Maintenance Charge (if the total purchase payments during the first five years $ 10
of plan participation are projected to equal or exceed $5,000,000.)
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
MORTALITY AND EXPENSE RISK PREMIUM (see Note 3 below)
Mortality and Expense Risk Premium (if the total purchase payments during the first 1.25%
five years of plan participation are projected to be from $50,000 to $999,999.)
Mortality and Expense Risk Premium (if the total purchase payments during the first 1.05%
five years of plan participation are projected to be from $1,000,000 to $2,499,999.)
Mortality and Expense Risk Premium (if the total purchase payments during the first .95%
five years of plan participation are projected to be from $2,500,000 to $4,999,999.)
Mortality and Expense Risk Premium (if the total purchase payments during the first .80%
five years of plan participation are projected to equal or exceed $5,000,000.)
ADMINISTRATIVE EXPENSE CHARGE (see Note 3 below)
Administrative Expense Charge (if the total purchase payments during the first five .15%
years of plan participation are projected to be from $50,000 to $2,499,999.)
Administrative Expense Charge (if the total purchase payments during the first five .10%
years of plan participation are projected to be from $2,500,000 to $4,999,999.)
Administrative Expense Charge (if the total purchase payments during the first five .05%
years of plan participation are projected to equal or exceed $5,000,000.)
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COVA SERIES TRUST'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
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Other Expenses
(after expense Total
reimbursement for Annual
Management certain Portfolios) Portfolio
Fees (see Note 5 below) Expenses
----------- ------------------- ------------
Managed by Van Kampen
American Capital
Investment Advisory Corp.
Money Market# .00% .11% .11%
Stock Index .50% .10% .60%
High Yield .75% .10% .85%
Quality Income .50% .10% .60%
VKAC Growth and Income .60% .10% .70%
Managed by J.P. Morgan
Investment Inc.
Select Equity* .75% .10% .85%
Small Cap Stock* .85% .10% .95%
International Equity* .85% .10% .95%
Quality Bond* .55% .10% .65%
Large Cap Stock* .65% .10% .75%
Managed by Lord, Abbett
& Co.
Bond Debenture* .75% .10% .85%
Mid-Cap Value** 1.00% .10% 1.10%
Large Cap Research** 1.00% .10% 1.10%
Developing Growth** .90% .10% 1.00%
Lord Abbett Growth
and Income** .75% .10% .85%
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* Annualized. The Portfolio commenced regular investment operations on April 2, 1996.
** Estimated. The Portfolio has not yet commenced regular investment operations.
# Cova Investment Advisory Corporation (Cova Advisory), the investment adviser for Cova Series Trust,
currently waives its fees for the Money Market Portfolio. Although not obligated to, Cova Advisory
expects to continue to waive its fees for the Money Market Portfolio. In the future, Cova Advisory may
charge its fees on a partial or complete basis. Absent the management fee waiver, the total management
fee on an annual basis for the Money Market Portfolio is .50%. The examples shown below for the Money
Market Portfolio are calculated based upon a waiver of the management fee.
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ANNUAL EXPENSES FOR NEUBERGER & BERMAN ADVISERS MANAGEMENT
TRUST AND ADVISERS MANAGERS TRUST(1)
(as a percentage of the average daily net assets of a Portfolio)
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Investment
Management and Other Total Annual
Portfolio Administration Fees Expenses Expenses
- ---------------------- --------------------- --------- -------------
Liquid Asset(2) 0.44% 0.56% 1.00%
Limited Maturity Bond 0.65% 0.13% 0.78%
Growth 0.83% 0.09% 0.92%
Balanced 0.85% 0.24% 1.09%
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(1) Neuberger & Berman Advisers Management Trust ("Trust") is divided
into eight portfolios ("Portfolios"), four of which are available in
connection with the Contracts offered under this Prospectus. Each Portfolio
invests all of its net investable assets in a corresponding series ("Series")
of Advisers Managers Trust. The figures reported under "Investment Management
and Administration Fees" include the aggregate of the administration fees paid
by the portfolio and the management fees paid by its corresponding series.
Similarly, "Other Expenses" includes all other expenses of the Portfolio and
its corresponding Series.
(2) Expenses reflect expense reimbursement. Neuberger & Berman Management
Incorporated has undertaken to reimburse the Liquid Asset Portfolio for certain
operating expenses, including the compensation of N&B Management and excluding
taxes, interest, extraordinary expenses, brokerage commissions and transaction
costs, that exceed, in the aggregate 1% of the Liquid Asset Portfolio's average
daily net asset value. Absent such reimbursement, the Total Annual Expenses for
the year ended December 31, 1996 would have been 1.21% for the Liquid Asset
Portfolio. This expense reimbursement policy is subject to termination upon 60
days written notice with respect to the Liquid Asset Portfolio.
GENERAL AMERICAN CAPITAL COMPANY
Management Other Total Annual
Fee Expenses Portfolio Expenses
---------- -------- ------------------
Money Market .205% .00% .205%
EXAMPLES (see Note 3 below)
An Owner would pay the following expenses on a $1,000 investment, assuming a
5% annual return on assets:
a) upon surrender at the end of each time period;
b) if the Contract is not surrendered or is annuitized.
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1 year 3 years
COVA SERIES TRUST MONEY MARKET PORTFOLIO
(if the total purchase payments during the first a) $66.36 $ 95.62
five years of plan participation are b) $16.36 $ 50.62
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $64.00 $ 88.45
five years of plan participation are b) $14.00 $ 43.45
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $62.32 $ 83.30
five years of plan participation are b) $12.32 $ 38.30
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $60.12 $ 76.55
five years of plan participation are b) $10.12 $ 31.55
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST QUALITY INCOME PORTFOLIO
(if the total purchase payments during the first a) $71.29 $110.60
five years of plan participation are b) $21.29 $ 65.60
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $68.95 $103.53
five years of plan participation are b) $18.95 $ 58.53
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $67.27 $ 98.45
five years of plan participation are b) $17.27 $ 53.45
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $65.08 $ 91.80
five years of plan participation are b) $15.08 $ 46.80
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST STOCK INDEX PORTFOLIO
(if the total purchase payments during the first a) $71.29 $110.60
five years of plan participation are b) $21.29 $ 65.60
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $68.95 $103.53
five years of plan participation are b) $18.95 $ 58.53
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $67.27 $ 98.45
five years of plan participation are b) $17.27 $ 53.45
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $65.08 $ 91.80
five years of plan participation are b) $15.08 $ 46.80
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST HIGH YIELD PORTFOLIO
(if the total purchase payments during the first a) $73.80 $118.16
five years of plan participation are b) $23.80 $ 73.16
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $71.46 $111.14
five years of plan participation are b) $21.46 $ 66.14
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $69.79 $106.09
five years of plan participation are b) $19.79 $ 61.09
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $67.61 $ 99.49
five years of plan participation are b) $17.61 $ 54.49
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST VKAC GROWTH AND INCOME PORTFOLIO
(if the total purchase payments during the first a) $72.29 $113.63
five years of plan participation are b) $22.29 $ 68.63
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $69.95 $106.58
five years of plan participation are b) $19.95 $ 61.58
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $68.28 $101.51
five years of plan participation are b) $18.28 $ 56.51
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $66.09 $ 94.88
five years of plan participation are b) $16.09 $ 49.88
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST QUALITY BOND PORTFOLIO
(if the total purchase payments during the first a) $71.79 $112.12
five years of plan participation are b) $21.79 $ 67.12
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $69.45 $105.06
five years of plan participation are b) $19.45 $ 60.06
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $67.77 $ 99.98
five years of plan participation are b) $17.77 $ 54.98
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $65.59 $ 93.34
five years of plan participation are b) $15.59 $ 48.34
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST SMALL CAP STOCK PORTFOLIO
(if the total purchase payments during the first a) $74.80 $121.17
five years of plan participation are b) $24.80 $ 76.17
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $72.46 $114.17
five years of plan participation are b) $22.46 $ 69.17
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $70.79 $109.13
five years of plan participation are b) $20.79 $ 64.13
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $68.61 $102.55
five years of plan participation are b) $18.61 $ 57.55
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST LARGE CAP STOCK PORTFOLIO
(if the total purchase payments during the first a) $72.80 $115.15
five years of plan participation are b) $22.80 $ 70.15
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $70.45 $108.10
five years of plan participation are b) $20.45 $ 63.10
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $68.78 $103.04
five years of plan participation are b) $18.78 $ 58.04
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $66.60 $ 96.42
five years of plan participation are b) $16.60 $ 51.42
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST SELECT EQUITY PORTFOLIO
(if the total purchase payments during the first a) $73.80 $118.16
five years of plan participation are b) $23.80 $ 73.16
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $71.46 $111.14
five years of plan participation are b) $21.46 $ 66.14
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $69.79 $106.09
five years of plan participation are b) $19.79 $ 61.09
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $67.61 $ 99.49
five years of plan participation are b) $17.61 $ 54.49
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST INTERNATIONAL EQUITY PORTFOLIO
(if the total purchase payments during the first a) $74.80 $121.17
five years of plan participation are b) $24.80 $ 76.17
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $72.46 $114.17
five years of plan participation are b) $22.46 $ 69.17
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $70.79 $109.13
five years of plan participation are b) $20.79 $ 64.13
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $68.61 $102.55
five years of plan participation are b) $18.61 $ 57.55
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST MID-CAP VALUE PORTFOLIO
(if the total purchase payments during the first a) $76.30 $125.66
five years of plan participation are b) $26.30 $ 80.66
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $73.97 $118.69
five years of plan participation are b) $23.97 $ 73.69
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $72.30 $113.68
five years of plan participation are b) $22.30 $ 68.68
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $70.12 $107.12
five years of plan participation are b)$20.12 $ 62.12
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST LARGE CAP RESEARCH PORTFOLIO
(if the total purchase payments during the first a) $76.30 $125.66
five years of plan participation are b) $26.30 $ 80.66
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $73.97 $118.69
five years of plan participation are b) $23.97 $ 73.69
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $72.30 $113.68
five years of plan participation are b) $22.30 $ 68.68
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $70.12 $107.12
five years of plan participation are b) $20.12 $ 62.12
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST DEVELOPING GROWTH PORTFOLIO
(if the total purchase payments during the first a) $75.30 $122.67
five years of plan participation are b) $25.30 $77.67
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $72.96 $115.68
five years of plan participation are b) $22.96 $ 70.68
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $71.29 $110.65
five years of plan participation are b) $21.29 $ 65.65
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $69.12 $104.08
five years of plan participation are b) $19.12 $ 59.08
projected to equal or exceed $5,000,000.)
COVA SERIES TRUST LORD ABBETT GROWTH AND INCOME PORTFOLIO
(if the total purchase payments during the first a) $73.80 $118.16
five years of plan participation are b) $23.80 $ 73.16
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $71.46 $111.14
five years of plan participation are b) $21.46 $ 66.14
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $69.79 $106.09
five years of plan participation are b) $19.79 $ 61.09
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $67.61 $ 99.49
five years of plan participation are b) $17.61 $ 54.49
projected to equal or exceed $5,000,000.)
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST GROWTH PORTFOLIO
(if the total purchase payments during the first a) $74.50 $120.27
five years of plan participation are b) $24.50 $ 75.27
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $72.16 $113.26
five years of plan participation are b) $22.16 $ 68.26
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $70.49 $108.22
five years of plan participation are b) $20.49 $ 63.22
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $68.31 $101.63
five years of plan participation are b) $18.31 $ 56.63
projected to equal or exceed $5,000,000.)
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST LIQUID
ASSET PORTFOLIO
(if the total purchase payments during the first a) $75.30 $122.67
five years of plan participation are b) $25.30 $ 77.67
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $72.96 $115.68
five years of plan participation are b) $22.96 $ 70.68
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $71.29 $110.65
five years of plan participation are b) $21.29 $ 65.65
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $69.12 $104.08
five years of plan participation are b) $19.12 $ 59.08
projected to equal or exceed $5,000,000.)
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
LIMITED MATURITY BOND PORTFOLIO
(if the total purchase payments during the first a) $73.10 $116.05
five years of plan participation are b) $23.10 $ 71.05
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $70.76 $109.02
five years of plan participation are b) $20.26 $ 64.02
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $69.08 $103.96
five years of plan participation are b) $19.08 $ 58.96
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $66.90 $ 97.34
five years of plan participation are b) $16.90 $ 52.34
projected to equal or exceed $5,000,000.)
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST BALANCED PORTFOLIO
(if the total purchase payments during the first a) $76.20 $125.36
five years of plan participation are b) $26.20 $ 80.36
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $73.86 $118.39
five years of plan participation are b) $23.86 $ 73.39
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $72.19 $113.38
five years of plan participation are b) $22.19 $ 68.38
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $70.02 $106.82
five years of plan participation are b) $20.02 $ 61.82
projected to equal or exceed $5,000,000.)
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET PORTFOLIO
(if the total purchase payments during the first a) $67.31 $ 98.54
five years of plan participation are b) $17.31 $ 53.54
projected to be from $50,000 to $999,999.)
(if the total purchase payments during the first a) $64.96 $ 91.39
five years of plan participation are b) $14.96 $ 46.39
projected to be from $1,000,000 to $2,499,999.)
(if the total purchase payments during the first a) $63.28 $ 86.25
five years of plan participation are b) $13.28 $ 41.25
projected to be from $2,500,000 to $4,999,999.)
(if the total purchase payments during the first a) $61.09 $ 79.52
five years of plan participation are b) $11.09 $ 34.52
projected to equal or exceed $5,000,000.)
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. The purpose of the above Table is to assist the Owner in
understanding the various costs and expenses that an Owner will incur,
directly or indirectly. The Table reflects expenses of the Variable Account as
well as of the Eligible Investments. For additional information, see "Charges
and Deductions" in this Prospectus and see the Prospectuses for Cova
Series Trust, Neuberger & Berman Advisers Management Trust and General American
Capital Company.
2. The Withdrawal Charge is imposed on withdrawals of Contract Values
attributable to purchase payments within five (5) years after receipt and
is equal to 5% of the purchase payment withdrawn. After the five year
period, withdrawals attributable to such purchase payments are not
subject to the Withdrawal Charge.
After the first Contract Year, a withdrawal of up to ten percent (10%) of
aggregate purchase payments made within the five years preceding the request
for withdrawal may be made free from the Withdrawal Charge on a noncumulative
basis once each Contract Year if the Contract Value prior to the withdrawal
exceeds $5,000. The 10% free withdrawal has been factored into the Examples
above.
3. As indicated elsewhere herein, the Contracts described in this
Prospectus are for use by individuals in connection with fringe benefit plans.
The amounts of the Contract Maintenance Charge, Mortality and Expense Risk
Premium and Administrative Expense Charge vary depending upon the total
projected purchase payments anticipated during the first five years of plan
participation in the Contracts. Where the total purchase payments during the
first five years of plan participation are initially projected to be from
$50,000 to $999,999, the amounts of the Mortality and Expense Risk Premium and
Contract Maintenance Charge may be reduced where purchase payments
subsequently exceed, or are projected to exceed, these amounts. (See "Charges
and Deductions.")
4. No Transfer Fee will be assessed for a transfer made in connection
with the Dollar Cost Averaging program providing for the automatic transfer of
funds from the Cova Series Trust Money Market Sub-Account, the Neuberger &
Berman Advisers Management Trust Liquid Asset Sub-Account or the General
American Capital Company Money Market Fund to any other Sub-Account(s). (See
"Charges and Deductions - Deduction for Transfer Fee" and "Purchase Payments
and Contract Value - Dollar Cost Averaging.")
5. Since August 20, 1990, the Company has been reimbursing the investment
portfolios of Cova Series Trust for all operating expenses (exclusive of the
management fees) in excess of approximately .10%.
Absent the expense reimbursement and management fee waiver, the percentages
shown for total annual portfolio expenses (on an annualized basis) for the
year or period ended December 31, 1996 would have been .71% for the Quality
Income Portfolio, 1.04% for the High Yield Portfolio, .74% for the Money
Market Portfolio, .67% for the Stock Index Portfolio, 1.02% for the VKAC
Growth and Income Portfolio, 1.70% for the Select Equity Portfolio, 2.68% for
the Small Cap Stock Portfolio, 3.80% for the International Equity Portfolio,
1.52% for the Quality Bond Portfolio, 1.23% for the Large Cap Stock Portfolio
and 2.05% for the Bond Debenture Portfolio.
6. The assumed average contract size is $30,000.
7. Premium taxes are not reflected. Premium taxes may apply. See
"Charges and Deductions - Deduction for Premium Taxes" on Page __.
8. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE COMPANY
Cova Financial Services Life Insurance Company (the "Company") was originally
incorporated on August 17, 1981 as Assurance Life Company, a Missouri
corporation and changed its name to Xerox Financial Services Life Insurance
Company in 1985. On June 1, 1995, a wholly-owned subsidiary of General
American Life Insurance Company ("General American") purchased the Company
from Xerox Financial Services, Inc. On June 1, 1995, the Company changed its
name to Cova Financial Services Life Insurance Company. The Company presently
is licensed to do business in the District of Columbia and all states except
California, Maine, New Hampshire, New York and Vermont.
General American is a St. Louis-based mutual company with more than $250
billion of life insurance in force and approximately $19 billion in assets.
It provides life and health insurance, retirement plans, and related financial
services to individuals and groups.
THE VARIABLE ACCOUNT
Cova Variable Annuity Account Four (the "Variable Account") is a
segregated asset account established under Missouri law pursuant to a
resolution of the Board of Directors of the Company adopted on February 24,
1987. The Company has caused the Variable Account to be registered
with the Securities and Exchange Commission as a unit investment trust
pursuant to the provisions of the Investment Company Act of 1940.
The assets of the Variable Account are the property of the Company. However,
the assets of the Variable Account, equal to the reserves and other contract
liabilities with respect to the Variable Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard
to other income, gains or losses of the Company. The Company's obligations
arising under the Contracts are general obligations.
The Variable Account meets the definition of a "separate account" under the
federal securities laws.
The Variable Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one Portfolio of Cova Series Trust, Neuberger &
Berman Advisers Management Trust or General American Capital Company.
There is no assurance that the investment objective of any of the Portfolios
will be met. Owners bear the complete investment risk for purchase payments
allocated to a Sub-Account. Contract Values will fluctuate in accordance with
the investment performance of the Sub-Account(s) to which purchase payments
are allocated, and in accordance with the imposition of the fees and charges
assessed under the Contracts.
COVA SERIES TRUST
Cova Series Trust ("Trust") has been established to act as one of the funding
vehicles for the Contracts offered. Prior to May 1, 1996, the Trust was known
as Van Kampen Merritt Series Trust. The Trust is managed by Cova Investment
Advisory Corporation (the "Adviser"). Prior to May 1, 1996, Van Kampen
American Capital Investment Advisory Corp. was the investment adviser of the
Trust. The Adviser is an Illinois corporation which was incorporated on August
31, 1993 under the name Oakbrook Investment Advisory Corporation and which is
registered with the Securities and Exchange Commission as an investment
adviser under the Investment Advisers Act of 1940. The Adviser is affiliated
with the Company. The Adviser has retained sub-advisers to make
investment decisions and place orders for the individual portfolios.
The Trust is an open-end management investment company. While a brief summary
of the investment objectives of the available Portfolios is set forth below,
more comprehensive information, including a discussion of potential risks, is
found in the current prospectus for the Trust which is included with this
Prospectus. A PROSPECTIVE INVESTOR SHOULD READ THE PROSPECTUS FOR THE TRUST
CAREFULLY BEFORE INVESTING. Additional Prospectuses and the Statement of
Additional Information can be obtained by calling or writing the Company's
Home Office.
Van Kampen American Capital Investment Advisory Corp. is the Sub-Adviser for
the following Portfolios:
MONEY MARKET PORTFOLIO. The investment objective of this Portfolio is to
provide high current income consistent with the preservation of capital and
liquidity through investment in a broad range of money market instruments that
will mature within 12 months of the date of purchase. An investment in the
Money Market Portfolio is neither insured nor guaranteed by the U.S.
government.
QUALITY INCOME PORTFOLIO. The investment objective of this Portfolio is to
seek a high level of current income, consistent with safety of principal, by
investing in obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities or in various investment grade debt obligations
including mortgage pass-through certificates and collateralized mortgage
obligations.
STOCK INDEX PORTFOLIO. The investment objective of this Portfolio is to
achieve investment results that approximate the aggregate price and yield
performance of the Standard & Poor's 500 Composite Stock Price Index by
investing in common stocks, stock index futures contracts and options on stock
indexes and stock index futures contracts, and certain short-term fixed income
securities such as cash reserves.
"Standard & Poor's", "S&P", "S&P 500", "Standard & Poor's 500" and "500" are
trademarks of McGraw-Hill Inc. and have been licensed for use by the Company.
The Stock Index Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation ("S&P") and S&P makes no representation
regarding the advisability of investing in the Stock Index Portfolio. (See the
Cova Series Trust Prospectus for more information concerning the Stock
Index Portfolio.)
HIGH YIELD PORTFOLIO. The investment objective of this Portfolio is the
maximization of total investment return through income and capital
appreciation. The Portfolio will pursue its investment objective by investing
in a portfolio substantially consisting of medium and lower grade domestic
corporate debt securities. The Portfolio may also invest up to 35% of its
assets in foreign government and foreign corporate debt securities of similar
quality. The Portfolio may also, from time to time, invest in cash or cash
equivalents due to market conditions or for other defensive purposes. Lower
grade corporate debt securities are commonly known as "junk bonds" and involve
a significant degree of risk. (See "Investment Objectives - High Yield
Portfolio" in the Trust Prospectus.) Prior to investing in this Portfolio,
purchasers are cautioned to read the section entitled "Special Risks of High
Yield Investing" in the Trust Prospectus. As disclosed in the Fee Table, the
management fee for the High Yield Portfolio is .75% of 1% of the average daily
net assets of the Portfolio. This fee is higher than fees paid by many other
investment companies with similar investment objectives. (See "Management of
the Trust - The Investment Adviser" in the Trust Prospectus.)
VKAC GROWTH AND INCOME PORTFOLIO. The investment objective of the VKAC Growth
and Income Portfolio is to seek long-term growth of both capital and income
by investing in a portfolio of common stocks which are considered by the
Investment Advisor to have potential for capital appreciation and dividend
growth. The Portfolio may also invest up to 35% of its assets in common
stocks which are considered by the Investment Adviser to have potential for
capital appreciation but which are issued by foreign corporations.
J.P. Morgan Investment Management Inc. is the Sub-Adviser for the following
Portfolios:
QUALITY BOND PORTFOLIO. The investment objective of the Quality Bond
Portfolio is to provide a high total return consistent with moderate risk of
capital and maintenance of liquidity. Although the net asset value of the
Portfolio will fluctuate, the Portfolio attempts to preserve the value of
its investments to the extent consistent with its objective.
SMALL CAP STOCK PORTFOLIO. The investment objective of the Small Cap
Portfolio is to provide a high total return from a portfolio of equity
securities of small companies. The Portfolio will invest primarily in the
common stock of small U.S. companies. The small company holdings of the
Portfolio will be primarily securities included in the Russell 2000 Index.
LARGE CAP STOCK PORTFOLIO. The investment objective of the Large Cap Stock
Portfolio is long-term growth of capital and income. The equity holdings of
the Portfolio will be primarily stocks of large- and medium-sized companies.
The Portfolio will be highly diversified and hold approximately 300 stocks.
SELECT EQUITY PORTFOLIO. The investment objective of the Select Equity
Portfolio is long-term growth of capital and income. The equity holdings of
the Portfolio will be primarily stocks of large- and medium-sized companies.
The Portfolio will typically hold between 60 and 90 stocks.
INTERNATIONAL EQUITY PORTFOLIO. The investment objective of the International
Equity Portfolio is to provide a high total return from a portfolio of equity
securities of foreign corporations. The equity holdings of the Portfolio will
be primarily stocks of established companies based in developed countries
outside the United States. The Portfolio is actively managed and seeks to
outperform the Morgan Stanley Capital International Europe, Australia and Far
East Index.
LORD, ABBETT & CO.: is the Sub-Adviser for the following Portfolios:
BOND DEBENTURE PORTFOLIO. The investment objective of the Bond Debenture
Portfolio is high current income and the opportunity for capital appreciation
to produce a high total return through a professionally-managed portfolio
consisting primarily of convertible and discount debt securities, many of
which are lower-rated. These lower-rated debt securities entail greater risks
than investment in higher-rated debt securities. Investors should carefully
consider these risks set forth under "Risk Factors - Special Risks of High
Yield Investing" in the Cova Series Trust prospectus before investing.
MID-CAP VALUE PORTFOLIO. The investment objective of the Mid-Cap Value
Portfolio is to seek capital appreciation through investments, primarily in
equity securities, which are believed to be undervalued in the marketplace.
Under normal circumstances, at least 65% of the Portfolio's total assets will
consist of investments in companies whose outstanding equity securities have
an aggregate market value of between $200 million and $5 billion.
LARGE CAP RESEARCH PORTFOLIO. The investment objective of the Large Cap
Research Portfolio is growth of capital and growth of income consistent with
reasonable risk. Production of current income is a secondary consideration.
Under normal circumstances, at least 65% of the Portfolio's total assets will
consist of investments in companies whose outstanding equity securities have
an aggregate market value of $1.5 billion and above.
DEVELOPING GROWTH PORTFOLIO. The investment objective of the Developing
Growth Portfolio is long-term growth of capital through a diversified and
actively-managed portfolio consisting of developing growth companies, many
of which are traded over-the-counter. The Portfolio will invest primarily in
the common stocks of companies with long-range growth potential, particularly
smaller companies considered to be in the developing growth phase. Volatile
price movement can be expected.
LORD ABBETT GROWTH AND INCOME PORTFOLIO. The investment objective of the Lord
Abbett Growth and Income Portfolio is long-term growth of capital and income
without excessive fluctuation in market value. The Portfolio will normally
invest in common stocks (including securities convertible into common stocks)
of large, seasoned companies in sound financial condition, which common stocks
are expected to show above-average price appreciation.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Each Portfolio of Neuberger & Berman Advisers Management Trust ("AMT")
invests all of its net investable assets in its corresponding series (each a
"Series") of Advisers Managers Trust ("Managers Trust"), an open-end
management investment company. All Series of Managers Trust are managed by
Neuberger & Berman Management Incorporated ("N&B Management"). Each Series
invests in securities in accordance with an investment objective, policies,
and limitations identical to those of its corresponding Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of
securities. For more information regarding this structure, see the prospectus
for AMT. There are eight Portfolios, four of which are available in connection
with the Contracts. In that the investment objective of each Portfolio matches
that of its corresponding Series, the following information is presented in
terms of the applicable Series of Managers Trust. The investment objectives of
each Series are as follows:
AMT LIQUID ASSET INVESTMENTS. The investment objective of AMT Liquid
Asset Investments is to provide the highest current income consistent with
safety and liquidity. The Series invests in high quality U.S.
dollar-denominated money market instruments of U.S. and foreign issuers,
including governments and their agencies and instrumentalities, banks and
other financial institutions, and corporations, and may invest in repurchase
agreements with respect to these instruments. An investment in the Liquid
Asset Portfolio is neither insured nor guaranteed by the U.S. Government.
AMT GROWTH INVESTMENTS. AMT Growth Investments seeks capital
appreciation without regard to income by investing in securities believed to
have the maximum potential for long-term capital appreciation. It does not
seek to invest in securities that pay dividends or interest, and any such
income is incidental. The Series expects to be almost fully invested in common
stocks, often of companies that may be temporarily out of favor in the market.
AMT LIMITED MATURITY BOND INVESTMENTS. The investment objective of AMT
Limited Maturity Bond Investments is to provide the highest current income
consistent with low risk to principal and liquidity; and secondarily, total
return. The Series invests in a diversified portfolio of fixed and variable
rate debt securities and seeks to increase income and preserve or enhance
total return by actively managing average portfolio maturity in light of
market conditions and trends. These are short-to-intermediate term debt
securities. The Series' dollar-weighted average portfolio maturity may range
up to five years.
AMT BALANCED INVESTMENTS. The investment objective of AMT Balanced
Investments is long-term capital growth and reasonable current income without
undue risk to principal. The investment adviser anticipates that the Series'
investments will normally be managed so that approximately 60% of the Series'
total assets will be invested in common stocks and the remaining assets will
be invested in debt securities. However, depending on the investment
adviser's view regarding current market trends, the common stock portion of
the Series' investments may be adjusted downward to as low as 50% or upward to
as high as 70%. At least 25% of the Series' assets will be invested in
fixed-income senior securities.
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company ("GACC") is a mutual fund with multiple
portfolios. Each portfolio is managed by Conning Asset Management Company,
formerly known as General American Investment Management Company.
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET PORTFOLIO. The investment
objective of the General American Capital Company Money Market Portfolio is
the highest level of current income which is consistent with the preservation
of capital and maintenance of liquidity.
Additional Portfolios and/or Eligible Investments may be made available to
Owners at the request of the trustee(s) of a participating fringe benefit plan
or plans.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote the
shares of the Trust, AMT and GACC held in the Variable Account at special
meetings of the shareholders in accordance with instructions received from
persons having the voting interest in the Variable Account. The Company will
vote shares for which it has not received instructions, as well as shares
attributable to it, in the same proportion as it votes shares for which it has
received instructions. The Trust, AMT and GACC do not hold regular meetings of
shareholders.
The number of shares which a person has a right to vote will be determined as
of a date to be chosen by the Company prior to a shareholder meeting of the
Trust, AMT or GACC. Voting instructions will be solicited by written
communication prior to the meeting.
Shares of AMT are issued and redeemed in connection with investment in and
payments under variable contracts issued through separate accounts of life
companies which may or may not be affiliated with AMT. Shares of the Balanced
Portfolio are also offered directly to qualified pension and retirement plans
("Qualified Plans"). Shares of AMT are purchased and redeemed at net asset
value. The Board of Trustees of AMT and Managers Trust have undertaken to
monitor AMT and Managers Trust, respectively, for the existence of any
material irreconcilable conflict between the interests of the variable
contract owners of the life companies and to determine what action, if any,
should be taken in the event of a conflict. The life companies and N&B
Management are responsible for reporting any potential or existing conflicts
to the Boards. Due to differences of tax treatment and other considerations,
the interests of various variable contract owners participating in AMT and
Managers Trust and the interests of Qualified Plans investing in AMT and
Managers Trust may conflict. If such a conflict were to occur, one or more
life company separate accounts or Qualified Plans might withdraw their
investment in the Trust. This might force Managers Trust to sell portfolios
securities at disadvantageous prices.
SUBSTITUTION OF SECURITIES
If the shares of the Trust, AMT or GACC (or any Portfolio within the Trust,
AMT, GACC, or any other Eligible Investment), are no longer available for
investment by the Variable Account or, if in the judgment of the Company,
further investment in the shares should become inappropriate in view of
the purpose of the Contracts, the Company, with the approval of the
trustee(s) of the participating fringe benefit plan(s), may substitute
shares of another Eligible Investment (or Portfolio) for shares already
purchased or to be purchased in the future by purchase payments under
the Contracts. No substitution of securities may take place without
prior approval of the Securities and Exchange Commission and under the
requirements it may impose.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Contract Values and the Variable
Account. These charges and deductions are:
DEDUCTION FOR WITHDRAWAL CHARGE (SALES LOAD)
If all or a portion of the Contract Value (see "Withdrawals") is withdrawn,
a Withdrawal Charge (sales load) will be calculated at the time of each
withdrawal and will be deducted from the Contract Value. This Charge
reimburses the Company for expenses incurred in connection with the promotion,
sale and distribution of the Contracts. The Withdrawal Charge is imposed
on withdrawals of Contract Values attributable to purchase payments within
five (5) years after receipt and is equal to 5% of the purchase payment
withdrawn. The Withdrawal Charge does not apply to a withdrawal equal
to: (a) purchase payments held for at least five (5) years not previously
withdrawn; (b) gain; and (c) amounts for which the waiver of Withdrawal
Charge applies. (See "Withdrawals.") After the five year period,
withdrawals attributable to such purchase payments are not subject to
the Withdrawal Charge.
In the event of the death of the Owner, the Company will waive the Withdrawal
Charge with respect to any death benefits paid.
For a partial withdrawal, the Withdrawal Charge will be deducted from the
remaining Withdrawal Value, if sufficient; otherwise it will be deducted from
the amount withdrawn. For example, based on the 5% Withdrawal Charge, if the
Owner requests $100 and the Withdrawal Charge is $5, the total withdrawal is
in the amount of $105 (i.e., the Withdrawal Charge is 5% of the amount
requested and is deducted from the Withdrawal Value remaining after the Owner
is paid the amount requested). The amount deducted from the Contract Value
will be determined by canceling Accumulation Units from each applicable
Sub-Account in the ratio that the value of each Sub-Account bears to the total
Contract Value. The Owner must specify in writing in advance which Units are
to be canceled from each Sub-Account if other than the above method of
cancellation is desired.
Commissions will be paid out of the Company's general investment account to
broker-dealers who sell the Contracts. Broker-dealers will be paid commissions
and other compensation up to an amount equal to 5.75% of purchase payments. In
addition, under certain circumstances, the Company may pay certain
broker-dealers a persistency bonus which will take into account, among other
factors, the length of time purchase payments have been held under the
Contract and Contract Values. To the extent that the Withdrawal Charge is
insufficient to cover the actual cost of distribution, the Company may use any
of its corporate assets, including potential profit which may arise from the
Mortality and Expense Risk Premium (see below), to provide for any difference.
WAIVER OF WITHDRAWAL CHARGE
After the first Contract Year, a withdrawal of up to ten percent (10%) of
aggregate purchase payments made within the five years preceding the
request for withdrawal may be made free from the Withdrawal Charge on a
noncumulative basis once each Contract Year if the Contract Value prior to
the withdrawal exceeds $5,000.
DEDUCTION FOR MORTALITY AND EXPENSE RISK PREMIUM
The Company deducts on each Valuation Date, both prior to the Annuity Date and
during the Annuity Period, a Mortality and Expense Risk Premium, the amount of
which will vary depending upon the total projected purchase payments to be
made over the first five years of plan participation in the Contracts as shown
in the schedule below. The Mortality and Expense Risk Premium is equal, on an
annual basis, to the following percentages of the daily net asset value of the
Variable Account:
Mortality and Expense Risk Premium Breakpoints:
<TABLE>
<CAPTION>
<S> <C>
Purchase Payment Charge
- --------------------------------- -------
$50,000 - $999,999 1.25%
$1,000,000 - $2,499,999 1.05%
$2,500,000 - $4,999,999 .95%
$5,000,000 - and over .80%
</TABLE>
The amount of the Mortality and Expense Risk Premium to be assessed by the
Company may be established at a rate below .80% in certain circumstances where
total purchase payments above $5,000,000 are projected.
The amount of the Mortality and Expense Risk Premium that is attributable to
each type of risk is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Total Mortality Expense
Charge Component Component
- ----------------- --------- ----------
1.25% 0.80% 0.45%
1.05% 0.75% 0.30%
0.95% 0.70% 0.25%
0.80% 0.65% 0.15%
</TABLE>
The amount of the Mortality and Expense Risk Premium is based on projected
purchase payments over the first five years of plan participation in the
Contracts and is determined at the time the employer establishes the program
making the Contracts available to its employees in connection with the fringe
benefit plan(s). In the event that actual purchase payments do not meet the
projected amount over the first five years of plan participation in the
Contracts, the amount of the Mortality and Expense Risk Premium will not be
increased. It will remain at the same level at which it was initially
established. Where projected purchase payments are from $50,000 - $999,999,
the amount of the Mortality and Expense Risk Premium may be subsequently
reduced under certain circumstances. (See "Reduction of Charges.")
The mortality risks assumed by the Company arise from its contractual
obligation to make annuity payments after the Annuity Date for the life of the
Annuitant and to waive the Withdrawal Charge in the event of the death of the
Owner. The expense risk assumed by the Company is that all actual expenses
involved in administering the Contracts, including Contract maintenance costs,
administrative costs, mailing costs, data processing costs, legal fees,
accounting fees, filing fees and the costs of other services may exceed the
amount recovered from the Contract Maintenance Charge and the Administrative
Expense Charge.
If the Mortality and Expense Risk Premium is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge.
The Mortality and Expense Risk Premium is guaranteed by the Company and cannot
be increased.
DEDUCTION FOR ADMINISTRATIVE EXPENSE CHARGE
The Company deducts on each Valuation Date, both prior to the Annuity Date and
during the Annuity Period, an Administrative Expense Charge, the amount of
which will vary depending upon the total projected purchase payments to be
made over the first five years of plan participation in the Contracts as shown
in the schedule below. The Administrative Expense Charge is equal, on an
annual basis, to the following percentages of the daily net asset value of the
Variable Account:
Administrative Expense Charge Breakpoints:
<TABLE>
<CAPTION>
<S> <C>
Purchase Payment Charge
- -------------------------------------- -------
$50,000 - $2,499,999 .15%
$2,500,000 - $4,999,999 .10%
$5,000,000 - and over .05%
</TABLE>
The amount of the Administrative Expense Charge to be assessed by the Company
may be established at a rate below .05% in certain circumstances where total
purchase payments above $5,000,000 are projected.
The amount of the Administrative Expense Charge is based on projected purchase
payments over the first five years of plan participation in the Contracts and
is determined at the time the employer establishes the program making the
Contracts available to its employees in connection with the fringe benefit
plan(s).
This charge, together with the Contract Maintenance Charge (see below), is to
reimburse the Company for the expenses it incurs in the establishment and
maintenance of the Contracts and the Variable Account. These expenses include
but are not limited to: preparation of the Contracts, confirmations, annual
reports and statements, maintenance of Owner records, maintenance of Variable
Account records, administrative personnel costs, mailing costs, data
processing costs, legal fees, accounting fees, filing fees, the costs of other
services necessary for Owner servicing and all accounting, valuation,
regulatory and reporting requirements. Since this charge is an asset-based
charge, the amount of the charge attributable to a particular Contract may
have no relationship to the administrative costs actually incurred by that
Contract. The Company does not intend to profit from this charge. This charge
will be reduced to the extent that the amount of this charge is in excess of
that necessary to reimburse the Company for its administrative expenses.
Should this charge prove to be insufficient, the Company will not increase
this charge and will incur the loss.
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE
The Company deducts an annual Contract Maintenance Charge from the Contract
Value on each Contract Anniversary. The amount of this charge will vary
depending upon the total projected purchase payments to be made over the first
five years of plan participation in the Contracts as shown in the schedule
below. (In South Carolina, the Contract Maintenance Charge is the lesser of
the applicable charge each year as set forth below or 2% of the Contract Value
on the Contract Anniversary.)
Contract Maintenance Charge Breakpoints:
<TABLE>
<CAPTION>
<S> <C>
Purchase Payment Charge
- -------------------------------------- -------
$50,000 - $999,999 $ 30
$1,000,000 - $2,499,999 $ 20
$2,500,000 - $4,999,999 $ 15
$5,000,000 - and over $ 10
</TABLE>
The amount of the Contract Maintenance Charge is based on projected purchase
payments over the first five years of plan participation in the Contracts and
is determined at the time the employer establishes the program making the
Contracts available to its employees in connection with the fringe benefit
plan(s). Where projected purchase payments are from $50,000 - $999,999, the
amount of the Contract Maintenance Charge may be subsequently reduced under
certain circumstances. (See "Reduction of Charges.")
This charge is to reimburse the Company for its administrative expenses (see
above). This charge is deducted by canceling Accumulation Units from each
applicable Sub-Account in the ratio that the value of each Sub-Account bears
to the total Contract Value. When the Contract is withdrawn for its full
Withdrawal Value, on other than the Contract Anniversary, the Contract
Maintenance Charge will be deducted at the time of withdrawal. If the Annuity
Date is not a Contract Anniversary, a pro rata portion of the annual Contract
Maintenance Charge will be deducted. After the Annuity Date, the Contract
Maintenance Charge will be collected on a monthly basis and will result in a
reduction of each Annuity Payment. The Company has set this charge at a level
so that, when considered in conjunction with the Administrative Expense Charge
(see above), it will not make a profit from the charges assessed for
administration.
REDUCTION OF CHARGES
Where purchase payments during the first five years of plan participation in
the Contracts are initially projected to be less than $1,000,000, the Company
will reduce the amount of the Mortality and Expense Risk Premium and Contract
Maintenance Charge where purchase payments subsequently exceed or are
projected to exceed $1,000,000 as described below. The Mortality and Expense
Risk Premium will be reduced from 1.25% to 1.05% and the Contract Maintenance
Charge will be reduced from $30 to $20 if, within two years from the date
purchase payments are initially received in connection with the fringe benefit
plan, the purchase payments received or the combination of purchase payments
received and purchase payments projected for the balance of the original five
year period equal or exceed $1,000,000. The reductions in charges will take
effect on the earlier of the following dates (a) within seven days following
the date on which purchase payments are received such as to cause the
aggregate purchase payments received in connection with the fringe benefit
plan to equal or exceed $1,000,000 or (b) within seven days following the date
on which the Company receives a request from the employer to review projected
purchase payments based on additional projected employees and/or purchase
payments being added which will cause the aggregate purchase payments made in
connection with the fringe benefit plan to become equal to or exceed
$1,000,000 during the first five years of plan participation in the Contracts.
DEDUCTION FOR PREMIUM TAXES
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values. Some states assess premium taxes
at the time purchase payments are made; others assess premium taxes at the
time annuity payments begin. The Company currently intends to advance any
premium taxes due at the time purchase payments are made and then deduct
premium taxes from an Owner's Contract Value at the time annuity payments
begin or upon withdrawal if the Company is unable to obtain a refund. The
Company, however, reserves the right to deduct premium taxes when incurred.
Premium taxes generally range from 0% to 4%.
DEDUCTION FOR INCOME TAXES
While the Company is not currently maintaining a provision for federal income
taxes with respect to the Variable Account, the Company has reserved the right
to establish a provision for income taxes if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Variable Account. The Company will deduct for any income taxes incurred by it
as a result of the operation of the Variable Account whether or not there was
a provision for taxes and whether or not it was sufficient. The Company will
deduct any withholding taxes required by applicable law.
DEDUCTION FOR TRUST AND AMT EXPENSES
There are other deductions from and expenses paid out of the assets of the
Trust and AMT which are described in the accompanying Trust and AMT
Prospectuses.
DEDUCTION FOR TRANSFER FEE
Prior to the Annuity Date, an Owner may transfer all or part of a Sub-Account
without the imposition of any fee or charge if there have been no more than 12
transfers made in the Contract Year. If more than 12 transfers have been made
in the Contract Year, the Company will deduct a transfer fee which will be
equal to $25 per transfer or, if less, 2% of the amount transferred. If the
Owner is participating in the Dollar Cost Averaging program providing for the
automatic transfer of funds from the Cova Series Trust Money Market
Sub-Account, the Neuberger & Berman Advisers Management Trust Liquid Asset
Sub-Account or the General American Capital Company Money Market Sub-Account
to any other Sub-Account(s), such transfers are not currently taken
into account in determining any transfer fee. (See "Purchase Payments and
Contract Value - Dollar Cost Averaging.")
THE CONTRACTS
OWNERSHIP
The Owner has all rights and may receive all benefits under the Contract.
Prior to the Annuity Date, the Owner is the person designated in the
Application, unless changed. On and after the Annuity Date, the Annuitant is
the Owner. Upon the death of the Annuitant, the Beneficiary is the Owner.
The Owner may change the Owner at any time. A change of Owner will
automatically revoke any prior designation of Owner. A request for change must
be: (1) made in writing; and (2) received at the Company. The change will
become effective as of the date the written request is signed. A new
designation of Owner will not apply to any payment made or action taken by the
Company prior to the time it was received.
ANNUITANT
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated in the Application, unless changed.
ASSIGNMENT
The Owner may, at any time during his or her lifetime, assign his or her
rights under the Contract. The Company will not be bound by any assignment
until written notice is received by the Company. The Company is not
responsible for the validity of any assignment. The Company will not be liable
as to any payment or other settlement made by the Company before receipt of
the assignment.
If the Contract is issued pursuant to a Qualified Plan, it may not be
assigned, pledged or otherwise transferred except as may be allowed under
applicable law.
BENEFICIARY
The Beneficiary is named in the Application, unless changed, and is entitled
to receive the benefits to be paid at the death of the Owner.
Unless the Owner provides otherwise, the Death Benefit will be paid in equal
shares or all to the survivor as follows:
(1) to the primary Beneficiaries who survive the Owner's death; or if
there are none,
(2) to the contingent Beneficiaries who survive the Owner's death; or
if there are none,
(3) to the estate of the Owner.
CHANGE OF BENEFICIARY
Subject to the rights of any irrevocable Beneficiary, the Owner may change the
primary Beneficiary or contingent Beneficiary. A change may be made by filing
a written request with the Company. The change will take effect as of the date
the notice is signed. The Company will not be liable for any payment made or
action taken before it records the change.
TRANSFERS OF CONTRACT VALUES DURING THE ACCUMULATION PERIOD
Prior to the Annuity Date, an Owner may transfer all or part of a Sub-Account
without the imposition of any fee or charge if there have been no more than 12
transfers made in the Contract Year. If more than 12 transfers have been made
in the Contract Year, the Company will deduct a transfer fee. If the Owner is
participating in the Dollar Cost Averaging program providing for the automatic
transfer of funds from the Van Kampen Merritt Series Trust Money Market
Sub-Account, the Neuberger & Berman Advisers Management Trust Liquid Asset
Sub-Account or the General American Capital Company Money Market Sub-Account
to any other Sub-Account(s), such transfers are not taken into account in
determining any transfer fee. (See "Charges and Deductions - Deduction
for Transfer Fee" and "Purchase Payments and Contract Value - Dollar Cost
Averaging.") After the Annuity Date, the Owner may make a transfer once in
each Contract Year. (See "Transfers During the Annuity Period.") All transfers
are subject to the following:
(1) the deduction of any transfer fee that may be imposed ($25 per
transfer or, if less, 2% of the amount transferred, for transfers if there
have been more than 12 transfers in the Contract Year). The transfer fee will
be deducted from the Sub-Account from which the transfer is made. However, if
the entire interest in the Sub-Account is being transferred, the transfer fee
will be deducted from the amount which is transferred.
(2) The minimum amount which may be transferred is the lesser of (i)
$1000; or (ii) the Owner's entire interest in the Sub-Account.
(3) Transfers will be effected during the Valuation Period next
following receipt by the Company of a written transfer request (or by
telephone, if authorized) containing all required information. However, no
transfer may be made effective within seven (7) calendar days of the Annuity
Date.
(4) Any transfer direction must clearly specify the amount which is to
be transferred and the Sub-Accounts which are to be affected.
(5) The Company reserves the right at any time and without prior notice
to any party including, but not limited to, the circumstances described in the
"Suspension of Payments or Transfers" provision below, to terminate, suspend
or modify the transfer privileges described above.
An Owner may elect to make transfers by telephone. If there are joint owners,
unless the Company is informed to the contrary, instructions will be accepted
from either one of the joint owners. The Company will use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If it does not, the Company may be liable for any losses due to unauthorized
or fraudulent instructions. The Company tape records all telephone
instructions.
DEATH OF THE ANNUITANT
Upon death of the Annuitant prior to the Annuity Date, the Owner must
designate a new Annuitant. If no designation is made within 30 days of the
death of the Annuitant, the Owner will become the Annuitant. An Owner which is
a non-natural person may not change the Annuitant. If the Owner is a
non-natural person, then the death of the Annuitant will be treated as the
death of the Owner. (See "Death of the Owner" below.) Upon death of the
Annuitant after the Annuity Date, the Death Benefit, if any, will be as
specified in the Annuity Option elected.
DEATH OF THE OWNER
Upon death of the Owner prior to the Annuity Date, the Death Benefit will be
paid to the Beneficiary designated by the Owner. The Death Benefit will be the
greater of:
1. the purchase payments, less any withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value.
The Death Benefit will be determined and paid as of the Valuation Period next
following the date of receipt by the Company of both due proof of death and an
election for a single sum payment or election under an Annuity Option as of
the date of death.
If a single sum payment is requested, the proceeds will be paid within seven
(7) days of receipt of proof of death and the election. Payment under an
Annuity Option may only be elected during the sixty-day period beginning with
the date of receipt of proof of death or a single sum payment will be made to
the Beneficiary at the end of the sixty-day period.
The entire Death Benefit must be paid within five (5) years of the date of
death unless:
(i) the Beneficiary is the spouse of the Owner, in which event the
Beneficiary will become the Owner and may elect that the Contract remain in
effect; or
(ii) the Beneficiary is not the spouse of the Owner, in which event the
Beneficiary may elect to have the Death Benefit payable under an Annuity
Option over the lifetime of the Beneficiary beginning within one year of the
date of death.
The Contract can be held by joint owners. Any joint owner must be the spouse
of the other owner. Upon the death of either joint owner, the surviving spouse
will be the designated Beneficiary. Any other Beneficiary designated in the
Application or as subsequently changed will be treated as a contingent
Beneficiary unless otherwise indicated.
ANNUITY PROVISIONS
ANNUITY DATE AND ANNUITY OPTION
The Owner selects an Annuity Date and Annuity Option at the time of
application. The Annuity Date must always be the first day of a calendar month
and must be at least one month after the Issue Date. The Annuity Date may not
be later than the first day of the first calendar month following the
Annuitant's 85th birthday. If no Annuity Option is elected, Option 2 with 10
years guaranteed payments will automatically be applied.
CHANGE IN ANNUITY DATE AND ANNUITY OPTION
Prior to the Annuity Date, the Owner may, upon at least thirty (30) days prior
written notice to the Company, change the Annuity Date. The Annuity Date must
always be the first day of a calendar month and must be at least one month
after the Issue Date. The Annuity Date may not be later than the first day of
the calendar month following the Annuitant's 85th birthday.
The Owner may, upon at least thirty (30) days prior written notice to the
Company, at any time prior to the Annuity Date, change the Annuity Option.
ALLOCATION OF ANNUITY PAYMENTS
At least seven (7) days, but not more than thirty (30) days, prior to the
Annuity Date the Owner may elect that:
(1) all of the Contract Value be used so that the Annuity will be paid
as a Fixed Annuity; or
(2) that a portion of the Contract Value be used to pay the Annuity as a
Fixed Annuity and a portion of the Contract Value be used to pay the Annuity
as a Variable Annuity.
However, if an election has not been made at least seven (7) days prior to the
Annuity Date, the Annuity will be paid as a Variable Annuity in accordance
with the allocation of the Contract Value on the Annuity Date.
TRANSFERS DURING THE ANNUITY PERIOD
During the Annuity Period, the Owner may transfer, by written request,
Contract Values among the Sub-Accounts subject to the following:
1. the Owner may make a transfer once each Contract Year between
Sub-Accounts of the Variable Account.
2. the Owner may, at any time, make a transfer from one or more
Sub-Accounts so that all or a portion of the Annuity Payments are paid as a
Fixed Annuity. The Owner may not make a transfer of amounts to be paid as
Fixed Annuity Payments to the Variable Account.
ANNUITY OPTIONS
The actual dollar amount of Variable Annuity Payments is dependent upon (i)
the Contract Value on the Annuity Date, (ii) the annuity table specified in
the Contract, (iii) the Annuity Option selected, and (iv) the investment
performance of the Sub-Account selected. The annuity tables contained in the
Contract are based on a three percent (3%) assumed investment rate. If the
actual net investment rate exceeds three percent (3%), payments will increase.
Conversely, if the actual rate is less than three percent (3%), Annuity
Payments will decrease. If a higher assumed investment rate was used, the
initial payment would be higher, but the actual net investment rate would have
to be higher in order for Annuity Payments to increase.
Variable Annuity Payments will reflect the investment performance of the
Variable Account in accordance with the allocation of the Contract Value to
the Sub-Account on the Annuity Date. Thereafter, allocations may not be
changed except as provided in "Transfers During the Annuity Period", above.
The total dollar amount of each Annuity Payment is the sum of the Variable
Annuity Payment and the Fixed Annuity Payment reduced by the Contract
Maintenance Charge (except in Oregon where the Fixed Annuity Payment is not
reduced by the Contract Maintenance Charge).
The amount payable under the Contract may be made under one of the following
options or any other option acceptable to the Company (except that if the
Contract is purchased pursuant to a pension plan, Option 3 must be selected):
OPTION 1. LIFE ANNUITY.
An annuity payable monthly during the lifetime of the Annuitant. Payments
cease at the death of the Annuitant.
OPTION 2. LIFE ANNUITY WITH 5, 10 OR 20 YEARS GUARANTEED.
An annuity payable monthly during the lifetime of the Annuitant with the
guarantee that, if at the death of the Annuitant, payments have been made for
less than the selected guaranteed period, payments will be continued to the
Beneficiary for the remainder of the guaranteed period. If the Beneficiary
does not desire payments to continue for the remainder of the guaranteed
period, he or she may elect to have the present value of the guaranteed
Annuity Payments remaining, as of the date notice of death is received by the
Company, commuted at the assumed investment rate.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY.
An annuity payable monthly during the joint lifetime of the Annuitant and
another person. At the death of either Payee, Annuity Payments will continue
to be made to the survivor Payee. The survivor's Annuity Payments will be
equal to 100%, 66 2/3% or 50% of the amount payable during the joint lifetime,
as chosen.
If no Annuity Option is elected, Option 2 with a 10 year guaranteed period
will automatically be applied (except that with respect to Contracts purchased
pursuant to pension plans, Option 3 is the only available option).
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity Payments will be paid as monthly installments. However, if the net
amount available to apply under any Annuity Option is less than $5,000
($2,000, if the Contract is issued in Massachusetts or Texas), the Company has
the right to pay the amount in one single lump sum. In addition, if the
payments provided for would be or become less than $100 ($20, if the Contract
is issued in Texas), the Company has the right to change the frequency of
payments to provide payments of at least $100 ($20, if the Contract is issued
in Texas).
PURCHASE PAYMENTS AND CONTRACT VALUE
PURCHASE PAYMENTS
The Contracts are purchased under a flexible purchase payment plan. The
initial purchase payment is due on the Issue Date. Prior Company approval must
be obtained for purchase payment(s) in excess of $1,000,000. The Company
reserves the right to decline any Application or purchase payment. As
indicated elsewhere, the Contracts described herein will be sold to fringe
benefit plans. The minimum size for a plan is $50,000 of aggregate purchase
payments anticipated over the first five Contract Years (including any
rollovers). In the event that a plan participant chooses to make purchase
payments through payroll deduction, such participant must make payments of at
least $1,200 per year. Additional purchase payments by participants (other
than participants utilizing payroll deduction) must be at least $2,000.
ALLOCATION OF PURCHASE PAYMENTS
Purchase payments are allocated to the appropriate Sub-Account(s) within the
Variable Account as elected by the Owner. Unless elected otherwise by the
Owner, subsequent purchase payments are allocated in the same manner as the
initial purchase payment. Under certain circumstances, however, purchase
payments which have been designated by prospective purchasers to be allocated
to Sub-Accounts other than the Van Kampen Merritt Series Trust Money Market
Sub-Account or the Neuberger & Berman Advisers Management Trust Liquid Asset
Sub-Account, may initially be allocated to the Cova Series Trust Money Market
Sub-Account, the Neuberger & Berman Advisers Management Trust Liquid Asset
Sub-Account or the General American Capital Company Money Market Sub-Account,
as elected by the Owner. (See "Highlights.") For each Sub-Account, purchase
payments are converted into Accumulation Units. The number of Accumulation
Units credited to the Contract is determined by dividing the purchase payment
allocated to the Sub-Account by the value of the Accumulation Unit for the
Sub-Account.
If the Application for a Contract is in good order, the Company will apply the
purchase payment to the Variable Account and credit the Contract with
Accumulation Units within two business days of receipt. If the Application for
a Contract is not in good order, the Company will attempt to get it in good
order or the Company will return the Application and the purchase payment
within five (5) business days. The Company will not retain a purchase payment
for more than five (5) business days while processing an incomplete
Application unless it has been so authorized by the purchaser.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer each month amounts from the Cova Series Trust Money
Market Sub-Account, the Neuberger & Berman Advisers Management Trust Liquid
Asset Sub-Account or the General American Capital Company Money Market
Sub-Account to any other Sub-Account(s). By allocating amounts on a
regularly scheduled basis as opposed to allocating the total amount at one
particular time, an Owner may be less susceptible to the impact of market
fluctuations. The minimum amount which may be transferred is $500. An Owner
must have a minimum of $6,000 of Contract Value in the Cova Series Trust
Money Market Sub-Account, the Neuberger & Berman Advisers Management
Trust Liquid Asset Sub-Account or the General American Capital Company Money
Market Sub-Account, or the amount required to complete the Owner's designated
program, in order to participate in the Dollar Cost Averaging program.
All Dollar Cost Averaging transfers will be made on the 15th of each month (or
the next Valuation Date if the 15th of the month is not a Valuation Date). If
the Owner is participating in the Dollar Cost Averaging program, such
transfers are not taken into account in determining any transfer fee. Under
certain circumstances, there may be restrictions with respect to an Owner's
ability to participate in the Dollar Cost Averaging program.
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 the Company. The Contracts are offered on a
continuous basis.
CONTRACT VALUE
The value of the Contract is the sum of the Owner's interest in the
Sub-Accounts of the Variable Account. The value of each Sub-Account is
determined by multiplying the number of Accumulation Units attributable to the
Sub-Account by the value of an Accumulation Unit for the Sub-Account.
ACCUMULATION UNIT
Purchase payments allocated to the Variable Account and amounts transferred to
or within the Variable Account are converted into Accumulation Units. This is
done by dividing each purchase payment by the value of an Accumulation Unit
for the Valuation Period during which the purchase payment is allocated to the
Variable Account or the transfer is made. The Accumulation Unit value for each
Sub-Account was arbitrarily set initially at $10. The Accumulation Unit value
for any later Valuation Period is determined by subtracting (b) from (a) and
dividing the result by (c) where:
(a) is the net result of
(1) the assets of the Sub-Account; i.e., the aggregate value of the
underlying Eligible Investment shares held at the end of such
Valuation Period, plus or minus
(2) the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation
of the Sub-Account;
(b) is the cumulative unpaid charge for the Mortality and Expense Risk
Premium and for the Administrative Expense Charge (see "Charges and
Deductions" above); and
(c) is the number of Accumulation Units outstanding at the end of such
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period. In that the Mortality and Expense Risk Premium and the
Administrative Expense Charge vary in amount depending on the size of the
projected purchase payments, Sub-Accounts may have more than one Accumulation
Unit Value at any one time.
WITHDRAWALS
While the Contract is in force and before the Annuity Date, the Company will,
upon written request to the Company by the Owner, allow the withdrawal of all
or a portion of the Contract for its Withdrawal Value. Withdrawals will result
in the cancellation of Accumulation Units from each applicable Sub-Account of
the Variable Account in the ratio that the Sub-Account Value bears to the
total Contract Value. The Owner must specify in writing in advance which units
are to be canceled if other than the above-mentioned method of cancellation is
desired. The Company will pay the amount of any withdrawal within seven (7)
days of receipt of a request, unless the "Suspension of Payments or Transfers"
provision is in effect (see "Suspension of Payments or Transfers" below).
The Withdrawal Value is the Contract Value for the Valuation Period next
following the Valuation Period during which a written request for withdrawal
is received at the Company reduced by the sum of:
(a) any applicable taxes not previously deducted;
(b) any applicable Contract Maintenance Charge; and
(c) any applicable Withdrawal Charge.
Each partial withdrawal must be for an amount which is not less than $1,000
or, if smaller, the remaining value in the Sub-Account. The remaining value in
each Sub-Account from which a partial withdrawal is requested must be at least
$1,000 after the partial withdrawal is completed.
A partial withdrawal will be made as follows:
(1) from the portion of the Contract Value equal to the amount of
purchase payments held under the Contract for at least 5 years less prior
withdrawals of these purchase payments; then
(2) from the Contract Value attributable to an amount, if any, in excess
of purchase payments made less prior withdrawals of purchase payments; then
(3) from the Contract Value for which the Waiver of Withdrawal Charge,
if any, applies (see "Waiver of Withdrawal Charge" on Page 13); then
(4) from the portion of the Contract Value equal to the amount of
purchase payments held under the Contract for less than 5 years less prior
withdrawals of these purchase payments.
Certain tax withdrawal penalties and restrictions may apply to withdrawals
from Contracts. (See "Tax Status.") For Contracts purchased in connection
with 403(b) plans, 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 591/2; (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 rollovers or transfers between
certain Qualified Plans. Owners should consult their own tax counsel or other
tax adviser regarding any distributions.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Company reserves the right 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 securities held
in the Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets; or
(4) during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of Owners; provided that applicable
rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions described in (2) and (3) exist.
PERFORMANCE INFORMATION
MONEY MARKET AND LIQUID ASSET PORTFOLIOS
From time to time, the Company may advertise the "yield" and "effective yield"
of the Money Market and Liquid Asset Sub-Accounts managed by Van Kampen
American Capital Investment Advisory Corporation, Neuberger & Berman Management
Incorporated and Conning Asset Management Company (collectively referred to as
the "Money Market Sub-Accounts")of the Variable Account. Both yield figures
are based on historical earnings and are not intended to indicate future
performance. The "yield" of the Money Market Sub-Accounts refers to the
income generated by Contract Values in the Money Market Sub-Accounts over a
seven-day period (which period will be stated in the advertisement). This
income is "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the Contract Values in the
Money Market Sub-Accounts. The "effective yield" is calculated similarly.
However, when annualized, the income earned by Contract Values is assumed to
be reinvested. This results in the "effective yield" being slightly higher
than the "yield" because of the compounding effect of the assumed
reinvestment. The yield figure will reflect the deduction of any asset-based
charges and any applicable Contract Maintenance Charge, but will not
reflect the deduction of any Withdrawal Charge. The deduction of any
Withdrawal Charge would reduce any percentage increase or make greater any
percentage decrease.
OTHER PORTFOLIOS
From time to time, the Company may advertise performance data for the various
other Portfolios under the Contract. Such data will show the percentage change
in the value of an Accumulation Unit based on the performance of an investment
medium 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. This percentage figure will reflect the
deduction of any asset-based charges and any applicable Contract Maintenance
Charges under the Contracts, but will not reflect the deduction of any
Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease. In that the
Mortality and Expense Risk Premium and the Administrative Expense Charge vary
in amount depending on the size of the projected purchase payments, there may
be different Accumulation Unit Values within the same Sub-Account. (See
"Purchase Payments and Contract Value - Accumulation Unit.")
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of any applicable Contract Maintenance Charges and
Withdrawal Charges, as well as any asset-based charges.
The Company may make available yield information with respect to some of the
Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Contract Maintenance Charge as well as any
asset-based charges.
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 Portfolios
against established market indices such as the Standard & Poor's 500 Stock
Index, the Dow Jones Industrial Average or other management investment
companies which have investment objectives similar to the Portfolio being
compared. The Standard & Poor's 500 Stock 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 Stock Index and the Dow Jones
Industrial Average assume quarterly reinvestment of dividends.
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts issued through
the Variable Account with the unit values of variable annuities issued through
the separate accounts of 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 Miami and published by Financial
Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges.
Morningstar rates a variable annuity subaccount against its peers with similar
investment objectives. Morningstar does not rate any subaccount that has less
than three years of performance data.
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 IN THIS PROSPECTUS 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 equal 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 Contracts described in this Prospectus are for use by individuals in
connection with fringe benefit plans including Qualified Plans. (See
"Qualified Plans.") Owners, Annuitants and Beneficiaries are cautioned
that benefits under such plans may be subject to the terms and conditions
of the related plan and trust documents regardless of the terms and conditions
of the Contracts issued pursuant to such plan and trust documents. In
addition, there may be certain tax consequences under Section 72 of the
Code in connection with the purchase of a Contract by an Owner in connection
with such plans. Purchasers should obtain competent tax advice prior to
purchasing a Contract issued under a plan.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable 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 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 Contracts
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 Contracts. 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 Portfolios of the Trust, General American
Capital Company, and AMT underlying the Contracts will be managed by the
investment advisers 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 Variable Account will cause the Owner to be treated as the
owner of the assets of the Variable 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
Variable 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 Owner
being retroactively determined to be the owner of the assets of the Variable
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. 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, investment earnings on premiums for the
Contracts will be taxed currently to the Contract 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 Contracts 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 held by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at
the rate of 10% from non-periodic payments. However, the Owner, in most cases,
may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for federal income tax. The 20% withholding
requirement generally does not apply to: a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary, or distributions for a specified period of 10 years or
more; or (b) distributions which are required minimum distributions; or (c)
the portion of the distribution that is not includible in gross income (i.e.,
the return of after-tax contributions). Participants should consult their own
tax counsel or other tax advisor 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 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.
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.")
QUALIFIED PLANS
The Contracts offered by this Prospectus 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. Contract 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
in this Prospectus. 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.")
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.) Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
B. CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit corporate employers 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 Corporate 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 (Corporate
Pension and Profit-Sharing Plans) and 403(b) (Tax-Sheltered Annuities). To the
extent amounts are not includible in gross income because they have been
rolled over to an Individual Retirement Annuity or to an 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 and (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 Annuity (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
reemployed for at least 60 days.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year, following the year in which the employee attains
age 70 1/2 or retires, whichever is later. 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. In addition,
distributions in excess of $150,000 per year may be subject to an additional
15% excise tax unless an exemption applies.
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 rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company have been included in the
Statement of Additional Information. No financial statements for the Variable
Account have been included herein because, as of the date of this Prospectus,
the Variable Account had no assets.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Variable Account,
the Distributor or the Company is a party.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
ITEM PAGE
Company............................................................. 3
Experts............................................................. 3
Legal Opinions...................................................... 3
Distributor......................................................... 3
Yield Calculation for Money Market and Liquid Asset Sub-Accounts.... 3
Performance Information............................................. 4
Annuity Provisions.................................................. 5
Variable Annuity............................................... 5
Fixed Annuity.................................................. 6
Annuity Unit................................................... 6
Net Investment Factor.......................................... 6
Mortality and Expense Guarantee................................ 6
Financial Statements................................................ 6
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACTS
issued by
COVA VARIABLE ANNUITY ACCOUNT FOUR
AND
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1997, FOR THE INDIVIDUAL
FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS WHICH ARE
REFERRED TO 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-LIFE.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1997.
TABLE OF CONTENTS
PAGE
Company................................................................ 3
Experts................................................................ 3
Legal Opinions......................................................... 3
Distributor............................................................ 3
Yield Calculation for Money Market and Liquid Asset Sub-Accounts....... 3
Performance Information................................................ 4
Annuity Provisions..................................................... 5
Variable Annuity..................................................... 5
Fixed Annuity........................................................ 6
Annuity Unit......................................................... 6
Net Investment Factor................................................ 6
Mortality and Expense Guarantee...................................... 6
Financial Statements................................................... 6
COMPANY
Information regarding the Company and its ownership is contained in the
Prospectus.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996
and 1995 and the related consolidated statements of income, shareholder's
equity and cash flows for the year ended December 31, 1996 and the periods
from June 1, 1995 through December 31, 1995 and January 1, 1995 through
May 31, 1995 and for the year ended December 31, 1994, included herein,
have been included herein in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
Cova Life Sales Company acts as the distributor. Cova Life Sales Company is an
affiliate of the Company. The offering is on a continuous basis.
YIELD CALCULATION FOR MONEY MARKET
AND LIQUID ASSET SUB-ACCOUNTS
The Money Market and Liquid Asset Sub-Accounts of the Variable Account will
calculate their current yields based upon the seven days ended on the date of
calculation. As of December 31, 1996, the Liquid Asset Sub-Account and the
Money Market Sub-Accounts had not yet commenced operations.
The current yields of the Money Market and Liquid Asset Sub-Accounts are
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing Contract Owner account having a balance
of one Accumulation Unit of the Sub-Account at the beginning of the period,
subtracting the Mortality and Expense Risk Premium, the Administrative Expense
Charge and the Contract Maintenance Charge, dividing the difference by the
value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7).
The Money Market and Liquid Asset Sub-Accounts compute their effective
compound yields according to the method prescribed by the Securities and
Exchange Commission. The effective yields reflect the reinvestment of net
income earned daily on Money Market or Liquid Asset Sub-Account assets.
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not.
The yields quoted should not be considered a representation of the yield of
the Money Market or Liquid Asset Sub-Accounts in the future since the yield is
not fixed. Actual yields will depend not only on the type, quality and
maturities of the investments held by the Money Market or Liquid Asset
Sub-Accounts and changes in the interest rates on such investments, but also
on changes in the Money Market or Liquid Asset Sub-Accounts' expenses during
the period. Information may be useful in reviewing the performance of the Money
Market and Liquid Asset Sub-Accounts and for providing a basis for comparison
with other investment alternatives. However, the Money Market and Liquid
Asset Sub-Accounts' yields fluctuate, unlike bank deposits or other
investments which typically pay a fixed yield for a stated period of time.
The yield information does not reflect the deduction of any applicable
Withdrawal Charge at the time of the surrender. (See "Charges and Deductions
- - Deduction for Withdrawal Charge (Sales Load)" in the Prospectus.)
PERFORMANCE INFORMATION
From time to time, the Company may advertise performance data as described in
the Prospectus. 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 Mortality and Expense Risk Premium, an
Administrative Expense Charge, the investment advisory fee for the underlying
Portfolio being advertised and any applicable Contract Maintenance Charges and
Withdrawal Charges.
The hypothetical value of a Contract purchased for the time periods described
in the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Withdrawal Charge to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P(1 + T) = ERV
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.
In addition to total return data, the Company may include yield information in
its advertisements. For each Sub-Account (other than the Money Market and
Liquid Asset Sub-Accounts) for which the Company will advertise yield, it will
show a yield quotation based on a 30 day (or one month) period ended on the
date of the most recent balance sheet of the Variable Account included in the
registration statement, computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price per
Unit on the last day of the period, according to the following formula:
6
Yield = 2 [ ( a-b + 1 ) - 1]
---
cd
<TABLE>
<CAPTION>
<S> <C> <C>
Where:
a = Net investment income earned during the period by the
Trust or AMT attributable to shares owned by the
Sub-Account.
b = Expenses accrued for the period (net of
reimbursements).
c = The average daily number of Accumulation Units
outstanding during the period.
d = The maximum offering price per Accumulation Unit on the
last day of the period.
</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
any Withdrawal Charge.
Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of the Sub-Account's total return or
yield for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return or yield may be in any
future period.
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 Sub-Account(s) of the Variable Account.
At the Annuity Date, the Contract Value in each Sub-Account will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. If, as of the Annuity Date, the then current Annuity
Option rates applicable to this class of Contracts provide a first Annuity
Payment greater than guaranteed under the same Annuity Option under this
Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the
value of an Annuity Unit as of the Annuity Date. This establishes the number
of Annuity Units for each monthly payment. The number of Annuity Units
remains fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month preceding the month for which
the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments reduced by the applicable Contract
Maintenance Charge.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period which
are guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Variable Account. If elected by the Owner at
least 7 days, but not more than 30 days, prior to the Annuity Date, a portion
of the Contract Value will be used to determine the Fixed Annuity monthly
payment. The first monthly Annuity Payment will be based upon the Annuity
Option elected and the appropriate Annuity Option Table.
ANNUITY UNIT
The value of an Annuity Unit for each Sub-Account was arbitrarily set
initially at $10. This was done when the first Eligible Investment shares
were purchased. The Sub-Account Annuity Unit value at the end of any
subsequent Valuation Period is determined by multiplying the Sub-Account
Annuity Unit value for the immediately preceding Valuation Period by the
product of (a) the Net Investment Factor for the day for which the
Annuity Unit Value is being calculated, and (b) 0.999919.
NET INVESTMENT FACTOR
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by dividing:
(a) the Accumulation Unit value as of the close of the current
Valuation Period, by
(b) the Accumulation Unit value as of the close of the immediately
preceding Valuation Period.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment after
the first Annuity Payment will not be affected by variations in mortality or
expense experience.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
COVA FINANCIAL SERVICES
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(With Independent Auditors' Report Thereon)
<PAGE>
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) as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders equity and cash flows for the
year ended December 31, 1996 and the period from June 1, 1995 to December 31,
1995 (Successor periods), and from January 1, 1995 to May 31, 1995, and for
the year ended December 31, 1994 (Predecessor periods). 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,
1996 and 1995, and the results of their operations and their cash flows for
the Successor periods, in conformity with generally accepted accounting
principles. Also, in our opinion, the aforementioned Predecessor consolidated
financial statements present fairly, in all material respects, the results of
their operations and their cash flows for the Predecessor periods presented,
in conformity with generally accepted accounting principles.
St. Louis, Missouri
March 7, 1997
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets
December 31, 1996 and 1995
(In thousands of dollars)
<TABLE>
<CAPTION>
ASSETS 1996
1995
<S> <C> <C>
Investments:
Debt securities available for sale at market
(cost of $952,817 in 1996 and $583,868 in 1995) $ 949,611 $ 594,556
Mortgage loans (net) 244,103 77,472
Policy loans 22,336 19,125
Short-term investments at cost which approximates
market 4,404 7,859
---------- ----------
Total investments 1,220,454 699,012
---------- ----------
Cash and cash equivalents - interest bearing 38,322 59,312
Cash - non-interest bearing 5,501 2,944
Receivable from sale of securities 1,064 --
Accrued investment income 15,011 9,116
Deferred policy acquisition costs 49,833 14,468
Present value of future profits 46,389 38,155
Goodwill 20,849 23,358
Federal and state income taxes recoverable 1,461 397
Deferred tax benefits (net) 13,537 13,556
Receivable from OakRe 1,973,813 2,391,982
Reinsurance receivables 3,504 8,891
Other assets 2,205 2,425
Separate account assets 641,871 410,449
---------- ----------
Total Assets $4,033,814 $3,674,065
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
(continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Balance Sheets (Continued)
December 31, 1996 and 1995
(In thousands of dollars)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS EQUITY 1996 1995
<S> <C> <C>
Policyholder deposits $3,135,325 $3,033,763
Future policy benefits 32,342 28,071
Payable on purchase of securities 15,978 5,327
Accounts payable and other liabilities 19,764 20,143
Future purchase price payable to OakRe 16,051 23,967
Guaranty fund assessments 12,409 14,259
Separate account liabilities 626,901 410,449
----------- -----------
Total Liabilities 3,858,770 3,535,979
----------- -----------
Shareholders equity:
Common stock, $2 par value. (Authorized
5,000,000 shares; issued and outstanding
2,899,446 shares in 1996 and 1995) 5,799 5,799
Additional paid-in capital 166,491 129,586
Retained earnings 3,538 (63)
Net unrealized appreciation/(depreciation)
on securities, net of tax (784) 2,764
----------- -----------
Total Shareholders Equity 175,044 138,086
----------- -----------
Total Liabilities and Shareholders Equity $4,033,814 $3,674,065
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Income
Years ended December 31, 1996, 1995, and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Revenues:
Premiums $ 3,154 $ 921 $ 1,097 $ 2,787
Net investment income 70,629 24,188 92,486 277,616
Net realized gain (loss) on sale of investments 472 1,324 (12,414) (101,361)
Separate Account charges 7,205 2,957 1,818 3,992
Other income 1,320 725 1,037 2,713
------- -------- ---------- -----------
Total revenues 82,780 30,115 84,024 185,747
------- -------- ---------- -----------
Benefits and expenses:
Interest on policyholder deposits 50,100 17,706 97,867 249,905
Current and future policy benefits 5,130 1,785 1,830 5,259
Operating and other expenses 14,573 7,126 12,777 24,479
Amortization of purchased intangible assets 2,332 3,030 -- --
Amortization of deferred acquisition costs 4,389 100 11,157 125,357
------- -------- ---------- -----------
Total Benefits and Expenses 76,524 29,747 123,631 405,000
------- -------- ---------- -----------
Income/(loss) before income taxes 6,256 368 (39,607) (219,253)
------- -------- ---------- -----------
Income Taxes:
Current 1,740 1,011 (16,404) (46,882)
Deferred 915 (580) 6,340 (30,118)
------- -------- ---------- -----------
Total income tax expense/(benefit) 2,655 431 (10,064) (77,000)
------- -------- ---------- -----------
Net Income/(Loss) $ 3,601 $ (63) $ (29,543) $(142,253))
======= ======== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholders Equity
Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Common stock ($2 par value common stock;
Authorized 5,000,000 shares; issued and
outstanding 2,899,446 in 1996, 1995 and 1994
Balance at beg. of period) $ 5,799 $ 5,799 $ 5,799 $ 5,632
Par value of additional shares issued -- -- -- 167
--------- --------- ----------
Balance at end of period 5,799 5,799 5,799 5,799
--------- --------- --------- ----------
Additional paid-in capital:
Balance at beginning of period 129,586 137,749 136,534 120,763
Adjustment to reflect purchase acquisition
indicated in note 2 -- (52,163) -- --
Capital contribution 36,905 44,000 1,215 15,771
--------- --------- --------- ----------
Balance at end of period 166,491 129,586 137,749 136,534
--------- --------- --------- ----------
Retained earnings/(deficit):
Balance at beginning of period (63) (36,441) 1,506 143,759
Adjustment to reflect purchase acquisition -- 36,441 -- --
indicated in note 2
Net income/(loss) 3,601 (63) (29,543) (142,253)
Dividends to shareholder -- -- (8,404) --
--------- --------- --------- ----------
Balance at end of period $ 3,538 $ (63) $(36,441) $ 1,506
--------- --------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Shareholders Equity (Continued)
Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Net unrealized appreciation/(depreciation)of securities:
Balance at beginning of period 2,764 $(28,837) $ (65,228) $ (321)
Adjustment to reflect purchase acquisition
indicated in note 2 -- 28,837 -- --
Implementation of change in accounting for
marketable debt and equity securities,
net of effects of deferred taxes
of $18,375 and deferred acquisition
costs of $42,955 -- -- -- 34,125
Change in unrealized appreciation/(depreciation)
of debt and equity securities (13,915) 10,724 178,010 (357,502)
Change in deferred Federal income taxes 1,910 (1,489) (18,458) 53,324
Change in deferred acquisition costs attributable
to unrealized losses/(gains) 1,561 -- (123,161) 205,146
Change in present value of future profits
attributable to unrealized losses/(gains) 6,896 (6,471) -- --
--------- --------- ----------
Balance at end of period (784) 2,764 (28,837) (65,228)
--------- --------- ---------- ----------
Total Shareholders Equity $175,044 $138,086 $ 78,270 $ 78,611
========= ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Interest and dividend receipts $ 68,622 $ 18,744 $ 131,439 $ 309,856
Premiums received 3,154 921 1,097 2,787
Insurance and annuity benefit payments (3,729) (2,799) (1,809) (3,755)
Operating disbursements (17,158) (10,480) (9,689) (26,023)
Taxes on income refunded (paid) (3,016) 60 48,987 17,032
Commissions and acquisition costs paid (36,735) (17,456) (23,872) (26,454)
Other 937 529 1,120 836
---------- ---------- ----------- ------------
Net cash provided by/(used in) operating
activities 12,075 (10,481) 147,273 274,279
---------- ---------- ----------- ------------
Cash flows from investing activities:
Cash used for the purchase of investment
securities (715,274) (875,994) (575,891) (1,935,353)
Proceeds from investment securities sold and
matured 262,083 253,814 2,885,053 3,040,474
Other (14,166) 179 (8,557) (8,185)
---------- ---------- ----------- ------------
Net cash provided by/(used in) investing
activities $(467,357) $(622,003) $2,300,605 $ 1,096,936
---------- ---------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
<PAGE>
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, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Policyholder deposits $ 446,784 $ 132,752 $ 130,660 $ 274,960
Transfers from/(to) OakRe 574,010 628,481 (3,048,531) --
Transfer to Separate Accounts (119,592) (37,946) (4,835) (33,548)
Return of policyholder deposits (491,025) (436,271) (290,586) (608,868)
Dividends to Shareholder -- -- (8,404) --
Capital contributions received 20,000 44,000 1,215 15,938
---------- ---------- ------------- -----------
Net cash provided by/(used in) financing
activities 430,177 331,016 (3,220,481) (351,518)
---------- ---------- ------------- -----------
Increase/(decrease) in cash and cash
equivalents (25,105) (301,468) (772,603) 1,019,697
Cash and cash equivalents at beginning of
period 62,256 363,724 1,136,327 116,630
CFLIC contributed cash (Note 9) 6,672 -- -- --
Cash and cash equivalents at end of period $ 43,823 $ 62,256 $ 363,724 $1,136,327
========== ========== ============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Consolidated Statements of Cash Flows, Continued
(In thousands of dollars)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Reconciliation of net income/(loss)to net cash
provided by operating activities:
Net income/(loss) $ 3,601 $ (63) $(29,543) $(142,253)
Adjustments to reconcile net income/(loss)
to net cash provided by operating activities:
Increase/(decrease) in future policy
benefits (net of reinsurance) 680 (1,013) 11 1,494
Increase/(decrease) in payables and accrued
liabilities 2,900 (392) (10,645) 3,830
Decrease/(increase) in accrued investment
income (4,778) (7,904) 32,010 21,393
Amortization of intangible assets 6,721 3,831 11,309 125,722
Amortization and accretion of securities
premiums and discounts 2,751 307 2,410 3,635
Recapture commissions paid to OakRe (4,483) (4,777) -- --
Net realized losson sale of
investments (472) (1,324) 12,414 101,361
Interest accumulated on policyholder
deposits 50,100 17,706 97,867 249,905
Investment expenses paid 1,151 642 2,373 7,296
Decrease/(Increase)in guaranty assessments -- (104) 5,070 (935)
Increase/(decrease) in current and deferred
Federal income taxes (351) 491 38,923 (59,263)
Separate account net loss (2,008) 1 1 2
Deferral of acquisition costs (34,803) (14,568) (13,354) (30,024)
Other (8,934) (3,314) (1,573) (7,884)
--------- ----------
Net cash provided by operating activities $ 12,075 $(10,481) $147,273 $ 274,279
========= ========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) NATURE OF BUSINESS AND ORGANIZATION
NATURE OF THE BUSINESS
Cova Financial Services Life Insurance Company (CFSLIC) and subsidiaries (the
Company), formerly Xerox Financial Services Life Insurance Company (the
Predecessor), market and service single premium deferred annuities, immediate
annuities, variable annuities, 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. Life insurance policies provide policy
beneficiaries with mortality benefits amounting to a multiple, which declines
with age, of the original premium.
Under the deferred 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.
Although the Company markets its products through numerous distributors,
including regional brokerage firms, national brokerage firms and banks,
approximately 66%, 59% and 57% of the companies sales have been through two
specific brokerage firms, A.G. Edwards & Sons, Incorporated. and Edward Jones
& Company in 1996, 1995 and 1994, respectively.
ORGANIZATION
Prior to June 1, 1995 Xerox Financial Services, Inc. (XFSI) owned 100% or
2,899,446 shares of the Predecessor. XFSI is a wholly owned subsidiary of
Xerox Corporation.
On June 1, 1995 XFSI sold 100% of the issued and outstanding shares of the
Predecessor to Cova Corporation, a subsidiary of General American Life
Insurance Company (GALIC), a Missouri domiciled life insurance company, in
exchange for approximately $91.4 million in cash and $22.7 million in future
payables. In conjunction with this Agreement, the Predecessor also entered
into a financing reinsurance transaction that caused OakRe Life Insurance
Company(OakRe),a subsidiary of the Predecessor, to assume the economic
benefits and risks of the existing single premium deferred annuity deposits
(SPDAs) of Cova Financial Services Life Insurance Company, which had an
aggregate carrying value at June 1, 1995 of $2,982.0 million. In exchange,
the Predecessor transferred specifically identified assets to OakRe with a
market value at June 1, 1995 of $2,986.0 million. Ownership of OakRe was
retained by XFSI subsequent to the sale of the Predecessor 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 in four years) by 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.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 ending December 31, 1996 and 1995.
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 Cova Financial Life Insurance Company 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) CHANGE IN ACCOUNTING
Upon closing the sale, the Company restated its financial statements in
accordance with "push down purchase accounting", which allocates the net
purchase price for the Company and its then sole subsidiary FCLIC of $91.4
million according to the fair values of the acquired assets and liabilities,
including the estimated present value of future profits. These allocated
values were dependent upon policies in force and market conditions at the time
of closing, however, these allocations were not finalized until 1996. The
table below summarizes the final allocation of purchase price:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> June 1, 1995
--------------
Assets acquired:
Debt securities $ 32.4
Policy loans 18.3
Cash and cash equivalents 363.7
Present value of future profits 47.4
Goodwill 20.5
Deferred tax benefit 24.9
Receivable from OakRe 2,969.0
Other assets 5.9
Separate account assets 332.7
--------------
3,814.8
--------------
Liabilities assumed:
Policyholder deposits 3,299.2
Future policy benefits 27.2
Future purchase price payable 22.7
Deferred Federal income taxes 12.6
Other liabilities 29.0
Separate account liabilities 332.7
--------------
3,723.4
--------------
Adjusted purchase price $ 91.4
==============
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
In addition to revaluing all material tangible assets and liabilities to their
respective estimated market values as of the closing date of the sale, the
Company also recorded in its financial statements the excess of cost over fair
value of net assets acquired (goodwill) as well as the present value of future
profits to be derived from the purchased and reinsured business. These amounts
were determined in accordance with the purchase method of accounting. This new
basis of accounting resulted in an increase in shareholders equity of $13.1
million in 1995 reflecting the application of push down purchase accounting.
The Companys consolidated financial statements subsequent to June 1, 1995
reflect this new basis of accounting.
All amounts for periods ended before June 1, 1995 are labeled Predecessor and
are based on predecessor historical costs. The periods ending on or after
such date are labeled The Company, and are based on the new cost basis of the
Company or fair values at June 1, 1995 and subsequent results of operations.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITIES
Investments in all debt securities and those equity 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 and equity
securities at December 31, 1996 and 1995 were classified as
available-for-sale. Securities available-for-sale are carried at market value,
with unrealized holding gains and losses reported as a separate component of
stockholders equity, net of deferred effects of income tax and related effects
on deferred acquisition costs.
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 market 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.
MORTGAGE LOANS AND OTHER INVESTED ASSETS
Mortgage loans and policy loans are carried at their unpaid principal
balances. Real estate is carried at cost less accumulated depreciation.
Other invested assets are carried at lower of cost or market.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
Real estate reserves are established when declines in collateral values,
estimated in light of current economic conditions and calculated in conformity
with Statement of Financial Accounting Standards No. 114, Accounting by
Creditors for Impairment of a Loan (SFAS 114), indicate a likelihood of loss.
Prior to 1995, the Company evaluated its real estate-related assets (including
accrued interest) by estimating the probabilities of loss utilizing various
projections that included several factors relating to the borrower, property,
term of the loan, tenant composition, rental rates, other supply and demand
factors and overall economic conditions. Generally, at that time, the reserve
was based upon the excess of the loan amount over the estimated future cash
flows from the loan.
In 1995, the Company adopted Statement of Financial Accounting Standards No.
118, Accounting by Creditors for Impairment of a Loan -- Income Recognition
and Disclosures (SFAS 118). SFAS 118 amends SFAS 114, providing clarification
of income recognition issues and requiring additional disclosures relating to
impaired loans. The adoption of SFAS 114 and 118 had no effect on the
Companys financial position or results of operations at or for the period
ended December 31, 1995. The Company had no impaired loans, but did establish
a valuation allowance for potential losses on mortgage loans of $88 thousand
at December 31, 1996.
Prior to 1995, when an investment supported by real estate collateral was
deemed "in-substance" foreclosed, the investment was reclassified as real
estate and recorded at its fair value, with any reduction in carrying value
recorded as a realized loss. The change in this valuation was recorded as a
realized capital gain or loss in the statements of income.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency and demand deposits in banks, US
Treasury bills, money market accounts, and commercial paper with maturities
under 90 days, which are not otherwise restricted.
SEPARATE ACCOUNT ASSETS
The separate account investments are 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 accounts and assesses withdrawal charges in the event of
early withdrawals. Separate accounts assets are valued at fair market 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. As
of December 31, 1996, approximately $15.0 million of capital investments
remained within the separate accounts.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 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 is not
recognized currently in income but as an offset to the unrealized gains and
losses reflected as a separate component of equity.
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.
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
(In Thousands) 1996 12/31/95 5/31/95 1994
<S> <C> <C> <C> <C>
Deferred policy acquisition costs,
beginning of period $14,468 $ 92,398 $ 213,362 $ 146,504
Effects of push down purchase
accounting -- (92,398) -- --
Commissions and expenses deferred 34,803 14,568 13,354 30,025
Amortization (4,389) (100) (11,157) (125,357)
Deferred policy acquisition costs
attributable to unrealized gains/(losses) 1,561 -- (123,161) 162,190
Effects on deferred policy acquisition
costs of CFLIC consolidation 3,390 -- -- --
--------
Deferred policy acquistion costs,
end of period $49,833 $ 14,468 $ 92,398 $ 213,362
======== ========= ========== ==========
</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
As of June 1, 1995 the Company established an intangible asset which
represents the present value of future profits 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 pre-tax
rate of 18% (12% net after tax).
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 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 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 the inception. The amortization and
adjustments resulting from unrealized gains and losses is not recognized
currently in income but as an offset to the unrealized gains and losses
reflected as a separate component of 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, are projected
to be 6.8%, 5.8%, 4.6%, 4.5% and 4.7% for the years ended December 31, 1997
through 2001, 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 re-allocation of the net purchased intangible asset between
present value of future profits, goodwill and the future payable. This final
allocation and the resulting impact on inception to date amortization was
recorded, in its entirety, in 1996. No restatement of the June 1, 1995
opening Balance Sheet was made.
The components of present value of future profits are below. The effects on
present value of future profits of the consolidation of CFLIC (see note 9)
with the Company are presented separately.
<TABLE>
<CAPTION>
The Company
7 Months
Ended
(In Thousands) 1996
12/31/95
<S> <C> <C>
Present value of future profits - beginning of period 38,155 46,709
Interest added 3,274 1,941
Net amortization (3,747) (4,024)
Present value of future profits attributable to unrealized gains 6,896 (6,471)
Adjustment due to revised push down purchase accounting 698 --
Effects on present value of future profits of CFLIC consolidation 1,113 --
Present value of future profits - end of period $46,389 $38,155
</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 3.5%
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%.
(continued)
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The Company has recorded a future payable that represents the present value
ofthe anticipated future commission payments payable to OakRe over the
remaining life of the financial reinsurance agreement discounted at an
estimated borrowing rate of 6.5%. 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 year 2000.
The components of this future payable are below. The effects on the future
payable of the consolidation of CFLIC (see note 9) with the Company are
presented separately.
<TABLE>
<CAPTION>
The Company
7 Months
Ended
(In Thousands) 1996 12/31/95
<S> <C> <C>
Future payable - beginning of period $23,967 $27,797
Interest added 943 947
Payments to OakRe (4,483) (4,777)
Adjustment due to revised push down purchase accounting (5,059) --
Effects on future payable of CFLIC consolidation 683 --
--------
Future payable - end of period $16,051 $23,967
======== ========
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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 below. The effects on goodwill of the
consolidation of CFLIC (see note 9) with the Company are presented separately.
<TABLE>
<CAPTION>
<S> <C> <C>
(In Thousands) The Company
--------------------
7 Months Ended
1996 12/31/95
----------------
Goodwill - beginning of period $ 23,358 $ 24,060
Amortization (916) (702)
Adjustment due to revised push down purchase accounting
(3,626) --
Effects on goodwill of CFLIC consolidation 2,033 --
--------------------
Goodwill - end of period $ 20,849 $ 23,358
</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
Companys assets as of the date of acquisition were revalued based upon fair
market values. The principal effect of the election was to establish a tax
asset on the tax-basis balance sheet of approximately $35.3 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 Companys
policyholder deposits as of December 31, 1996 was 5.77%.
FUTURE POLICY BENEFITS
Reserves are held for future annuity 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.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
PREMIUM REVENUE
The Company recognizes premium revenue at the time of issue on annuity
policies that subject it to longevity risks.
The Company currently assesses no explicit life insurance premium for its
commitment to make payments in excess of its recorded liability that are
contingent upon policyholder mortality. Benefits paid in excess of the
recorded liability are recognized when incurred as the amounts are not
material to the financial statements.
Amounts collected on policies not subject to any mortality or longevity risk
are recorded as increases in the policyholder deposits liability.
FEDERAL INCOME TAXES
Prior to June 1,1995 the revenues and expenses of the Predecessor were
included in a consolidated Federal income tax return with its parent company
and other affiliates. Allocations of Federal income taxes were based upon
separate return calculations.
Subsequent to June 1, 1995, the Company filed its own separate income tax
return, independent from its ultimate parent, GALIC.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. 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 to 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 market valuation
- Amortization of deferred policy acquisition costs
- Amortization of present value of future profits
- Recoverability of Goodwill
The market 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.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The amortization of deferred 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 present value of future profits is
based on estimates of long-term future profits from existing and recaptured
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
asset.
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long Lived Assets and for Long Lived Assets
to be Disposed of (SFAS 121), which was adopted by the Company in the fourth
quarter of 1995, the Company has considered the recoverability of Goodwill and
has concluded that no circumstances have occurred which would give rise to
impairment of Goodwill for the period ending December 31, 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard No. 107, "Disclosures About Fair
Value of Financial Instruments" (SFAS #107) 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 #107
excludes certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Because of this, and further because a value of
a business is also based upon its anticipated earning power, the aggregate
fair value amounts presented do not represent the underlying value of the
Company.
The Predecessor adopted Statement of Financial Accounting Standard No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments" (SFAS #119), as of December 31, 1994. SFAS #119 requires
increased disclosures about derivative financial instruments including the
amount, nature, and terms of all derivative financial instruments as well as
disclosure of the purposes for which derivative financial instruments are
held, end-of-period fair values and any net gains or losses arising from
trading of derivative financial instruments.
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 values amounts reported in the balance sheets for these
instruments approximate their fair values. Short-term debt securities are
considered "available for sale."
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
INVESTMENT SECURITIES (INCLUDING MORTGAGE-BACKED SECURITIES):
Fair values for 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 and certain mortgage-backed securities, 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 4 for fair value disclosures). Fair values for mortgages are based on
management estimates and incorporate independent appraisals of underlying real
property. As of December 31, 1996, fair value of the Companys mortgage loans
are equivalent to their carrying value.
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 6 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, 1996 and 1995 the cash surrender value of
policyholder funds on deposit were approximately $29.1 million and $2.2
million less than their stated carrying value, respectively. Of the contracts
permitting surrender, 90% 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:
The impact of reinsurance on the December 31, 1996 financial statements is not
considered material.
The financing reinsurance agreement entered into with OakRe 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.
OTHER
Certain 1994 and 1995 amounts have been reclassified to conform to the 1996
presentation.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(4) 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 equity. The carrying value and amortized cost of investments at
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
AMORTIZED
VALUE GAINS LOSSES VALUE COST
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Debt Securities:
US. Government Treasuries $ 7,175 $ 29 ($50) $ 7,175 $ 7,196
Collateralized mortgage obligations 382,335 985 (2,721) 382,335 384,071
Corporate, state, municipalities, and
political subdivisions 560,101 3,971 (5,427) 560,101 561,557
Total debt securities 949,611 4,985 (8,198) 949,611 952,824
Mortgage loans 244,103 -- -- 244,103 244,103
Policy loans 22,336 -- -- 22,336 22,336
Short term investments 4,404 21 -- 4,404 4,383
Total investments $1,220,454 $5,006 ($8,198) $1,220,454 $1,223,646
Companys beneficial interest in
separate accounts $ 14,970 -- -- $ 14,970 --
</TABLE>
<TABLE>
<CAPTION>
1995
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
AMORTIZED
VALUE GAINS LOSSES VALUE
COST
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Debt Securities:
US. Government Treasuries $ 4,307 $ 156 -- $ 4,307 $ 4,151
Collateralized mortgage obligations 252,148 4,344 $ (237) 252,148 248,041
Corporate, state, municipalities, and
political subdivisions 338,101 7,261 (836) 338,101 331,676
-------- ------- --------- -------- --------
Total debt securities 594,556 11,761 (1,073) 594,556 583,868
-------- ------- --------- -------- --------
Mortgage loans 77,472 -- -- 77,472 77,472
Policy loans 19,125 -- -- 19,125 19,125
Short term investments 7,859 36 -- 7,859 7,823
-------- ------- --------- -------- --------
Total investments $699,012 $11,797 $ (1,073) $699,012 $688,288
======== ======= ========= ======== ========
<FN>
As of December 31, 1996, the Company had no impaired investments. The Company did
establish a valuation allowance for potential losses on mortgage loans of $88 thousand as
of December 31, 1996.
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
The amortized cost and estimated market value of debt securities at December
31, 1996, 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>
1996
ESTIMATED
AMORTIZED MARKET
COST VALUE
<S> <C> <C>
(in thousands of dollars)
Due after one year through five years $233,232 $234,493
Due after five years through ten years 283,884 281,155
Due after ten years 51,630 51,628
Mortgage-backed securities 384,078 382,335
Total $952,824 $949,611
<FN>
At December 31, 1996, approximately 98.7% of the Company's debt securities are
investment grade or are non-rated but considered to be of investment grade.
Of the 1.3% non-investment grade debt securities, all are rated as BB+.
</TABLE>
Included in debt securities in 1994 and the first five months of 1995 are
investments in interest-only mortgage-backed stripped securities (IOs) and
similar IOettes. Accounting for investments in "high risk" (interest only)
collateralized mortgage obligations (CMOs), is in accordance with the
provisions of EITF Nos. 89-4 and 93-18. An effective yield is calculated for
each high risk CMO based on the current amortized cost of the investment and
the current estimate of future cash flow. The recalculated effective yield is
used to record interest income in subsequent periods (the "prospective
method"). If the anticipated cash flow for any "high risk" CMO discounted at
the comparable risk-free rate is less than the unamortized cost, an impairment
loss is recorded and the unamortized cost adjusted. The write-down is treated
as a realized loss. Write-downs of $3,341,163 were recorded in 1994. No IOs
or IOettes were held by the Company at December 31, 1996 or 1995. The
weighted average of the effective yield that was used to accrue interest
income in 1994 was 11.88%.
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
counter parties to these agreements. Securities loaned at December 31, 1996
had market values totaling $16,612,411. Cash, letters of credit, and
government securities of $17,251,070 was held by the custodian bank as
collateral to secure this agreement. Income on the Companys security lending
program in 1996 was immaterial.
No debt securities were non-income producing during the years ended December
31, 1996 and 1995.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
Information related to troubled debt restructurings during 1994 is as follows:
<TABLE>
<CAPTION>
THE
PREDECESSOR
DEBT MORTGAGE
SECURITIES LOANS TOTAL
(in thousands of dollars)
<S> <C> <C> <C>
Aggregate carrying value at December 31, 1994 $3,306 -- $3,306
Gross interest income included in net income
during 1994 205 -- 205
Gross interest income that would have been
earned during 1994 if there had been no
restructuring 538 -- 538
</TABLE>
The components of net investment income, realized capital gains/(losses) and
unrealized gains/(losses) were as follows:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
(in thousands of dollars)
<S> <C> <C> <C> <C>
Income on debt securities $53,632 $19,629 $ 63,581 $ 267,958
Income on equity securities -- -- 302 645
Income on short-term investments 2,156 2,778 28,060 11,705
Income on cash on deposit -- -- -- 316
Income on interest rate swaps -- -- 377 (244)
Income on policy loans 1,454 868 624 1,376
Interest on mortgage loans 13,633 1,444 248 1,162
Income on foreign exchange -- -- 184 (433)
Income of real estate -- -- 1,508 3,278
Income on separate account investments 772 -- (1) 2
Miscellaneous interest 133 109 (24) (853)
-------- --------- -----------------
Total investment income 71,780 24,828 94,859 284,912
---------
Investment expenses (1,151) (640) (2,373) (7,296)
-------- -------- ---------
Net investment income $70,629 $24,188 $ 92,486 $ 277,616
======== ======== ========= =================
Realized capital gains/(losses) were as follows:
Debt securities 469 $ 1,344 $(16,749) $ (79,300)
Mortgage loans 4 -- 1,431 (3,452)
Equity securities -- -- (423) (76)
Real estate -- -- (124) --
Short-term investments (1) (20) (1,933) (282)
Other assets -- -- (76) 147
Interest rate swaps -- -- 5,460 -- (18,398)
--------- -----------------
Net realized gains/(losses) on investments $ 472 $ 1,324 $(12,414) $ (101,361)
======== ======== ========= =================
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95 1994
(In thousands
of dollars)
<S> <C> <C> <C> <C>
Unrealized gains/(losses) were as follows:
Debt securities ($3,213) $10,688 $(85,410) $(261,947)
Short-term investments 21 36 879 (594)
Effects on deferred acquisition costs amortization 1,561 -- 39,030 162,190
Effects on present value of future profits 425 (6,471) -- --
Unrealized gains/(losses) before income tax (1,206) 4,253 (45,501) (100,351)
Unrealized income tax benefit/(expense) 422 (1,489) 16,664 35,123
Net unrealized gains (losses) on investments ($784) $ 2,764 $(28,837) ($65,228)
======== ========= ==========
</TABLE>
Proceeds from sales 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 non-investment grade securities.
Proceeds from sales of investments in debt securities for the Company during
1995 were $214,811,186, and for the Predecessor were $2,786,998,780. Gross
gains of $1,533,501 and gross losses of $190,899 were realized by the Company
on its sales. Included in these amounts for the Company are $373,768 of
gross gains realized on the sale of non-investment grade securities. The
Predecessor realized gross gains of $9,499,191 and gross losses of $26,249,279
on its sales. Included in these amounts are $6,367,297 of gross gains and
$7,607,167 of gross losses realized on the sale of non-investment grade
securities.
Proceeds from sales of investments in debt securities during 1994 were
$3,081,863,341. Gross gains of $59,472,808 and gross losses of $136,394,109
were realized on those sales. Included in these amounts are $6,455,887 of
gross gains and $6,692,683 of gross losses realized on the sale of
non-investment grade securities.
Unrealized appreciation/(depreciation) of debt securities for the Company in
1996 and 1995, and the Predecessor in 1995 and 1994 were $(13,900,000),
$10,688,000, $176,537,000, and $(357,401,000), respectively. Unrealized
appreciation/(depreciation)of debt securities is calculated as the change
between the cost and market values of debt securities for the years then
ended.
Securities with a book value of approximately $7,032,267 at December 31, 1996
were deposited with government authorities as required by law.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(5) SECURITIES GREATER THAN 10% OF SHAREHOLDERS EQUITY
As of December 31, 1996 the Company held the following individual securities
which exceeded 10% of shareholders equity:
<TABLE>
<CAPTION>
LONG-TERM DEBT CARRYING
SECURITIES VALUE
<S> <C>
Countrywide Mtg. 1993-12 A4 $19,347,536
FNMA Remic Tr 1996-50 A1 19,104,500
</TABLE>
As of December 31, 1995 the Company held the following individual securities
which exceeded 10% of shareholders equity:
<TABLE>
<CAPTION>
LONG-TERM DEBT CARRYING
SECURITIES VALUE
<S> <C>
Countrywide Mtg. 1993-12 A4 $18,726,875
American Airlines 15,080,392
</TABLE>
(6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
FINANCIAL FUTURES CONTRACTS
Futures contracts are contracts for delayed delivery of securities in which
the seller agrees to make delivery at a specified future date for a specific
price. Gains or losses are realized in daily cash settlements. Risks arise
from the possible inability of counter parties to meet the terms of their
contracts and from movements in securities values and interest rates. When
future contracts are designated as hedges, additional risks arise due to the
possibility that the futures contract will provide an imperfect correlation to
the hedged security.
The Company periodically enters into financial futures contracts in order to
hedge its short term investment spread risks encountered during occasional
periods of unusually large recapture activity. Gains and losses from these
anticipatory hedges are applied to the cost basis of the assets acquired with
recaptured funds. In 1996, $381,105 in net losses were recorded as basis
adjustments to hedged debt securities.
In order to limit its exposure to market fluctuations while it holds temporary
seed money investments within the separate account (see note 3), the Company
has adopted a hedging policy that involves holdings of futures contracts. As
of December 31, 1996, the Company held 35 S&P 500 index futures contracts, 5
5-year T-Note futures contracts and 10 10-year T-Note futures contracts with a
total notional face amount of $14,528,750 and a total fair market value of
$14,652,969. Collateral requirements set by the Chicago Board of Trade
averaged $9,800 per contract at December 31, 1996. At December 31, 1996, the
Company recorded as a component of net investment income, $1,639,717 of gross
losses from terminated contracts and $406,141 of gross gains from open
contracts. In 1996, the Company also recorded, as an offsetting component of
net investment income, a net gain of $2,007,720 from market appreciation on
the underlying hedged securities within the separate account.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
(7) POST-RETIREMENT 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 1996 and 1995, the Company
was allocated a portion of benefit costs including severance pay, accumulated
vacations, and disability benefits. At December 31, 1996 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 subsidiary, 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 $1.4 million of state income tax recoveries.
Income taxes are recorded in the statements of earnings and directly in
certain shareholders equity accounts. Income tax expense (benefit) for the
years ended December 31 was allocated as follows:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
7 MONTHS 5 MONTHS
ENDED ENDED
1996 12/31/95 5/31/95
1994
(In thousands of dollars)
<S> <C> <C> <C> <C>
Statements of income:
Operating income (excluded realized
investment gains and losses) $ 2,493 $ (85) $ (5,038) $ (39,511)
Realized investment gains/(losses) 162 516 (5,026) (37,489)
-------- -------
Income tax expense/(benefit) included
in the statements of income 2,655 431 (10,064) (77,000)
Shareholders equity:
Unrealized gains/(losses) on securities
available for sale and intangible assets (1,910) 1,489 18,458 (53,324)
Total income tax expense/(benefit) $ 745 $1,920 $ 8,394 $(130,324)
</TABLE>
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of COVA Corporation)
Notes to Consolidated Financial Statements
The actual Federal income tax expense differed from the expected tax expense
computed by applying the US. Federal statutory rate to income before taxes on
income as follows:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
1996 1995 1995 1994
7 MONTHS 5 MONTHS
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $2,190 35.0% $129 35.0% $(13,862) 35.0% $(76,739) 35.0%
State income taxes, net 77 1.23 11 3.0 (306) 0.8 (1,552) 0.7
Tax-exempt bond interest -- -- (22) (6.0) (332) 0.8 (1,208) 0.6
Amortization of intangible assets 320 5.12 254 69.0 -- -- 111 (0.1)
Permanent difference due to derivative transfer
-- -- -- -- 4,399 (11.1) -- --
Other 68 1.09 59 16.1 37 (.1) 2,388 (1.1)
Total $2,655 42.44% $431 117.1% $(10,064) 25.4% $(77,000) 35.1%
====== ====== ===== ====== ========= ====== ========= =====
</TABLE>
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1996 &
1995 follows:
<TABLE>
<CAPTION>
1996 1995
(In thousands of dollars)
<S> <C> <C>
Deferred tax assets:
PVFP $ 1,639 --
Policy Reserves 19,237 $ 7,601
Liability for commissions on recapture 6,073 8,868
Tax basis of intangible assets purchased 6,230 13,141
DAC Proxy Tax 9,032 4,749
Unrealized losses on investments 422 --
Other deferred tax assets 827 2,860
Total assets $43,460 $37,219
------- -------
Deferred tax liabilities:
PVFP $19,169 $16,774
Unrealized gains on investments -- 1,489
Deferred Acquisition Costs 10,694 5,316
Other deferred tax liabilities 60 84
Total liabilities 29,923 23,663
-------
Net Deferred Tax Asset $13,537 $13,556
======= =======
</TABLE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
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
The Company has entered into management, operations and services agreements
with both affiliated and unaffiliated companies. The affiliated companies are
Cova Life Management Company (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 Companys ultimate parent, GALIC. The unaffiliated companies are
Johnson & Higgins, a New Jersey corporation, and Johnson & Higgins/Kirke Van
Orsdel, a Delaware corporation, which provide various services for the Company
including underwriting, claims and administrative functions. The affiliated
and unaffiliated service providers are reimbursed for the cost of their
services and are paid a service fee. Expenses and fees paid to affiliated
companies during 1996 and the 7 months of 1995 for the Company were
$6,618,303, and $7,139,525, respectively, and the five months of 1995 and the
year 1994 for the Predecessor were 6,364,609, and $8,553,028, respectively.
On December 31, 1996 Cova Corporation transferred its ownership of Cova
Financial Life Insurance Company (CFLIC), an affiliated life insurer domiciled
in the state of California, to the Company. The transfer of ownership was
recorded as additional paid in capital and increased Shareholders Equity on
the Companys 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 CFLICs Balance
Sheet is fully consolidated with the Companys December 31, 1996 Balance Sheet,
CFLICs 1996 Income Statement and Cash Flow have not been consolidated with the
Companys 1996 Income Statement or Cash Flow Statement. However, CFLICs
year-end cash balance of $6.7 million is included in the Cash Flow Statement.
(10) STATUTORY SURPLUS AND DIVIDEND RESTRICTION
Generally accepted accounting principles (GAAP) differ 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 taxes under GAAP reporting, the
non-recognition 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, SFAS #115 adjustments to record the carrying values of debt
securities and certain equity securities at market 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 shareholders
equity to the net purchase price. Statutory accounting does not recognize the
purchase method of accounting.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
As of December 31, the differences between statutory capital and surplus and
shareholder's equity determined in conformity with generally accepted
accounting principles (GAAP) were as follows:
<TABLE>
<CAPTION>
1996 1995
(in thousands of dollars)
<S> <C> <C>
Statutory Capital and Surplus $ 75,354 $ 59,682
Reconciling items:
GAAP investment valuation reserves (88) --
Statutory Asset Valuation Reserves 17,599 13,378
Interest Maintenance Reserve 2,301 1,892
GAAP investment adjustments to fair value (3,191) 10,724
Deferred policy acquisition costs 49,833 14,468
GAAP basis policy reserves (30,202) (11,233)
Deferred federal income taxes (net) 13,537 13,556
Modified coinsurance -- --
Goodwill 20,849 23,358
Present value of future profits 46,389 38,155
Future purchase price payable (16,051) (23,967)
Other (1,286) (1,927)
GAAP Shareholders' Equity $175,044 $138,086
========= =========
</TABLE>
Statutory net losses for CFSLIC for the years ended December 31, 1996, 1995
and 1994 were $(13,575,788), $(74,012,650), and $(92,952,989), 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. Accordingly, the maximum
dividend permissible during 1997 will be $0.
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, 1996 the Company's Total Adjusted
Capital and Authorized Control Level - RBC were, $92,953,237, and $21,058,220
respectively. This level of adjusted capital qualifies under all tests.
(11) GUARANTY FUND ASSESSMENTS
The Company participates with all 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 Companys authority to issue new business, the
Company is contingently liable for its share of claims covered by the guaranty
associations for insolvencies incurred through 1996, 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 assessments as a credit against premium or
other state taxes over, most commonly, five years.
<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)
Notes to Consolidated Financial Statements
At December 31, 1996, the National Organization of Life and Health Guaranty
Associations (NOLHGA) 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 $12.4 million in
future assessments on insolvencies that occurred before December 31, 1996.
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 $12.3
million.
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
PART C
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included in
Part B hereof:
1 Independent Auditor's Report.
2. Consolidated Balance Sheets of the Company as of December 31, 1996
and 1995.
3. Consolidated Statements of Income for the Company for the years ended
December 31, 1996, 1995 and 1994.
4. Consolidated Statements of Shareholder's Equity for the years ended
December 31, 1996, 1995 and 1994.
5. Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1995 and 1994.
6. Notes to Consolidated Financial Statements, December 31, 1996, 1995
and 1994.
b. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account.*
2. Not Applicable.
3. Principal Underwriter's Agreement.###
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.#
5. Application for Variable Annuity.##
6. (i) Copy of Articles of Incorporation of the Company.
(ii) Copy of the Bylaws of the Company.
7. Not Applicable.
8. Form of Fund Participation Agreement.#
9. Opinion and Consent of Counsel.
10. Consent of Independent Accountants.
11. Not Applicable.
12. Not Applicable.
13. Not Applicable.
14. Company Organizational Chart.***
27. Not Applicable.
* incorporated by reference to Cova Variable Annuity Account One,
Form N-4 (File No. 811-5200) as filed on June 11, 1987.
** incorporated by reference to Cova Financial Services Life Insurance
Company, Pre-Effective Amendment No. 1 to Form S-1 (File No. 33-43099)
as filed on December 24, 1991.
*** incorporated by reference to Registrant's Post-Effective Amendment
No. 5 (File No. 33-45223) as electronically filed on April 28, 1997.
# incorporated by reference to Registrant's Form N-4 as filed on April
2, 1992.
## incorporated by reference to Registrant's Pre-Effective Amendment
No. 2 to Form N-4 as filed on May 1, 1992.
### incorporated by reference to Registrant's Post-Effective Amendment
No. 1 to Form N-4 as filed on May 1, 1993.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Position and Offices
Business Address with Depositor
- -------------------------------- ----------------------------------
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Leonard Rubenstein Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
Jerome P. Darga Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Judy M. Drew Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Judith A. Gallup Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
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
Christopher Harden Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Eric T. Henry Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Jeffery K. Hoelzel Vice President, General Counsel,
One Tower Lane, Suite 3000 Secretary and Director
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 Street
St. Louis, MO 63101
Douglas E. Jacobs Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
William C. Mair Vice President, Controller
One Tower Lane, Suite 3000 and Director
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market Street
St. Louis, MO 63101
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
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart was filed as Exhibit 14 in Registrant's
Post-Effective Amendment No. 5 and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
There are no contract owners.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article IV, Section 1) provide that:
Each person who is or was a director, officer or employee of the corporation
or is or was serving at the request of the corporation as a director, officer
or employee of another corporation, partnership, joint venture, trust or other
enterprise (including the heirs, executors, administrators or estate of such
person) shall be indemnified by the corporation as of right to the full extent
permitted or authorized by the laws of the State of Missouri, as now in effect
and as hereafter amended, against any liability, judgment, fine, amount paid
in settlement, cost and expenses (including attorney's fees) asserted or
threatened against and incurred by such person in his capacity as or arising
out of his status as a director, officer or employee of the corporation or if
serving at the request of the corporation, as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise.
The indemnification provided by this bylaw provision shall not be exclusive
of any other rights to which those indemnified may be entitled under any other
bylaw or under any agreement, vote of shareholders or disinterested directors
or otherwise, and shall not limit in any way any right which the corporation
may have to make different or further indemnification with respect to the same
or different persons or classes of persons.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(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.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------ ---------------------------------------
Judy M. Drew President, Chief Operations Officer and
Director
Lorry J. Stensrud Director
Patricia E. Gubbe Vice President and Chief Compliance
Officer
William C. Mair Director
Jeffery K. Hoelzel Secretary
Philip A. Haley Vice President
Frances S. Cook Assistant Secretary
Robert A. Miner Treasurer
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Christopher Harden, whose address is One Tower Lane, Suite 3000, Oakbrook
Terrace, IL 60181-4644 maintains physical possession of the accounts, books or
documents of the Variable Account required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
d. Cova Financial Services Life Insurance Company ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Registration Statement and has
caused this Registration Statement to be signed on its behalf, in the City of
Oakbrook Terrace, and State of Illinois on this 28th day of April, 1997.
COVA VARIABLE ANNUITY ACCOUNT FOUR
Registrant
By: COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
By: /S/ JEFFERY K. HOELZEL
___________________________________________
By: COVA FINANCIAL SERVICES LIFE
INSURANCE COMPANY
Depositor
By: JEFFERY K. HOELZEL
___________________________________________
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board and
- ---------------------- Director -------
Richard A. Liddy Date
/s/ Lorry J. Stensrud* President and Director 4/28/97
- ------------------------ -------
Lorry J. Stensrud Date
Director
- ------------------------ -------
Leonard M. Rubenstein Date
Director
- ------------------------ -------
J. Robert Hopson Date
/s/ William C. Mair* Controller and Director 4/28/97
- ------------------------ ------
William C. Mair Date
/s/ Jeffery K. Hoelzel Director 4/28/97
- ------------------------ ------
Jeffery K. Hoelzel Date
/s/ E. Thomas Hughes, Jr.* Treasurer and Director 4/28/97
- ------------------------ ------
E. Thomas Hughes, Jr. Date
/s/ Matthew P. McCauley* Director 4/28/97
- ------------------------ ------
Matthew P. McCauley Date
/s/ John W. Barber* Director 4/28/97
- ------------------------ -------
John W. Barber Date
</TABLE>
*By: /S/ JEFFERY K. HOELZEL
____________________________________
Jeffery K. Hoelzel, Attorney-in-Fact
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO.
EX-99.B6(i) Copy of Articles of Incorporation of the Company
EX-99.B6(ii) Copy of Bylaws of the Company.
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Accountants
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM N-4
FOR
COVA VARIABLE ANNUITY ACCOUNT FOUR
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
[SEAL OF THE SECRETARY OF STATE MISSOURI] STATE OF MISSOURI
JAMES C. KIRKPATRICK,
Secretary of State
Corporation Division
Certificate of Amendment and Restatement
I, JAMES C. KIRKPATRICK, Secretary of State of the State of Missouri, do
hereby certify that ASSURANCE LIFE COMPANY a corporation organized under the
Laws of Missouri, has delivered to me and that I have filed its Certificate of
Amendment of its Articles of Incorporation; that said Corporation has in all
respects complied with the requirements of law governing the Amendment of
Articles of Incorporation and that said Articles are amended in accordance
therewith.
IN WITNESS WHEREOF, I hereunto set my hand and affixed
the Great Seal of the State of Missouri, at the City of
Jefferson, this 27th day of April, A.D. 1983.
/s/ JAMES C. KIRKPATRICK
---------------------------------
Secretary of State
---------------------------------
Deputy Secretary of State
STATE OF MISSOURI DIVISION OF INSURANCE
Department of Consumer Affairs, Regulation and Licensing
P.O. Box 690, Jefferson City, MO 65102
CERTIFICATE OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION
I, Mary C. Hall, Deputy Director, Division of Insurance, Department of
Consumer Affairs, Regulation and Licensing, State of Missouri, do hereby
certify that ASSURANCE LIFE COMPANY, a corporation organized and existing
under the insurance laws of the State of Missouri, has delivered to me and I
have filed its Certificate of Amendment and Restatement of Articles of
Incorporation amending Article V of their Articles of Incorporation granting
authority to Assurance Life Company to increase the number of shares of
capital stock from 500,000 to 1,000,000 with a par value of $2.00 per share as
more fully set forth in the Certificate of Amendment and Restatement of the
Articles of Incorporation attached hereto.
I further certify that I have examined the Certificate of Amendment and
Restatement of the Articles of Incorporation and find that they conform to
law; that the proceedings were regular; that the condition and the assets of
the company justify the amendment and that the same will not be prejudicial to
the interests of the policyholders, all as provided by law.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
my office in Jefferson City, Missouri, this 27th day of April, 1983.
/S/ MARY C. HALL
--------------------------
MARY C. HALL, Deputy Director
Division of Insurance
Department of Consumer Affairs,
Regulation and Licensing
State of Missouri
[DIVISION OF INSURANCE]
CERTIFICATE OF AMENDMENT AND RESTATEMENT
OF THE ARTICLES OF INCORPORATION
OF ASSURANCE LIFE COMPANY
The undersigned, Assurance Life Company, a Missouri insurance corporation
(hereinafter called the "Corporation"), for the purpose of amending and
restating its Articles of Incorporation, does hereby make and execute this
Certificate of Amendment and Restatement of the Articles of Incorporation.
(1) The name of the Corporation is Assurance Life Company.
(2) The shareholders of the Corporation, at a Special Meeting held April
25, 1983, upon notice made as required by law, did, by unanimous vote of the
outstanding shares entitled to vote, adopt a resolution amending and restating
the Articles of Incorporation, as hereinafter set forth.
(3) The amended and restated Articles of Incorporation of said
corporation thus adopted are as follows:
ARTICLES OF INCORPORATION
OF
ASSURANCE LIFE COMPANY
ARTICLE I
The name of this corporation is ASSURANCE LIFE COMPANY.
ARTICLE II
The principal office of the corporation shall be located in Kansas City,
Missouri.
ARTICLE III
The duration of the corporation perpetual.
ARTICLE IV
The corporation is formed for the purpose of making insurance upon the
lives of individuals, and every assurance pertaining thereto or connected
therewith, and to grant, purchase and dispose of annuities and endowments of
every kind and description whatsoever, and to provide an indemnity against
death, and for weekly or other periodic indemnity for disability occasioned by
accident or sickness to the person of the insured, and generally to do all
such other things as shall be permitted a corporation of this kind by law and
not expressly prohibited by applicable provisions of Missouri law. The
accident and health insurance and life insurance shall be made separate
departments of the corporation.
In order to carry out the purposes for which it is organized, the
corporation shall have the following rights and powers to the extent not
inconsistent with or expressly prohibited by applicable provisions of Missouri
law:
A. To enter into any lawful contract or contracts with persons, firms,
corporations, other entities, governments or any agencies or subdivisions
thereof, including guaranteeing the performance of any contract or any
obligation of any person, firm, corporation or other entity.
B. To purchase and acquire, as a going concern or otherwise, and to
carry on, maintain and operate all or any part of the property or business of
any corporation, firm, association, entity, syndicate or person whatsoever,
deemed to be of benefit to the corporation, or of use in any manner in
connection with any of its purposes; and to dispose thereof upon such terms as
may seem advisable to the corporation.
C. To purchase or otherwise acquire, hold, sell, pledge, re-issue,
transfer or otherwise deal in, shares of the corporation's own stock, provided
that it shall not use its funds or property for the purchase of its own shares
of stock when such use would be prohibited by law, by the articles of
incorporation or by the bylaws of the corporation; and, provided further, that
shares of its own stock belonging to it shall not be voted upon directly or
indirectly.
D. To invest, lend and deal with moneys of the corporation in any lawful
manner, and to acquire by purchase, by the exchange of stock or other
securities of the corporation, by subscription or otherwise, and to invest in,
to hold for investment or for any other purpose, and to use, sell, pledge or
otherwise dispose of, and in general to deal in any interest concerning or
enter into any bonds, notes, debentures, certificates, receipts and other
securities and obligations of any government, state, municipality,
corporation, association or other entity, including individuals and
partnerships and, while owner thereof, to exercise all of the rights, powers
and privileges of ownership, including among other things, the right to vote
thereon for any and all purposes and to give consents with respect thereto.
E. To borrow or raise money for any purpose of the corporation and to
secure any loan, indebtedness or obligation of the corporation and the
interest accruing thereon, and for that or any other purpose to mortgage,
pledge, hypothecate or charge all or any part of the present or hereafter
acquired property, rights and franchises of the corporation, real, personal,
mixed or of any character whatever, subject only to limitations specifically
imposed by law.
F. To advise and counsel others and to act for and on behalf of others
concerning the acquisition, organization, promotion, development, financing,
operation, management, disposition and termination of corporations,
associations, partnerships, firms and investments of all kinds and to perform
any and all services relating to the foregoing and otherwise and to enter into
and perform contracts, agreements and undertakings in connection therewith.
G. To buy, lease, rent or otherwise acquire, own, hold, use, divide,
partition, develop, improve, operate and sell, lease, mortgage or otherwise
dispose of, deal in and turn to account real estate, leaseholds, and any and
all interests or estates therein or appertaining thereto; and to construct,
acquire, manage, operate, improve, maintain, own, sell, lease or otherwise
dispose of or deal in buildings, structures and improvements situated or to be
situate on any real estate or leasehold.
H. To do any or all of the things hereinabove enumerated along for its
own account, or for the account of others, or as the agent for others, or in
association with others or by or through others, and to enter into all lawful
contracts and undertakings in respect thereof.
I. In general, to carry on any other business in connection with each
and all of the foregoing or incidental thereto, and to carry on, transact and
engage in any and every lawful business or other lawful things calculated to
be of gain, profit or benefit to the corporation as fully and freely as a
natural person might do, to the extent and in the manner, and anywhere within
and without the State of Missouri, as it may from time to time determine; and
to have and exercise each and all of the powers and privileges, either direct
or incidental, which are given and provided by or are available under the laws
of the State of Missouri applicable to life insurance companies or applicable
to all insurance companies.
None of the purposes and powers specified in any of the paragraphs of
this Article IV shall be in any way limited or restricted by reference to or
inference from the terms of any other paragraph, and the purposes and powers
specified in each of the paragraphs of this Article IV shall be regarded as
independent purposes and powers. The enumeration of specific purposes and
powers in this Article IV shall not be construed to restrict in any manner the
general purposes and powers of this corporation, nor shall the expression of
one thing be deemed to exclude another, although it be of like nature. The
enumeration of purposes or powers herein shall not be deemed to exclude or in
any way limit by inference any purposes or powers which this corporation has
power to exercise, whether expressly by the laws of the State of Missouri, now
or hereafter in effect, or impliedly by any reasonable construction of such
laws.
ARTICLE V
The aggregate number of shares of capital stock which the corporation
shall have authority to issue is 1,000,000 shares each of a par value of Two
Dollars ($2.00) per share, amounting in the aggregate to Two Million Dollars
($2,000,000.00). Each share of stock shall be entitled to one vote except
that in the annual election of directors each shareholder shall have the right
of cumulative voting.
ARTICLE VI
The number of directors to constitute the present board of directors of
the corporation is nine. Hereafter, the number of directors of the
corporation shall be fixed by, or in the manner provided in, and elected in
the manner provided in, the bylaws of the corporation, the applicable
provisions of which shall be consistent with those provisions of the
General and Business Corporation Law of Missouri relating to election of
directors and not prohibited by applicable insurance law. Vacancies in the
board of directors shall be filled in the manner provided in the bylaws.
Directors need not be shareholders unless bylaws of the corporation require
them to be shareholders.
ARTICLE VII
Except as may be otherwise specifically provided by statute, or the
articles of incorporation or the bylaws of the corporation, as from time to
time amended, all powers of management, direction and control of the
corporation shall be, and hereby are, vested in the board of directors, and
shall be exercised by them and by such officers and agents as they may from
time to time appoint and empower. The board shall have the power to make such
bylaws, rules and regulations for the transaction of the business of the
corporation as are not inconsistent with these Articles or the laws of the
State of Missouri.
The bylaws of the corporation may from time to time be altered, amended,
suspended or repealed, or new bylaws may be adopted, by either of the
following ways: (i) by the affirmative vote, at any annual or special meeting
of the shareholders, of the holders of a majority of the outstanding shares of
stock of the corporation entitled to vote, or (ii) by resolution adopted by a
majority of the full board of directors; provided, however, that the power of
the directors to alter, amend, suspend or repeal the bylaws or any portion
thereof enacted by the shareholders may be denied as to any bylaws or portion
thereof enacted by the shareholders if at the time of such enactment the
shareholders shall so expressly provide.
ARTICLE VIII
The corporation reserves the right at any annual or special meeting of
shareholders to alter, amend or repeal any provision contained in its articles
of incorporation in the manner now or hereafter prescribed by the statutes of
Missouri, and all rights and powers conferred herein are granted subject to
this reservation.
(4) The number of shares outstanding and entitled to vote at the Special
Meeting of Shareholders on April 25, 1983, was 500,000 shares, of which
500,000 shares voted for the resolution amending and restating the Articles of
Incorporation and 0 shares voted against said resolution.
(5) The amended and restated Articles of Incorporation provide that the
corporation shall have authority to issue 1,000,000 shares of capital stock
each of the par value of $2 per share. The Articles of Incorporation
previously authorized 500,000 shares of capital stock, each of the par value
of $2 per share.
IN WITNESS WHEREOF, this Certificate of Amendment and Restatement is
executed in triplicate by the Corporation by its Vice President and Actuary
and Secretary this 25th day of April, 1983.
ASSURANCE LIFE COMPANY
By: /S/ R.C. JOHNSON
__________________________
Vice President and Actuary
Attest: /S/ J.K. BALES
__________________________
Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
Now on this 25th day of April, 1983, before me personally appeared R.C.
Johnson and J.K. Bales, to me known to be the persons who executed the
foregoing instrument and to me known to be, respectively, Vice President
and Actuary and Secretary of Assurance Life Company, and being first duly
sworn upon their oaths each did say that the statements and matters set forth
therein are true, and that they executed the same as their free act and deed
and as the free act and deed of said corporation for the purposes set forth
therein, and that the seal affixed is the corporate seal of said corporation,
and that said instrument was signed and sealed by authority of the
shareholders and Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year last above written.
/S/ TANYA JO THIERRY
_____________________________
Notary Public
My Commission Expires:
Tanya Jo Thierry
Notary Public
FILED AND CERTIFICATE ISSUED
APR 27, 1983
Corporation Dept., SECRETARY OF STATE
STATE OF MISSOURI
James C. Kirkpatrick, Secretary of State
Corporation Division
Statement of Change of Registered Agent or Registered
Office by Foreign or Domestic Corporations
INSTRUCTIONS
There is a $3.00 fee for filing this statement. It must be filed in
TRIPLICATE (all copies signed and notarized).
The statement should be sealed with the corporate seal. If it does not
have a seal, write "no seal" where the seal would otherwise appear.
The registered office may be, but need not be, the same as the place of
business of the corporation, but the registered office and the business
address of the agent must be the same. The corporation cannot act as its own
registered agent.
Any subsequent change in the registered office or agent must be
immediately reported to the Secretary of State. These forms are available
upon request from the Office of the Secretary of State.
To SECRETARY OF STATE, Charter No. I-233744
P.O. Box 778
Jefferson City, Missouri 65102
The undersigned corporation, organized and existing under the laws of the
State of Missouri for the purpose of changing its registered agent or its
registered office, or both, in Missouri as provided by the provisions of "The
General and Business Corporation Act of Missouri," represents that:
1. The name of the corporation is Assurance Life Company.
2. The name of its PRESENT registered agent (before change) is James P.
Dalton, Esq.
3. The name of the new registered agent is Harold E. Henson, Vice President
and Secretary.
4. The address, including street number, if any, of its PRESENT registered
office (before change) is 314 East High Street, Jefferson City, Missouri
65101.
5. Its registered office (including street number, if any change is to be
made) is hereby CHANGED TO BMA Tower - 700 Karnes Boulevard, Kansas City,
Missouri 64108.
6. The address of its registered office and the address of the business
office of its registered agent, as changed, will be identical.
7. Such change was authorized by resolution duly adopted by the board of
directors.
IN WITNESS WHEREOF, the undersigned corporation has caused this report to
be executed in its name by its PRESIDENT OR VICE-PRESIDENT, attested by its
SECRETARY OR ASSISTANT SECRETARY this 10th day of July, 1984.
Assurance Life Company
________________________________
NAME OF CORPORATION
(Corporate Seal) By /s/ HAROLD E. HENSON
________________________________
VICE PRESIDENT & SECRETARY
If no seal, state "none"
Attest: /s/ DAVID H. REID
______________________
ASSISTANT SECRETARY
STATE OF MISSOURI )
COUNTY OF JACKSON ) ss.
I, Lorna G. Brammell, a Notary Public, do hereby certify that on the 10th
day of July, 1984, personally appeared before me Harold E. Henson who declares
he is Vice President of the corporation, executing the foregoing document, and
being first duly sworn, acknowledged that he signed the foregoing document in
the capacity therein set forth and declared that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
(Notarial Seal) /S/ LORNA G. BRAMMELL
__________________________
NOTARY PUBLIC
My term expires January 25, 1985
LORNA G. BRAMMELL
NOTARY PUBLIC STATE OF MISSOURI
JACKSON CO.
MY COMMISSION EXPIRES JAN. 25, 1985
FILED JUL 13, 1984
ROY D. BLUNT
SECRETARY OF STATE
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
[SEAL OF THE SECRETARY OF STATE MISSOURI]
CORRECTED Certificate of Amendment
I, ROY D. BLUNT, Secretary of State of the State of Missouri, do hereby
certify that XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY (FORMERLY:
ASSURANCE LIFE COMPANY), a corporation organized under the Laws of Missouri,
has delivered to me and that I have filed its Certificate of Amendment of its
Articles of Incorporation; that said Corporation has in all respects complied
with the requirements of law governing the Amendment of Articles of
Incorporation and that said Articles are amended in accordance therewith.
NOW, THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my
hand and affix the GREAT SEAL of the State
of Missouri. Done at the City of
Jefferson, this 8th day of July, 1985.
EFFECTIVE DATE OF September 1, 1985.
/s/ ROY D. BLUNT
[SEAL] ________________________
Secretary of State
RECEIVED OF: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
FIFTEEN DOLLARS-------------Dollars $15.00
For Credit of General Revenue Fund, on Account of Incorporation Tax and Fee.
No. I00233744
STATE OF MISSOURI DIVISION OF INSURANCE
Department of Economic Development
P.O. Box 690, Jefferson City, MO 65102-0690
DIRECTOR'S CERTIFICATE OF AMENDMENT
I, C. Donald Ainsworth, Director of the Division of Insurance, Department
of Economic Development, State of Missouri, do hereby certify that Assurance
Life Company, a corporation organized and existing under the insurance laws of
the State of Missouri, has delivered to me and I have filed its Certificate of
Amendment to its Articles of Incorporation as fully set forth and attached
hereto.
I further certify that I have examined the Certificate of Amendment to
the Articles of Incorporation and find that it conforms to law.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
my office in Jefferson City, Missouri, this 5th day of July, 1985.
/S/ C. DONALD AINSWORTH
--------------------------
Division of Insurance
Department of Economic
Development
State of Missouri
[DIVISION OF INSURANCE]
CERTIFICATE OF AMENDMENT AND RESTATEMENT
OF THE ARTICLES OF INCORPORATION
OF ASSURANCE LIFE COMPANY
The undersigned, Assurance Life Company, a Missouri insurance corporation
(hereinafter called the "Corporation"), for the purpose of amending its
Articles of Incorporation, does hereby make and execute this Certificate of
Amendment of the Articles of Incorporation.
(1) The name of the Corporation is Assurance Life Company.
(2) The shareholders of the Corporation, by written consent in lieu of a
meeting dated as of July 1, 1985, did unanimously adopt a resolution amending
the Articles of Incorporation, as hereinafter set forth.
(3) The Amendments to the Articles of Incorporation of said Corporation
thus adopted are as follows:
A. Article One is hereby amended to be effective on September 1, 1985,
to read as follows:
"The name of this Corporation is Xerox Financial Services Life
Insurance Company."
B. Article Two is hereby amended to read as follows:
"The principal office of the Corporation shall be located in
St. Louis, Missouri, and the Administrative Office of the
Corporation shall be located in Morristown, New Jersey."
(4) The number of shares outstanding and entitled to vote on July 1, 1985
was 550,000 shares, of which 550,000 shares voted for the resolution amending
the Articles of Incorporation and 0 shares voted against said resolution.
IN WITNESS WHEREOF, this Certificate of Amendment is executed in
triplicate by the Corporation by its Vice President and Treasurer and
Secretary this 2nd day of July, 1985.
ASSURANCE LIFE COMPANY
By: /S/ JOHN P. SKAHILL
--------------------------------------
Vice President and Actuary
Attest: /S/ ANTOINETTE C. BENTLEY
--------------------------------------
Secretary
STATE OF NEW JERSEY )
) ss.
COUNTY OF MORRIS )
Now on this 2nd day of July, 1985, before me personally appeared John P.
Skahill and Antoinette C. Bentley, to me known to be the persons who executed
the foregoing instrument and to me known to be, respectively, the Vice
President and Treasurer and Secretary of Assurance Life Company, and being
first duly sworn upon their oaths each did say that the statements and matters
set forth therein are true, and that they executed the same as their free act
and deed and as the free act and deed of said Corporation for the purposes set
forth therein, and that the seal affixed is the corporate seal of said
Corporation, and that said instrument was signed and sealed by authority of
the shareholders and Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year last above written.
/S/ LOUISE STECKI
_____________________________
Notary Public
My Commission Expires:
LOUISE STECKI
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires July 6, 1988
FILED AND ISSUED JULY 8, 1985
ROY D. BLUNT
Corporation Dept. SECRETARY OF STATE
STATE OF MISSOURI
Roy D. Blunt, Secretary of State
Corporation Division
Statement of Change of Registered Agent or Registered
Office by Foreign or Domestic Corporations
INSTRUCTIONS
There is a $3.00 fee for filing this statement. It must be filed in
DUPLICATE.
The statement should be sealed with the corporate seal. If it does not
have a seal, write "no seal" where the seal would otherwise appear.
The registered office may be, but need not be, the same as the place of
business of the corporation, but the registered office and the business
address of the agent must be the same. The corporation cannot act as its own
registered agent.
Any subsequent change in the registered office or agent must be
immediately reported to the Secretary of State. These forms are available
upon request from the Office of the Secretary of State.
To SECRETARY OF STATE, Charter No. I-233744
P.O. Box 778
Jefferson City, Missouri 65102
The undersigned corporation, organized and existing under the laws of the
State of Missouri for the purpose of changing its registered agent or its
registered office, or both, in Missouri as provided by the provisions of "The
General and Business Corporation Act of Missouri," represents that:
1. The name of the corporation is Xerox Financial Services Life Insurance
Company.
2. The name of its PRESENT registered agent (before change) is Harold E.
Henson.
3. The name of the new registered agent is Verne Purvines.
4. The address, including street number, if any, of its PRESENT registered
office (before change) is 700 Karnes Boulevard - BMA Tower , Kansas City,
Missouri 64108.
5. Its registered office (including street number, if any change is to be
made) is hereby CHANGED TO 10534 Natural Bridge Road, St. Louis, Missouri 631
6. The address of its registered office and the address of the business
office of its registered agent, as changed, will be identical.
7. Such change was authorized by resolution duly adopted by the board of
directors.
IN WITNESS WHEREOF, the undersigned corporation has caused this report to
executed in its name by its VICE-PRESIDENT & TREASURER, attested by its
ASSISTANT SECRETARY this 31st day of July, 1984.
Xerox Financial Services Life Insurance Company
___________________________________________________
NAME OF CORPORATION
(Corporate Seal) By /s/ JOHN H. SKAHILL
________________________________
VICE PRESIDENT & TREASURER
If no seal, state "none"
Attest: /s/ RICHARD G. MCCARTHY
---------------------------
ASSISTANT SECRETARY
STATE OF NEW JERSEY )
COUNTY OF MORRIS ) ss.
I, Cynthia M. Davatelis, a Notary Public, do hereby certify that on the
31st day of July, 1986, personally appeared before me John P. Skahill who
declares he is Vice President & Treasurer of the corporation, executing the
foregoing document, and being first duly sworn, acknowledged that he signed
the foregoing document in the capacity therein set forth and declared that the
statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
(Notarial Seal) /S/ CYNTHIA M. DAVATELIS
__________________________
NOTARY PUBLIC
CYNTHIA M. DAVATELIS
NOTARY PUBLIC STATE OF NEW JERSEY
MY COMMISSION EXPIRES DEC. 19, 1988
FILED AUG 6, 1986
ROY D. BLUNT
SECRETARY OF STATE
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
[SEAL OF THE SECRETARY OF STATE MISSOURI]
Certificate of Amendment
I, ROY D. BLUNT, Secretary of State of the State of Missouri, do hereby
certify that XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY, a corporation
organized under the Laws of Missouri, has delivered to me and that I have
filed its Certificate of Amendment of its Articles of Incorporation; that said
Corporation has in all respects complied with the requirements of law
governing the Amendment of Articles of Incorporation and that said Articles
are amended in accordance therewith.
NOW THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment, as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my
hand and affix the GREAT SEAL of the State
of Missouri. Done at the City of
Jefferson, this 12th day of August, 1987.
/s/ ROY D. BLUNT
[SEAL] ________________________
Secretary of State
RECEIVED OF: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
TWENTY DOLLARS-------------Dollars $20.00
For Credit of General Revenue Fund, on Account of Incorporation Tax and Fee.
No. I00233744
STATE OF MISSOURI DIVISION OF INSURANCE
Department of Economic Development
P.O. Box 690, Jefferson City, MO 65102-0690
DIRECTOR'S CERTIFICATE OF AMENDMENT
I, Lewis R. Crist, Director, Division of Insurance, Department of
Economic Development, State of Missouri, do hereby certify that Xerox
Financial Services Life Insurance Company, a corporation organized and
operating under the insurance laws of the state of Missouri, has delivered to
me and I have filed its Certificate of Amendment of its Articles of
Incorporation as fully set forth and attached hereto.
I further certify that I have examined the Certificate of Amendment of
Articles of Incorporation and find that it conforms to law, that proceedings
were regular, that the condition and the assets of the company justify the
amendment and that same will not be prejudicial to the interests of the
policyholders, all as provided by law.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
my office in Jefferson City, Missouri, this 13th day of July, 1987.
/S/ LEWIS R. CRIST
--------------------------
LEWIS R. CRIST, Director
Division of Insurance
Department of Economic
Development
State of Missouri
[DIVISION OF INSURANCE]
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned, Xerox Financial Services Life Insurance Company, a
Missouri insurance corporation (hereinafter called the "Corporation"), for the
purpose of amending its Articles of Incorporation, does hereby make and
execute this Certificate of Amendment of the Articles of Incorporation.
(1) The name of the Corporation is Xerox Financial Services Life
Insurance Company.
(2) The shareholders of the Corporation, by written consent in lieu of a
meeting dated as of June 18, 1987, did unanimously adopt a resolution amending
the Articles of Incorporation, as hereinafter set forth.
(3) The Amendment to the Articles of Incorporation of said Corporation
thus adopted are as follows:
A. Article II is hereby amended to read as follows:
"The principal office of the Corporation shall be located in Earth
City, Missouri, and the Administrative Office of the Corporation
shall be located in Morristown, New Jersey."
(4) The number of shares outstanding and entitled to vote on June 18,
1987 was 1,000,000 shares, of which 1,000,000 shares voted for the
resolution amending the Articles of Incorporation and 0 shares voted
against said resolution.
IN WITNESS WHEREOF, this Certificate of Amendment is executed in
triplicate by the Corporation by its Vice President and Counsel and Secretary
this 26th day of June, 1987.
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /S/ RICHARD G. MCCARTHY
__________________________
Vice President and Counsel
Attest: /S/ ANTOINETTE C. BENTLEY
__________________________
Secretary
STATE OF NEW JERSEY )
) SS
COUNTY OF MORRIS )
Now on this 26th day of June, 1987, before me personally appeared Richard
G. McCarthy and Antoinette C. Bentley, to me known to be the persons who
executed the foregoing instrument and to me known to be, respectively, the
Vice President and Counsel and Secretary of Xerox Financial Services Life
Insurance Company, and being first duly sworn upon their oaths each did say
that the statements and matters set forth therein are true, and that they
executed the same as their free act and deed and as the free act and deed of
said Corporation for the purposes set forth therein, and that the seal affixed
is the corporate seal of said Corporation, and that said instrument was signed
and sealed by authority of the shareholders and Board of Directors of said
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year last above written.
/S/ GENE R. LEHNHARDT
_____________________________
Notary Public
My Commission Expires:
GENE R. LEHNHARDT
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires Sept. 29, 1988
FILED AND ISSUED AUG 12, 1987
ROY D. BLUNT
Corporation Dept. SECRETARY OF STATE
STATE OF MISSOURI
ROY D. BLUNT OFFICE OF SECRETARY OF STATE
SECRETARY OF STATE JEFFERSON CITY 65102 314-751-4609
February 3, 1988
XEROX LIFE
ADMINISTRATIVE OFFICE
305 MADISON AVENUE
MORRISTOWN, NEW JERSEY 07960
ATTN: ANTOINETTE C. BENTLEY
RE: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY (I00233744)
Dear Corporation:
This is to advise that on the above date we have filed for record in this
office a Statement of Change in the number of directors from nine (9) to
ten (10). (Pursuant to Chapter 351.055(6) and 351.085.2(4) RSMo.)
Very Truly Yours,
ROY D. BLUNT
Secretary of State
Corporation Division
Amendment Desk
FILED FEB 3, 1988
ROY D. BLUNT
SECRETARY OF STATE
Xerox Life
A XEROX Financial Services Company
Administrative Office
305 Madison Avenue
Morristown, New Jersey 07960
201-285-7000
February 1, 1988
The Secretary of State
State of Missouri
Jefferson City, Missouri 65101
RE: Xerox Financial Services Life Insurance Company
(the "Corporation")
__________________________________________________
Dear Sir:
In accordance with Section 351.085, subdivision (4), of the Missouri
General and Business Corporation Law, this is to advise you that by Consent of
the Board of Directors in Lieu of Meeting dated as of January 18, 1988, it was
resolved that the number of directors of the Corporation be fixed at ten (10).
Please acknowledge receipt of this letter by signing and returning the
enclosed copy of this letter in the self-addressed envelope provided.
Very truly yours,
/S/ ANTOINETTE C. BENTLEY
_____________________________
Antoinette C. Bentley
Secretary
ACB/grl
Enclosures
RECEIPT ACKNOWLEDGED:
By___________________________
Date ________________________
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
[SEAL OF THE SECRETARY OF STATE MISSOURI]
Certificate of Amendment
I, ROY D. BLUNT, Secretary of State of the State of Missouri, do hereby
certify that XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY, a corporation
organized under the Laws of Missouri, has delivered to me and that I have
filed its Certificate of Amendment of its Articles of Incorporation; that said
Corporation has in all respects complied with the requirements of law
governing the Amendment of Articles of Incorporation and that said Articles
are amended in accordance therewith.
NOW, THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment, as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my
hand and affix the GREAT SEAL of the State
of Missouri. Done at the City of
Jefferson, this 10th day of May 1988.
/s/ ROY D. BLUNT
[SEAL] ________________________
Secretary of State
RECEIVED OF: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
FOUR THOUSAND TWENTY DOLLARS-------------Dollars $4,020.00
For Credit of General Revenue Fund, on Account of Incorporation Tax and Fee.
No. I00233744
STATE OF MISSOURI DIVISION OF INSURANCE
Department of Economic Development
P.O. Box 690, Jefferson City, MO 65102-0690
DIRECTOR'S CERTIFICATE OF AMENDMENT
I, Lewis R. Crist, Director, Division of Insurance, Department of
Economic Development, State of Missouri, do hereby certify that Xerox
Financial Services Life Insurance Company, a corporation organized and
operating under the insurance laws of the state of Missouri, has delivered to
me and I have filed its Certificate of Amendment of its Articles of
Incorporation as fully set forth and attached hereto.
I further certify that I have examined the Certificate of Amendment of
Articles of Incorporation and find that it conforms to law, that proceedings
were regular, that the condition and the assets of the company justify the
amendment and that same will not be prejudicial to the interests of the
policyholders, all as provided by law.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
my office in Jefferson City, Missouri, this 5th day of May, 1988.
/S/ LEWIS R. CRIST
--------------------------
LEWIS R. CRIST, Director
Division of Insurance
Department of Economic
Development
State of Missouri
[DIVISION OF INSURANCE]
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned, Xerox Financial Services Life Insurance Company, a
Missouri insurance corporation (hereinafter called the "Corporation"), for the
purpose of amending its Articles of Incorporation, does hereby make and
execute this Certificate of Amendment of the Articles of Incorporation.
(1) The name of the Corporation is Xerox Financial Services Life
Insurance Company.
(2) The shareholders of the Corporation, by written consent in lieu of a
meeting dated as of April 15, 1988, did unanimously adopt a resolution
amending the Articles of Incorporation, as hereinafter set forth.
(3) The Amendment to the Articles of Incorporation of said Corporation
thus adopted are as follows:
A. Article V is hereby amended to read as follows:
The aggregate number of shares of capital stock which the
corporation shall have authority to issue is 5,000,000 shares,
each of a par value of Two Dollars ($2.00) per share, amounting
the aggregate to Ten Million Dollars ($10,000,000.00). Each
share of stock shall be entitled to one vote except that in the
annual election of directors each shareholder shall have the
right of cumulative voting.
(4) The number of shares outstanding and entitled to vote on April 15,
1988 was 1,000,000 shares, each of a par value of Two Dollars ($2.00) per
share, of which 1,000,000 shares voted for the resolution amending the
Articles of Incorporation and 0 shares voted against said resolution.
IN WITNESS WHEREOF, this Certificate of Amendment is executed in
triplicate by the Corporation by its Vice President and Counsel and Secretary
this 2nd day of May, 1988.
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /S/ RICHARD G. MCCARTHY
__________________________
Vice President and Counsel
Attest: /S/ ANTOINETTE C. BENTLEY
__________________________
Secretary
STATE OF NEW JERSEY )
) SS
COUNTY OF MORRIS )
Now on this 2nd day of May, 1988, before me personally appeared Richard
G. McCarthy and Antoinette C. Bentley, to me known to be the persons who
executed the foregoing instrument and to me known to be, respectively, the
Vice President and Counsel and Secretary of Xerox Financial Services Life
Insurance Company, and being first duly sworn upon their oaths each did say
that the statements and matters set forth therein are true, and that they
executed the same as their free act and deed and as the free act and deed of
said Corporation for the purposes set forth therein, and that the seal affixed
is the corporate seal of said Corporation, and that said instrument was signed
and sealed by authority of the shareholders and Board of Directors of said
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year last above written.
/S/ GENE R. LEHNHARDT
_____________________________
Notary Public
My Commission Expires:
GENE R. LEHNHARDT
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires Sept. 29, 1988
FILED AND ISSUED MAY 10, 1988
ROY D. BLUNT
Corporation Dept. SECRETARY OF STATE
STATE OF MISSOURI
ROY D. BLUNT OFFICE OF SECRETARY OF STATE
SECRETARY OF STATE JEFFERSON CITY 65102 314-751-4609
June 21, 1988
XEROX LIFE
ADMINISTRATIVE OFFICE
305 MADISON AVENUE
MORRISTOWN, NEW JERSEY 07960
ATTN: VALERIE J. GASPARIK
RE: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY (I00233744)
Dear Corporation:
This is to advise that on the above date we have filed for record in this
office a Statement of Change in the number of directors from ten (10) to
eleven (11). (Pursuant to Chapter 351.055(6) and 351.085.2(4) RSMo.)
Very Truly Yours,
ROY D. BLUNT
Secretary of State
Corporation Division
Amendment Desk
FILED JUN 21, 1988
ROY D. BLUNT
SECRETARY OF STATE
Xerox Life
A XEROX Financial Services Company
Administrative Office
305 Madison Avenue
Morristown, New Jersey 07960
201-285-7000
June 15, 1988
The Secretary of State
State of Missouri
Jefferson City, Missouri 65101
RE: Xerox Financial Services Life Insurance Company
(the "Corporation")
__________________________________________________
Dear Sir:
In accordance with Section 351.085, subdivision (4), of the Missouri
General and Business Corporation Law, this is to advise you that by Consent of
the Board of Directors in Lieu of Annual Meeting dated as of May 25, 1988, it
was resolved that the number of directors of the Corporation be fixed at
eleven (11).
Please acknowledge receipt of this letter by signing and returning the
enclosed copy of this letter in the self-addressed envelope provided.
Very truly yours,
/S/ VALERIE J. GASPARIK
_____________________________
Valerie J. Gasparik
Assistant Secretary
VJG/grl
Enclosures
cc: A.C. Bentley
RECEIPT ACKNOWLEDGED:
By___________________________
Date ________________________
RECEIVED JUN 21, 1988
ROY D. BLUNT
CORPORATION DEPT. SECRETARY OF STATE
STATE OF MISSOURI
ROY D. BLUNT OFFICE OF SECRETARY OF STATE
SECRETARY OF STATE JEFFERSON CITY 65102 314-751-4609
September 14, 1988
XEROX LIFE
ADMINISTRATIVE OFFICE
305 MADISON AVENUE
MORRISTOWN, NEW JERSEY 07960
ATTN: VALERIE J. GASPARIK
RE: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY (I00233744)
Dear Corporation:
This is to advise that on the above date we have filed for record in this
office a Statement of Change in the number of directors from eleven (11) to
ten (10). (Pursuant to Chapter 351.055(6) and 351.085.2(4) RSMo.)
Very Truly Yours,
ROY D. BLUNT
Secretary of State
Corporation Division
Amendment Desk
FILED SEPT 14, 1988
ROY D. BLUNT
SECRETARY OF STATE
Xerox Life
A XEROX Financial Services Company
Administrative Office
305 Madison Avenue
Morristown, New Jersey 07960
201-285-7000
September 9, 1988
The Secretary of State
State of Missouri
Jefferson City, Missouri 65101
RE: Xerox Financial Services Life Insurance Company
(the "Corporation")
__________________________________________________
Dear Sir:
In accordance with Section 351.085, subdivision (4), of the Missouri
General and Business Corporation Law, this is to advise you that by Consent of
the Board of Directors in Lieu of Meeting dated as of August 24, 1988, it was
resolved that the number of directors of the Corporation be fixed at ten (10).
Please acknowledge receipt of this letter by signing and returning the
enclosed copy of this letter in the self-addressed envelope provided.
Very truly yours,
/S/ VALERIE J. GASPARIK
_____________________________
Valerie J. Gasparik
Assistant Secretary
VJG/grl
Enclosures
cc: A.C. Bentley
RECEIPT ACKNOWLEDGED:
By___________________________
Date ________________________
STATE OF MISSOURI
ROY D. BLUNT OFFICE OF SECRETARY OF STATE
SECRETARY OF STATE JEFFERSON CITY 65102 314-751-4609
October 23, 1989
CRUM & FOSTER
211 MT. AIRY ROAD
BASKING RIDGE, NEW JERSEY 07920
ATTN: VALERIE J. GASPARIK
RE: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY (I00233744)
Dear Corporation:
This is to advise that on the above date we have filed for record in this
office a Statement of Change in the number of directors from ten (10) to
eleven (11). (Pursuant to Chapter 351.055(6) and 351.085.2(4) RSMo.)
Very Truly Yours,
ROY D. BLUNT
Secretary of State
Corporation Division
Amendment Desk
FILED OCT 23, 1989
ROY D. BLUNT
SECRETARY OF STATE
Crum & Foster Corporation
A XEROX Financial Services Company
211 Mt. Airy Road
Basking Ridge, New Jersey 07920
201-204-3500
October 20, 1989
The Secretary of State
State of Missouri
Jefferson City, Missouri 65101
RE: Xerox Financial Services Life Insurance Company
(the "Corporation")
__________________________________________________
Dear Sir:
In accordance with Section 351.085, subdivision (4), of the Missouri
General and Business Corporation Law, this is to advise you that by Consent of
the Board of Directors in Lieu of Meeting dated as of September 29, 1989, it
was resolved that the number of directors of the Corporation be fixed at
eleven (11).
Please acknowledge receipt of this letter by signing and returning the
enclosed copy of this letter in the self-addressed envelope provided.
Very truly yours,
/S/ VALERIE J. GASPARIK
_____________________________
Valerie J. Gasparik
Assistant Secretary
VJG/grl
Enclosures
cc: A. C. Bentley
RECEIPT ACKNOWLEDGED:
By___________________________
Date ________________________
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
[SEAL OF THE SECRETARY OF STATE MISSOURI]
Certificate of Amendment
I, ROY D. BLUNT, Secretary of State of the State of Missouri, do hereby
certify that XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY, a corporation
organized under the Laws of Missouri, has delivered to me and that I have
filed its Certificate of Amendment of its Articles of Incorporation; that said
Corporation has in all respects complied with the requirements of law
governing the Amendment of Articles of Incorporation and that said Articles
are amended in accordance therewith.
NOW, THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment, as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my
hand and affix the GREAT SEAL of the State
of Missouri. Done at the City of
Jefferson, this 30th day of January, 1990.
/s/ ROY D. BLUNT
[SEAL] ________________________
Secretary of State
RECEIVED OF: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
TWENTY DOLLARS-------------Dollars $20.00
For Credit of General Revenue Fund, on Account of Incorporation Tax and Fee.
No. I00233744
STATE OF MISSOURI
DIVISION OF INSURANCE
Department of Economic Development
P.O. Box 690, Jefferson City, MO 65102-0690
DIRECTOR'S CERTIFICATE OF AMENDMENT
I, Lewis E. Melahn, Director, Division of Insurance, Department of
Economic Development, State of Missouri, do hereby certify that Xerox
Financial Services Life Insurance Company, a corporation, organized and
existing under the insurance laws of the State of Missouri, has delivered to
me and I have filed its Certificate of Amendment of Articles of Incorporation
as more fully set forth in the Certificate of Amendment of Articles of
Incorporation as attached hereto.
I further certify that I have examined the Certificate of Amendment of
Articles of Incorporation and find it conforms to law; that the proceedings
were regular; that the condition and the assets of the company justify the
amendment and that same will not be prejudicial to the interests of the
policyholders, all as provided by law.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
my office in Jefferson City, Missouri, this 2nd day of January, 1990.
/S/ LEWIS E. MELAHN
--------------------------
LEWIS E. MELAHN, Director
Division of Insurance
Department of Economic
Development
State of Missouri
[DIVISION OF INSURANCE]
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned, Xerox Financial Services Life Insurance Company, a
Missouri insurance corporation (hereinafter called the "Corporation"), for the
purpose of amending its Articles of Incorporation, does hereby make and
execute this Certificate of Amendment of the Articles of Incorporation.
(1) The name of the Corporation is Xerox Financial Services Life
Insurance Company.
(2) The shareholders of the Corporation, by written consent in lieu of a
meeting dated as December 21, 1989, did unanimously adopt a resolution
amending the Articles of Incorporation, as hereinafter set forth.
(3) The Amendment to the Articles of Incorporation of said Corporation
thus adopted are as follows:
A. Article II is hereby amended to read as follows:
"The principal office of the Corporation shall be located in
Hazelwood, Missouri, and the Administrative Office of the
Corporation shall be located in Lisle, Illinois."
(4) The number of shares outstanding and entitled to vote on December 21,
1989 was 1,765,000 shares, of which 1,765,000 shares voted for the resolution
amending the Articles of Incorporation and 0 shares voted against said
resolution.
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /S/ CHARLES S. ERNST
__________________________
Vice President and Counsel
Attest: /S/ VALERIE J. GASPARIK
__________________________
Assistant Secretary
STATE OF NEW JERSEY )
) SS
COUNTY OF SOMERSET )
Now on this 22nd day of December, 1989, before me personally appeared
Charles S. Ernst and Valerie J. Gasparik, to me known to be the persons who
executed the foregoing instrument and to me known to be, respectively, the
Vice President and Counsel and Assistant Secretary of Xerox Financial Services
Life Insurance Company, and being first duly sworn upon their oaths each did
say that the statements and matters set forth therein are true, and that they
executed the same as their free act and deed and as the free act and deed of
said Corporation for the purposes set forth therein, and that the seal affixed
is the corporate seal of said Corporation, and that said instrument was signed
and sealed by authority of the shareholders of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year last above written.
/S/ JACQUELINE G. SCHMIDT
_____________________________
Notary Public
My Commission Expires:
JACQUELINE G. SCHMIDT
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires Oct. 12, 1994
FILED AND CERTIFICATE ISSUED January 30, 1990
ROY D. BLUNT
Corporation Dept. SECRETARY OF STATE
STATE OF MISSOURI
ROY D. BLUNT OFFICE OF SECRETARY OF STATE
SECRETARY OF STATE JEFFERSON CITY 65102 314-751-4609
June 12, 1990
XEROX LIFE
DEAN H. GOOSSEN
1001 WARRENVILLE RD.
LISLE, ILLINOIS 60532
RE: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY (I00233744)
Dear Corporation:
This is to advise that on the above date we have filed for record in this
office a Statement of Change in the number of directors from eleven (11) to
ten (10). (Pursuant to Chapter 351.055(6) and 351.085.2(4) RSMo.)
Very Truly Yours,
ROY D. BLUNT
Secretary of State
Corporation Division
Amendment Desk
FILED JUN 12, 1990
ROY D. BLUNT
SECRETARY OF STATE
Xerox Life
A XEROX Financial Services Company
1001 Warrenville Rd.
Lisle, Illinois 60532
Inside Illinois: call collect
708-719-6207
June 1, 1990
The Secretary of State
State of Missouri
Jefferson City, Missouri 65101
RE: Xerox Financial Services Life Insurance Company (the "Corporation")
___________________________________________________________________
Dear Sir:
In accordance with Section 351.085, subdivision (4), of the Missouri
General and Business Corporation Law, this is to advise you that by Consent of
the Board of Directors in Lieu of Annual Meeting dated as of May 4, 1990,
it was resolved that the number of directors of the Corporation be fixed at
ten (10).
Please acknowledge receipt of this letter by signing and returning the
enclosed copy of this letter in the self-addressed, stamped envelope provided.
Very truly yours,
/S/ DEAN H. GOOSSEN
_____________________________
Dean H. Goossen
Vice President, General Counsel & Secretary
DHG/cv
Enclosures
RECEIPT ACKNOWLEDGED:
By___________________________
Date ________________________
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
[SEAL OF THE SECRETARY OF STATE MISSOURI]
Certificate of Amendment
I, ROY D. BLUNT, Secretary of State of the State of Missouri, do hereby
certify that XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY, a corporation
organized under the Laws of Missouri, has delivered to me and that I have
filed its Certificate of Amendment of its Articles of Incorporation; that said
Corporation has in all respects complied with the requirements of law
governing the Amendment of Articles of Incorporation and that said Articles
are amended in accordance therewith.
NOW THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my
hand and affix the GREAT SEAL of the State
of Missouri. Done at the City of
Jefferson, this 4th day of March, 1991.
/s/ ROY D. BLUNT
[SEAL] ________________________
Secretary of State
RECEIVED OF: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
TWENTY DOLLARS-------------Dollars $20.00
For Credit of General Revenue Fund, on Account of Incorporation Tax and Fee.
No. I00233744
CERTIFICATE OF AMENDMENT OF ARTICLES
(to be executed in triplicate)
We, the undersigned president or vice president and secretary or assistant
secretary, on our oaths swear and certify to the truth of the following
statements:
(1) NAME OF THE INSURANCE COMPANY: XEROX FINANCIAL SERVICES LIFE INSURANCE
COMPANY. IF THE NAME OF THE INSURANCE COMPANY CHANGED AS A RESULT OF THIS
AMENDMENT, THE NAME OF THE INSURANCE COMPANY IMMEDIATELY BEFORE THIS AMENDMENT
WAS______________.
(2) THE DATE OF THE ADOPTION OF THE AMENDMENT BY THE SHAREHOLDERS, MEMBERS OR
OTHER GROUP OF PERSON ENTITLED TO VOTE ON THE AMENDMENT: December 19, 1990.
(3) THE AMENDMENT ADOPTED (attach additional pages if necessary):
A. Article II is hereby amended to read as follows:
"The principal office of the Corporation shall be located in
St. Louis, Missouri, and the Administrative Office of the
Corporation shall be located in Lisle, Illinois."
(4) THE NUMBER OF SHARES, MEMBERS, OR OTHER GROUP OF PERSONS ENTITLED TO VOTE,
OR IF A MUTUAL, THE NUMBER OF THE MEMBERS PRESENT EITHER IN PERSON OR BY PROXY
ENTITLED TO VOTE: 2,512,100.
(5) THE NUMBER OF SHARES, MEMBERS, OR OTHER GROUP OF PERSONS THAT VOTED FOR
AND AGAINST SAID AMENDMENT RESPECTIVELY: For: 2,512,100 Against: 0
(6) IF THE AMENDMENT EFFECTS A CHANGE IN THE NUMBER OR PAR VALUE OF AUTHORIZED
SHARES, THEN A STATEMENT SHOWING THE NUMBER OF SHARES AND PAR VALUE THEREOF
PREVIOUSLY AUTHORIZED: __________________________
/s/ STEPHEN P. CLARK
___________________________
Executive Vice President
PLACE CORPORATE SEAL HERE
(If no corporate seal, state "none".)
/s/ DEAN H. GOOSSEN
____________________________
Secretary
State of Illinois
County of Dupage
Subscribed and sworn to before me this 6th day of February 1991.
"OFFICIAL SEAL"
CATHERINE A. VRONA /S/ CATHERINE A. VRONA
NOTARY PUBLIC STATE OF ILLINOIS ________________________________
MY COMMISSION EXPIRES 1/4/92 NOTARY PUBLIC
My Commission expires 1/4/92.
____________________________________________________________________________ _
CERTIFICATE OF AMENDMENT OF THE DIRECTOR OF INSURANCE
(This certificate may be filled out only by the Director of Insurance)
I certify that I have examined the above Certificate of Amendment of Articles
as executed by the insurance company and find that it conforms to law, that
the proceedings were regular, that the condition and the assets of the company
justify the amendment, and that the same will not be prejudicial to the
interests of the policyholders, all as provided by law.
So Certified, Signed, and Official Seal Affixed on this date: 2-13-91.
/s/ LEWIS E. MELAHN
____________________________
LEWIS E. MELAHN
Director of Insurance
State of Missouri
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
The undersigned, Xerox Financial Services Life Insurance Company, a
Missouri insurance corporation (hereinafter called the "Corporation"), for the
purpose of amending its Articles of Incorporation, does hereby make and
execute this Certificate of Amendment of the Articles of Incorporation.
(1) The name of the Corporation is Xerox Financial Services Life
Insurance Company.
(2) The shareholders of the Corporation, by written consent in lieu of a
meeting dated as of December 19, 1990, did unanimously adopt a resolution
amending the Articles of Incorporation, as hereinafter set forth.
(3) The Amendment of the Articles of Incorporation of said Corporation
thus adopted are as follows:
A. Article II is hereby amended to read as follows:
"The principal office of the Corporation shall be located in
St. Louis, Missouri, and the Administrative Office of the
Corporation shall be located in Lisle, Illinois."
(4) The number of shares outstanding and entitled to vote on December 1,
1990 was 2,512,000 shares, of which 2,512,000 shares voted for the resolution
amending the Articles of Incorporation and 0 shares voted against said
resolution.
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
By: /S/ STEPHEN P. CLARK
__________________________
Stephen P. Clark
Executive Vice President
& Chief Financial Officer
Attest: /S/ DEAN H. GOOSSEN
__________________________
Dean H. Goossen
Vice President, General Counsel
& Secretary
STATE OF ILLINOIS )
) SS
COUNTY OF DUPAGE )
Now on this 18th day of January, 1991, before me personally appeared
Stephen P. Clark and Dean H. Goossen, to me known to be the persons who
executed the foregoing instrument and to me known to be, respectively, the
Executive Vice President and Chief Financial Officer and the Vice President,
General Counsel and Secretary of Xerox Financial Services Life Insurance
Company, and being first duly sworn upon their oaths each did say that the
statements and matters set forth therein are true and that they executed the
same as their free act and deed and as the free act and deed of said
Corporation for the purposes set forth therein, and that the seal affixed is
the corporate seal of said Corporation, and that said instrument was signed
and sealed by authority of the shareholders of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year last above written.
/S/ CATHERINE A. VRONA
_____________________________
Notary Public
"OFFICIAL SEAL"
CATHERINE A. VRONA
NOTARY PUBLIC STATE OF ILLINOIS
MY COMMISSION EXPIRES 1/4/92
FILED AND CERTIFICATE ISSUED MAR 4, 1991
ROY D. BLUNT
Corporation Dept. SECRETARY OF STATE
STATE OF MISSOURI . . . Office of Secretary of State
Roy D. Blunt, Secretary of State
STATEMENT OF CHANGE OF REGISTERED AGENT OR REGISTERED OFFICE
INSTRUCTIONS
The filing fee for this change is $5.00.
Change must be filed in DUPLICATE.
The registered office may be, but need not be, the same as the place of
business of the corporation or limited partnership, but the registered office
and the business address of the agent must be the same. The corporation or
limited partnership cannot act as its own registered agent.
Any subsequent change in the registered office or agent must be
immediately reported to the Secretary of State. Forms are available upon
request.
Charter No. I00233744
The undersigned corporation or limited partnership, organized and
existing under the laws of the State of Missouri for the purpose of changing
its registered agent "The General and Business Corporation Act of Missouri,"
or the "Missouri Uniform Limited Partnership Law," represents that:
1. The name of the corporation/ltd. partnership is: XEROX FINANCIAL SERVICES
LIFE INSURANCE COMPANY.
2. The name of its registered agent before this change is: VERNE E. PURVINES.
3. The name of the new registered agent is: THOMAS R. DRUMMOND.
4. The address, including street number, if any, of its registered office
before this change is: 10534 Natural Bridge Road, St. Louis, Missouri 63134.
5. Its registered office (including street number, if any change is to be
made) is hereby CHANGED TO: 77 Westport Plaza, Suite 351, St. Louis, Missouri
63146.
6. The address of its registered office and the address of the business
office of its registered agent, as changed will be identical.
7. Such change was authorized by resolution duly adopted by the board of
directors of the corporation or by the limited partnership.
IN WITNESS WHEREOF, the undersigned corporation or limited partnership
has caused this report to be executed in its name by its PRESIDENT or VICE
PRESIDENT of the corporation, or GENERAL PARTNER of the limited partnership,
and attested to by the assistant secretary of a corporation on the 31st
day of May, 1991.
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
______________________________________________
Name of corporation or limited partnership
(Corporate Seal) By /s/ STEPHEN P. CLARK
________________________________
Executive Vice President of Corporation
or
If no seal, state "none" General Partner of limited partnership
Attest: /s/ DEAN H. GOOSSEN
__________________________
Secretary of Corporation
STATE OF ILLINOIS )
COUNTY OF DUPAGE ) ss.
I, Catherine Vrona, a Notary Public, do hereby certify that on the 31st
day of May, 1991, personally appeared before me Stephen P. Clark who declares
he is the Executive Vice President of the corporation, or a General Partner
of the limited partnership, executing the foregoing document, and being first
duly sworn, acknowledged that he signed the foregoing document in the capacity
therein set forth and declared that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
(Notarial Seal) /S/ CATHERINE A. VRONA
__________________________
NOTARY PUBLIC
My Commission expires 1/4/92
"OFFICIAL SEAL"
CATHERINE A. VRONA
NOTARY PUBLIC STATE OF ILLINOIS
MY COMMISSION EXPIRES 1/4/92.
FILED JUN 3, 1991
SECRETARY OF STATE
P.O. BOX 778
JEFFERSON CITY, MO 65102
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
[SEAL OF THE SECRETARY OF STATE MISSOURI]
Certificate of Amendment
I, ROY D. BLUNT, Secretary of State of the State of Missouri, do hereby
certify that XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY, a corporation
organized under the Laws of Missouri, has delivered to me and that I have
filed its Certificate of Amendment of its Articles of Incorporation; that said
Corporation has in all respects complied with the requirements of law
governing the Amendment of Articles of Incorporation and that said Articles
are amended in accordance therewith.
NOW THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment, as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my
hand and affix the GREAT SEAL of the State
of Missouri. Done at the City of
Jefferson, this 2nd day of December, 1991.
/s/ ROY D. BLUNT
[SEAL] ________________________
Secretary of State
RECEIVED OF: XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
TWENTY DOLLARS-------------Dollars $20.00
For Credit of General Revenue Fund, on Account of Incorporation Tax and Fee.
No. I00233744
CERTIFICATE OF AMENDMENT OF ARTICLES
(to be executed in triplicate)
We, the undersigned president or vice president and secretary or assistant
secretary, on our oaths swear and certify to the truth of the following
statements:
(1) NAME OF THE CORPORATION: XEROX FINANCIAL SERVICES LIFE INSURANCE
COMPANY. IF THE NAME OF THE INSURANCE COMPANY CHANGED AS A RESULT OF THIS
AMENDMENT, THE NAME OF THE INSURANCE COMPANY IMMEDIATELY BEFORE THIS AMENDMENT
WAS ________________________________________________________________________.
(2) THE DATE OF THE ADOPTION OF THE AMENDMENT BY THE SHAREHOLDERS, MEMBERS OR
OTHER GROUP OF PERSONS ENTITLED TO VOTE ON THE AMENDMENT: October 15, 1991.
(3) The Amendment adopted (attach additional pages if necessary):
Article II is hereby amended to read as follows:
"The principal office of the Corporation shall be located in
Jefferson City, Missouri, and the Administrative Office of the
Corporation shall be located in Oakbrook Terrace, Illinois."
(4) THE NUMBER OF SHARES, MEMBERS, OR OTHER GROUP OF PERSONS ENTITLED TO VOTE,
OR IF A MUTUAL, THE NUMBER OF THE MEMBERS PRESENT EITHER IN PERSON OR BY PROXY
ENTITLED TO VOTE: 2,696,100.
(5) THE NUMBER OF SHARES, MEMBERS OR OTHER GROUP OF PERSONS THAT VOTED FOR AND
AGAINST SAID AMENDMENT RESPECTIVELY: For: 2,696,100 Against: 0
(6) IF THE AMENDMENT EFFECTS A CHANGE IN THE NUMBER OR PAR VALUE OF AUTHORIZED
SHARES, THEN A STATEMENT SHOWING THE NUMBER OF SHARES AND PAR VALUE THEREOF
PREVIOUSLY AUTHORIZED: __________________________________________________.
By: /S/ STEPHEN P. CLARK
__________________________
Executive Vice President
PLACE CORPORATE SEAL HERE
(If no corporate seal, state "none".)
/s/ LINDA S. MACARZEAL
__________________________
Assistant Secretary
State of ILLINOIS
County of DUPAGE
Subscribed and sworn to before me this 31st day of October, 1991.
"OFFICIAL SEAL"
SUSAN MARIE GASKILL
NOTARY PUBLIC STATE OF ILLINOIS
MY COMMISSION EXPIRES 5/16/93 /S/ SUSAN MARIE GASKILL
____________________________
NOTARY PUBLIC
My Commission expires 5/16/93.
______________________________________________________________________________
CERTIFICATE OF AMENDMENT OF THE DIRECTOR OF INSURANCE
(This certificate may be filled out only by the Director of Insurance)
I certify that I have examined the above Certificate of Amendment of Articles
as executed by the insurance company and find that it conforms to law, that
the proceedings were regular, that the condition and the assets of the company
justify the amendment, and that the same will not be prejudicial to the
interests of the policyholders, all as provided by law.
So Certified, Signed, and Official Seal Affixed on this date: 11/8/91.
/S/ LEWIS E. MELAHN
_____________________________
LEWIS E. MELAHN
Director of Insurance
State of Missouri
STATE OF MISSOURI
Rebecca McDowell Cook, Secretary of State
P.O. Box 778, Jefferson City, MO 65102
Corporation Division
Statement of Change of Registered Agent or Registered Office
INSTRUCTIONS
1. The filing fee for this change is $10.00. Change must be filed in
DUPLICATE.
2. P.O. Box may only be used in conjunction with Street, Route or Highway.
3. Agent and address must be in the State of Missouri.
4. If a corporation, officers (president or vice president and secretary or
assistant secretary) must sign, and president's or vice president's signature
must be notarized.
5. If limited partnership, general partner must sign and have their signature
notarized.
Charter No. I-233744
The undersigned corporation or limited partnership, organized and existing
under the laws of the State of Missouri for the purpose of changing its
registered agent "The General and Business Corporation Act of Missouri," or
the "Missouri Uniform Limited Partnership Law," represents that:
1. The name of the corporation is Xerox Financial Services Life Insurance
Company.
2. The name of its registered agent before this change is Thomas R. Drummond.
3. The name of the new registered agent is Nick Monaco.
4. The address, including street number, if any, of its registered office
before this change is 77 Westport Plaza, Suite 351, St. Louis Missouri 63146.
5. Its registered office (including street number, if any change is to be
made) is hereby CHANGED TO 237 E. High Street, Jefferson City, Missouri 65101.
6. The address of its registered office and the address of the business
office of its registered agent, as changed, will be identical.
7. Such change was authorized by resolution duly adopted by the board of
directors of the corporation or by the limited partnership.
IN WITNESS WHEREOF, the undersigned corporation has caused this report to
be executed in its name by its President or Vice President of the corporation,
or General Partner of the limited partnership, and attested to by the
assistant secretary of a corporation on the 8th day of May, 1995.
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
_______________________________________________
Name of corporation or limited partnership
(Corporate Seal) By /s/ J. ROBERT HOPSON
________________________________
President or Vice President of corporation
If no seal, state "none" or General Partner of limited partnership
Attest: /s/ JEFFERY K. HOELZEL
________________________________
Secretary or Assistant Secretary
of corporation
STATE OF ILLINOIS )
COUNTY OF DUPAGE ) ss.
I, Dolores K. Delgado, a Notary Public, do hereby certify that on the 8th
day of May, 1995, personally appeared before me J. Robert Hopson who declares
he/she is the President or Vice President of the corporation, or a General
Partner of the limited partnership, executing the foregoing document, and
being first duly sworn, acknowledged that he/she signed the foregoing document
in the capacity therein set forth and declared that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
(Notarial Seal) /S/ DOLORES K. DELGADO
__________________________
NOTARY PUBLIC
My Commission expires 3/9/96.
"OFFICIAL SEAL"
DOLORES K. DELGADO
NOTARY PUBLIC STATE OF ILLINOIS
MY COMMISSION EXPIRES 3/9/96
STATE OF MISSOURI
Rebecca McDowell Cook, Secretary of State
CORPORATION DIVISION
Certificate of Amendment
I, REBECCA MCDOWELL COOK, Secretary of State of the State of Missouri, do
hereby certify that COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY (FORMERLY
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY), a corporation organized
under the Laws of Missouri, has delivered to me and that I have filed its
Certificate of Amendment of its Articles of Incorporation; that said
Corporation has in all respects complied with the requirements of law
governing the Amendment of Articles of Incorporation and that said Articles
are amended in accordance therewith.
IN TESTIMONY WHEREOF, I have hereunto set my
hand and imprinted the GREAT SEAL of the State
of Missouri, on this, the 22nd day of June, 1995.
/s/ REBECCA MCDOWELL COOK
[SEAL] ______________________________
Secretary of State
$25.00
CERTIFICATE OF AMENDMENT OF ARTICLES
(to be executed in triplicate)
We, the undersigned, president or vice president and secretary or assistant
secretary, on our oaths swear and certify to the truth of the following
statements:
(1) NAME OF THE CORPORATION: COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY.
IF THE NAME OF THE INSURANCE COMPANY CHANGED AS A RESULT OF THIS AMENDMENT,
THE NAME OF THE INSURANCE COMPANY IMMEDIATELY BEFORE THIS AMENDMENT WAS XEROX
FINANCIAL SERVICES LIFE INSURANCE COMPANY.
(2) THE DATE OF THE ADOPTION OF THE AMENDMENT BY THE SHAREHOLDERS, MEMBERS OR
OTHER GROUP OF PERSONS ENTITLED TO VOTE ON THE AMENDMENT: JUNE 1, 1995.
(3) The Amendment adopted (attache additional pages if necessary): PLEASE SEE
EXHIBIT A ATTACHED HERETO AND INCORPORATED HEREIN.
(4) THE NUMBER OF SHARES, MEMBERS, OR OTHER GROUP OF PERSONS ENTITLED TO VOTE,
OR IF A MUTUAL, THE NUMBER OF THE MEMBERS PRESENT EITHER IN PERSON OR BY PROXY
ENTITLED TO VOTE: 2,899,446 shares of Common Stock.
(5) THE NUMBER OF SHARES, MEMBERS OR OTHER GROUP OF PERSONS THAT VOTED FOR AND
AGAINST SAID AMENDMENT RESPECTIVELY: For: 2,899,446 Against: 0
(6) IF THE AMENDMENT EFFECTS A CHANGE IN THE NUMBER OR PAR VALUE OF AUTHORIZED
SHARES, THEN A STATEMENT SHOWING THE NUMBER OF SHARES AND PAR VALUE THEREOF
PREVIOUSLY AUTHORIZED: N/A.
By: /S/ WILLIAM L. MAXI
__________________________
President or Vice President
PLACE CORPORATE SEAL HERE
(If no corporate seal, state "none".)
/s/ JEFFERY K. HOELZEL
__________________________
Secretary or Assistant Secretary
State of ILLINOIS
County of DUPAGE
Subscribed and sworn to before me this 2nd day of June, 1995.
"OFFICIAL SEAL"
DOLORES K. DELGADO
NOTARY PUBLIC STATE OF ILLINOIS
MY COMMISSION EXPIRES 3/9/96. /S/ DOLORES K. DELGADO
____________________________
NOTARY PUBLIC
My Commission expires 3/9/96.
______________________________________________________________________________
CERTIFICATE OF AMENDMENT OF THE DIRECTOR OF INSURANCE
(This certificate may be filled out only by the Director of Insurance)
I certify that I have examined the above Certificate of Amendment of Articles
as executed by the insurance company and find that it conforms to law, that
the proceedings were regular, that the condition and the assets of the company
justify the amendment, and that the same will not be prejudicial to the
interests of the policyholders, all as provided by law.
So Certified, Signed, and Official Seal Affixed on this date: 6/22/95.
/S/ JAY ANGOFF
_____________________________
JAY ANGOFF
Director of Insurance
State of Missouri
EXHIBIT A
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY,
FORMERLY KNOWN AS
XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY
1. Article I is hereby amended to read in its entirety as follows:
The name of this corporation is Cova Financial Services Life
Insurance Company.
2. Article II is hereby amended to read in its entirety as follows:
The principal office of the Corporation shall be located in
St. Louis, Missouri, and the Administrative Office of the
Corporation shall be located in Oakbrook Terrace, Illinois.
BY-LAWS
OF
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY (Amended 6/1/95) (Formerly
Xerox Financial Services Life Insurance Company - Amended 9/1/85)
(Formerly Assurance Life Company)
a Missouri domiciled life insurance company
Article I
Shareholders
Section 1. Place of Meetings.
All meetings of the shareholders shall be held at the principal business
office of the corporation in Missouri, except such meetings as the board of
directors to the extent permissible by law expressly determines shall be
held elsewhere, in which case such meeting may be held, upon notice thereof
as hereinafter provided, at such other place or places, within or without
the State of Missouri, as the board of directors shall have determined, and
as shall be stated in such notice; and, unless specifically prohibited by
law, any meeting may be held at any place and time, and for any purpose, if
consented to in writing by all of the shareholders entitled to vote thereat.
Section 2. Annual Meetings.
An annual meeting of the shareholders to elect directors and to transact
such other business as may properly be brought before the meeting shall be
held each year at such date, time and place as the board of directors may
determine. (Amended 6/1/95)
Section 3. Special Meetings.
Special meetings of the shareholders may be called by the chairman of the
board, by the president, by the secretary, by the board of directors, or by
the holders of, or by any officer or shareholder upon the written request of
the holders of, not less than four-fifths of all outstanding shares entitled
to vote at any such meeting, and shall be called by an officer directed to
do so by the board of directors. Shareholders' requests for such special
meeting shall be in writing and shall state the nature of the business
desired to be transacted.
The "call" and the "notice" of any such meeting shall be deemed to be
synonymous.
Section 4. Notice of Meeting.
Written or printed notice of each meeting of the shareholders, whether
annual or special, stating the place, day and hour of the meeting, and, in
case of a special meeting, the purpose or purposes thereof, shall be
delivered or given to each shareholder entitled to vote thereat, either
personally or by mail, not less than ten (10) days or more than fifty (50)
days prior to the meeting, unless, as to a particular matter, other or
further notice is required by law, in which case such other or further
notice shall be given. In addition to such written or printed notice,
published notice shall be given if (and in the manner) then required by
law.
Any notice of a shareholders' meeting sent by mail shall be deemed to be
delivered when deposited in the United States mail with postage thereon
prepaid addressed to the shareholder at his address as it appears on the
records of the corporation.
Section 5. Presiding Officials.
Every meeting of the shareholders, for whatever object, shall be convened by
the chairman of the board, by the president, or by the officer or person who
called the meeting by notice as above provided.
Section 6. Business Which May Be Transacted at Annual Meeting.
At each annual meeting of the shareholders, the shareholders shall elect a
board of directors to hold office until the next succeeding annual meeting
or until their successors shall have been elected and qualified and they may
transact such other business as may be desired, whether or not the same was
specified in the notice of the meeting, unless the consideration of such
other business without its having been specified in the notice of the
meeting as one of the purposes thereof, is prohibited by law.
Section 7. Business Which May Be Transacted at Special Meetings.
Business transacted at all special meetings shall be confined to the
purposes stated in the notice of such meeting, unless the transaction of
other business is consented to by the holders of all of the outstanding
shares of stock of the corporation entitled to vote thereat.
Section 8. Quorum of Shareholders.
Except as otherwise provided by law or by the articles of incorporation, a
majority of the outstanding shares entitled to vote at any meeting
represented in person or by proxy shall constitute a quorum at a meeting of
the shareholders, but less than a quorum shall have the right successively
to adjourn the meeting to a specified date not longer than ninety days after
such adjournment, and no notice need be given of such adjournment to
shareholders not present at the meeting.
Section 9. Voting of Shareholders.
Each shareholder shall be entitled to as many votes on any proposition as
he has shares of stock in the corporation, and he may vote them in person
or by proxy. Such proxy shall be in writing and shall state the name of the
person authorized to cast such vote and the date of the meeting at which
such vote shall be cast, and no such proxy shall be valid unless the same
shall have been given within thirty days prior to the meeting at which such
vote is to be cast and shall be filed with the Secretary at or previous to
the time of the meeting and before the votes are cast.
If the board of directors does not close the transfer books or set a record
date for the determination of the shareholders entitled to notice of, and to
vote at, a meeting of shareholders, only the shareholders who are
shareholders of record at the close of business the twentieth day preceding
the date of the meeting shall be entitled to notice of, and to vote at, the
meeting, and any adjournment of the meeting.
Section 10. Registered Shareholders - Exceptions - Stock Ownership Presumed.
The corporation shall be entitled to treat the holders of the shares of
stock of the corporation, as recorded in the stock record or transfer books
of the corporation, as the holders of record and as the holders and owners
in fact thereof and, accordingly, the corporation shall not be required to
recognize any equitable or other claim to or interest in any such shares on
the part of any other person, firm, partnership, corporation or association,
whether or not the corporation shall have express or other notice thereof,
except as is otherwise expressly required by law, and the term "shareholder"
as used in these bylaws means one who is a holder of record of shares of the
corporation.
Article II
Board of Directors
Section 1. Directors - Number and Vacancies.
Unless and until changed by the board of directors as hereinafter provided,
the number of directors to constitute the board of directors of the
corporation shall be nine. (Amended 6/1/95) The board of directors, to the
extent permitted by law, shall have the power to change the number of
directors from time to time provided that any notice required by law of any
such change is duly given. Directors need not be shareholders unless the
Articles of Incorporation at any time so provide.
Vacancies on the board of directors shall be filled for the unexpired term
by a majority of the remaining directors, or, if they are unable to do so,
by vote of a majority of shareholders at an annual or special meeting.
Section 2. Removal of Directors.
Any director may be removed either with or without cause at any time by the
affirmative vote of the shareholders of record holding a majority of the
outstanding shares of the corporation entitled to vote for the election of
directors, given at a meeting of the shareholders called for that purpose,
or by the holders of a majority of the outstanding shares entitled to vote
for the election of directors without holding a meeting or notice but by
merely presenting their majority to the secretary of the corporation in
writing for the removal of a director or directors without cause. Any
director may be removed with cause by a majority of the total number of
directors constituting the entire Board of Directors at a meeting of the
Board of Directors. (Amended 6/1/95)
Section 3. Directors - Employment and Age Qualifications.
"Inside directors" shall be defined as any director who is also an employee
of the corporation, or any affiliate thereof, at the time first elected to
the board. "Outside director" shall be defined as any director who is not an
inside director. Directors shall hold office subject to the employment and
age qualifications contained herein, provided, however, the board of
directors may, by resolution adopted by a majority of the entire board,
waive such qualifications as to any director or candidate for the office of
director.
(1) Inside Directors. The term of office of any person serving as an
"inside director" shall cease upon the first to occur of the following
events:
(a) Termination of employment with the corporation and all affiliates
thereof for any reason, or
(b) Retirement pursuant to any retirement plan or pension plan
adopted by the corporation or any affiliate thereof.
(2) Outside directors. The person shall be eligible for election as an
"outside director" after he has attained age 70.
Section 4. Powers of the Board.
The property and business of the corporation shall be controlled and managed
by the directors, acting as a board. The board shall have and is vested with
all and unlimited powers and authorities, except as may be expressly limited
by law, the articles of incorporation or these bylaws, to do or cause to be
done any and all lawful things for and in behalf of the corporation, to
exercise or cause to be exercised any or all of its powers, privileges, and
franchises, and to seek the effectuation of its objects and purposes.
Section 5. Regular Meetings.
A regular meeting of the board of directors shall be held without notice
other than this By-Law immediateley after, and at the same place as, the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place, either within or without the State of
Missouri, for the holding of additional regular meetings without notice
other than such resolution. (Amended 6/1/95)
Section 6. Special Meetings.
Special Meetings of the board of directors shall be held at such time and
place as is specified in the notice of such meeting and shall be called by
the chairman of the board, the president, the secretary, any vice president,
or any one or more of the directors. Notice of any such meeting of the board
shall be given personally or by mail or telegram to each member of the board
at least two hours prior to the scheduled time of the meeting, but such
notice may be waived in writing or by telegram either before or after the
meeting, and attendance at the meeting by any director shall be deemed a
waiver of such notice.
Section 7. Quorum.
A majority of the full board of directors shall constitute a quorum for the
transaction of business, but less than a quorum may adjourn from time to
time until a quorum be obtained. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
board of directors.
Section 8. Action Without a Meeting.
If all the directors severally or collectively consent in writing to any
action to be taken by the directors, such consents shall have the same force
and effect as an unanimous vote of the directors at a meeting duly held. The
secretary shall file such consents with the minutes of the meetings of the
board of directors.
Section 9. Advisory Directors.
The board of directors may appoint to the office of advisory director any
person whose abilities and interest in the corporation, in the opinion of
the board, qualify him to render service to the board in an advisory
capacity. Such advisory directors may receive notice of and attend meetings
of the board of directors, shall have no vote in the affairs of the
corporation and shall not be counted for the purposes of determining a
quorum or majority of the board of any purpose. Such advisory directors
shall serve in an advisory capacity to the board of directors only and no
action of the board shall be invalid because of the failure of any such
advisory director to receive notice of or to attend any meeting of the board
or to be informed of or to approve of any action taken by the board of
directors.
Section 10. Executive Committee.
The board of directors may, by resolution or resolutions adopted by a
majority of the whole board of directors, designate an executive committee,
such committee to consist of two or more directors of the corporation,
which committee, to the extent provided in said resolution or resolutions,
shall have and may exercise all of the authority of the board of directors
in the management of the corporation; provided, however, that the
designation of such committee and the delegation thereto of authority shall
not operate to relieve the board of directors, or any member thereof, of
any responsibility imposed upon it or him by law.
The executive committee shall keep regular minutes of its proceedings which
minutes shall be recorded in the minutes of the corporation. The secretary
or an assistant secretary of the corporation may act as secretary for the
committee if the committee so requests.
Section 11. Other Committees.
The board of directors may appoint a finance committee and fix its duties,
and may from time to time appoint such other committees as the board shall
deem advisable, including a committee or committees which shall have
authority to approve payments of salary in excess of $20,000 per annum to
any officer or employee of the corporation and authority to approve payment
of salary, compensation or emolument amounting in any year to more than
$20,000 to any other person, firm or corporation. The board of directors
shall appoint and fix the duties of such additional committees as they in
their discretion shall deem necessary or advisable for proper operation of
the corporation.
Section 12. Compensation of Directors and Committee Members.
Each director, as such, shall be entitled to receive reimbursement for his
reasonable expenses incurred in attending meetings of the board of directors
or any committee thereof or otherwise in connection with his attention to
the affairs of the Corporation. In addition, each director, who is not at
the time a regularly compensated officer or employee of the Corporation or
any of its affiliates, shall be entitled to such fee for his services as a
director (and if a member of any committee of the board of directors, such
fee for his services as such member) as may be fixed from time to time by
the board of directors. Such fees may be fixed both for meetings attended
and on an annual basis, or either thereof, and may be payable currently or
deferred. Nothing herein contained shall be construed to preclude any
director or committee member from serving the corporation or any of its
affiliates in any other capacity and receiving compensation thereof.
Article III
Officers
Section 1. Officers -Who Shall Constitute.
The officers of the corporation shall be a chairman of the board, a
president, one or more vice presidents, a secretary, a treasurer and one or
more assistant secretaries. The board shall elect or appoint a president
and secretary at its annual meeting held after each annual meeting of the
shareholders. The board then, or from time to time, may also elect or
appoint one or more of the other prescribed officers or any other officers
as it shall deem advisable, but need not elect or appoint any officers
other than a president and a secretary. The board may, if it desires,
further identify or describe any one or more of such officers.
The officers of the corporation need not be members of the board of
directors. Any two or more offices may be held by the same person, except
the office of president and secretary.
An officer shall be deemed qualified when he enters upon the duties of the
office to which he has been elected or appointed and furnished any bond
required by the board; but the board may also require of such person his
written acceptance and promise faithfully to discharge the duties of such
office.
Section 2. Term of Office.
Each officer of the corporation shall hold his office at the pleasure of the
board of directors or for such other period as the board may specify at the
time of his election or appointment, or until his death, resignation or
removal of the board, whichever occurs first. In any event, the term of
office of each officer of the corporation holding his office at the pleasure
of the board shall terminate at the annual meeting of the board next
succeeding his election or appointment and at which any officer of the
corporation is elected or appointed, unless the board provides otherwise at
the time of his election or appointment.
Section 3. Removal.
Any officer or agent elected or appointed by the board of directors, and any
employee, may be removed or discharged by the board whenever in its judgment
the best interests of the corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. Salaries and Compensation.
Salaries and compensation of all elected or appointed officers, and of all
employees of the corporation shall be fixed, increased or decreased by the
board of directors, but this power, except as to the salary or compensation
of the chairman of the board and the president, may, unless prohibited by
law, be delegated by the board to the chairman of the board, the president,
a committee or such other officer or officers as the board may find
convenient to so empower.
Section 5. Delegation of Authority to Hire, Discharge and Designate Duties.
The board may from time to time delegate to the chairman of the board, the
president or other officer or executive employee of the corporation,
authority to hire, discharge and fix and modify the duties, salary or other
compensation of employees of the corporation under their jurisdiction, and
the board may delegate to such officer or executive employee similar
authority with respect to obtaining and retaining for the corporation the
services of attorneys, accountants and other experts.
Section 6. The Chairman of the Board.
The chairman of the board shall be the chief executive officer of the
corporation; he shall preside at all meetings of the shareholders and
directors; he shall have general supervision and active management of the
business and finances of the corporation and he shall see that all orders
and resolutions of the Board of Directors are carried into effect. (Amended
6/28/85)
Section 7. The President.
The president shall be the chief operating officer of the corporation. In
the absence of the chairmen of the board, he shall preside at meetings of
the shareholders and of the Board of Directors. In addition to any other
powers and duties that may be assigned to him by the board of directors, in
the absence of the chairman of the board in the event of his death,
inability or refusal to act, the president shall perform the duties of the
chairman of the board, and when so acting, shall have all powers of and be
subject to all of the restrictions upon the chairman of the board. (Amended
6/28/85)
Section 8. Vice Presidents.
The vice presidents in the order of their seniority, as determined by the
board, shall, in the absence, disability, or inability to act of the
president, perform the duties and exercise the powers of the president, and
shall perform such other duties as the board of directors shall from time to
time prescribe.
Section 9. The Secretary and Assistant Secretaries.
The secretary shall attend all meetings of the shareholders, and shall
record or cause to be recorded all votes taken and the minutes of all
proceedings in a minute book of the corporation to be kept for that purpose.
He shall perform like duties for the executive and other standing committees
when requested by the board or any such committee to do so.
He shall see that all books, records, lists and information, or duplicates
required to be maintained at the principal office for the transaction of the
business of the corporation in Missouri, or elsewhere, are so maintained.
He shall keep in safe custody the seal of the corporation, and when duly
authorized to do so shall affix the same to any instrument requiring it, and
when so affixed, he shall attest the same by his signature.
He shall perform such other duties and have such other authority as may be
prescribed elsewhere in these bylaws or from time to time by the board of
directors or the chief executive officer of the corporation, under whose
direct supervision he shall be.
He shall have the general duties, powers and responsibilities of a secretary
of a corporation.
Any assistant secretary, in the absence, disability or inability to act of
the secretary, may perform the duties and exercise the powers of the
secretary, and shall perform such other duties and have such other authority
as the board of directors may from time to time prescribe.
Section 10. The Treasurer and Assistant Treasurers.
The treasurer shall have responsibility for the safekeeping of the funds and
securities of the corporation, shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall keep, or cause to be kept, all other books of account
and accounting records of the corporation. He shall deposit or cause to be
deposited all monies and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the
board of directors or by any officers of the corporation to whom such
authority has been granted by the board of directors.
He shall disburse, or permit to be disbursed, the funds of the corporation
as may be ordered, or authorized generally, by the board, and shall render
to the chief executive officer of the corporation and the directors whenever
they may require it, an account of all his transactions as treasurer and of
those under his jurisdiction, and of the financial conditions of the
corporation.
He shall perform such other duties and shall have such other responsibility
and authority as may be prescribed elsewhere in these bylaws or from time to
time by the board of directors.
He shall have the general duties, powers and responsibility of a treasurer
of a corporation, and shall, unless otherwise provided by the board, be the
chief financial and accounting officer of the corporation.
Any assistant treasurer, in the absence, disability or inability to act of
the treasurer, may perform the duties and exercise the powers of the
treasurer, and shall perform such other duties and have such other authority
as the board of directors may from time to time prescribe.
Section 11. Duties of Officers May Be Delegated.
If any officer of the corporation be absent or unable to act, or for any
other reason that the board may deem sufficient, the board may delegate, for
the time being, some or all of the functions, duties, powers and
responsibilities of any officer to any other officer, or to any other agent
or employee of the corporation or other responsible person, provided a
majority of the whole board of directors concurs therein.
Article IV
Indemnification and Liability of Directors, Officers & Employees
Section 1. Indemnification.
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 or 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 indemnifications with respect to the same or different
persons or classes of persons.
Section 2. Insurance.
The corporation may purchase and maintain insurance on behalf of any 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 against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of these bylaws.
Section 3. Liability.
No person shall be liable to the corporation for any loss, damage, liability
or expense suffered by it on account of any action taken or omitted to be
taken by him as a director, officer or employee of the corporation or of any
other corporation which he serves as a director, officer or employee at the
request of the corporation, if such person (i) exercised the same degree of
care and skill as a prudent man would have exercised under the circumstances
in the conduct of his own affairs, or (ii) took or omitted to take such
action in reliance upon advice of counsel for the corporation, or for such
other corporation, or upon statements made or information furnished by
directors, officers, employees or agents of the corporation, or of such
other corporation, which he had no reasonable grounds to disbelieve.
Article V
Capital Stock
Section 1. Issuance of Certificate.
Shares of the capital stock of the corporation may be represented by entry
on the stock record or transfer books of the corporation and need not be
represented by certificates. When shares of stock of the corporation are
represented by certificates, such certificates shall be numbered, shall be
in such form as may be prescribed by the board of directors in conformity
with law, and shall be entered in the stock books of the corporation as they
are issued. Such entries shall show the name and address of the person,
firm, partnership, corporation or association to whom each certificate is
issued. Each certificate shall have printed, typed or written thereon the
name of the person, firm, partnership, corporation or association to whom it
is issued and the number of shares represented thereby. It shall be signed
by the president or a vice president and the secretary or any assistant
secretary or the treasurer or an assistant treasurer or the chairman of the
board or the chief executive officer of the corporation, provided each
certificate is signed by two officers who are not the same person and sealed
with the seal of the corporation, which seal may be immediately, engraved or
printed. If the corporation has a transfer agent or a transfer clerk who
signs such certificates, the signatures of any of the other officers above
mentioned may be immediately facsimiled, engraved or printed. In case any
such officer who has signed or whose facsimile signature has been placed
upon any such certificate shall have ceased to be such officer before such
certificate is issued, such certificate may nevertheless be issued by the
corporation with the same effect as if such officer were an officer at the
date of its issue.
Section 2. Transfers of Shares - Transfer Agent - Registrar.
Transfers of shares of stock shall be made on the stock record or transfer
books of the corporation only by the person named in the stock certificate,
or by his attorney lawfully constituted in writing, and upon surrender of
the certificate therefor. The stock record book and other transfer records
shall be in the possession of the secretary or of a transfer agent or
transfer clerk for the corporation. The corporation, by resolution of the
board, may from time to time appoint a transfer agent or transfer clerk, and
if desired, a registrar, under such arrangements and upon such terms and
conditions as the board deems advisable, but until and unless the board
appoints some other person, firm or corporation as its transfer agent or
transfer clerk (and upon the revocation of any such appointment, thereafter
until a new appointment is similarly made) the secretary of the corporation
shall be the transfer agent or transfer clerk of the corporation without the
necessity of any formal action of the board, and the secretary or any person
designated by him, shall perform all the duties thereof.
Section 3. Lost Certificates.
In case of the loss or destruction of any certificate for shares of stock of
the corporation, another may be issued in its place upon proof of such loss
or destruction and upon the giving of a satisfactory bond of indemnity to
the corporation and the transfer agent and registrar of such stock, if any,
in such sum as the board of directors may provide, provided, however, that a
new certificate may be issued without requiring a bond when in the judgment
of the board it is proper to do so.
Section 4. Regulations.
The board of directors shall have power and authority to make all such rules
and regulations as it may deem expedient concerning the issue, transfer,
conversion and registration of and all other rights pertaining to
certificates for shares of stock of the corporation, not inconsistent with
the laws of Missouri, the articles of incorporation or these bylaws.
Article VI
General
Section 1. Fixing of Capital - Transfers of Surplus.
Except as may be specifically otherwise provided in the articles of
incorporation, the board of directors is expressly empowered to exercise all
authority conferred upon it or the corporation by any law or statute, and in
conformity therewith, relative to:
(i) the determination of what part of the consideration received for shares
of the corporation shall be stated capital,
(ii) increasing stated capital,
(iii) transferring surplus to stated capital,
(iv) the consideration to be received by the corporation for its shares, and
(v) all similar or related matters;
provided that any concurrent action or consent by or of the corporation and
its shareholders required to be taken or given pursuant to law, shall be
duly taken or given in connection therewith.
Section 2. Dividends.
Dividends upon the outstanding shares of the corporation, subject to the
provisions of the articles of incorporation and of any applicable law, may
be declared by the board of directors at any meeting. Dividends may be paid
in cash, in property, or in shares of the corporation's stock. Liquidating
dividends or dividends representing a distribution of paid-in surplus or a
return of capital shall be made only when and in the manner permitted by
law.
Section 3. Checks.
All checks and similar instruments for the payment of money shall be signed
by such officer or officers or such other person or persons as the board of
directors may from time to time designate. If no such designation is made,
and unless and until the board otherwise provides, the president and
secretary or the president and treasurer, shall have power to sign all such
instruments for, in behalf and in the name of the corporation which are
executed or made in the ordinary course of the corporation's business.
Section 4. Records.
The corporation shall keep at its principal place of business, in Missouri,
original or duplicate books in which shall be recorded the number of its
shares subscribed, the names of the owners of its shares, the numbers owned
of record by them respectively, the amount of shares paid, and by whom, the
transfer of said shares with the date of transfer, the amount of its assets
and liabilities, and the names and places of residence of its officer, and
from time to time such other or additional records, statements, lists and
information as may be required by law, including shareholders' lists.
Section 5. Inspection of Records.
A shareholder, if he be entitled and demands to inspect the records of the
corporation pursuant to any statutory or other legal right, shall be
privileged to inspect such records only during the usual and customary
hours of business and in such manner as will not unduly interfere with the
regular conduct of the business of the corporation. A shareholder may
delegate his right of inspection to a certified or public accountant on the
condition, to be enforced at the option of the corporation, that the
shareholder and accountant agree with the corporation to furnish to the
corporation promptly a true and correct copy of each report with respect to
such inspection made by such accountant. No shareholder shall use, permit
to be used or acquiesce in the use by others of any information so obtained
to the detriment competitively of the corporation, nor shall he furnish or
permit to be furnished any information so obtained to any competitor or
prospective competitor of the corporation. The corporation as a condition
precedent to any shareholder's inspection of the records of the corporation
may require the shareholder to indemnify the corporation, in such manner
and for such amount as may be determined by the board of directors, against
any loss or damage which may be suffered by it arising out of or resulting
from any unauthorized disclosure made or permitted to be made by such
shareholder of information obtained in the course of such inspection.
Section 6. Corporate Seal.
The corporate seal shall have inscribed thereon the name of the corporation
and the words: Corporate Seal - Missouri. Said seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
Section 7. Amendments.
The bylaws of the corporation may from time to time be suspended, repealed,
amended or altered, or new bylaws may be adopted, in the manner provided in
the articles of incorporation.
Section 8. Execution of Instruments.
Except as the Board of Directors may by resolution generally or in specific
instances otherwise provide, the chairman of the board, the president or any
vice president shall have power on behalf of the corporation:
(a) to execute, affix the corporate seal manually or by facsimile to,
acknowledge, verify and deliver any contracts, obligations instruments
and documents whatsoever in connection with its business, including
without limiting the foregoing, any bonds, guarantees, undertakings,
recognizance, powers of attorney or revocations of any powers of
attorney, stipulations, deeds, leases, mortgages, releases and
satisfactions;
(b) to appoint one or more persons for any or all of the purposes
mentioned in the preceding subsection (a) of this Section 8, including
affixing the seal of the corporation. (Amended 6/28/85)
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 28, 1997
Board of Directors
Cova Financial Services Life Insurance Company
One Tower Lane - Suite 3000
Oakbrook Terrace, IL 60181
RE: Opinion of Counsel - Cova Variable Annuity Account Four
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-4 for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts (the "Contracts") to be issued by Cova
Financial Services Life Insurance Company and its separate account, Cova
Variable Annuity Account Four.
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 Four 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 ACCOUNTANTS
The Board of Directors of
Cova Financial Services Life Insurance Company
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Statement of Additional
Information.
KPMG PEAT MARWICK LLP
St. Louis, Missouri
April 25, 1997
