The Fixed
And Variable Annuity
issued by
COVA VARIABLE ANNUITY
ACCOUNT FIVE
and
COVA FINANCIAL
LIFE INSURANCE COMPANY
This prospectus describes the Fixed and Variable Annuity Contract offered by
Cova Financial Life Insurance Company (Cova).
The annuity contract has 44 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 43 investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios. CURRENTLY, IF YOU ARE NOT PARTICIPATING IN AN ASSET
ALLOCATION PROGRAM, YOU CAN ONLY INVEST IN 15 INVESTMENT PORTFOLIOS AT ANY ONE
TIME.
AIM Variable Insurance Funds, Inc.:
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Alliance Variable Products Series Fund, Inc.:
Managed by Alliance Capital
Management L.P.
Premier Growth Portfolio
Real Estate Investment Portfolio
Cova Series Trust:
Managed by J.P. Morgan
Investment Management Inc.
Small Cap Stock Portfolio
Large Cap Stock Portfolio
Select Equity Portfolio
International Equity Portfolio
Quality Bond Portfolio
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio (a "high yield" portfolio under
California insurance regulations)
Large Cap Research Portfolio
Developing Growth Portfolio
Mid-Cap Value Portfolio
Lord Abbett Growth and Income Portfolio (not currently available)
General American Capital Company:
Managed by Conning Asset
Management Company
Money Market Fund
Goldman Sachs Variable Insurance Trust:
Managed by Goldman Sachs
Asset Management
Goldman Sachs Growth and Income Fund
Managed by Goldman Sachs
Asset Management International
Goldman Sachs International Equity Fund
Goldman Sachs Global Income Fund
Investors Fund Series:
Managed by Scudder Kemper
Investments, Inc.
Kemper Small Cap Value Portfolio
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Liberty Variable Investment Trust:
Managed by Newport Fund
Management Inc.
Newport Tiger, Variable Series
Lord Abbett Series Fund, Inc.:
Managed by Lord, Abbett & Co.
Growth and Income Portfolio
MFS Variable Insurance Trust:
Managed by Massachusetts
Financial Services Company
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS High Income Series
MFS World Governments Series
MFS/Foreign & Colonial Emerging
Markets Equity Series
Oppenheimer Variable Account Funds:
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer Strategic Bond Fund
Putnam Variable Trust:
Managed by Putnam Investment
Management, Inc.
Putnam VT Growth and Income Fund
Putnam VT International Growth Fund
Putnam VT International New
Opportunities Fund
Putnam VT New Value Fund
Putnam VT Vista Fund
Templeton Variable Products Series Fund:
Managed by Templeton Asset
Management Ltd.
Templeton Developing Markets Fund, Class 1 Shares
Managed by Templeton Investment
Counsel, Inc.
Templeton International Fund, Class 1 Shares
Managed by Franklin Mutual Advisers, Inc.
Mutual Shares Investments Fund, Class 1 Shares
The Cova Series Trust Lord Abbett Growth and Income Portfolio is not currently
available. In California, the Templeton Developing Markets Fund, the Templeton
International Fund and the Mutual Shares Investments Fund are not available
until approved by the California Insurance Department. (Check with your broker
regarding future availability of these investment portfolios).
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Cova Fixed and Variable
Annuity Contract.
To learn more about the Cova Fixed and Variable Annuity Contract, you can obtain
a copy of the Statement of Additional Information (SAI) dated May 1,1998. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding registrants that file electronically with the
SEC. The Table of Contents of the SAI is on Page 19 of this prospectus. For a
free copy of the SAI, call us at (800) 523-1661 or write us at : One Tower Lane,
Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
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.
May 1, 1998.
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS 3
SUMMARY 4
FEE TABLE 6
EXAMPLES 9
1. THE ANNUITY CONTRACT 12
2. ANNUITY PAYMENTS (THE INCOME PHASE) 12
3. PURCHASE 12
Purchase Payments 12
Allocation of Purchase Payments 12
Accumulation Units 13
4. INVESTMENT OPTIONS 13
AIM Variable Insurance Funds, Inc. 13
Alliance Variable Products Series Fund, Inc. 13
Cova Series Trust 13
General American Capital Company 13
Goldman Sachs Variable Insurance Trust 13
Investors Fund Series 14
Liberty Variable Investment Trust 14
Lord Abbett Series Fund, Inc. 14
MFS Variable Insurance Trust 14
Oppenheimer Variable Account Funds 14
Putnam Variable Trust 14
Templeton Variable Products Series Fund 14
Transfers 14
Dollar Cost Averaging Program 14
Automatic Rebalancing Program 15
Approved Asset Allocation Programs 15
Voting Rights 15
Substitution 15
5. EXPENSES 15
Insurance Charges 15
Contract Maintenance Charge 15
Withdrawal Charge 16
Reduction or Elimination of the
Withdrawal Charge 16
Premium Taxes 16
Transfer Fee 16
Income Taxes 16
Investment Portfolio Expenses 16
6. TAXES 16
Annuity Contracts in General 16
Qualified and Non-Qualified Contracts 16
Withdrawals - Non-Qualified Contracts 16
Withdrawals - Qualified Contracts 17
Withdrawals - Tax-Sheltered Annuities 17
Diversification 17
7. ACCESS TO YOUR MONEY 17
Systematic Withdrawal Program 17
8. PERFORMANCE 17
9. DEATH BENEFIT 17
Upon Your Death 17
Death of Annuitant 18
10. OTHER INFORMATION 18
Cova 18
The Separate Account 18
Distributor 18
Ownership 18
Beneficiary 19
Assignment 19
Suspension of Payments or Transfers 19
Financial Statements 19
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION 19
APPENDIX
Performance Information A-1
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable. We have identified the following as some of these
words or terms. They are identified in the text in italic and the page that is
indicated here is where we believe you will find the best explanation for the
word or term.
Page
Accumulation Phase 12
Accumulation Unit 13
Annuitant 12
Annuity Date 12
Annuity Options 12
Annuity Payments 12
Annuity Unit 13
Beneficiary 19
Fixed Account 12
Income Phase 12
Investment Portfolios 13
Joint Owner 19
Non-Qualified 16
Owner 18
Purchase Payment 12
Qualified 16
Tax Deferral 16
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
1. THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by Cova is a contract between
you, the owner, and Cova, an insurance company. The contract provides a means
for investing on a tax-deferred basis in a fixed account of Cova and 43
investment portfolios. The Contract is intended for retirement savings or other
long-term investment purposes and provides for a death benefit and guaranteed
income options.
The fixed account offers an interest rate that is guaranteed by the insurance
company, Cova. While your money is in the fixed account, the interest your money
will earn as well as your principal is guaranteed by Cova.
This contract also offers 43 investment portfolios which are listed in Section
4. These portfolios are designed to offer a potentially better return than the
fixed account. However, this is NOT guaranteed. You can also lose your money.
You can put money in up to 15 of the investment portfolios and the fixed
account. (If you are participating in an asset allocation program, this limit
may not apply). You can transfer between accounts up to 12 times a year without
charge or tax implications. After 12 transfers, the charge is $25 or 2% of the
amount transferred, whichever is less.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine the amount of income payments during the
income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE):
If you want to receive regular income from your annuity, you can choose one of
three options. Once you begin receiving regular payments, you cannot change your
payment plan. During the income phase, you have the same investment choices you
had during the accumulation phase. You can choose to have payments come from the
fixed account, the investment portfolios or both. If you choose to have any part
of your payments come from the investment portfolios, the dollar amount of your
payments may go up or down.
3. PURCHASE:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
4. INVESTMENT OPTIONS:
You can put your money in the following investment portfolios which are
described in the prospectuses for the funds. Currently, if you are not
participating in an asset allocation program, you can invest in 15 investment
portfolios at any one time.
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
MANAGED BY ALLIANCE CAPITAL MANAGEMENT L.P.
Premier Growth Portfolio
Real Estate Investment Portfolio
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN INVESTMENT MANAGEMENT INC.
Small Cap Stock Portfolio
Large Cap Stock Portfolio
Select Equity Portfolio
International Equity Portfolio
Quality Bond Portfolio
MANAGED BY LORD, ABBETT & CO.
Bond Debenture Portfolio (a "high yield" portfolio under
California insurance regulations)
Large Cap Research Portfolio
Developing Growth Portfolio
Mid-Cap Value Portfolio
Lord Abbett Growth and Income Portfolio (not currently available)
GENERAL AMERICAN CAPITAL COMPANY:
MANAGED BY CONNING ASSET MANAGEMENT COMPANY
Money Market Fund
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
Goldman Sachs Growth and Income Fund
MANAGED BY GOLDMAN SACHS ASSET
MANAGEMENT INTERNATIONAL
Goldman Sachs International Equity Fund
Goldman Sachs Global Income Fund
INVESTORS FUND SERIES:
MANAGED BY SCUDDER KEMPER INVESTMENTS, INC.
Kemper Small Cap Value Portfolio
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
LIBERTY VARIABLE INVESTMENT TRUST:
MANAGED BY NEWPORT FUND MANAGEMENT INC.
Newport Tiger, Variable Series
LORD ABBETT SERIES FUND, INC.:
MANAGED BY LORD, ABBETT & CO.
Growth and Income Portfolio
MFS VARIABLE INSURANCE TRUST:
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES COMPANY
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS High Income Series
MFS World Governments Series
MFS/Foreign & Colonial Emerging Markets Equity Series
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
MANAGED BY OPPENHEIMERFUNDS, INC.
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer Strategic Bond Fund
PUTNAM VARIABLE TRUST:
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam VT Growth and Income Fund
Putnam VT International Growth Fund
Putnam VT International New Opportunities Fund
Putnam VT New Value Fund
Putnam VT Vista Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND
MANAGED BY TEMPLETON ASSET MANAGEMENT LTD.
Templeton Developing Markets Fund, Class 1 Shares
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton International Fund, Class 1 Shares
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
Mutual Shares Investments Fund, Class 1 Shares
In California, the Templeton Developing Markets Fund, the Templeton
International Fund and the Mutual Shares Investments Fund are not available
until approved by the California Insurance Department (check with your broker
regarding availability).
Depending upon market conditions, you can make or lose money in any of these
portfolios.
5. EXPENSES:
The contract has insurance features and investment features, and there are costs
related to each.
Each year Cova deducts a $30 contract maintenance charge from your contract.
During the accumulation phase, Cova currently waives this charge if the value of
your contract is at least $50,000. Cova also deducts for its insurance charges
which total 1.40% of the average daily value of your contract allocated to the
investment portfolios.
If you take your money out, Cova may assess a withdrawal charge which is equal
to 5% of the purchase payment you withdraw. When you begin receiving regular
income payments from your annuity, Cova will assess a state premium tax charge,
if applicable, which ranges from 0 - 4% depending upon the state.
There are also investment charges which currently range from .205% to 1.60% of
the average daily value of the investment portfolio depending upon the
investment portfolio.
6. TAXES:
Your earnings are not taxed until you take them out. If you take money out
during the accumulation phase, earnings come out first and are taxed as income.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal tax penalty on the earnings. Payments during the income phase are
considered partly a return of your original investment. That part of each
payment is not taxable as income.
7. ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from Cova. Withdrawals in excess of that will be charged 5% of
each payment you take out. Each purchase payment you add to your contract has
its own 5 year withdrawal charge period. After Cova has had a payment for 5
years, there is no charge for withdrawing that payment. Of course, you may also
have to pay income tax and a tax penalty on any money you take out.
8. PERFORMANCE:
The value of the contract will vary up or down depending upon the investment
performance of the Portfolio(s) you choose. Cova provides performance
information in the Appendix and the SAI. Past performance is not a guarantee of
future results.
9. DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
10. OTHER INFORMATION:
Free Look. If you cancel the contract within 10 days after receiving it (or, in
the State of California, within 30 days if you are 60 years or older when we
issue the contract), we will send your money back without assessing a withdrawal
charge. You will receive whatever your contract is worth on the day we receive
your request. This may be more or less than your original payment. If we're
required by law to return your original payment, we reserve the right to put
your money in the Money Market Fund during the free-look period.
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
Who should purchase the contract? The contract is designed for people seeking
long-term tax-deferred accumulation of assets, generally for retirement or other
long-term purposes. The tax-deferred feature is most attractive to people in
high federal and state tax brackets. You should not buy this contract if you are
looking for a short-term investment or if you cannot take the risk of getting
back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
* Under certain circumstances, Cova will give you your money without a
withdrawal charge if you need it while you're in a nursing home. We call
this feature the Nursing Home Waiver.
These features may not be suitable for your particular situation.
11. INQUIRIES:
If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE
Owner Transaction Expenses
Withdrawal Charge (see Note 2 below)
5% of purchase payment withdrawn
Transfer Fee (see Note 3 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
Contract Maintenance Charge (see Note 4 below)
$30 per contract per year
Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
---
TOTAL SEPARATE ACCOUNT
ANNUAL EXPENSES 1.40%
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an investment portfolio)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund+ .63% .05% .68%
AIM V.I. International Equity Fund+ .75% .18% .93%
AIM V.I. Value Fund+ .62% .08% .70%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
+ A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its respective fees. Effective May 1, 1998, the Funds reimburse AIM
in an amount up to 0.25% of the average net asset value of each Fund, for
expenses incurred in providing or assuring that participating insurance
companies provide, certain administrative services. Currently the fee only
applies to the average net asset value of each Fund in excess of the net
asset value of each Fund as calculated on April 30, 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Management Other Total Annual
Fees Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
<S> <C> <C> <C>
Premier Growth Portfolio* 1.00% .08% 1.08%
Real Estate Investment Portfolio**/*** 0% .95% .95%
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
* The adviser to the Fund discontinued the expense reimbursement with respect
to the Premier Growth Portfolio effective May 1, 1998.
** The expenses shown with respect to the Real Estate Investment Portfolio are
net of voluntary reimbursements. Expenses have been capped at .95% and the
adviser to the Fund intends to continue such reimbursements for the
foreseeable future. The estimated expenses for the Real Estate Investment
Portfolio, before reimbursement, are: .90% management fees and 1.41% for
other expenses.
*** Annualized.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement)(1) reimbursement)(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
<S> <C> <C> <C>
Select Equity Portfolio .75% .10% .85%
Small Cap Stock Portfolio .85% .10% .95%
International Equity Portfolio .85% .10% .95%
Quality Bond Portfolio .55% .10% .65%
Large Cap Stock Portfolio .65% .10% .75%
Managed by Lord, Abbett &Co.
Bond Debenture Portfolio (a "high yield" portfolio
under California insurance regulations) .75% .10% .85%
Mid-Cap Value Portfolio* 1.00% .10% 1.10%
Large Cap Research Portfolio* 1.00% .10% 1.10%
Developing Growth Portfolio* .90% .10% 1.00%
Lord Abbett Growth and Income Portfolio** .65% .10% .75%
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Since August 20, 1990, Cova has been reimbursing the investment portfolios
of Cova Series Trust for all operating expenses (exclusive of the
management fees) in excess of approximately .10%. Absent the expense
reimbursement, the percentages shown for total annual portfolio expenses
(on an annualized basis) for the year or period ended December 31, 1997
would have been 1.00% for the Select Equity Portfolio, 1.39% for the Small
Cap Stock Portfolio, 1.53% for the International Equity Portfolio, 1.08%
for the Quality Bond Portfolio, 1.08% for the Large Cap Stock Portfolio,
1.07% for the Bond Debenture Portfolio, 8.41% for the Mid-Cap Value
Portfolio, 10.04 for the Large Cap Research Portfolio and 9.00% for the
Developing Growth Portfolio.
* Annualized. The Portfolio commenced investment operations on August 20,
1997.
** Estimated. The Portfolio has not yet commenced investment operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
<S> <C> <C> <C>
Money Market Fund .125% .08% .205%
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement)* reimbursement)*
- ---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund .75% .15% .90%
Managed by Goldman Sachs Asset Management International
Goldman Sachs International Equity Fund 1.00% .25% 1.25%
Goldman Sachs Global Income Fund .90% .15% 1.05%
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
* The investment advisers have voluntarily agreed to reduce or limit certain
"Other Expenses" of such Funds (excluding management fees, taxes, interest
and brokerage fees and litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed the amounts set forth above
under "Other Expenses." The reductions or limits, if any, are calculated
monthly on a non-cumulative basis and may be discontinued or modified by
the investment advisers in their discretion at any time.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Investors Fund Series
Managed by Scudder Kemper Investments, Inc.
<S> <C> <C> <C>
Kemper Small Cap Value Portfolio .75% .09% .84%
Kemper Government Securities Portfolio .55% .09% .64%
Kemper Small Cap Growth Portfolio .65% .06% .71%
- --------------------------------------------------------------------------------------------------------------------------------
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
Newport Tiger, Variable Series .90% .37% 1.27%
- --------------------------------------------------------------------------------------------------------------------------------
Management 12b-1 Other Total Annual
Fees Fees Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc.
Managed by Lord, Abbett & Co.
Growth and Income Portfolio* .50% .15% .02% .67%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
* The Growth and Income Portfolio of Lord Abbett Series Fund, Inc. has a
12b-1 plan which provides for payments to Lord, Abbett & Co. for remittance
to a life insurance company for certain distribution expenses (see the Fund
Prospectus). The 12b-1 plan provides that such remittances, in the
aggregate, will not exceed .15%, on an annual basis, of the daily net asset
value of shares of the Growth and Income Portfolio. For the year ending
December 31, 1998, the 12b-1 fees are estimated to be .15%. The examples
below for this Portfolio reflect the estimated 12b-1 fees.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement)* reimbursement)*
- --------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
<S> <C> <C> <C>
MFS Emerging Growth Series .75% .12% .87%
MFS Research Series .75% .13% .88%
MFS Growth With Income Series .75% .25% 1.00%
MFS High Income Series .75% .25% 1.00%
MFS World Governments Series .75% .25% 1.00%
MFS/Foreign & Colonial Emerging
Markets Equity Series 1.25% .25% 1.50%
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
* The adviser has agreed to bear expenses for the Series, subject to
reimbursement by the Series, so that the Series' "Other Expenses" do not
exceed .25% annually. Absent such reimbursement, "Total Annual Portfolio
Expenses" would be: 1.10% for the MFS Growth With Income Series; 1.15% for
the MFS High Income Series and the MFS World Governments Series; and are
estimated to be 5.92% for the MFS/Foreign & Colonial Emerging Markets
Equity Series.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
<S> <C> <C> <C>
Oppenheimer High Income Fund .75% .07% .82%
Oppenheimer Bond Fund .73% .05% .78%
Oppenheimer Growth Fund .73% .02% .75%
Oppenheimer Growth & Income Fund .75% .08% .83%
Oppenheimer Strategic Bond Fund .75% .08% .83%
- --------------------------------------------------------------------------------------------------------------------------------
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Fund .47% .04% .51%
Putnam VT International Growth Fund* .73% .47% 1.20%
Putnam VT International New Opportunities Fund* .92% .68% 1.60%
Putnam VT New Value Fund .70% .15% .85%
Putnam VT Vista Fund .65% .22% .87%
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
* The management fees and "Other Expenses" shown in the table reflect an
expense limitation. In the absence of an expense limitation, management
fees, "Other Expenses" and total annual portfolio expenses would have been:
.80%, .47% and 1.27% respectively for the Putnam VT International Growth
Fund and 1.20%, .68% and 1.88% respectively for the Putnam VT International
New Opportunities Fund.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund
Templeton Developing Markets Fund,
<S> <C> <C> <C> <C>
Class 1 Shares 1.25% .33% 1.58%
Templeton International Fund,
Class 1 Shares* .69% .19% .88%
Mutual Shares Investments Fund,
Class 1 Shares (Estimates)** .40% .60% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
* Management Fees and Total Annual Portfolio expenses have been restated to
reflect the management fee schedule approved by shareholders and effective
May 1, 1997. See fund prospectus for details. Actual Management Fees and
Total Annual Portfolio Expenses during 1997 were lower.
** The Manager has agreed in advance to waive management fees and make certain
payments to reduce fund expenses as necessary so that Total Annual
Portfolio Expenses do not exceed 1.00% of the fund's Class I net assets
through 1998. The Manager may end this arrangement without notice at a
later date. Estimated Management Fees, Other Expenses and Total Annual
Portfolio Expenses before any waivers would be .60%, .60% and 1.20%,
respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Examples
You 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.
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C>
AIM V.I. Capital Appreciation Fund (a) $72.09 (a) $113.03
(b) $22.09 (b) $ 68.03
AIM V.I. International Equity Fund (a) $74.60 (a) $120.57
(b) $24.60 (b) $ 75.57
AIM V.I. Value Fund (a) $72.29 (a) $113.63
(b) $22.29 (b) $ 68.63
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Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Portfolio (a) $76.10 (a) $125.06
(b) $26.10 (b) $ 80.06
Real Estate Investment Portfolio (a) $74.80 (a) $121.17
(b) $24.80 (b) $ 76.17
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Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
Small Cap Stock Portfolio (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
Large Cap Stock Portfolio (a) $72.80 (a) $115.15 (a) $164.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Select Equity Portfolio (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
International Equity Portfolio (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
Quality Bond Portfolio (a) $71.79 (a) $112.12 (a) $159.89 (a) $245.92
(b) $21.79 (b) $ 67.12 (b) $114.89 (b) $245.92
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio (a "high yield" portfolio
under California insurance regulations) (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Large Cap Research Portfolio (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Developing Growth Portfolio (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
Mid-Cap Value Portfolio (a) $76.30 (a) $125.66
(b) $26.30 (b) $ 80.66
Lord Abbett Growth and Income Portfolio (a) $72.80 (a) $115.15
(b) $22.80 (b) $ 70.15
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General American Capital Company
Managed by Conning Asset Management Company
Money Market Fund (a) $67.31 (a) $ 98.54 (a) $137.02 (a) $199.08
(b) $17.31 (b) $ 53.54 (b) $ 92.02 (b) $199.08
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund (a) $74.30 (a) $119.67
(b) $24.30 (b) $ 74.67
Managed by Goldman Sachs Asset Management International
Goldman Sachs International Equity Fund (a) $77.80 (a) $130.14
(b) $27.80 (b) $ 85.14
Goldman Sachs Global Income Fund (a) $75.80 (a) $124.17
(b) $25.80 (b) $ 79.17
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Investors Fund Series
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value Portfolio (a) $73.70 (a) $117.86
(b) $23.70 (b) $ 72.86
Kemper Government Securities Portfolio (a) $71.69 (a) $111.82
(b) $21.69 (b) $ 66.82
Kemper Small Cap Growth Portfolio (a) $72.39 (a) $113.94
(b $22.39 (b) $ 68.94
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
<S> <C> <C>
Newport Tiger, Variable Series (a) $78.00 (a) $130.73
(b) $28.00 (b) $ 85.73
- ------------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc.
Managed by Lord, Abbett & Co.
Growth and Income Portfolio (a) $71.99 (a) $112.73
(b) $21.99 (b) $ 67.73
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Series (a) $74.00 (a) $118.76
(b) $24.00 (b) $ 73.76
MFS Research Series (a) $74.10 (a) $119.07
(b) $24.10 (b) $ 74.07
MFS Growth With Income Series (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS High Income Series (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS World Governments Series (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
MFS/Foreign & Colonial Emerging
Markets Equity Series (a) $80.29 (a) $137.54
(b) $30.29 (b) $ 92.54
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Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Fund (a) $73.50 (a) $117.26
(b) $23.50 (b) $ 72.26
Oppenheimer Bond Fund (a) $73.10 (a) $116.05
(b $23.10 (b) $ 71.05
Oppenheimer Growth Fund (a) $72.80 (a) $115.15
(b) $22.80 (b) $ 70.15
Oppenheimer Growth & Income Fund (a) $73.60 (a) $117.56
(b) $23.60 (b) $ 72.56
Oppenheimer Strategic Bond Fund (a) $73.60 (a) $117.56
(b) $23.60 (b) $ 72.56
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Fund (a) $70.39 (a) $107.87
(b) $20.39 (b) $ 62.87
Putnam VT International Growth Fund (a) $77.30 (a) $128.65
(b) $27.30 (b) $ 83.65
Putnam VT International New Opportunities Fund (a) $81.28 (a) $140.49
(b) $31.28 (b) $ 95.49
Putnam VT New Value Fund (a) $73.80 (a) $118.16
(b) $23.80 (b) $ 73.16
Putnam VT Vista Fund (a) $74.00 (a) $118.76
(b) $24.00 (b) $ 73.76
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Fund, Class 1 Shares (a) $81.08 (a) $139.90
(b) $31.08 (b) $ 94.90
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund, Class 1 Shares (a) $74.10 (a) $119.07
(b) $24.10 (b) $ 74.07
Managed by Franklin Mutual Advisers, Inc.
Mutual Shares Investments Fund, Class 1 Shares (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Explanation of Fee Table and Examples
1. The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract. The Fee Table reflects
expenses of the Separate Account as well as of the investment portfolios.
2. The withdrawal charge is 5% of the purchase payments you withdraw. After
Cova has had a purchase payment for 5 years, there is no charge by Cova for
a withdrawal of that purchase payment. You may also have to pay income tax
and a tax penalty on any money you take out. After the first year, you can
take up to 10% of your total purchase payments each year without a charge
from Cova.
3. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is for the Dollar Cost Averaging,
Automatic Rebalancing or Approved Asset Allocation Programs.
4. During the accumulation phase, Cova will not charge the contract
maintenance charge if the value of your contract is $50,000 or more,
although, if you make a complete withdrawal, Cova will charge the contract
maintenance charge.
5. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
6. The assumed average contract size is $30,000.
7. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
</FN>
</TABLE>
1. THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case Cova), where the insurance company promises to pay you an income, in
the form of annuity payments, beginning on a designated date that's at least 30
days in the future. Until you decide to begin receiving annuity payments, your
annuity is in the accumulation phase. Once you begin receiving annuity payments,
your contract switches to the income phase. The contract benefits from tax
deferral.
Tax deferral means that you are not taxed on earnings or appreciation on the
assets in your contract until you take money out of your contract.
The contract is called a variable annuity because you can choose among 43
investment portfolios, and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends upon the investment performance of the investment
portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by Cova. Cova guarantees that the interest credited to
the fixed account will not be less than 3% per year. If you select the fixed
account, your money will be placed with the other general assets of Cova. If you
select the fixed account, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the total interest credited
to your contract. The amount of the annuity payments you receive during the
income phase from the fixed account portion of the contract will remain level
for the entire income phase.
As owner of the contract, you exercise all rights under the contract. You can
change the owner at any time by notifying Cova in writing. You and your spouse
can be named joint owners. We have described more information on this in Section
10 - Other Information.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month. You can also
choose among income plans. We call those annuity options.
We ask you to choose your annuity date and annuity option when you purchase the
contract. You can change either at any time before the annuity date with 30 days
notice to us. Your annuity date cannot be any earlier than one month after you
buy the contract. Annuity payments must begin by the annuitant's 85th birthday
or 10 years from the date the contract was issued, whichever is later. The
annuitant is the person whose life we look to when we make annuity payments.
If you do not choose an annuity option at the time you purchase the contract, we
will assume that you selected Option 2 which provides a life annuity with 10
years of guaranteed payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from the fixed account, the investment portfolio(s)
or a combination of both. If you don't tell us otherwise, your annuity payments
will be based on the investment allocations that were in place on the annuity
date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things: 1) the value of your contract in the investment portfolio(s) on the
annuity date, 2) the 3% assumed investment rate used in the annuity table for
the contract, and 3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed rate, your annuity payments
will increase. Similarly, if the actual rate is less than 3%, your annuity
payments will decrease.
You can choose one of the following annuity options or any other annuity option
acceptable to Cova. After annuity payments begin, you cannot change the annuity
option.
Option 1. Life Annuity. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
Option 2. Life Annuity with 5, 10 or 20 Years Guaranteed. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. In that case, Cova may provide your annuity payment in a
single lump sum. Likewise, if your annuity payments would be less than $100 a
month, Cova has the right to change the frequency of payments so that your
annuity payments are at least $100.
3. PURCHASE
Purchase Payments
A purchase payment is the money you give us to buy the contract. The minimum we
will accept is $5,000 when the contract is bought as a non-qualified contract.
If you are buying the contract as part of an IRA (Individual Retirement
Annuity), 401(k) or other qualified plan, the minimum we will accept is $2,000.
The maximum we accept is $1 million without our prior approval. You can make
additional purchase payments of $500 or more to either type of contract.
Allocation of Purchase Payments
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise.
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it (or, in the state of California, within 30 days if you
are 60 years or older when we issue the contract). When you cancel the contract
within this time period, Cova will not assess a withdrawal charge. You will
receive back whatever your contract is worth on the day we receive your request.
If you have purchased the contract as an IRA, we are required to give you back
your purchase payment if you decide to cancel your contract within 10 days after
receiving it (or whatever period is required). If that is the case, we reserve
the right to put your purchase payment in the Money Market Fund of General
American Capital Company for 15 days before we allocate your first purchase
payment to the investment portfolio(s) you have selected. Currently, Cova
directly allocates your purchase payment to the investment portfolios and/or
fixed account you select.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within 2 business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 P.M. Eastern time.
Accumulation Units
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular investment
portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Quality Bond Portfolio. When the
New York Stock Exchange closes on that Monday, we determine that the value
of an accumulation unit for the Quality Bond Portfolio is $13.90. We then
divide $5,000 by $13.90 and credit your contract on Monday night with
359.71 accumulation units for the Quality Bond Portfolio.
4. INVESTMENT OPTIONS
The Contract offers 43 investment portfolios which are described below.
Currently, if you are not participating in an asset allocation program, you can
invest in only 15 investment portfolios at any one time. Additional investment
portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS. CERTAIN PORTFOLIOS
CONTAINED IN THE FUND PROSPECTUSES MAY NOT BE AVAILABLE WITH YOUR CONTRACT.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is a mutual fund with multiple portfolios. A
I M Advisors, Inc. is the investment adviser to each portfolio. The following
portfolios are available under the contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
Premier Growth Portfolio
Real Estate Investment Portfolio
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of Cova. Cova Series Trust is a mutual fund
with multiple portfolios. Cova Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
portfolios are available under the contract:
J.P. Morgan Investment Management Inc. is the sub-adviser to the following
portfolios:
Small Cap Stock Portfolio
Large Cap Stock Portfolio
Select Equity Portfolio
International Equity Portfolio
Quality Bond Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolios:
Bond Debenture Portfolio (a "high yield" portfolio under California
insurance regulations)
Large Cap Research Portfolio
Developing Growth Portfolio
Mid-Cap Value Portfolio
Lord Abbett Growth and Income Portfolio
THE COVA SERIES TRUST LORD ABBETT GROWTH AND INCOME PORTFOLIO IS NOT CURRENTLY
AVAILABLE. (CHECK WITH YOUR BROKER REGARDING FUTURE AVAILABILITY.)
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Goldman Sachs Variable Insurance Trust is a mutual fund with multiple
portfolios. Goldman Sachs Asset Management is the investment adviser for the
Goldman Sachs Growth and Income Fund and Goldman Sachs Asset Management
International is the investment adviser for the Goldman Sachs International
Equity Fund and the Goldman Sachs Global Income Fund. The following portfolios
are available under the contract:
Goldman Sachs Growth and Income Fund
Goldman Sachs International Equity Fund
Goldman Sachs Global Income Fund
INVESTORS FUND SERIES
Investors Fund Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the Kemper Government Securities
Portfolio, the Kemper Small Cap Growth Portfolio and the Kemper Small Cap Value
Portfolio. The following portfolios are available under the contract:
Kemper Small Cap Value Portfolio
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
LIBERTY VARIABLE INVESTMENT TRUST
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger, Variable Series. The following
portfolio is available under the contract:
Newport Tiger, Variable Series
(a portfolio investing in equity securities of companies located in certain
countries of Asia).
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund. The following portfolio managed
by Lord, Abbett & Co. is available under the contract:
Growth and Income Portfolio
MFS VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust is a mutual fund with multiple portfolios.
Massachusetts Financial Services Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS High Income Series
MFS World Governments Series
MFS/Foreign & Colonial Emerging Markets
Equity Series
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Variable Account Funds is a mutual fund with multiple portfolios.
OppenheimerFunds, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer Strategic Bond Fund
PUTNAM VARIABLE TRUST
Putnam Variable Trust is a mutual fund with multiple portfolios. Putnam
Investment Management, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Putnam VT Growth and Income Fund
Putnam VT International Growth Fund
Putnam VT International New Opportunities Fund
Putnam VT New Value Fund
Putnam VT Vista Fund (a stock portfolio)
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Each portfolio has two classes of shares: Class 1 and Class 2. The
portfolios available in connection with your contract are Class 1 shares.
Templeton Asset Management Ltd. is the investment adviser for the Templeton
Developing Markets Fund, Templeton Investment Counsel, Inc. is the investment
adviser for the Templeton International Fund and Franklin Mutual Advisers, Inc.
is the investment adviser for the Mutual Shares Investments Fund, Class 1
Shares. The following portfolios are available under the contract:
Templeton Developing Markets Fund, Class 1 Shares
Templeton International Fund, Class 1 Shares
Mutual Shares Investments Fund, Class 1 Shares
In California, the Templeton Developing Markets Fund, the Templeton
International Fund and the Mutual Shares Investments Fund are not available
until approved by the California Insurance Department (check with your broker
regarding availability).
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds do
not believe that offering their shares in this manner will be disadvantageous to
you.
Cova may enter into certain arrangements under which it is reimbursed by the
investment portfolios' advisors, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
Transfers
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described above.
You can make transfers by telephone. If you own the contract with a joint owner,
unless Cova is instructed otherwise, Cova will accept instructions from either
you or the other owner. Cova will use reasonable procedures to confirm that
instructions given us by telephone are genuine. If Cova fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. Cova tape records all telephone instructions.
Transfers during the Accumulation Phase. You can make 12 transfers every year
during the accumulation phase without charge. We measure a year from the
anniversary of the day we issued your contract. You can make a transfer to or
from the fixed account and to or from any investment portfolio. If you make more
than 12 transfers in a year, there is a transfer fee deducted. The fee is $25
per transfer or, if less, 2% of the amount transferred. The following apply to
any transfer during the accumulation phase:
1 Your request for transfer must clearly state which investment portfolio(s)
or the fixed account are involved in the transfer.
2. Your request for transfer must clearly state how much the transfer is for.
3. You cannot make any transfers within 7 calendar days of the annuity date.
Transfers during the Income Phase. You can only make transfers between the
investment portfolios once each year. We measure a year from the anniversary of
the day we issued your contract. You cannot transfer from the fixed account to
an investment portfolio, but you can transfer from one or more investment
portfolios to the fixed account at any time.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund or the fixed account to any of the
other investment portfolio(s). By allocating amounts on a regular schedule as
opposed to allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations. The Dollar Cost Averaging
Program is available only during the accumulation phase.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program. There is no additional charge for participating
in the Dollar Cost Averaging Program.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
Automatic Rebalancing Program
Once your money has been allocated among the investment portfolios, the
performance of each portfolio may cause your allocation to shift. You can direct
us to automatically rebalance your contract to return to your original
percentage allocations by selecting our Automatic Rebalancing Program. You can
tell us whether to rebalance quarterly, semi-annually or annually. We will
measure these periods from the anniversary of the date we issued your contract.
The transfer date will be the 1st day after the end of the period you selected.
The Automatic Rebalancing Program is available only during the accumulation
phase. There is no additional charge for participating in the Automatic
Rebalancing Program. If you participate in the Automatic Rebalancing Program,
the transfers made under the program are not taken into account in determining
any transfer fee.
Example:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Quality Bond Portfolio and
60% to be in the Select Equity Portfolio. Over the next 2 1/2 months the
bond market does very well while the stock market performs poorly. At the
end of the first quarter, the Quality Bond Portfolio now represents 50% of
your holdings because of its increase in value. If you had chosen to have
your holdings rebalanced quarterly, on the first day of the next quarter,
Cova would sell some of your units in the Quality Bond Portfolio to bring
its value back to 40% and use the money to buy more units in the Select
Equity Portfolio to increase those holdings to 60%.
Approved Asset Allocation Programs
Cova recognizes the value to certain owners of having available, on a continuous
basis, advice for the allocation of your money among the investment options
available under the contracts. Certain providers of these types of services have
agreed to provide such services to owners in accordance with Cova's
administrative rules regarding such programs.
Cova has made no independent investigation of these programs. Cova has only
established that these programs are compatible with our administrative systems
and rules. Approved asset allocation programs are only available during the
accumulation phase.
Even though Cova permits the use of approved asset allocation programs, the
contract was not designed for professional market timing organizations. Repeated
patterns of frequent transfers are disruptive to the operations of the
investment portfolios, and when Cova becomes aware of such disruptive practices,
we may modify the transfer provisions of the contract.
If you participate in an Approved Asset Allocation Program, the transfers made
under the program are not taken into account in determining any transfer fee.
Voting Rights
Cova is the legal owner of the investment portfolio shares. However, Cova
believes that when an investment portfolio solicits proxies in conjunction with
a vote of shareholders, it is required to obtain from you and other owners
instructions as to how to vote those shares. When we receive those instructions,
we will vote all of the shares we own in proportion to those instructions. This
will also include any shares that Cova owns on its own behalf. Should Cova
determine that it is no longer required to comply with the above, we will vote
the shares in our own right.
Substitution
Cova may be required to substitute one of the investment portfolios you have
selected with another portfolio. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give you notice of our intent
to do this.
5. EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
Insurance Charges
Each day, Cova makes a deduction for its insurance charges. Cova does this as
part of its calculation of the value of the accumulation units and the annuity
units. The insurance charge has two parts: 1) the mortality and expense risk
premium and 2) the administrative expense charge.
Mortality and Expense Risk Premium. This charge is equal, on an annual basis, to
1.25% of the daily value of the contracts invested in an investment portfolio,
after expenses have been deducted. This charge is for all the insurance benefits
e.g., guarantee of annuity rates, the death benefits, for certain expenses of
the contract, and for assuming the risk (expense risk) that the current charges
will be sufficient in the future to cover the cost of administering the
contract. If the charges under the contract are not sufficient, then Cova will
bear the loss. Cova does, however, expect to profit from this charge. The
mortality and expense risk premium cannot be increased. Cova may use any profits
we make from this charge to pay for the costs of distributing the contract.
Administrative Expense Charge. This charge is equal, on an annual basis, to .15%
of the daily value of the contracts invested in an investment portfolio, after
expenses have been deducted. This charge, together with the contract maintenance
charge (see below), is for all the expenses associated with the administration
of the contract. Some of these expenses are: preparation of the
contract, confirmations, annual reports and statements, maintenance of contract
records, personnel costs, legal and accounting fees, filing fees, and computer
and systems costs. Because this charge is taken out of every unit value, you may
pay more in administrative costs than those that are associated solely with your
contract. Cova does not intend to profit from this charge. However, if this
charge and the contract maintenance charge are not enough to cover the costs of
the contracts in the future, Cova will bear the loss.
Contract Maintenance Charge
During the accumulation phase, every year on the anniversary of the date when
your contract was issued, Cova deducts $30 from your contract as a contract
maintenance charge. This charge is for administrative expenses (see above). This
charge cannot be increased.
Cova will not deduct this charge during the accumulation phase if, when the
deduction is to be made, the value of your contract is $50,000 or more. Cova may
some time in the future discontinue this practice and deduct the charge.
If you make a complete withdrawal from your contract, the contract maintenance
charge will also be deducted. A pro rata portion of the charge will be deducted
if the annuity date is other than an anniversary. After the annuity date, the
charge will be collected monthly out of the annuity payment.
Withdrawal Charge
During the accumulation phase, you can make withdrawals from your contract. Cova
keeps track of each purchase payment. Once a year after the first year, you can
withdraw up to 10% of your total purchase payments and no withdrawal charge will
be assessed on the 10%, if on the day you make your withdrawal the value of your
contract is $5,000 or more. Otherwise, the charge is 5% of each purchase payment
you take out. However, after Cova has had a purchase payment for 5 years, there
is no charge when you withdraw that purchase payment. For purposes of the
withdrawal charge, Cova treats withdrawals as coming from the oldest purchase
payment first. When the withdrawal is for only part of the value of your
contract, the withdrawal charge is deducted from the remaining value in your
contract.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the contract. Thus, for tax purposes, earnings are considered to come
out first.
Cova does not assess the withdrawal charge on any payments paid out as annuity
payments or as death benefits.
After you have owned the contract for one year, if you, or your joint owner,
become confined to a nursing home or hospital for at least 90 consecutive days
under a doctor's care and you need part or all of the money from your contract,
Cova will not impose a withdrawal charge. You or your joint owner cannot have
been so confined when you purchased your contract if you want to take advantage
of this provision (confinement must begin after the first contract anniversary).
This is called the Nursing Home Waiver.
Reduction or Elimination of the Withdrawal Charge
Cova will reduce or eliminate the amount of the withdrawal charge when the
contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the contract or a prospective purchaser already had a relationship with Cova.
Cova will not deduct a withdrawal charge under a contract issued to an officer,
director or employee of Cova or any of its affiliates.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is Cova's current practice to not charge anyone for these
taxes until annuity payments begin. Cova may some time in the future discontinue
this practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 4%, depending on the state.
Transfer Fee
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred whichever is less.
If the transfer is part of the Dollar Cost Averaging Program, the Automatic
Rebalancing Program or an Approved Asset Allocation Program, it will not count
in determining the transfer fee.
Income Taxes
Cova will deduct from the contract for any income taxes which it incurs because
of the contract. At the present time, we are not making any such deductions.
Investment Portfolio Expenses
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the attached fund prospectuses.
6. TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included in the Statement of Additional Information an additional discussion
regarding taxes.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,corporation
or certain other entities other than tax-qualified trusts), the contract will
generally not be treated as an annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts),
H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension and
profit-sharing plans, which include 401(k) plans.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts: (1) paid on or after the
taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer
becomes totally disabled (as that term is defined in the Code); (4) paid in a
series of substantially equal payments made annually (or more frequently) under
a lifetime annuity; (5) paid under an immediate annuity; or (6) which come from
purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of purchase payments made by owners from certain
Tax-Sheltered Annuities. Withdrawals can only be made when an owner: (1) reaches
age 59 1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled (as that term
is defined in the Code); or (5) in the case of hardship. However, in the case of
hardship, the owner can only withdraw the purchase payments and not any
earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Cova believes that the investment portfolios are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Cova would be
considered the owner of the shares of the investment portfolios. If this occurs,
it will result in the loss of the favorable tax treatment for the contract. It
is unknown to what extent owners are permitted to select investment portfolios,
to make transfers among the investment portfolios or the number and type of
investment portfolios owners may select from. If any guidance is provided which
is considered a new position, then the guidance would generally be applied
prospectively. However, if such guidance is considered not to be a new position,
it may be applied retroactively. This would mean that you, as the owner of the
contract, could be treated as the owner of the investment portfolios.
Due to the uncertainty in this area, Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making a withdrawal
(either a partial or a complete withdrawal); (2) by electing to receive annuity
payments; or (3) when a death benefit is paid to your beneficiary. Under most
circumstances, withdrawals can only be made during the accumulation phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any applicable withdrawal charge, less
any premium tax and less any contract maintenance charge. (See Section 5.
Expenses for a discussion of the charges.)
Unless you instruct Cova otherwise, any partial withdrawal will be made pro rata
from all the investment portfolios and the fixed account you selected. Under
most circumstances the amount of any partial withdrawal must be for at least
$500. Cova requires that after a partial withdrawal is made you keep at least
$500 in any selected investment portfolio.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan. For a more complete explanation see Section 6. Taxes and
the discussion in the Statement of Additional Information.
Systematic Withdrawal Program
If you are 59 1/2 or older, you may use the Systematic Withdrawal Program. This
program provides an automatic monthly payment to you of up to 10% of your total
purchase payments each year. No withdrawal charge will be made for these
payments. Cova does not have any charge for this program, but reserves the right
to charge in the future. If you use this program, you may not also make a single
10% free withdrawal. For a discussion of the withdrawal charge and the 10% free
withdrawal, see Section 5. Expenses.
INCOME TAXES MAY APPLY TO SYSTEMATIC WITHDRAWALS.
8. PERFORMANCE
Cova periodically advertises performance of the various investment portfolios.
Cova will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that unit
by the value of the accumulation unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges and the
investment portfolio expenses. It does not reflect the deduction of any
applicable contract maintenance charge and withdrawal charge. The deduction of
any applicable contract maintenance charge and withdrawal charges would reduce
the percentage increase or make greater any percentage decrease. Any
advertisement will also include total return figures which reflect the deduction
of the insurance charges, contract maintenance charges, withdrawal charges and
the investment portfolio expenses.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios, performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
Cova may, from time to time, include in its advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
The Appendix contains performance information that you may find informative.
Future performance will vary and the results shown are not necessarily
representative of future results.
9. DEATH BENEFIT
Upon Your Death
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). If you have a joint owner, the death benefit will be
paid when the first of you dies. Joint owners must be spouses. The surviving
joint owner will be treated as the beneficiary.
The amount of the death benefit depends on how old you or your joint owner is.
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less withdrawals (and any withdrawal charges paid
on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest of the values resulting from taking the contract value on any
five (5) year contract anniversary prior to the date of your death or the
joint owner's death, plus any payments you made subsequent to that contract
anniversary, less any withdrawals (and any withdrawal charges paid on the
withdrawals) subsequent to that contract anniversary.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments less withdrawals (and any withdrawal charges paid
on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest of the values resulting from taking the contract value on any
prior five (5) year contract anniversary on or before your or the joint
owner's 80th birthday, plus any purchase payments made after that contract
anniversary, less any withdrawals (and any withdrawal charges paid on the
withdrawals) made after that contract anniversary.
If you have a joint owner, the death benefit is determined based on the age of
the oldest joint owner and the death benefit is payable on the death of the
first joint owner.
The death benefit described above may not be available in your state. In those
states where it is not available, the death benefit will be as follows:
The amount of the death benefit depends on how old you or your joint owner is.
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greater of:
1. Total purchase payments, less withdrawals (and any withdrawal charges paid
on the withdrawals);
2. The value of your contract at the time the death benefit is to be paid; or
3. The value of your contract on the most recent five year anniversary before
the date of death, plus any subsequent purchase payments, less any
withdrawals (and any withdrawal charges paid on the withdrawals).
After you, or your joint owner, reaches age 80, the death benefit will be the
greater of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals);
2. The value of your contract at the time the death benefit is to be paid; or
3. The value of your contract on the most recent five year anniversary on or
before you or your joint owner reaches age 80, plus any subsequent purchase
payments, less any withdrawals (and any withdrawal charges paid on the
withdrawals).
CHECK YOUR CONTRACT AND APPLICABLE ENDORSEMENT FOR YOUR DEATH BENEFIT.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name at the then current value. If a lump sum payment is elected and
all the necessary requirements are met, the payment will be made within 7 days.
Death of Annuitant
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death benefit,
if any, will be as provided for in the annuity option selected.
10. OTHER INFORMATION
Cova
Cova Financial Life Insurance Company ("Cova") was originally incorporated on
September 6, 1972 as Industrial Indemnity Life Insurance Company, a California
corporation and changed its name to Xerox Financial Life Insurance Company in
1986. On June 1, 1995, a wholly-owned subsidiary of General American Life
Insurance Company purchased Cova which on that date changed its name to Cova
Financial Life Insurance Company.
Cova is presently licensed to do business in the state of California.
The Separate Account
Cova has established a separate account, Cova Variable Annuity Account Five
(Separate Account), to hold the assets that underlie the contracts. The Board of
Directors of Cova adopted a resolution to establish the Separate Account under
California insurance law on March 24, 1992. We have registered the Separate
Account with the Securities and Exchange Commission as a unit investment trust
under the Investment Company Act of 1940.
The assets of the Separate Account are held in Cova's name on behalf of the
Separate Account and legally belong to Cova. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts Cova may issue.
Distributor
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the contracts. Life
Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions up to 5.75% of purchase payments but,
under certain circumstances, may be paid an additional .5% commission.
Sometimes, Cova enters into an agreement with the broker-dealer to pay the
broker-dealer persistency bonuses, in addition to the standard commissions.
Ownership
Owner. You, as the owner of the contract, have all the rights under the
contract. Prior to the annuity date, the owner is as designated at the time the
contract is issued, unless changed. On and after the annuity date, the annuitant
is the owner. The beneficiary becomes the owner when a death benefit is payable.
Joint Owner. The contract can be owned 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
designation at the time the contract was issued or as may have been later
changed will be treated as a contingent beneficiary unless otherwise indicated.
Beneficiary
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before you die.
Assignment
You can assign the contract at any time during your lifetime. Cova will not be
bound by the assignment until it receives the written notice of the assignment.
Cova will not be liable for any payment or other action we take in accordance
with the contract before we receive notice of the assignment. AN ASSIGNMENT MAY
BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be
limitations on your ability to assign the contract.
Suspension of Payments or Transfers
Cova may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or Cova cannot
reasonably value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
Cova has reserved the right to defer payment for a withdrawal or transfer from
the fixed account for the period permitted by law but not for more than six
months.
Financial Statements
The financial statements of Cova and the Separate Account have been included in
the Statement of Additional Information.
Table of Contents of the Statement of Additional Information
Company
Experts
Legal Opinions
Distribution
Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
APPENDIX
PERFORMANCE INFORMATION
Future performance will vary and the results shown are not necessarily
representative of future results.
PART 1
The contracts are relatively new and therefore have no performance history.
However, the Separate Account has invested in certain portfolios for some time
and has an investment performance history. In order to show how the historical
performance of the Separate Account affects the contract's accumulation unit
values, the following performance was developed. The information is based upon
the historical experience of the Separate Account and portfolios and is for the
periods shown. The chart below shows the investment performance of the Separate
Account and the accumulation unit performance calculated by assuming that the
contracts were invested in the Separate Account for the same periods.
Column A presents performance figures for the accumulation units which reflect
the insurance charges and fees and expenses of each portfolio. Column B presents
performance figures for the accumulation units which reflect the insurance
charges, the contract maintenance charge, the fees and expenses of each
portfolio, and assumes that you make a withdrawal at the end of the period and
therefore the withdrawal charge is reflected.
Total Return for the periods ended 12/31/97:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects insurance (reflects all charges
charges and and portfolio
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr Inception 1 yr Inception
- ------------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
<S> <C> <C> <C> <C> <C> <C>
Small Cap Stock 5/15/96 19.31% 13.94% 14.12% 10.98%
Large Cap Stock 5/16/96 31.36% 26.51% 26.15% 23.69%
Select Equity 5/15/96 29.67% 22.08% 24.47% 19.23%
International Equity 5/14/96 4.52% 8.07% (0.64)% 5.07%
Quality Bond 5/20/96 7.58% 7.32% 2.43% 4.28%
Bond Debenture 5/20/96 14.05% 15.91% 8.87% 12.97%
- ------------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Series Fund, Inc.
Growth and Income 7/20/95 22.91% 20.45% 17.48% 18.53%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX
PERFORMANCE INFORMATION (continued)
PART 2
The contracts are relatively new and therefore have no performance history.
However, certain portfolios have been in existence for some time and have an
investment performance history. In order to show how the historical performance
of the portfolios affects the contract's accumulation unit values, the following
performance was developed. The information is based upon the historical
experience of the portfolios and is for the periods shown. The chart below shows
the investment performance of the portfolios and the accumulation unit
performance calculated by assuming that the contracts were invested in the
portfolios for the same periods.
The performance figures in Column A reflect the fees and expenses paid by each
portfolio. Column B presents performance figures for the accumulation units
which reflect the insurance charges and the fees and expenses of each portfolio.
Column C presents performance figures for the accumulation units which reflect
the insurance charges, the contract maintenance charge, the fees and expenses of
each portfolio, and assumes that you make a withdrawal at the end of the period
and therefore the withdrawal charge is reflected.
Total Return for the periods ended 12/31/97:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects insurance (reflects all charges
Portfolio Performance charges and and portfolio
Column A portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation 5/5/93 13.51% - - 18.65% 12.11% - - 17.25% 7.01% - - 12.65%
AIM V.I.
International Equity 5/5/93 6.94% - - 12.91% 5.54% - - 11.51% 0.44% - - 6.91%
AIM V.I. Value 5/5/93 23.69% - - 19.76% 22.29% - - 18.36% 17.19% - - 13.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth 6/26/92 33.86% 21.06% 21.72% 32.46% 19.66% 20.32% 27.36% 15.06% 20.22%
Real Estate
Investment 1/9/97 - - - - 23.40% - - - - 22.00% - - - - 16.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Select Equity 5/1/96 31.55% - - 23.74% 29.67% - - 21.97% 24.48% - - 19.33%
Small Cap Stock 5/1/96 20.89% - - 17.72% 19.31% - - 16.10% 14.12% - - 13.38%
International Equity 5/1/96 5.96% - - 8.67% 4.52% - - 7.14% (0.64)% - - 4.31%
Quality Bond 5/1/96 9.06% - - 8.87% 7.58% - - 7.42% 2.43% - - 4.60%
Large Cap Stock 5/1/96 33.25% - - 28.66% 31.36% - - 26.87% 26.15% - - 24.29%
Bond Debenture 5/1/96 15.63% - - 17.28% 14.05% - - 15.69% 8.87% - - 12.97%
Mid-Cap Value 8/20/97 - - - - 4.90% - - - - 4.58% - - - - (0.54)%
Large Cap Research 8/20/97 - - - - (0.74)% - - - - (1.00)% - - - - (6.21)%
Developing Growth 8/20/97 - - - - 5.52% - - - - 5.28% - - - - 0.06%
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market 10/1/87 5.71% 4.89% 5.99% 4.31% 3.49% 4.59% (0.79)% (1.11)% 4.49%
Liberty Variable Investment Trust
Newport Tiger,
Variable Series 5/1/95 (31.14)% - - (4.47)% (32.54)% - - (5.87)% _ _ (37.64)% (10.47)%
Lord Abbett Series Fund, Inc.
Growth and Income 12/11/89 24.30% 17.90% 16.60% 22.91% 16.28% 14.99% 17.48% 15.25% 14.59%
Investors Fund Series
Kemper Small
Cap Value 5/1/96 21.73% - - 13.74% 20.33% - - 12.34% 15.23% - - 7.74%
Kemper Government
Securities 9/3/87 8.96% 6.61% 7.98% 7.56% 5.21% 6.58% 2.46% 0.61% 6.48%
Kemper Small Cap
Growth 5/2/94 34.20% - - 25.83% 32.80% - - 24.43% 27.70% - - 19.83%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects insurance (reflects all charges
Portfolio Performance charges and and portfolio
Column A portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth 7/24/95 21.90% - - 23.53% 20.50% - - 22.13% 15.40% - - 17.53%
MFS Research 7/26/95 20.26% - - 22.13% 18.86% - - 20.73% 13.76% - - 16.13%
MFS Growth With
Income 10/9/95 29.78% - - 27.61% 28.38% - - 26.21% 23.28% - - 21.61%
MFS High Income 7/26/95 13.62% - - 12.66% 12.22% - - 11.26% 7.12% - - 6.66%
MFS World
Governments 6/14/94 (1.13)% - - 4.92% (2.53)% - - 3.52% (7.63)% - - (1.08)%
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Oppenheimer Variable Account Funds
Oppenheimer High
Income 4/30/86 12.21% 13.75% 14.32% 10.81% 12.35% 12.92% 5.71% 7.75% 12.82%
Oppenheimer Bond 4/3/85 9.25% 8.23% 9.50% 7.85% 6.83% 8.10% 2.75% 2.23% 8.00%
Oppenheimer
Growth 4/3/85 26.68% 18.61% 16.67% 25.28% 17.21% 15.27% 20.18% 12.61% 15.17%
Oppenheimer
Growth & Income 7/5/95 32.48% - - 37.24% 31.08% - - 35.84% 25.98% - - 31.24%
Oppenheimer
Strategic Bond 5/3/93 8.71% - - 7.64% 7.31% - - 6.24% 2.21% - - 1.64%
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Putnam Variable Trust
Putnam VT Growth
and Income 2/1/88 24.15% 18.87% 16.64% 22.75% 17.47% 15.24% 17.65% 12.87% 15.14%
Putnam VT New
Value 1/2/97 - - - - 17.60% - - - - 16.20% - - - - 11.10%
Putnam VT Vista 1/2/97 - - - - 23.21% - - - - 21.81% - - - - 16.71%
Putnam VT
International
Growth 1/2/97 - - - - 16.13% - - - - 14.73% - - - - 9.63%
Putnam VT
International
New Opportunities 1/2/97 - - - - (0.10)% - - - - (1.50)% - - - - (6.60)%
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Templeton Variable Products Series Fund
Templeton Developing
Markets Fund,
Class 1 Shares* 3/1/96 (29.22)% - - (19.78)% (30.62)% - - (21.18)% (35.72)% - - (25.78)%
Templeton International
Fund, Class 1 Shares 5/1/92 13.95% 18.71% 15.05% 12.55% 17.31% 13.65% 7.45% 12.71% 13.55%
<FN>
* Past fee waivers by the portfolio's manager increased its total returns.
- ------------------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
Cova Financial Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
Please send me, at no charge, the Statement of Additional Information dated May
1, 1998, for The Annuity Contract issued by Cova.
(Please print or type and fill in all information)
................................................................................
Name
................................................................................
Address
................................................................................
City State Zip Code
CC-3043 (5/98) COVA VA
[back cover]
COVA
Cova Financial Life Insurance Company
Marketing and Executive Office
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
800-523-1661
Annuity Service Office
P.O. Box 10366
Des Moines, IA 50306-9775
800-343-8496
CC-3035(5/98) Policy Form Series XLCC-648, XLCC-833 21-CSA-CA (5/98)
