File Nos. 333-34817
811-07060
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 4 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 16 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT FIVE
___________________________________
(Exact Name of Registrant)
COVA FINANCIAL LIFE INSURANCE COMPANY
______________________________________
(Name of Depositor)
4100 Newport Place Drive, Suite 840, Newport Beach, CA 92600
______________________________________________________ ______
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 831-5433
______________
Name and Address of Agent for Service
Lorry J. Stensrud, President
Cova Financial Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 831-5433
Copies to:
Judith A. Hasenauer and Frances S. Cook
Blazzard, Grodd & Hasenauer, P.C. First Vice President and
943 Post Road East Associate Counsel
P.O. Box 5108 Cova Financial Life Insurance
Westport, CT 06881 Company
(203) 226-7866 One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on May 1, 1999 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following:
_____ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Title of Securities Registered:
Individual Variable Annuity Contracts.
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EXPLANATORY NOTE
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This Registration Statement contains two prospectuses (Version A and Version B).
The two versions are identical except for the funding options. Different
versions of Version A of the Prospectus will be created -- each one with
different funding options available. The Prospectuses will be filed with the
Commission pursuant to Rule 497 under the Securities Act of 1933. The Registrant
undertakes to update this Explanatory Note, as needed, each time a
Post-Effective Amendment is filed.
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<TABLE>
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Profile
Item 4. Condensed Financial Information . . . Appendix - Condensed Financial Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Investment
Options
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Fixed and Variable Annuity
Item 8. Annuity Period . . . . . . . . . . . . Income Phase
Item 9. Death Benefit. . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . Table of Contents of the
Statement of Additional
Information
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------
PART B
Item 15. Cover Page . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . Company
Item 18. Services . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A - VERSION A
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 __ investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and __ 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
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
Kemper Variable 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 Fund, Variable Series
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 Global Governments Series (formerly MFS World Governments)
MFS/Foreign & Colonial Emerging
Markets Equity Series (not available)
Oppenheimer Variable Account Funds:
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth)
Oppenheimer Main Street Growth & Income Fund/VA (formerly Oppenheimer
Growth & Income)
Oppenheimer Strategic Bond Fund/VA
Putnam Variable Trust:
Managed by Putnam Investment
Management, Inc.
Putnam VT Growth and Income Fund Class IA Shares
Putnam VT International Growth Fund Class IA Shares
Putnam VT International New
Opportunities Fund Class IA Shares
Putnam VT New Value Fund Class IA Shares
Putnam VT Vista Fund Class IA Shares
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
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Cova Fixed and Variable
Annuity Contract.
To learn more about the Cova Fixed and Variable Annuity Contract, you can obtain
a copy of the Statement of Additional Information (SAI) dated May 1, 1999. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the
SEC. The Table of Contents of the SAI is on Page __ of this prospectus. For a
free copy of the SAI, call us at (800) 523-1661 or write us at : One Tower Lane,
Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 1999
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
EXAMPLES
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund, Inc.
Cova Series Trust
General American Capital Company
Goldman Sachs Variable Insurance Trust
Kemper Variable Series
Liberty Variable Investment Trust
MFS Variable Insurance Trust
Oppenheimer Variable Account Funds
Putnam Variable Trust
Templeton Variable Products Series Fund
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Approved Asset Allocation Programs
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the
Withdrawal Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Suspension of Payments or Transfers
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
Cova
Year 2000
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Performance Information
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable and need an explanation. We have identified the
following as some of these words or terms. They are identified in the text in
italic and the page that is indicated here is where we believe you will find the
best explanation for the word or term.
Page
Accumulation Phase
Accumulation Unit
Annuitant
Annuity Date
Annuity Options
Annuity Payments
Annuity Unit
Beneficiary
Fixed Account
Income Phase
Investment Portfolios
Joint Owner
Non-Qualified
Owner
Purchase Payment
Qualified
Tax Deferral
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by Cova is a contract between
you, the owner, and Cova, an insurance company. The contract provides a means
for investing on a tax-deferred basis. The contract is intended for
retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
This contract offers __ investment portfolios. 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.
The fixed account offers an interest rate that is guaranteed by the insurance
company, Cova. While your money is in the fixed account, the interest your money
will earn as well as your principal is guaranteed by Cova.
You can 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.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments
during the income phase.
ANNUITY PAYMENTS (THE INCOME PHASE):
If you want to receive regular income from your annuity, you can choose an
annuity option. Once you begin receiving regular payments, you cannot change
your payment plan. During the income phase, you have the same investment choices
you had during the accumulation phase. You can choose to have payments come from
the fixed account, the investment portfolios or both. If you choose to have any
part of your payments come from the investment portfolios, the dollar amount of
your payments may go up or down.
HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
INVESTMENT OPTIONS:
You can put your money in 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. The investment objectives and policies of certain of
the investment portfolios are similar to the investment objectives and policies
of other mutual funds that certain of the investment advisers manage. Although
the objectives and policies may be similar, the investment results of the
investment portfolios may be higher or lower than the results of such other
mutual funds. The investment advisers cannot guarantee, and make no
representation, that the investment results of similar funds will be comparable
even though the funds have the same investment advisers.
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
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
KEMPER VARIABLE 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 Fund, Variable Series
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 Global Governments Series (formerly MFS World Governments)
MFS/Foreign & Colonial Emerging Markets Equity Series (not available)
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
MANAGED BY OPPENHEIMERFUNDS, INC.
Oppenheimer High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth)
Oppenheimer Main Street Growth & Income Fund/VA (formerly Oppenheimer
Growth & Income)
Oppenheimer Strategic Bond Fund/VA
PUTNAM VARIABLE TRUST:
MANAGED BY PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam VT Growth and Income Fund Class IA Shares
Putnam VT International Growth Fund Class IA Shares
Putnam VT International New Opportunities Fund Class IA Shares
Putnam VT New Value Fund Class IA Shares
Putnam VT Vista Fund Class IA Shares
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
Depending upon market conditions and the performance of the portfolio(s) you
select, you can make or lose money in any of these portfolios.
EXPENSES:
The contract has insurance 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. After Cova has had a purchase
payment for 5 years, there is no charge by Cova for a withdrawal of that
purchase payment.
* 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.
* The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
* There are also investment charges which currently range from .205% to
1.66% of the average daily value of the investment portfolio depending
upon the investment portfolio.
TAXES:
Your earnings are not taxed until you take them out. If you take money out
during the accumulation phase, earnings come out first and are taxed as income.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal tax penalty on the earnings. Payments during the income phase are
considered partly a return of your original investment. That part of each
payment is not taxable as income.
ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from Cova. Withdrawals of purchase payments in excess of that
may be charged a withdrawal charge, depending on how long your money has been in
the contract. However, Cova will never assess a withdrawal charge on earnings
you withdraw. Earnings are defined as the value in your contract minus the
remaining purchase payments in your contract. Of course, you may also have to
pay income tax and a tax penalty on any money you take out.
DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
OTHER INFORMATION:
Free Look. If you cancel the contract within 10 days after receiving it (or, 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 income tax brackets. You should not buy this contract if
you are looking for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
* Under certain circumstances, Cova will give you your money without a
withdrawal charge if you need it while you're in a nursing home. We call
this feature the Nursing Home Waiver.
These features may not be suitable for your particular situation.
INQUIRIES:
If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract. The Fee Table reflects
expenses of the Separate Account as well as the investment portfolios.
OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 1 below) 5% of purchase payment withdrawn
Transfer Fee (see Note 2 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
CONTRACT MAINTENANCE CHARGE (see Note 3
below) $30 per contract per year
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>
A I M V.I. Capital Appreciation Fund .62% .05% .67%
A I M V.I. International Equity Fund .75% .16% .91%
A I M V.I. Value Fund .61% .05% .66%
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</TABLE>
<TABLE>
<CAPTION>
Management Other Total Annual
Fees Expenses Portfolio Expenses
(after expense (after expense
reimbursement) reimbursement)
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
<S> <C> <C> <C>
Premier Growth Portfolio* 1.00% .06% 1.06%
Real Estate Investment Portfolio** .08% .87% .95%
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<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% annually
and the adviser to the Fund intends to continue such reimbursements for the
foreseeable future. The estimated expenses for the Real Estate Investment
Portfolio, before reimbursement, are: .90% management fees and 1.41% for
other expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement reimbursement
for certain for certain
Portfolios)(1) Portfolios)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
<S> <C> <C> <C>
Select Equity Portfolio .68% .18% .86%
Small Cap Stock Portfolio .85% .27% 1.12%
International Equity Portfolio .80% .28% 1.08%
Quality Bond Portfolio .55% .10% .65%
Large Cap Stock Portfolio .65% .10% .75%
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio (a "high yield" portfolio .75% .10% .85%
under California insurance regulations)
Mid-Cap Value Portfolio 1.00% .30% 1.30%
Large Cap Research Portfolio 1.00% .30% 1.30%
Developing Growth Portfolio .90% .30% 1.20%
Lord Abbett Growth and Income Portfolio(2) .65% .07% .72%
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<FN>
(1) Since May 1, 1996, Cova has been reimbursing the investment
portfolios of Cova Series Trust for all operating expenses (exclusive of the
management fees) in excess of approximately .10%. Beginning May 1, 1999,
Cova will discontinue this reimbursement arrangement for the Select Equity,
Small Cap Stock and International Equity Portfolios. Therefore, the amounts
shown above under "Other Expenses" have been restated to reflect the actual
expenses for these Portfolios for the year ended December 31, 1998. Also
beginning May 1, 1999, Cova will reimburse the Mid-Cap Value, Large Cap
Research and Developing Growth Portfolios for all operating expenses
(exclusive of the management fees) in excess of approximately .30%, instead of
.10%. This change is reflected above under "Other Expenses" for these three
Portfolios. Absent the expense reimbursement, the percentages shown for
total annual portfolio expenses for the year ended December 31, 1998 would
have been .86% for the Quality Bond Portfolio, .94% for the Large Cap Stock
Portfolio, .93% for the Bond Debenture Portfolio, 1.68% for the Mid-Cap Value
Portfolio, 1.95% for the Large Cap Research Portfolio and 1.70% for the
Developing Growth Portfolio.
(2) Estimated. The Portfolio commenced investment operations on January 8,
1999.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE 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%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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
<S> <C> <C> <C>
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%
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<FN>
* The investment advisers to the Goldman Sachs Growth and Income,
International Equity and Global Income Funds 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 0.15%, 0.25% and
0.15% per annum of such Funds' average daily net assets, respectively. The
expenses shown include this reimbursement. If not included, the "Other
Expenses" and "Total Annual Portfolio Expenses" for the Goldman Sachs Growth
and Income, International Equity and Global Income Funds would be 1.94% and
2.69%, 1.97% and 2.97% and 2.40% and 3.30%, respectively. The reductions or
limitations 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
(after expense (after expense
reimbursement reimbursement
for Small Cap Value for Small Cap
Portfolio) Value Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
<S> <C> <C> <C>
Kemper Small Cap Value Portfolio .75% .05%* .80%
Kemper Government Securities Portfolio .55% .11% .66%
Kemper Small Cap Growth Portfolio .65% .05% .70%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Pursuant to its agreement with Kemper Variable Series, the investment
manager and the accounting agent have agreed, for the one year period
commencing on the date of this prospectus, to limit their respective fees and
to reimburse other operating expenses, in a manner communicated to the Board
of the Fund, to the extent necessary to limit total operating expenses of the
Kemper Small Cap Value Portfolio to .84%. The amounts set forth in the table
above reflect actual expenses for the past fiscal year, which were lower than
these expense limits.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
<S> <C> <C> <C>
Newport Tiger Fund, Variable Series .90% .40% 1.30%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement reimbursement for
for Global Governments Global Governments
Series) Series)
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust(1)
Managed by Massachusetts Financial Services Company
<S> <C> <C> <C>
MFS Emerging Growth Series .75% .10% .85%
MFS Research Series .75% .11% .86%
MFS Growth With Income Series .75% .13% .88%
MFS High Income Series .75% .28% 1.03%
MFS Global Governments Series(2) .75% .26% 1.01%
MFS/Foreign & Colonial Emerging
Markets Equity Series 1.25% .25% 1.50%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. Expenses do not take into account
these expense reductions, and are therefore higher than the actual expenses
of the series.
(2) MFS has agreed to bear expenses for the Global Governments Series,
subject to reimbursement by this series, such that the series' "Other Expenses"
shall not exceed 0.25% of the average daily net assets of the series during the
current fiscal year. The payments made by MFS on behalf of the series under
this arrangement are subject to reimbursement by the series to MFS, which will
be accomplished by the payment of an expense reimbursement fee by the series
to MFS computed and paid monthly at a percentage of the series' average daily
net assets for its then current fiscal year, with a limitation that immediately
after such payment, the series' "Other Expenses" will not exceed the percentage
set forth above. The obligation of MFS to bear the series' "Other Expenses"
pursuant to this arrangement, and the series' obligation to pay the reimbursement
fee to MFS, terminates on the earlier of the date on which payments made by
the series equal the prior payment of such reimbursable expenses by MFS or
December 31, 2004. MFS may, in its discretion, terminate this arrangement at
an earlier date provided that the arrangement will continue for the series until
at least May 1, 2000, unless terminated with the consent of the board of trustees
which oversees the 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/VA .74% .04% .78%
Oppenheimer Bond Fund/VA .72% .02% .74%
Oppenheimer Capital Appreciation
Fund/VA .72% .03% .75%
Oppenheimer Main Street Growth &
Income Fund/VA .74% .06% .79%
Oppenheimer Strategic Bond Fund/VA .74% .08% .80%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Annual
Management Fees Other Expenses Portfolio Expenses
(after expense (after expense
reimbursement reimbursement
for one Portfolio) for one Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Fund Class IA Shares .46% .04% .50%
Putnam VT International Growth Fund Class IA Shares .80% .27% 1.07%
Putnam VT International New Opportunities Fund Class
IA Shares* 1.18% .42% 1.60%
Putnam VT New Value Fund Class IA Shares .70% .11% .81%
Putnam VT Vista Fund Class IA Shares .65% .12% .77%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The Management Fees and Total Annual Portfolio Expenses reflect an
expense limitation. In the absence of the expense limitation, the Management
Fees and Total Annual Portfolio Expenses would have been 1.20% and 1.62%,
respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Management Total Annual
Fees Other Expenses Portfolio Expenses
(after expense (after expense
reimbursement for reimbursement for
one Portfolio) one Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund
Templeton Developing Markets Fund,
<S> <C> <C> <C> <C>
Class 1 Shares 1.25% .41% 1.66%
Templeton International Fund,
Class 1 Shares .69% .17% .86%
Mutual Shares Investments Fund,
Class 1 Shares* .00% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Figures reflect expenses from the Fund's inception on May 1, 1998 and
are annualized. The investment manager agreed in advance to limit management
fees and make certain payments to reduce Fund expenses as necessary so that
Total Annual Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net
assets in 1998. The investment manager has agreed to continue this
arrangement through 1999. Management Fees, Other Expenses and Total Annual
Portfolio Expenses in 1998 before any waivers were as follows: 0.60%, 2.27%
and 2.87% for the Mutual Shares Investments Fund.
</FN>
</TABLE>
Examples
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract value
to an annuity option.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Time Periods
1 year 3 years 5 years 10 years
------ ------- ------- --------
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation (a) $71.99 (a) $112.73 (a) $160.90 (a) $247.97
(b) $21.99 (b) $ 67.73 (b) $115.90 (b) $247.97
AIM V.I. International Equity (a) $74.40 (a) $119.97 (a) $173.00 (a) $272.25
(b) $24.40 (b) $ 74.97 (b) $128.00 (b) $272.25
AIM V.I. Value (a) $71.89 (a) $112.42 (a) $160.39 (a) $246.95
(b) $21.89 (b) $ 67.42 (b) $115.39 (b) $246.95
ALLIANCE VARIABLE PRODUCTS SERIES FUND,
INC.
Managed by Alliance Capital
Management L.P.
Premier Growth (a) $75.90 (a) $124.47 (a) $180.49 (a) $287.10
(b) $25.90 (b) $ 79.47 (b) $135.49 (b) $287.10
Real Estate Investment (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity (a) $73.90 (a) $118.46 (a) $170.49 (a) $267.24
(b) $23.90 (b )$ 73.46 (b) $125.49 (b) $267.24
Small Cap Stock (a) $76.50 (a) $126.26 (a) $183.47 (a) $292.98
(b) $26.50 (b) $ 81.26 (b) $138.47 (b) $292.98
International Equity (a) $76.10 (a) $125.06 (a) $181.48 (a) $289.07
(b) $26.10 (b) $ 80.06 (b) $136.48 (b) $289.07
Quality Bond (a) $71.79 (a) $112.12 (a) $159.89 (a) $245.92
(b) $21.79 (b) $ 67.12 (b) $114.89 (b) $245.92
Large Cap Stock (a) $72.80 (a) $115.15 (a) $164.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Managed by Lord, Abbett & Co.
Bond Debenture (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Mid-Cap Value (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Large Cap Research (a) $78.30 (a) $131.62 (a) $192.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Developing Growth (a) $77.30 (a) $128.65 (a) $187.42 (a) $300.75
(b) $27.30 (b) $ 83.65 (b) $142.42 (b) $300.75
Lord Abbett Growth and Income (a) $72.49 (a) $114.24 (a) $163.43 (a) $253.08
(b) $22.49 (b) $ 69.24 (b) $118.43 (b) $253.08
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market (a) $67.31 (a) $ 98.54 (a) $137.02 (a) $199.08
(b) $17.31 (b) $ 53.54 (b) $ 92.02 (b) $199.08
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund (a) $74.30 (a) $119.67 (a) $172.50 (a) $271.25
(b) $24.30 (b) $ 74.67 (b) $127.50 (b) $271.25
Managed by Goldman Sachs Asset Management
International
Goldman Sachs International Equity Fund (a) $77.80 (a) $130.14 (a) $189.89 (a) $305.57
(b) $27.80 (b) $ 85.14 (b) $144.89 (b) $305.57
Goldman Sachs Global Income Fund (a) $75.80 (a) $124.17 (a) $179.99 (a) $286.12
(b) $25.80 (b) $ 79.17 (b) $134.99 (b) $286.12
KEMPER VARIABLE SERIES
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value (a)$73.70 (a)$117.86 (a) $169.49 (a) $265.23
(b)$23.70 (b)$ 72.86 (b) $124.49 (b) $265.23
Kemper Government Securities (a)$71.89 (a)$112.42 (a) $160.39 (a) $246.95
(b)$21.89 (b)$ 67.42 (b) $115.39 (b) $246.95
Kemper Small Cap Growth (a)$72.29 (a)$113.63 (a) $162.42 (a) $251.04
(b)$22.29 (b)$ 68.63 (b) $117.42 (b) $251.04
LIBERTY VARIABLE INVESTMENT TRUST
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Series (a)$78.30 (a)$131.62 (a) $192.35 (a) $310.37
(b)$28.30 (b)$ 86.62 (b) $147.35 (b) $310.37
MFS VARIABLE INSURANCE TRUST
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $73.80 (a) $118.16 (a) $169.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
MFS Research (a) $73.90 (a) $118.46 (a) $170.49 (a) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
MFS Growth with Income (a) $74.10 (a) $119.07 (a) $171.50 (a) $269.25
(b) $24.10 (b) $ 74.07 (b) $126.50 (b) $269.25
MFS High Income (a) $75.60 (a) $123.57 (a) $179.00 (a) $284.15
(b) $25.60 (b) $ 78.57 (b) $134.00 (b) $284.15
MFS Global Governments (a) $75.40 (a) $122.97 (a) $178.00 (a) $282.18
(b) $25.40 (b) $ 77.97 (b) $133.00 (b) $282.18
MFS/Foreign & Colonial Emerging Markets
Equity Series (a) $80.29 (a) $137.54 (a) $202.11 (a) $329.29
(b) $30.29 (b) $ 92.54 (b) $157.11 (b) $329.29
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA (a)$73.10 (a)$116.05 (a) $166.47 (a) $259.18
(b)$23.10 (b)$ 71.05 (b) $121.47 (b) $259.18
Oppenheimer Bond Fund/VA (a)$72.69 (a)$114.84 (a) $164.45 (a) $255.12
(b)$22.69 (b)$ 69.84 (b) $119.45 (b) $255.12
Oppenheimer Capital Appreciation Fund/VA (a)$72.80 (a)$115.15 (a) $164.95 (a) $256.13
(b)$22.80 (b)$ 70.15 (b) $119.95 (b) $256.13
Oppenheimer Main Street Growth & Income
Fund/VA (a)$73.20 (a)$116.35 (a) $166.97 (a) $260.19
(b)$23.20 (b)$ 71.35 (b) $121.97 (b) $260.19
Oppenheimer Strategic Bond Fund/VA (a)$73.30 (a)$116.65 (a) $167.47 (a) $261.20
(b)$23.30 (b)$ 71.65 (b) $122.47 (b) $261.20
PUTNAM VARIABLE TRUST
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income-Class IA Shares (a)$70.29 (a)$107.56 (a) $152.24 (a) $230.39
(b)$20.29 (b)$ 62.56 (b) $107.24 (b) $230.39
Putnam VT International Growth-Class IA Shares (a)$76.00 (a)$124.77 (a) $180.99 (a) $288.08
(b)$26.00 (b)$ 79.77 (b) $135.99 (b) $288.08
Putnam VT International New Opportunities-
Class IA Shares (a)$81.48 (a)$141.08 (a) $207.93 (a) $340.45
(b)$31.48 (b)$ 96.08 (b) $162.93 (b) $340.45
Putnam VT New Value-Class IA Shares (a)$73.40 (a)$116.96 (a) $167.98 (a) $262.21
(b)$23.40 (b)$ 71.96 (b) $122.98 (b) $262.21
Putnam VT Vista-Class IA Shares (a)$73.00 (a)$115.75 (a) $165.96 (a) $258.16
(b)$23.00 (b)$ 70.75 (b) $120.96 (b) $258.16
TEMPLETON VARIABLE PRODUCTS SERIES FUND,
CLASS 1 SHARES
Managed by Franklin Mutual Advisers, Inc.
Mutual Shares Investments (a)$75.30 (a)$122.67 (a) $177.50 (a) $281.19
(b)$25.30 (b)$ 77.67 (b) $132.50 (b) $281.19
Managed by Templeton Investment Counsel, Inc.
Templeton International (a)$73.90 (a)$118.46 (a) $170.49 (a) $267.24
(b)$23.90 (b)$ 73.46 (b) $125.49 (b) $267.24
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets (a)$81.88 (a)$142.26 (a) $209.86 (a) $344.13
(b)$31.88 (b)$ 97.26 (b) $164.86 (b) $344.13
</TABLE>
Explanation of Fee Table
1. The withdrawal charge is 5% of the purchase payments you withdraw. After
Cova has had a purchase payment for 5 years, there is no charge by Cova for
a withdrawal of that purchase payment. You may also have to pay income tax
and a tax penalty on any money you take out. After the first year, you can
take up to 10% of your total purchase payments each year without a charge
from Cova.
2. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is for the Dollar Cost Averaging,
Automatic Rebalancing or Approved Asset Allocation Programs.
3. During the accumulation phase, Cova will not charge the contract
maintenance charge if the value of your contract is $50,000 or more,
although, if you make a complete withdrawal, Cova will charge the contract
maintenance charge.
4. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
There is an accumulation unit value history (Condensed Financial Information)
contained in Appendix A.
THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case Cova), where the insurance company promises to pay an income to you,
in the form of annuity payments, beginning on a designated date that is at
least 30 days in the future. Until you decide to begin receiving annuity
payments, your annuity is in the accumulation phase. Once you begin receiving
annuity payments, your contract switches to the income phase.
The contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your contract until you take
money out of your contract.
The contract is called a variable annuity because you can choose among the
investment portfolios, and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends, in part, upon the investment performance of the
investment portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by Cova. Cova guarantees that the interest rate
credited to the fixed account will not be less than 3% per year. If you select
the fixed account, your money will be placed with the other general assets of
Cova. If you select the fixed account, the amount of money you are able to
accumulate in your contract during the accumulation phase depends upon the
total interest credited to your contract. The amount of the annuity payments
you receive during the income phase from the fixed account portion of the
contract will remain level for the entire income phase.
As owner of the contract, you exercise all interest and rights under the
contract. You can change the owner at any time by notifying Cova in writing. You
and your spouse can be named joint owners. We have described more information on
this under "Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one month after you buy the contract.
Annuity Payments
You will receive annuity payments during the income phase. In general, annuity
payments must begin by the annuitant's 85th birthday or 10 years from the date
the contract was issued, whichever is later (this requirement may differ
slightly for special programs). The annuitant is the person whose life we look
to when we make annuity payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from the:
* fixed account,
* the investment portfolio(s), or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the
annuity date,
2) the 3% assumed investment rate used in the annuity table for the
contract, and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. 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.
Annuity Options
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. If you do not choose
an annuity option at the time you purchase the contract, we will assume that you
selected Option 2 which provides a life annuity with 10 years of guaranteed
payments.
You can choose one of the following annuity options or any other annuity option
acceptable to Cova. After annuity payments begin, you cannot change the annuity
option.
Option 1. Life Annuity. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
Option 2. Life Annuity with 5, 10 or 20 Years Guaranteed. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a non-
qualified contract. If you are purchasing the contract as part of an IRA
(Individual Retirement Annuity), 401(k) or other qualified plan, the minimum
we will accept is $2,000. The maximum 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.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within 2 business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 P.M. Eastern time.
Free Look
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it (or, 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 for 15 days
before we allocate your first purchase payment to the investment portfolio(s)
you have selected. In such case, we will refund the greater of purchase payments
(less withdrawals) or contract value. Currently, Cova directly allocates your
purchase payment to the investment portfolios and/or fixed account you select.
Accumulation Units
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular investment
portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Quality Bond Portfolio. When the
New York Stock Exchange closes on that Monday, we determine that the value
of an accumulation unit for the Quality Bond Portfolio is $13.90. We then
divide $5,000 by $13.90 and credit your contract on Monday night with
359.71 accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The Contract offers __ 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
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
KEMPER VARIABLE SERIES
Kemper Variable 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 Fund, Variable Series. The
following portfolio is available under the contract:
Newport Tiger Fund, Variable Series
(a portfolio investing in equity securities of companies located in certain
countries of Asia).
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 Global Governments Series (formerly MFS World Governments)
MFS/Foreign & Colonial Emerging Markets
Equity Series (not available)
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/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth Fund)
Oppenheimer Main Street Growth & Income Fund/VA (formerly Oppenheimer
Growth & Income Fund)
Oppenheimer Strategic Bond Fund/VA
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 Class IA Shares
Putnam VT International Growth Fund Class IA Shares
Putnam VT International New Opportunities Fund Class IA Shares
Putnam VT New Value Fund Class IA Shares
Putnam VT Vista Fund (a stock portfolio) Class IA Shares
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
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
Cova may enter into certain arrangements under which it is reimbursed by the
investment portfolios' advisers, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
Transfers
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described below.
Telephone Transfers. You and/or your registered representative on your behalf
can make transfers by telephone. Telephone transfers will be automatically
permitted unless you tell us otherwise. If you own the contract with a joint
owner, unless Cova is instructed otherwise, Cova will accept instructions from
either you or the other owner. Cova will use reasonable procedures to confirm
that instructions given us by telephone are genuine. If Cova fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. Cova tape records all telephone instructions.
Transfers during the Accumulation Phase. You can make 12 transfers every year
during the accumulation phase without charge. We measure a year from the
anniversary of the day we issued your contract. You can make a transfer to or
from the fixed account and to or from any investment portfolio. If you make more
than 12 transfers in a year, there is a transfer fee deducted. The following
apply to any transfer during the accumulation phase:
1 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.
Cova reserves the right to modify, terminate or suspend the Dollar Cost
Averaging Program.
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. Cova may, from time to time, offer other dollar cost averaging
programs which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to the investment portfolios, the
performance of each portfolio may cause your allocation to shift. You can direct
us to automatically rebalance your contract to return to your original
percentage allocations by selecting our Automatic Rebalancing Program. You can
tell us whether to rebalance quarterly, semi-annually or annually. We will
measure these periods from the anniversary of the date we issued your contract.
The transfer date will be the 1st 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 have chosen to have
your holdings rebalanced quarterly, on the first day of the next quarter,
Cova will 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. Currently, Cova does not charge for participating in an
approved asset allocation program.
Even though Cova permits the use of approved asset allocation programs, the
contract was not designed for professional market timing organizations. Repeated
patterns of frequent transfers are disruptive to the operations of the
investment portfolios, and when Cova becomes aware of such disruptive practices,
we may modify the transfer provisions of the contract.
If you participate in an Approved Asset Allocation Program, the transfers made
under the program are not taken into account in determining any transfer fee.
Voting Rights
Cova is the legal owner of the investment portfolio shares. However, Cova
believes that when an investment portfolio solicits proxies in conjunction with
a vote of shareholders, it is required to obtain from you and other affected
owners instructions as to how to vote those shares. When we receive those
instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that Cova owns on its own
behalf. Should Cova determine that it is no longer required to comply with the
above, we will vote the shares in our own right.
Substitution
Cova may be required to substitute one of the investment portfolios you have
selected with another portfolio. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give you notice of our intent
to do this.
EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
Insurance Charges
Each day, Cova makes a deduction for its insurance charges. Cova does this as
part of its calculation of the value of the accumulation units and the annuity
units. The insurance charge has two parts:
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 fund expenses have been deducted. This charge is for 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below), is for 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 (and
during the first year of payment of charitable remainder trust administration
fees), 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. Withdrawals after the
first year for purposes of charitable remainder trust administration fees are
included in the 10% free withdrawal amount. Otherwise, the charge is 5% of
each purchase payment you take out unless the purchase payment was made more
than 5 years ago. After Cova has had a purchase payment for 5 years, there is
no charge when you withdraw that purchase payment. Cova does not assess a
withdrawal charge on earnings withdrawn from the contract. Earnings are
defined as the value in your contract minus the remaining purchase payments in
your contract. The withdrawal order for calculating the withdrawal charge is
shown below.
* 10% of purchase payments free.
* Remaining purchase payments that are over 5 years old and not subject to
a withdrawal charge.
* Earnings in the contract free.
* Remaining purchase payments that are less than 5 years old and are subject
to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules
may apply to Section 1035 exchanges.
When the withdrawal is for only part of the value of your contract, the
withdrawal charge is deducted from the remaining value in your contract.
Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
Reduction or Elimination of the Withdrawal Charge
General:
Cova will reduce or eliminate the amount of the withdrawal charge when the
contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the contract or a prospective purchaser already had a relationship with Cova.
Cova will not deduct a withdrawal charge under a contract issued to an officer,
director or employee of Cova or any of its affiliates.
Nursing Home Waiver:
After you have owned the contract for one year, if you, or your joint owner,
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.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is Cova's current practice to not charge anyone for these
taxes until annuity payments begin. Cova may some time in the future discontinue
this practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 4%, depending on the state.
Transfer Fee
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred whichever is less.
If the transfer is part of the Dollar Cost Averaging Program, the Automatic
Rebalancing Program or an Approved Asset Allocation Program, it will not count
in determining the transfer fee.
Income Taxes
Cova will deduct from the contract for any income taxes which it incurs because
of the contract. At the present time, we are not making any such deductions.
Investment Portfolio Expenses
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the attached fund prospectuses.
TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included an additional discussion regarding taxes in the Statement of Additional
Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,corporation
or certain other entities other than a trust holding the contract as an agent
for a natural person), the contract will generally not be treated as an annuity
for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts),
and pension and profit-sharing plans, which include 401(k) plans and H.R. 10
plans.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of amounts attributable to purchase payments made
under a salary reduction agreement by owners from Tax-Sheltered Annuities.
Withdrawals can only be made when an owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Cova believes that the investment portfolios are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Cova would be
considered the owner of the shares of the investment portfolios. If you are
considered the owner of the shares, it will result in the loss of the favorable
tax treatment for the contract. It is unknown to what extent owners are
permitted to select investment portfolios, to make transfers among the
investment portfolios or the number and type of investment portfolios owners
may select from without being considered the owner of the shares. If any
guidance is provided which is considered a new position, then the guidance
would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This
would mean that you, as the owner of the contract, could be treated as the
owner of the shares of the investment portfolios.
Due to the uncertainty in this area, Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
Under most circumstances, withdrawals can only be made during the accumulation
phase.
When you make a complete withdrawal you will receive the withdrawal value of the
contract. The withdrawal value of the contract is the value of the contract at
the end of the business day when Cova receives a written request for a
withdrawal:
* less any applicable withdrawal charge,
* less any premium tax, and
* less any contract maintenance charge.
Unless you instruct Cova otherwise, any partial withdrawal will be made pro rata
from all the investment portfolios and the fixed account 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.
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan. For a more complete explanation see "Taxes" and the
discussion in the Statement of Additional Information.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
Systematic Withdrawal Program
You may use the Systematic Withdrawal Program. This program provides an
automatic monthly payment to you of up to 10% of your total purchase payments
each year. No withdrawal charge will be made for these payments. Cova does
not have any charge for this program, but reserves the right to charge in the
future. If you use this program, you may not also make a single 10% free
withdrawal. For a discussion of the withdrawal charge and the 10% free
withdrawal, see "Expenses."
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
Suspension of Payments or Transfers
Cova may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or Cova cannot
reasonably value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
Cova has reserved the right to defer payment for a withdrawal or transfer from
the fixed account for the period permitted by law but not for more than six
months.
PERFORMANCE
Cova periodically advertises performance of the various investment portfolios.
Cova will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that unit
by the value of the accumulation unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges 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.
It is divided into various parts, depending upon the type of performance
information shown. Future performance will vary and the results shown
are not necessarily representative of future results.
DEATH BENEFIT
Upon Your Death
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). If you have a joint owner, the death benefit will be
paid when the first of you dies. Joint owners must be spouses. The surviving
joint owner will be treated as the beneficiary.
Beginning May 1, 1999, at the time you buy the contract, you will receive
Death Benefit Option A. If you purchased your contract before May 1, 1999, you
received Death Benefit Option C. For these contracts (i.e., contracts purchased
prior to May 1, 1999), effective beginning with your next contract anniversary
on or after July 1, 1999, your death benefit will automatically be enhanced to
Death Benefit Option B.
The death benefits are described below. The amount of death benefit depends on
how old you or your joint owner is. If you have a joint owner, the death benefit
is determined based on the age of the oldest joint owner and the death benefit
is payable on the death of the first joint owner.
DEATH BENEFIT OPTION A:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 greatest contract value on any contract anniversary while the owner, or
a joint owner is living, plus any purchase 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);
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest contract value on any prior contract anniversary on or before
your or your joint owner's 80th birthday, plus any purchase payments you
made subsequent to that contract anniversary, less any withdrawals (and any
withdrawal charges paid on the withdrawals) subsequent to that contract
anniversary.
DEATH BENEFIT OPTION B:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 greatest of the values of your contract resulting from taking the
contract value on any contract anniversary on or after July 1, 1999 while
the owner, or a joint owner is living, plus any purchase 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);
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest of the values of your contract resulting from taking the
contract value on any prior contract anniversary on or after July 1, 1999
and on or before your or your joint owner's 80th birthday, plus any
purchase payments you made subsequent to that contract anniversary, less
any withdrawals (and any withdrawal charges paid on the withdrawals)
subsequent to that contract anniversary.
DEATH BENEFIT OPTION C:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 purchase 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);
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 you made after that contract
anniversary, less any withdrawals (and any withdrawal charges paid on the
withdrawals) made after that contract anniversary.
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.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date Cova receives proof of death. If Cova does not receive
an election during such time, it will make a single sum payment to the
beneficiary at the end of the 60 day period.
Death of Annuitant
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death benefit,
if any, will be as provided for in the annuity option selected.
OTHER INFORMATION
Cova
Cova Financial 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.
YEAR 2000
Cova has developed and initiated plans to assure that its computer systems will
function properly in the year 2000 and later years. These efforts have included
receiving assurances from outside service providers that their computer systems
will also function properly in this context. Included within these plans are the
computer systems of the advisers and sub-advisers of the various investment
portfolios underlying the Separate Account.
Although an assessment of the total cost of implementing these plans has not
been completed, the total amounts to be expended are not expected to have a
material effect on Cova's financial position or results of operations. Cova
believes that it has taken all reasonable steps to address these potential
problems. There can be no guarantee, however, that the steps taken will be
adequate to avoid any adverse impact.
The Separate Account
Cova has established a separate account, Cova Variable Annuity Account 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 Separate Account is divided into
sub-accounts.
The assets of the Separate Account are held in Cova's name on behalf of the
Separate Account and legally belong to Cova. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts Cova may issue.
Distributor
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the contracts. Life
Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions up to 5.75% 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 interest and rights
under the contract. Prior to the annuity date, the owner is as designated at
the time the contract is issued, unless changed. On and after the annuity date,
the annuitant is the owner (this may be a taxable event). 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.
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
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
APPENDIX A
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUE HISTORY
The following schedule includes accumulation unit values for the periods
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
Period Year or
Ended Period Ended Year or Period
12/31/98 12/31/97 ended 12/31/96
<S> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS INC.:
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Sub-Account
Beginning of Period $10.00 * *
End of Period $11.80
Number of Accum. Units Outstanding 5,570
AIM V.I. International Equity Sub-Account
Beginning of Period $10.00 * *
End of Period $11.42
Number of Accum. Units Outstanding 15,257
AIM V.I. Value Sub-Account
Beginning of Period $10.00 * *
End of Period $13.08
Number of Accum. Units Outstanding 2,865
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Managed by Alliance Capital Management L.P.
Premier Growth Sub-Account
Beginning of Period $10.00 ** **
End of Period $14.62
Number of Accum. Units Outstanding 62,869
Real Estate Investment Sub-Account
Beginning of Period $10.00 ** **
End of Period $ 8.00
Number of Accum. Units Outstanding 22,077
COVA SERIES TRUST
Managed by Lord Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $12.88 $11.30 $ 10.15
End of Period $13.50 $12.88 11.30
Number of Accum. Units Outstanding 681,676 347,400 39,545
Mid-Cap Value Sub-Account
Beginning of Period $10.47 $10.05 *
End of Period $10.44 $10.47 *
Number of Accum. Units Outstanding 85,457 8,510
Developing Growth Sub-Account
Beginning of Period $10.53 $10.83 *
End of Period $11.07 $10.53 *
Number of Accum. Units Outstanding 70,926 6,039
Large Cap Research Sub-Account
Beginning of Period $10.76 * *
End of Period $11.83
Number of Accum. Units Outstanding 49,894
Managed by J.P. Morgan Investment
Management Inc.
Select Equity Sub-Account
Beginning of Period $14.05 $10.84 $ 10.15
End of Period $16.99 $14.05 10.84
Number of Accum. Units Outstanding1,052,797 700,550 185,509
Small Cap Stock Sub-Account
Beginning of Period $13.49 $11.31 $ 10.91
End of Period $12.58 $13.49 11.31
Number of Accum. Units Outstanding 663,925 487,580 113,118
International Equity Sub-Account
Beginning of Period $11.46 $10.97 $ 10.10
End of Period $12.89 $11.46 10.97
Number of Accum. Units Outstanding 779,375 554,105 124,032
Quality Bond Sub-Account
Beginning of Period $11.16 $10.37 $ 9.95
End of Period $11.91 $11.16 10.37
Number of Accum. Units Outstanding 501,045 234,643 64,534
Large Cap Stock Sub-Account
Beginning of Period $14.89 $11.34 $ 10.16
End of Period $19.43 $14.89 11.34
Number of Accum. Units Outstanding 1,132,390 686,677 126,231
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market Sub-Account
Beginning of Period $10.67 $10.63 *
End of Period $11.11 $10.67
Number of Accum. Units Outstanding 129,569 14,091
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Managed by Goldman Sachs Asset Management
Goldman Sachs Growth and Income Sub-Account
Beginning of Period $11.21 ** **
End of Period $ 9.91
Number of Accum. Units Outstanding 13,107
Managed by Goldman Sachs Asset Management International
Goldman Sachs International Equity Sub-Account
Beginning of Period $11.20 ** **
End of Period $11.42
Number of Accum. Units Outstanding 15,859
Goldman Sachs Global Income Sub-Account
Beginning of Period $10.15 ** **
End of Period $10.82
Number of Accum. Units Outstanding 3,002
KEMPER VARIABLE SERIES
Managed by Scudder Kemper Investments, Inc.
Kemper Small Cap Value Sub-Account
Beginning of Period $10.00 ** **
End of Period $ 8.77
Number of Accum. Units Outstanding 16,641
Kemper Government Securities Sub-Account
Beginning of Period $10.00 ** **
End of Period $10.63
Number of Accum. Units Outstanding 2,519
Kemper Small Cap Growth Sub-Account
Beginning of Period $10.00 ** **
End of Period $11.69
Number of Accum. Units Outstanding 3,829
LIBERTY VARIABLE INVESTMENT TRUST
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Sub-Account
Beginning of Period $10.00 ** **
End of Period $ 9.28
Number of Accum. Units Outstanding 2,397
MFS VARIABLE INSURANCE TRUST:
Managed by Massachusetts Financial
Services Company
MFS Emerging Growth Sub-Account
Beginning of Period $10.00 * *
End of Period $13.24
Number of Accum. Units Outstanding 47,710
MFS Research Sub-Account
Beginning of Period $10.00 * *
End of Period $12.18
Number of Accum. Units Outstanding 25,994
MFS Growth With Income Sub-Account
Beginning of Period $10.00 * *
End of Period $12.08
Number of Accum. Units Outstanding 64,791
MFS High Income Sub-Account
Beginning of Period $10.00 * *
End of Period $ 9.86
Number of Accum. Units Outstanding 13,080
MFS Global Governments Sub-Account
Beginning of Period $10.00 * *
End of Period $10.66
Number of Accum. Units Outstanding 385
MFS/Foreign & Colonial Emerging Markets Equity Sub-Account
Beginning of Period $10.00 * *
End of Period $ 6.58
Number of Accum. Units Outstanding 4,234
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Sub-Account
Beginning of Period $10.00 ** **
End of Period $ 9.91
Number of Accum. Units Outstanding 10,533
Oppenheimer Bond Sub-Account
Beginning of Period $10.00 ** **
End of Period $10.55
Number of Accum. Units Outstanding 46,377
Oppenheimer Capital Appreciation Sub-Account
Beginning of Period $10.00 ** **
End of Period $12.34
Number of Accum. Units Outstanding 5,037
Oppenheimer Main Street Growth & Income Sub-Account
Beginning of Period $10.00 ** **
End of Period $10.24
Number of Accum. Units Outstanding 14,882
Oppenheimer Strategic Bond Sub-Account
Beginning of Period $10.00 ** **
End of Period $10.16
Number of Accum. Units Outstanding 2,684
PUTNAM VARIABLE TRUST
Managed by Putnam Investment Management Inc.
Putnam VT Growth and Income Sub-Account
Beginning of Period $10.00 ** **
End of Period $11.40
Number of Accum. Units Outstanding 80,114
Putnam VT International Growth Sub-Account
Beginning of Period $10.00 ** **
End of Period $11.73
Number of Accum. Units Outstanding 56,566
Putnam VT International New Opportunities Sub-Account
Beginning of Period $10.00 ** **
End of Period $11.42
Number of Accum. Units Outstanding 4,783
Putnam VT New Value Sub-Account
Beginning of Period $10.00 ** **
End of Period $10.50
Number of Accum. Units Outstanding 2,202
Putnam VT Vista Sub-Account
Beginning of Period $10.00 ** **
End of Period $11.80
Number of Accum. Units Outstanding 6,799
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
Managed by Franklin Mutual Advisers, Inc.
Mutual Shares Investments Sub-Account
Beginning of Period $ 8.64 ** **
End of Period $ 9.65
Number of Accum. Units Outstanding 944
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Sub-Account
Beginning of Period $ 5.65 ** **
End of Period $ 7.56
Number of Accum. Units Outstanding 7,033
Managed by Templeton Investment Counsel, Inc.
Templeton International Sub-Account
Beginning of Period $ 7.89
End of Period $ 9.15
Number of Accum. Units Outstanding 6,626
<FN>
* The accumulation unit values shown above for the beginning of the period for
the Select Equity, Small Cap Stock, Large Cap Stock, International Equity,
Quality Bond and Bond Debenture Portfolios reflect the date these investment
portfolios were first offered for sale to the public which were as follows: May
15, 1996 for the Select Equity and Small Cap Stock Portfolios; May 16, 1996 for
the Large Cap Stock Portfolio; May 14, 1996 for the International Equity
Portfolio; and May 20, 1996 for the Quality Bond and Bond Debenture
Portfolios; and November 7, 1997 for the Developing Growth and Mid-Cap Value
Portfolios. The accumulation unit values for the beginning of the period for
the General American Capital Company Money Market Sub-Account reflect the
date they were first offered for sale under the Contracts on December 4, 1997.
The Separate Account had not invested in the following Portfolios which are
advised by Lord, Abbett & Co. as of December 31, 1997: Large Cap Research and
Lord Abbett Growth and Income. The investment start date for the investment
portfolios managed by A I M Advisors, Inc., Massachusetts Financial
Services Company, Alliance Capital Management L.P., Scudder Kemper Investments,
Inc., Newport Fund Management Inc. OppenheimerFunds, Inc., and Putnam Variable Trust
was December 31, 1997. The investment portfolios investing in Templeton Variable
Products Series Fund commenced operations as of September 21, 1998. The investment
portfolios investing in Goldman Sachs Variable Insurance Trust commenced operations
on March 31, 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
APPENDIX B
PERFORMANCE INFORMATION
Future performance will vary and the results shown are not necessarily
representative of future results.
Note: The figures below present investment performance information for the
periods ended December 31, 1998. While these numbers represent the returns as of
that date, they do not represent performance information of the portfolios since
that date. Performance information for the periods after December 31, 1998 may
be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before December 31, 1998. As a
result, performance information is available for the accumulation units
investing in these portfolios.
* Column A 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.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges and fees and expenses of each portfolio.
Total Return for the periods ended 12/31/98:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr Inception 1 yr Inception
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation 12/31/97 13.38% 13.38% 18.00% 18.00%
AIM V.I. International Equity 12/31/97 9.57% 9.57% 14.19% 14.19%
AIM V.I. Value 12/31/97 26.13% 26.13% 30.76% 30.76%
- -----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth 12/31/97 41.56% 41.56% 46.21% 46.21%
Real Estate Investment 12/31/97 (24.57)% (24.57)% (19.99)% (19.99)%
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
<S> <C> <C> <C> <C> <C> <C>
Small Cap Stock 5/15/96 (11.33)% 3.88% (6.74)% 5.58%
Large Cap Stock 5/16/96 25.86% 26.67% 30.49% 27.97%
Select Equity 5/15/96 16.25% 20.20% 20.88% 21.59%
International Equity 5/14/96 7.84% 8.09% 12.45% 9.70%
Quality Bond 5/20/96 2.20% 5.44% 6.81% 7.12%
Bond Debenture 5/20/96 0.17% 9.92% 4.77% 11.51%
Mid-Cap Value 11/7/97 (4.89)% (0.73)% (0.29)% 3.36%
Large Cap Research 2/17/98 4.83% 9.94%
Developing Growth 11/7/97 0.53% (2.19)% 5.13% 1.90%
------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Goldman Sachs Growth and Income 3/31/98 (16.69)% (11.60)%
Goldman Sachs International Equity 3/31/98 (3.16)% 1.94%
Goldman Sachs Global Income 3/31/98 1.43% 6.53%
- --------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Small Cap Value 12/31/97 (16.88)% (16.88)% (12.30)% (12.30)%
Kemper Government Securities 12/31/97 1.74% 1.74% 6.35% 6.35%
Kemper Small Cap Growth 12/31/97 12.26% 12.26% 16.88% 16.88%
- --------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund, Variable Series 12/31/97 (11.81)% (11.81)% (7.21)% (7.21)%
- --------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging Growth 12/31/97 27.81% 27.81% 32.44% 32.44%
MFS Research 12/31/97 17.17% 17.17% 21.79% 21.79%
MFS Growth With Income 12/31/97 16.13% 16.13% 20.75% 20.75%
MFS High Income 12/31/97 (5.97)% (5.97)% (1.37)% (1.37)%
MFS Global Governments 12/31/97 2.03% 2.03% 6.63% 6.63%
MFS/Foreign & Colonial Emerging
Markets Equity 12/31/97 (38.75)% (38.75)% (34.18)% (34.18)%
- --------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund/VA 12/31/97 (5.52)% (5.52)% (0.92)% (0.92)%
Oppenheimer Bond Fund/VA 12/31/97 0.91% 0.91% 5.52% 5.52%
Oppenheimer Capital Appreciation
Fund/VA 12/31/97 17.82% 17.82% 22.44% 22.44%
Oppenheimer Main Street Growth &
Income Fund/VA 12/31/97 (1.20)% (1.20)% 3.40% 3.40%
Oppenheimer Strategic Bond Fund/VA 12/31/97 (2.95)% (2.95)% 1.65% 1.65%
- -------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth and Income Class
IA Shares 12/31/97 9.42% 9.42% 14.03% 14.03%
Putnam VT International Growth
Class IA Shares 12/31/97 12.68% 12.68% 17.29% 17.29%
Putnam VT International New
Opportunities Class IA Shares 12/31/97 9.59% 9.59% 14.21% 14.21%
Putnam VT New Value Class IA Shares 12/31/97 0.38% 0.38% 4.98% 4.98%
Putnam VT Vista Class IA Shares 12/31/97 13.42% 13.42% 18.04% 18.04%
- -------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund, Class 1 Shares
Templeton Developing Markets 9/21/98 28.73% 33.87%
Templeton International 9/21/98 10.80% 15.92%
Mutual Shares Investments 9/21/98 6.49% 11.61%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX
PERFORMANCE INFORMATION (continued)
PART 2 - HISTORICAL FUND PERFORMANCE
The contracts are relatively new and therefore have no meaningful 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, 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.
* Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
Total Return for the periods ended 12/31/98:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and
Column A portfolio expenses) portfolio 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
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital
Appreciation 5/5/93 19.30% 17.23% 18.77% 13.38% 15.73% 17.27% 18.00% 15.83% 17.37%
AIM V.I.
International Equity 5/2/93 15.49% 11.33% 13.36% 9.57% 9.83% 11.86% 14.19% 9.93% 11.96%
AIM V.I. Value 5/5/93 32.41% 21.70% 21.90% 26.13% 20.20% 20.40% 30.76% 20.30% 20.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth 6/26/92 47.97% 27.85% 25.42% 41.56% 26.35% 23.92% 46.21% 26.45% 24.02%
Real Estate
Investment 1/9/97 (19.07)% (0.06)% (24.57)% (6.06)% (19.99)% (1.46)%
- ------------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Select Equity 5/1/96 22.56% 23.30% 16.25% 20.19% 20.88% 21.56%
Small Cap Stock 5/1/96 (5.40)% 8.47% (11.33)% 5.31% (6.74)% 6.96%
International Equity 5/1/96 14.07% 10.66% 7.84% 7.50% 12.45% 9.10%
Quality Bond 5/1/96 8.37% 8.68% 2.20% 5.55% 6.81% 7.19%
Large Cap Stock 5/1/96 32.31% 30.02% 25.86% 26.95% 30.49% 28.21%
Bond Debenture 5/1/96 6.26% 13.03% 0.17% 9.92% 4.77% 11.47%
Mid-Cap Value 8/20/97 1.11% 4.40% (4.89)% (0.24)% (0.29)% 3.18%
Large Cap Research 8/20/97 21.04% 14.37% 14.84% 9.72% 19.46% 13.05%
Developing Growth 8/20/97 6.60% 8.99% 0.53% 4.32% 5.13% 7.70%
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market 10/1/87 5.62% 5.40% 5.78% (0.45)% 3.90% 4.28% 4.15% 4.00% 4.38%
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Goldman Sachs Growth
and Income 1/12/98 5.47% (0.98)% 4.12%
Goldman Sachs
International Equity 1/12/98 20.07% 13.62% 18.72%
Goldman Sachs Global
Income 1/12/98 8.29% 1.84% 6.94%
- ------------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Small
Cap Value 5/1/96 (11.25)% 3.65% (16.88)% (2.35)% (12.30)% 2.25%
Kemper Government
Securities 9/3/87 7.03% 6.72% 8.37% 1.74% 5.22% 6.87% 6.35% 5.32% 6.97%
Kemper Small Cap
Growth 5/2/94 18.37% 24.20% 12.26% 18.20% 16.88% 22.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 5/1/95 (6.43)% (5.01)% (11.81)% (11.01)% (7.21)% (6.41)%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 12/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and
Column A portfolio expenses) portfolio 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
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MFS Variable Insurance Trust
MFS Emerging
Growth 7/24/95 34.16% 26.55% 27.81% 20.55% 32.44% 25.15%
MFS Research 7/26/95 23.39% 22.52% 17.17% 16.52% 21.79% 21.12%
MFS Growth With
Income 10/9/95 22.32% 25.98% 16.13% 19.98% 20.75% 24.58%
MFS High Income 7/26/95 (0.18)% 8.77% (5.97)% 2.77% (1.37)% 7.37%
MFS Global
Governments 6/14/94 7.90% 5.57% 2.03% (0.43)% 6.63% 4.17%
MFS Foreign and
Colonial Emerging
Markets Equity 10/16/97 (33.37)% (34.51)% (38.75)% (40.51)% (34.18)% (35.91)%
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Oppenheimer High
Income Fund/VA 4/30/86 0.30% 8.62% 12.71% (5.52)% 7.12% 11.21% (0.92)% 7.22% 11.31%
Oppenheimer Bond
Fund/VA 4/3/85 6.80% 7.01% 9.28% 0.91% 5.51% 7.78% 5.52% 5.61% 7.88%
Oppenheimer
Capital Appreciation
Fund/VA 4/3/85 24.00% 22.10% 16.85% 17.82% 20.60% 15.35% 22.44% 20.70% 15.45%
Oppenheimer
Main Street Growth &
Income Fund/VA 7/5/95 4.70% 27.00% (1.20)% 21.00% 3.40% 25.60%
Oppenheimer
Strategic Bond
Fund/VA 5/3/93 2.90% 6.83% 6.79% (2.95)% 5.33% 5.29% 1.65% 5.43% 5.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth
and Income Class
IA Shares 2/1/88 15.42% 19.10% 16.04% 9.42% 17.60% 14.54% 14.03% 17.70% 14.64%
Putnam VT New
Value Class IA
Shares 1/2/97 6.26% 11.85% 0.38% 5.85% 4.98% 10.45%
Putnam VT Vista Class
IA Shares 1/2/97 19.48% 21.45% 13.42 15.45% 18.04% 20.05%
Putnam VT
International
Growth Class IA
Shares 1/2/97 18.69% 17.50% 12.68% 11.50% 17.29% 16.10%
Putnam VT
International
New Opportunities
Class IA Shares 1/2/97 15.58% 7.49% 9.59% 1.49% 14.21% 6.09%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund
Templeton Developing
Markets Fund,
Class 1 Shares* 3/1/96 (20.94)% (20.25)% (26.94)% (26.25)% (22.34)% (21.65)%
Templeton International
Fund, Class 1 Shares 5/1/92 9.33% 11.84% 14.17% 3.33% 10.34% 12.67% 7.93% 10.44% 12.77%
Mutual Shares
Investments 5/1/98 (2.80)% (8.84)% (3.74)%
<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, 1999 for The Annuity Contract issued by Cova.
(Please print or type and fill in all information)
................................................................................
Name
................................................................................
Address
................................................................................
City State Zip Code
CC-3043 (5/99) 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(5/99) Policy Form Series XLCC-648, XLCC-833 21-CSA-CA (5/99)
PART A - VERSION B
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 7 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 6 investment portfolios listed
below. The 6 investment portfolios are part of Russell Insurance Funds or
General American Capital Company. You can put your money in the fixed account
and/or any of these investment portfolios.
Russell Insurance Funds:
Managed by Frank Russell Investment
Management Company
Multi-Style Equity
Aggressive Equity
Non-U.S.
Core Bond
Real Estate Securities (available starting 7/1/99)
General American Capital Company:
Managed by Conning Asset
Management Company
Money Market
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Cova Fixed and Variable
Annuity Contract.
To learn more about the Cova Fixed and Variable Annuity Contract, you can obtain
a copy of the Statement of Additional Information (SAI) dated May 1, 1999. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of the prospectus. The SEC maintains a Web site (http://www.sec.
gov) that contains the SAI, material incorporated by reference, and other
information regarding companies that file electronically. The Table of
Contents of the SAI is on Page __ of this prospectus. For a free copy of the
SAI, call us at (800) 523-1661 or write us at : One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 1999
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
EXAMPLES
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
Russell Insurance Funds
General American Capital Company
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Approved Asset Allocation Programs
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the
Withdrawal Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Suspension of Payments or Transfers
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
Cova
Year 2000
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Performance Information
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable and need an explanation. We have identified the
following as some of these words or terms. They are identified in the text in
italic and the page that is indicated here is where we believe you will find
the best explanation for the word or term.
Page
Accumulation Phase
Accumulation Unit
Annuitant
Annuity Date
Annuity Options
Annuity Payments
Annuity Unit
Beneficiary
Fixed Account
Income Phase
Investment Portfolios
Joint Owner
Non-Qualified
Owner
Purchase Payment
Qualified
Tax Deferral
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by Cova is a contract between
you, the owner, and Cova, an insurance company. The contract provides a means
for investing on a tax-deferred basis. The contract is intended for
retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
This contract offers 6 investment portfolios. 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.
The fixed account offers an interest rate that is guaranteed by the insurance
company, Cova. While your money is in the fixed account, the interest your money
will earn as well as your principal is guaranteed by Cova.
You can put money into any or all of the investment portfolios and the fixed
account. You can transfer between accounts up to 12 times a year without charge
or tax implications.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments
during the income phase.
ANNUITY PAYMENTS (THE INCOME PHASE):
If you want to receive regular income from your annuity, you can choose an
annuity option. Once you begin receiving regular payments, you cannot change
your payment plan. During the income phase, you have the same investment choices
you had during the accumulation phase. You can choose to have payments come from
the fixed account, the investment portfolios or both. If you choose to have any
part of your payments come from the investment portfolios, the dollar amount of
your payments may go up or down.
HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
INVESTMENT OPTIONS:
You can put your money in the following investment portfolios which are
described in the prospectuses for the funds. The investment objectives and
policies of certain of the investment portfolios are similar to the investment
objectives and policies of other mutual funds that certain of the investment
advisers manage. Although the objectives and policies may be similar, the
investment results of the investment portfolios may be higher or lower than the
results of such other mutual funds. The investment advisers cannot guarantee,
and make no representation, that the investment results of similar funds will
be comparable even though the funds have the same investment advisers.
Managed by Frank Russell
Investment Management Company
Multi-Style Equity
Aggressive Equity
Non-U.S.
Core Bond
Real Estate Securities (available starting 7/1/99)
Managed by Conning Asset
Management Company
Money Market
Depending upon market conditions and the performance of the portfolio(s) you
select, you can make or lose money in any of these portfolios.
EXPENSES:
The contract has insurance 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. After Cova has had a purchase
payment for 5 years, there is no charge by Cova for a withdrawal of that
purchase payment.
* 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.
* The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
* There are also investment charges which currently range from .205% to
1.30% of the average daily value of the investment portfolio depending
upon the investment portfolio.
TAXES:
Your earnings are not taxed until you take them out. If you take money out
during the accumulation phase, earnings come out first and are taxed as income.
If you are younger than 59 1/2 when you take money out, you may be charged a 10%
federal tax penalty on the earnings. Payments during the income phase are
considered partly a return of your original investment. That part of each
payment is not taxable as income.
ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from Cova. Withdrawals of purchase payments in excess of that
may be charged a withdrawal charge, depending on how long your money has been in
the contract. However, Cova will never assess a withdrawal charge on earnings
you withdraw. Earnings are defined as the value in your contract minus the
remaining purchase payments in your contract. Of course, you may also have to
pay income tax and a tax penalty on any money you take out.
DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
OTHER INFORMATION:
Free Look. If you cancel the contract within 10 days after receiving it (or, 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 and will refund
the greater of your original payment (less any withdrawals) or the value of your
contract.
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
Who should purchase the contract? This contract is designed for people seeking
long-term tax-deferred accumulation of assets, generally for retirement or other
long-term purposes. The tax-deferred feature is most attractive to people in
high federal and state income tax brackets. You should not buy this contract if
you are looking for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
* Under certain circumstances, Cova will give you your money without a
withdrawal charge if you need it while you're in a nursing home. We call
this feature the Nursing Home Waiver.
These features may not be suitable for your particular situation.
INQUIRIES:
If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract. The Fee Table reflects
expenses of the Separate Account as well as the investment portfolios.
OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 1 below) 5% of purchase payment withdrawn
Transfer Fee (see Note 2 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
CONTRACT MAINTENANCE CHARGE (see Note 3
below) $30 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
---
ANNUAL EXPENSES 1.40%
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an investment portfolio)
Management Fees Other Expenses Total Annual
(after fee waiver) (after expense reimbursement) Portfolio Expenses
- -------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds*
Managed by Frank Russell
Investment Management Company
<S> <C> <C> <C>
Multi-Style Equity .09% .83% .92%
Aggressive Equity 0% 1.25% 1.25%
Non-U.S. 0% 1.30% 1.30%
Core Bond 0% .80% .80%
Real Estate Securities .85% .30% 1.15%
- -------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset
Management Company
Money Market .125% .08% .205%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* The manager of Russell Insurance Funds has voluntarily agreed to waive a
portion of the management fee, up to the full amount of the fee, equal to
the amount by which the Fund's total operating expenses exceed the amounts
set forth above under "Total Annual Portfolio Expenses." Additionally, the
manager has voluntarily agreed to reimburse the Fund for all remaining
expenses after fee waivers which exceed the amount set forth above for each
Fund under "Total Annual Portfolio Expenses". Absent such waiver and
reimbursement, the management fees and total operating expenses would be
.78% and 1.61% for the Multi-Style Equity Fund; .95% and 2.22% for the
Aggressive Equity Fund; .95% and 3.65% for the Non-U.S. Fund; .60% and
2.30% for the Core Bond Fund and ___% and ___% (estimated) for the Real
Estate Securities Fund which has not yet commenced operations.
<TABLE>
<CAPTION>
Examples
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract
value to an annuity option.
Time Periods
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
Managed by Frank Russell
Investment Management Company
<S> <C> <C> <C> <C>
Multi-Style Equity (a) $ 81.38 (a) $140.79 (a)$207.44 (a)$339.52
(b) $ 31.38 (b) $ 95.79 (b)$162.44 (b)$339.52
Aggressive Equity (a) $ 87.43 (a) $158.57 (a)$236.45 (a)$394.08
(b) $ 37.43 (b) $113.57 (b)$191.45 (b)$394.08
Non-U.S. (a) $101.46 (a) $198.96 (a)$300.92 (a)$508.46
(b) $ 51.46 (b) $153.96 (b)$255.92 (b)$508.46
Core Bond (a) $ 88.22 (a) $160.87 (a)$240.18 (a)$400.97
(b) $ 38.22 (b) $115.87 (b)$195.18 (b)$400.97
Real Estate Securities (a) $ 76.80 (a) $127.16 (a)$184.95 (a)$295.90
(b) $ 26.80 (b) $ 82.16 (b)$139.95 (b)$295.90
- -------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset
Management Company
Money Market (a) $67.31 (a) $ 98.54 (a)$137.02 (a)$199.08
(b) $17.31 (b) $ 53.54 (b)$ 92.02 (b)$199.08
- -------------------------------------------------------------------------------------------------------------------
<FN>
Explanation of Fee Table
1. The withdrawal charge is 5% of the purchase payments you withdraw. After
Cova has had a purchase payment for 5 years, there is no charge by Cova for
a withdrawal of that purchase payment. You may also have to pay income tax
and a tax penalty on any money you take out. After the first year, you can
take up to 10% of your total purchase payments each year without a charge
from Cova.
2. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is for the Dollar Cost Averaging,
Automatic Rebalancing or Approved Asset Allocation Programs.
3. During the accumulation phase, Cova will not charge the contract
maintenance charge if the value of your contract is $50,000 or more,
although, if you make a complete withdrawal, Cova will charge the contract
maintenance charge.
4. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
</FN>
</TABLE>
There is an accumulation unit value history (condensed financial information)
contained in Appendix A.
THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case Cova), where the insurance company promises to pay an income to you,
in the form of annuity payments, beginning on a designated date that is at
least 30 days in the future. Until you decide to begin receiving annuity
payments, your annuity is in the accumulation phase. Once you begin receiving
annuity payments, your contract switches to the income phase.
The contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your contract until you
take money out of your contract.
The contract is called a variable annuity because you can choose among 6
investment portfolios, and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends, in part, upon the investment performance of the
investment portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by Cova. Cova guarantees that the interest rate
credited to the fixed account will not be less than 3% per year. If you
select the fixed account, your money will be placed with the other general
assets of Cova. If you select the fixed account, the amount of money you are
able to accumulate in your contract during the accumulation phase depends upon
the total interest credited to your contract. The amount of the annuity
payments you receive during the income phase from the fixed account portion
of the contract will remain level for the entire income phase.
As owner of the contract, you exercise all interest and rights under the
contract. You can change the owner at any time by notifying Cova in writing. You
and your spouse can be named joint owners. We have described more information on
this under "Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one month after you buy the contract.
Annuity Payments
You will receive annuity payments during the income phase. In general, annuity
payments must begin by the annuitant's 85th birthday or 10 years from the date
the contract was issued, whichever is later (this requirement may differ
slightly for special programs). The annuitant is the person whose life we look
to when we make annuity payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from the:
* fixed account,
* the investment portfolio(s), or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the
annuity date,
2) the 3% assumed investment rate used in the annuity table for
the contract, and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. 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.
Annuity Options
You can choose among income plans. We call those annuity options. We ask you
to choose an annuity option when you purchase the contract. You can change it
at any time before the annuity date with 30 days notice to us. If you do not
choose an annuity option at the time you purchase the contract, we will assume
that you selected Option 2 which provides a life annuity with 10 years of
guaranteed payments.
You can choose one of the following annuity options or any annuity option
acceptable to Cova. After annuity payments begin, you cannot change the annuity
option.
Option 1. Life Annuity. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
Option 2. Life Annuity with 5, 10 or 20 Years Guaranteed. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a non-
qualified contract. If you are purchasing the contract as part of an IRA
(Individual Retirement Annuity), 401(k) or other qualified plan, the minimum we
will accept is $2,000. The maximum purchase payment we accept is $1 million
without our prior approval. You can make additional purchase payments of $500 or
more to 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.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within 2 business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 P.M. Eastern time.
Free Look
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it (or, 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.
In certain states, or 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 for 15 days before we allocate your first purchase payment to the
investment portfolio(s) you have selected. In such case, we will refund the
greater of purchase payments (less withdrawals) or contract value. Currently,
Cova directly allocates your purchase payment to the investment portfolios
and/or fixed account you select.
Accumulation Units
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular investment
portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Multi-Style Equity Fund. When the
New York Stock Exchange closes on that Monday, we determine that the value
of an accumulation unit for the Multi-Style Equity Fund 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 Multi-Style Equity Fund.
INVESTMENT OPTIONS
The contract offers 6 investment portfolios which are described below.
Additional investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
Russell Insurance Funds
Russell Insurance Funds is managed by Frank Russell Investment Management
Company. Russell Insurance Funds is a mutual fund with four portfolios, each
with its own investment objective. The following portfolios are available under
the contract:
Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Core Bond Fund
Real Estate Securities Fund (available starting 7/1/99)
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
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous
to you.
Cova may enter into certain arrangements under which it is reimbursed by the
investment portfolios' advisers, distributors and/or affiliates for the
administrative services which it provides to the portfolios.
Transfers
You can transfer money among the fixed account and the investment portfolios.
Cova has reserved the right during the year to terminate or modify the transfer
provisions described below.
Telephone Transfers. You and/or your registered representative on your behalf
can make transfers by telephone. Telephone transfers will be automatically
permitted unless you tell us otherwise. If you own the contract with a joint
owner, unless Cova is instructed otherwise, Cova will accept instructions from
either you or the other owner. Cova will use reasonable procedures to confirm
that instructions given us by telephone are genuine. If Cova fails to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. Cova tape records all telephone instructions.
Transfers during the Accumulation Phase. You can make 12 transfers every year
during the accumulation phase without charge. We measure a year from the
anniversary of the day we issued your contract. You can make a transfer to or
from the fixed account and to or from any investment portfolio. If you make more
than 12 transfers in a year, there is a transfer fee deducted. The following
apply to any transfer during the accumulation phase:
1. 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.
Cova reserves the right to modify, terminate or suspend the Dollar Cost
Averaging Program.
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. Cova may, from time to time, offer other dollar cost
averaging programs which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to the investment portfolios, the
performance of each portfolio may cause your allocation to shift. You can direct
us to automatically rebalance your contract to return to your original
percentage allocations by selecting our Automatic Rebalancing Program. You can
tell us whether to rebalance quarterly, semi-annually or annually. We will
measure these periods from the anniversary of the date we issued your contract.
The transfer date will be the 1st 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 Core Bond Fund and 60% to
be in the Multi-Style Equity Fund. 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 Core Bond Fund now represents 50% of your holdings
because of its increase in value. If you have chosen to have your holdings
rebalanced quarterly, on the first day of the next quarter, Cova will sell
some of your units in the Core Bond Fund to bring its value back to 40% and
use the money to buy more units in the Multi-Style Equity Fund 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. Currently, Cova does not charge for participating in an
approved asset allocation program.
Even though Cova permits the use of approved asset allocation programs, the
contract was not designed for professional market timing organizations. Repeated
patterns of frequent transfers are disruptive to the operations of the
investment portfolios, and when Cova becomes aware of such disruptive practices,
we may modify the transfer provisions of the contract.
If you participate in an Approved Asset Allocation Program, the transfers made
under the program are not taken into account in determining any transfer fee.
Voting Rights
Cova is the legal owner of the investment portfolio shares. However, Cova
believes that when an investment portfolio solicits proxies in conjunction with
a vote of shareholders, it is required to obtain from you and other
affected owners instructions as to how to vote those shares. When we receive
those instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that Cova owns on its own
behalf. Should Cova determine that it is no longer required to comply with
the above, we will vote the shares in our own right.
Substitution
Cova may be required to substitute one of the investment portfolios you have
selected with another portfolio. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give you notice of our intent
to do this.
EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
Insurance Charges
Each day, Cova makes a deduction for its insurance charges. Cova does this as
part of its calculation of the value of the accumulation units and the annuity
units. The insurance charge has two parts:
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 fund expenses have been deducted. This charge is for 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below), is for 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 (and
during the first year for purposes of payment of charitable remainder trust
administration fees), 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. Withdrawals after
the first year for purposes of charitable remainder trust administration fees
are included in the 10% free withdrawal amount. Otherwise, the charge is 5% of
each purchase payment you take out, unless the purchase payment was made more
than 5 years ago. After Cova has had a purchase payment for 5 years, there is
no charge when you withdraw that purchase payment. Cova does not assess a
withdrawal charge on earnings withdrawn from the contract. Earnings are
defined as the value in your contract minus the remaining purchase payments
in your contract. The withdrawal order for calculating the withdrawal
charge is shown below.
* 10% of purchase payments free.
* Remaining purchase payments that are over 5 years old and not subject to
a withdrawal charge.
* Earnings in the contract free.
* Remaining purchase payments that are less than 5 years old and are subject
to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules
may apply to Section 1035 exchanges.
When the withdrawal is for only part of the value of your contract, the
withdrawal charge is deducted from the remaining value in your contract.
Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
Reduction or Elimination of the Withdrawal Charge
General:
Cova will reduce or eliminate the amount of the withdrawal charge when the
contract is sold under circumstances which reduce its sales expense. Some
examples are: if there is a large group of individuals that will be purchasing
the contract or a prospective purchaser already had a relationship with
Cova. Cova will not deduct a withdrawal charge under a contract issued to an
officer, director or employee of Cova or any of its affiliates.
Nursing Home Waiver:
After you have owned the contract for one year, if you, or your joint owner,
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.
Premium Taxes
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is Cova's current practice to not charge anyone for these
taxes until annuity payments begin. Cova may some time in the future discontinue
this practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 4%, depending on the state.
Transfer Fee
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred whichever is less.
If the transfer is part of the Dollar Cost Averaging Program, the Automatic
Rebalancing Program or an Approved Asset Allocation Program, it will not count
in determining the transfer fee.
Income Taxes
Cova will deduct from the contract for any income taxes which it incurs because
of the contract. At the present time, we are not making any such deductions.
Investment Portfolio Expenses
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the attached fund prospectuses.
TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included an additional discussion regarding taxes in the Statement of Additional
Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the
contract as an agent for a natural person), the contract will generally not be
treated as an annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts),
and pension and profit-sharing plans, which include 401(k) plans and H.R. 10
plans.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of amounts attributable to purchase
payments made under a salary reduction agreement by owners from Tax-
Sheltered Annuities. Withdrawals can only be made when an owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the
purchase payments and not any earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Cova believes that the investment portfolios are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Cova would be
considered the owner of the shares of the investment portfolios. If you are
considered the owner of the shares, it will result in the loss of the favorable
tax treatment for the contract. It is unknown to what extent owners are
permitted to select investment portfolios, to make transfers among the
investment portfolios or the number and type of investment portfolios owners
may select from without being considered the owner of the shares. If any
guidance is provided which is considered a new position, then the guidance
would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This
would mean that you, as the owner of the contract, could be treated as the
owner of the shares of the investment portfolios.
Due to the uncertainty in this area, Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
Under most circumstances, withdrawals can only be made during the accumulation
phase.
When you make a complete withdrawal you will receive the withdrawal value of the
contract. The withdrawal value of the contract is the value of the contract at
the end of the business day when Cova receives a written request for a
withdrawal:
* less any applicable withdrawal charge,
* less any premium tax, and
* less any contract maintenance charge.
Unless you instruct Cova otherwise, any partial withdrawal will be made pro rata
from all the investment portfolios and the fixed account 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.
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan. For a more complete explanation see "Taxes" and
the discussion in the Statement of Additional Information.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
Systematic Withdrawal Program
You may use the Systematic Withdrawal Program. This program provides an
automatic monthly payment to you of up to 10% of your total purchase payments
each year. No withdrawal charge will be made for these payments. Cova does
not have any charge for this program, but reserves the right to charge in the
future. If you use this program, you may not also make a single 10% free
withdrawal. For a discussion of the withdrawal charge and the 10% free
withdrawal, see "Expenses."
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
Suspension of Payments or Transfers
Cova may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or Cova cannot
reasonably value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
Cova has reserved the right to defer payment for a withdrawal or transfer from
the fixed account for the period permitted by law but not for more than six
months.
PERFORMANCE
Cova periodically advertises performance of the various investment
portfolios. Cova will calculate performance by determining the percentage change
in the value of an accumulation unit by dividing the increase (decrease) for
that unit by the value of the accumulation unit at the beginning of the period.
This performance number reflects the deduction of the insurance charges and the
expenses of the investment portfolio. It does not reflect the deduction of any
applicable contract maintenance charge and withdrawal charge. The deduction of
any applicable contract maintenance charge and withdrawal charges would reduce
the percentage increase or make greater any percentage decrease. Any
advertisement will also include total return figures which reflect the deduction
of the insurance charges, contract maintenance charge, withdrawal charges and
the expenses of the investment portfolio.
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.
It is divided into various parts, depending upon the type of performance
information shown. Future performance will vary and the results shown
are not necessarily representative of future results.
DEATH BENEFIT
Upon Your Death
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). If you have a joint owner, the death benefit will be
paid when the first of you dies. Joint owners must be spouses. The surviving
joint owner will be treated as the beneficiary.
Beginning May 1, 1999, at the time you buy the contract, you will receive
Death Benefit Option A. If you purchased your contract before May 1, 1999, you
received Death Benefit Option C. For these contracts (i.e, contracts purchased
prior to May 1, 1999) effective beginning with your next contract anniversary
on or after July 1, 1999, your death benefit will automatically be enhanced to
Death Benefit Option B.
The death benefits are described below. The amount of death benefit depends on
how old you or your joint owner is. If you have a joint owner, the death benefit
is determined based on the age of the oldest joint owner and the death benefit
is payable on the death of the first joint owner.
DEATH BENEFIT OPTION A:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 greatest contract value on any contract anniversary while the owner, or
a joint owner is living, plus any purchase 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);
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest contract value on any prior contract anniversary on or before
your or your joint owner's 80th birthday, plus any purchase payments you made
subsequent to that contract anniversary, less any withdrawals (and any
withdrawal charges paid on the withdrawals) subsequent to that contract
anniversary.
DEATH BENEFIT OPTION B:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 greatest of the values of your contract resulting from taking the
contract value on any contract anniversary on or after July 1, 1999 while
the owner, or a joint owner is living, plus any purchase 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);
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest of the values of your contract resulting from taking the
contract value on any prior contract anniversary on or after July 1, 1999
and on or before your or your joint owner's 80th birthday, plus any
purchase payments you made subsequent to that contract anniversary, less
any withdrawals (and any withdrawal charges paid on the withdrawals)
subsequent to that contract anniversary.
DEATH BENEFIT OPTION C:
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less 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 purchase 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);
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 you made after that contract
anniversary, less any withdrawals (and any withdrawal charges paid on the
withdrawals) made after that contract anniversary.
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.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date Cova receives proof of death. If Cova does not receive
an election during such time, it will make a single sum payment to the
beneficiary at the end of the 60 day period.
Death of Annuitant
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death
benefit, if any, will be as provided for in the annuity option selected.
OTHER INFORMATION
Cova
Cova Financial 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.
YEAR 2000
Cova has developed and initiated plans to assure that its computer systems
will function properly in the year 2000 and later years. These efforts
have included receiving assurances from outside service providers that
their computer systems will also function properly in this context.
Included within these plans are the computer systems of the advisers
and sub-advisers of the various investment portfolios underlying the
Separate Account.
Although an assessment of the total cost of implementing these plans has not
been completed, the total amounts to be expended are not expected to have a
material effect on Cova's financial position or results of operations. Cova
believes that it has taken all reasonable steps to address these potential
problems. There can be no guarantee, however, that the steps taken will be
adequate to avoid any adverse impact.
The Separate Account
Cova has established a separate account, Cova Variable Annuity Account 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 Separate Account is divided into
sub-accounts.
The assets of the Separate Account are held in Cova's name on behalf of the
Separate Account and legally belong to Cova. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts Cova may issue.
Distributor
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the contracts. Life
Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions up to 5.75% 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 interest and rights
under the contract. Prior to the annuity date, the owner is as designated at
the time the contract is issued, unless changed. On and after the annuity
date, the annuitant is the owner (this may be a taxable event). 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.
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
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
APPENDIX A
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUE HISTORY
The following schedule includes accumulation unit values for the periods
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
Year or Year or
Period Period
Ended Ended
12/31/98 12/31/97
---------- ----------
RUSSELL INSURANCE FUNDS
Multi-Style Equity Sub-Account
Beginning of Period $10.00 *
End of Period 12.74
Number of Accum. Units Outstanding 48,388
Aggressive Equity Sub-Account
Beginning of Period $10.00 *
End of Period 10.00
Number of Accum. Units Outstanding 8,651
Non-U.S. Sub-Account
Beginning of Period $10.00 *
End of Period 11.18
Number of Accum. Units Outstanding 18,259
Core Bond Sub-Account
Beginning of Period $10.00 *
End of Period 10.63
Number of Accum. Units Outstanding 61,498
GENERAL AMERICAN CAPITAL COMPANY
Money Market Sub-Account
Beginning of Period $10.67 $10.63
End of Period 11.11 10.67
Number of Accum. Units Outstanding 129,569 14,091
*The accumulation unit values shown above for the beginning of the period
for the Multi-Style Equity, Aggressive Equity, Non U.S., Core Bond and
Money Market sub-accounts reflect the date these investment portfolios were
offered for sale through the Separate Account (_________________).
<TABLE>
<CAPTION>
APPENDIX B
PERFORMANCE INFORMATION
Future performance will vary and the results shown are not necessarily
representative of future results.
Note: The figures below present investment performance information for the
periods ended December 31, 1998. While these numbers represent the returns as of
that date, they do not represent performance information of the portfolios since
that date. Performance information for the periods after December 31, 1998 may
be different that the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before December 31, 1998. As
a result, performance information is available for the accumulation unit
values investing in these portfolios.
* Column A presents performance figures for the accumulation units
which reflect the insurance charges, the contract maintenance charge,
the fees and expenses of the portfolio, and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge
is reflected.
* Column B presents performance figures for the accumulation units
which reflect the insurance charges and the fees and expenses of the
portfolio.
Total Return for the periods ended 12/31/98
- ------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all (reflects insurance
charges and charges and
portfolio expenses) portfolio expenses)
- --------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
in Portfolio 1 yr Inception 1 yr Inception
- --------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
<S> <C> <C> <C> <C> <C>
Multi-Style Equity 12/31/97 22.77% 22.77% 27.40% 27.40%
Aggressive Equity 12/31/97 (4.59)% (4.59)% 0.01% 0.01%
Non-U.S. 12/31/97 7.22% 7.22% 11.83% 11.83%
Core Bond 12/31/97 1.71% 1.71% 6.31% 6.31%
General American Capital Company
Money Market 12/4/97 (0.45)% (0.19)% 4.15% 4.19%
</TABLE>
PART 2 - HISTORICAL FUND PERFORMANCE
The contracts are relatively new and therefore have no meaningful performance
history. However, the portfolios of Russell Insurance Funds and the Money Market
Fund of General American Capital Company 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, 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.
* Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
<TABLE>
<CAPTION>
Total Return for the periods ended 12/31/98:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and
Column A portfolio expenses) portfolio 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
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
<S> <C> <C> <C> <C> <C>
Multi-Style Equity 1/2/97 28.71% 28.73% 22.77% 22.73% 27.40% 27.33%
Aggressive Equity 1/2/97 1.02% 16.87% (4.59)% 10.87% 0.01% 15.47%
Non-U.S. 1/2/97 12.96% 6.47% 7.22% 0.47% 11.83% 5.07%
Core Bond 1/2/97 7.38% 8.58% 1.71% 2.58% 6.31% 7.18%
- ------------------------------------------------------------------------------------------------------------------------------------
General American
Capital Company
Money Market 10/1/87 5.62% 5.40% 5.78% (0.45)% 3.90% 4.28% 4.15% 4.00% 4.38%
- ------------------------------------------------------------------------------------------------------------------------------------
</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, 1999, for The Annuity Contract issued by Cova.
(Please print or type and fill in all information)
................................................................................
Name
................................................................................
Address
................................................................................
City State Zip Code
CC-3044 (5/99) COVA VA
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 Center
P.O. Box 10366
Des Moines, IA 50306
800-343-8496
CC-3003 Policy Form Series XLCC-648 AND XLCC-833 21-RUSS-CA (5/99)
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
issued by
COVA VARIABLE ANNUITY ACCOUNT FIVE
AND
COVA FINANCIAL LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1999 FOR THE
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS DESCRIBED
HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644,
(800) 831-5433.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1999.
TABLE OF CONTENTS
Page
COMPANY ....................................................................
EXPERTS ....................................................................
LEGAL OPINIONS...............................................................
DISTRIBUTION.................................................................
Reduction or Elimination of the Withdrawal Charge...................
CALCULATION OF PERFORMANCE INFORMATION.......................................
Total Return........................................................
Historical Unit Values..............................................
Reporting Agencies..................................................
FEDERAL TAX STATUS...........................................................
General ...........................................................
Diversification.....................................................
Multiple Contracts.................................................
Contracts Owned by Other than Natural Persons......................
Tax Treatment of Assignments.......................................
Income Tax Withholding.............................................
Tax Treatment of Withdrawals - Non-Qualified Contracts.............
Qualified Plans....................................................
Tax Treatment of Withdrawals - Qualified Contracts.................
Tax-Sheltered Annuities - Withdrawal Limitations...................
ANNUITY PROVISIONS..........................................................
Variable Annuity...................................................
Fixed Annuity......................................................
Annuity Unit.......................................................
Net Investment Factor..............................................
Mortality and Expense Guarantee....................................
FINANCIAL STATEMENTS........................................................
COMPANY
Cova Financial Life Insurance Company (the "Company") was originally
incorporated on September 6, 1972 as Industrial Indemnity Life Insurance
Company, a California corporation and changed its name on January 1, 1986 to
Xerox Financial Life Insurance Company. The Company presently is licensed to do
business in the state of California. On June 1, 1995 a wholly-owned subsidiary
of General American Life Insurance Company ("General American") purchased Xerox
Financial Services Life Insurance Company ("Xerox Life"), an affiliate of the
Company, from Xerox Financial Services, Inc. The acquisition of Xerox Life
included related companies, including the Company. On June 1, 1995 the Company
changed its name to Cova Financial Life Insurance Company.
General American is a St. Louis-based mutual company with more than $300 billion
of life insurance in force and approximately $24 billion in assets. It provides
life and health insurance, retirement plans, and related financial services to
individuals and groups.
EXPERTS
The balance sheets of the Company as of December 31, 1998 and 1997, and the
related statements of income, shareholder's equity, and cash flows for each
of the years in the three-year period ended December 31, 1998, and the
statement of assets and liabilities of the Separate Account as of December 31,
1998, and the related statement of operations for the year then ended and the
statements of changes in net assets for the two years then ended, have been
included herein in reliance upon the reports of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
DISTRIBUTION
Cova Life Sales Company ("Life Sales") acts as the distributor. Prior to June 1,
1995, Cova Life Sales Company was known as Xerox Life Sales Company. Life Sales
is an affiliate of the Company. The offering is on a continuous basis.
Reduction or Elimination of the Withdrawal Charge
The amount of the Withdrawal Charge on the Contracts may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group of
individuals in a manner that results in savings of sales expenses. The
entitlement to reduction of the Withdrawal Charge will be determined by the
Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Contracts
with fewer sales contacts.
2. The total amount of purchase payments to be received will be
considered. Per Contract sales expenses are likely to be less on larger purchase
payments than on smaller ones.
3. Any prior or existing relationship with the Company will be
considered. Per Contract sales expenses are likely to be less when there is a
prior existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts.
4. There may be other circumstances, of which the Company is not
presently aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Withdrawal Charge.
The Withdrawal Charge may be eliminated when the Contracts are issued to an
officer, director or employee of the Company or any of its affiliates. In no
event will any reduction or elimination of the Withdrawal Charge be permitted
where the reduction or elimination will be unfairly discriminatory to any
person.
CALCULATION OF PERFORMANCE INFORMATION
Total Return
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.25% Mortality and Expense Risk Premium, a .15% Administrative
Expense Charge, the expenses for the underlying investment portfolio being
advertised and any applicable Contract Maintenance Charges and Withdrawal
Charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Withdrawal Charges to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the time periods used.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
contract maintenance charge and withdrawal charge. The deduction of any contract
maintenance charge and withdrawal charge would reduce any percentage increase or
make greater any percentage decrease.
You should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what your total return may be in any future period.
The contracts are relatively new and therefore have no meaningful performance
history. However, the Separate Account and certain Portfolios have been in
existence for sometime and consequently have an investment performance history.
In order to show how the historical investment performance of the Separate
Account and the Portfolios affect accumulation unit values, performance
information was developed. The information is based upon the historical
experience of the Separate Account and the Portfolios and is for the periods
shown. The prospectus contains a chart of performance information.
Future performance of the Portfolios will vary and the results shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance for a Portfolio is calculated for a specified period of time by
assuming an initial Purchase Payment of $1,000 allocated to the Portfolio. There
are performance figures for the Accumulation Units which reflect the insurance
charges as well as the Portfolio expenses. There are also performance figures
for the Accumulation Units which reflect the insurance charges, the contract
maintenance charge, the Portfolio expenses, and assume that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected. The percentage increases (decreases) are determined by subtracting
the initial Purchase Payment from the ending value and dividing the remainder by
the beginning value. The performance may also show figures when no withdrawal is
assumed.
Historical Unit Values
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
Reporting Agencies
The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
FEDERAL TAX STATUS
General
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment or as annuity payments under the Annuity
Option selected. For a lump sum payment received as a total withdrawal (total
surrender), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludible amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
Diversification
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
Tax Treatment of Assignments or Transfer of Ownership
An assignment, pledge or transfer of ownership of a Contract may be a taxable
event. Owners should therefore consult competent tax advisers should they
wish to assign, pledge or transfer ownership of their Contracts.
Income Tax Withholding
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
Tax Treatment of Withdrawals - Non-Qualified Contracts
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Qualified Plans
The Contracts offered herein are designed to be suitable for use under various
types of Qualified Plans. Taxation of participants in each Qualified Plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations" below.) Employee loans are not allowable under the
Contracts. Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability
and distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts"
below.) Under certain conditions, distributions from other IRAs and other
Qualified Plans may be rolled over or transferred on a tax-deferred basis
into an IRA. Sales of Contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Purchasers of Contracts to be qualified as Individual Retirement Annuities
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
ROTH IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of
single taxpayers, between $150,000 and $160,000 in the case of married
taxpayers filing joint returns, and between $0 and $10,000 in the case of
married taxpayers filing separately. An overall $2,000 annual limitation
continues to apply to all of a taxpayer's IRA contributions, including Roth IRA
and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-
employed individuals, to establish various types of retirement plans for
employees. These retirement plans may permit the purchase of the Contracts to
provide benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all Plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Pension or Profit
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
Tax Treatment of Withdrawals - Qualified Contracts
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b) Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been rolled over to an IRA or to another eligible Qualified Plan, no
tax penalty will be imposed. The tax penalty will not apply to the following
distributions: (a)if distribution is made on or after the date on which the
Owner or Annuitant (as applicable) reaches age 59 1/2; (b) distributions
following the death or disability of the Owner or Annuitant (as applicable) (for
this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the Owner or Annuitant (as applicable) or the joint lives
(or joint life expectancies) of such Owner or Annuitant (as applicable) and his
or her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (g) distributions from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable)to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code). The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must commence no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
Tax-Sheltered Annuities - Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers and transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
ANNUITY PROVISIONS
Variable Annuity
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account. At the
Annuity Date, the Contract Value in each investment portfolio will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. If, as of the Annuity Date, the then current Annuity
Option rates applicable to this class of Contracts provide a first Annuity
Payment greater than guaranteed under the same Annuity Option under this
Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value of
an Annuity Unit as of the Annuity Date. This establishes the number of
Annuity Units for each monthly payment. The number of Annuity Units remains
fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit value
for the last Valuation Period of the month preceding the month for which
the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
investment portfolios' Variable Annuity Payments reduced by the applicable
Contract Maintenance Charge.
Fixed Annuity
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. The first monthly Annuity Payment will be based upon
the Annuity Option elected and the appropriate Annuity Option Table.
Annuity Unit
The value of an Annuity Unit for each investment portfolio was arbitrarily set
initially at $10. This was done when the first investment portfolio shares were
purchased. The investment portfolio Annuity Unit value at the end of any
subsequent Valuation Period is determined by multiplying the investment
portfolio Annuity Unit value for the immediately preceding Valuation Period by
the product of (a) the Net Investment Factor for the day for which the Annuity
Unit value is being calculated, and (b) 0.999919.
Net Investment Factor
The Net Investment Factor for any investment portfolio for any Valuation Period
is determined by dividing:
(a) the Accumulation Unit value as of the close of the current Valuation
Period, by
(b) the Accumulation Unit value as of the close of the immediately preceding
Valuation Period.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.
Mortality and Expense Guarantee
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
COVA VARIABLE ANNUITY ACCOUNT FIVE
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Contract Owners of Cova Variable Annuity Account Five, Board of
Directors and Shareholder of Cova Financial Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Quality Income, Money Market, Stock Index, Growth and Income, Bond
Debenture, Developing Growth, Large Cap Research, Mid-Cap Value, Quality
Bond, Small Cap Stock, Large Cap Stock, Select Equity, and International
Equity sub-accounts (investment options within the Cova Series Trust); the
Growth and Income sub-account (investment option within the Lord Abbett
Series Fund, Inc.); the Money Market sub-account (investment option within
the General American Capital Company); the Multi-Style Equity, Aggressive
Equity, Non-US, and Core Bond sub-accounts (investment options within the
Russell Insurance Funds); the AIM V.I. Value, AIM V.I. Capital
Appreciation, and AIM V.I. International Equity sub-accounts (investment
options within the AIM Variable Insurance Funds, Inc.); the Premier Growth
and Real Estate Investment sub-accounts (investment options within the
Alliance Variable Products Series Fund, Inc.); the Newport Tiger
sub-account (investment option within the Liberty Variable Investment
Trust); the Growth and Income, International Equity, and Global Income
sub-accounts (investment options within the Goldman Sachs Variable
Insurance Trust); the Kemper-Dreman High Return Equity, Kemper Small Cap
Growth, Kemper Small Cap Value, and Kemper Government Securities
sub-accounts (investment options within the Investors Fund Series); the MFS
Bond, MFS Research, MFS Growth with Income, MFS Emerging Growth,
MFS/Foreign & Colonial Emerging Markets Equity, MFS High Income, and MFS
World Governments sub-accounts (investment options within the MFS Variable
Insurance Trust); the Oppenheimer Growth, Oppenheimer Growth & Income,
Oppenheimer High Income, Oppenheimer Bond, and Oppenheimer Strategic Bond
sub-accounts (investment options within the Oppenheimer Variable Account
Funds); the Putnam Growth and Income, Putnam New Value, Putnam Vista,
Putnam International Growth, and Putnam International New Opportunities
(investment options within the Putnam Variable Trust); the Templeton
International, Templeton Developing Markets, and Mutual Shares Investments
(investment options within the Templeton Variable Products Series Fund) and
Growth, Contrafund, Growth Opportunities, Growth & Income, and
Equity-Income sub-accounts (investment options within the Variable
Insurance Products Fund, Fund II, and Fund III) of Cova Variable Annuity
Account Five of Cova Financial Life Insurance Company (the Separate
Account) as of December 31, 1998, and the related statement of operations
for the year then ended and the statements of changes in net assets for the
two years then ended. These financial statements are the responsibility of
the Separate Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with transfer agents. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the sub-accounts of
Cova Variable Annuity Account Five of Cova Financial Life Insurance Company
as of December 31, 1998, and the results of their operations and the
changes in their net assets for each of the years presented, in conformity
with generally accepted accounting principles.
Chicago, Illinois
March 1, 1999
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Assets:
Investments:
Cova Series Trust (Trust):
Quality Income Portfolio - 70,231 shares at a net asset value of $10.99 per share (cost: $ 771,521
$752,312)
Money Market Portfolio - 267,480 shares at a net asset value of $1.00 per share (cost: 267,480
$267,480)
Stock Index Portfolio - 103,701 shares at a net asset value of $22.24 per share (cost: 2,306,502
$1,814,789)
VKAC Growth and Income Portfolio - 118,981 shares at a net asset value of $17.81 per share 2,118,735
(cost: $1,802,450)
Bond Debenture Portfolio - 743,132 shares at a net asset value of $12.38 per share (cost: 9,200,594
$8,927,195)
Developing Growth Portfolio - 69,838 shares at a net asset value of $11.24 per share (cost: 785,026
$727,393)
Large Cap Research Portfolio - 49,317 shares at a net asset value of $11.96 per share 590,045
(cost: $537,947)
Mid-Cap Value Portfolio - 84,292 shares at a net asset value of $10.58 per share (cost: 892,031
$877,515)
Quality Bond Portfolio - 541,754 shares at a net asset value of $11.02 per share (cost: 5,969,934
$5,715,813)
Small Cap Stock Portfolio - 697,228 shares at a net asset value of $11.98 per share (cost: 8,354,398
$8,357,230)
Large Cap Stock Portfolio - 1,214,540 shares at a net asset value of $18.12 per share 22,001,488
(cost: $17,283,927)
Select Equity Portfolio - 1,112,492 shares at a net asset value of $16.08 per share (cost: 17,884,756
$14,721,013)
International Equity Portfolio - 781,347 shares at a net asset value of $12.86 per share 10,045,997
(cost: $9,127,009)
Lord Abbett Series Fund, Inc. (Lord
Abbett):
Growth and Income Portfolio - 1,796,658 shares at a net asset value of $20.65 per share 37,099,191
(cost: $34,316,395)
General American Capital Company
(GACC):
Money Market Portfolio - 74,779 shares at a net asset value of $19.25 per share (cost: 1,439,559
$1,430,813)
Russell Insurance Funds
(Russell):
Multi-Style Equity Fund - 38,483 shares at a net asset value of $16.02 per share (cost: 616,495
$579,110)
Aggressive Equity Fund - 6,813 shares at a net asset value of $12.70 per share (cost: 86,528
$88,281)
Non-US Fund - 18,412 shares at a net asset value of $11.09 per share 204,193
(cost: $202,349)
Core Bond Fund - 61,219 shares at a net asset value of $10.68 per share 653,821
(cost: $650,278)
AIM Variable Insurance Funds, Inc.
(AIM):
AIM V.I. Value Fund - 1,427 shares at a net asset value of $26.25 per share (cost: $36,084) 37,460
AIM V.I. Capital Appreciation Fund - 2,608 shares at a net asset value of $25.20 per share 65,734
(cost: $60,348)
AIM V.I. International Equity Fund - 8,880 shares at a net asset value of $19.62 per share 174,220
(cost: $180,444)
Alliance Variable Products Series Fund, Inc.
(Alliance):
Premier Growth Portfolio - 29,623 shares at a net asset value of $31.03 per share (cost: 919,211
$800,697)
Real Estate Investment Portfolio - 18,061 shares at a net asset value of $9.78 per share 176,632
(cost: $193,823)
Liberty Variable Investment Trust
(Liberty):
Newport Tiger Fund, Variable Series - 14,183 shares at a net asset value of $1.57 per share 22,267
(cost: $19,524)
Goldman Sachs Variable Insurance Trust
(Goldman Sachs):
Growth and Income Fund - 12,433 shares at a net asset value of $10.45 per share (cost: 129,922
$141,135)
International Equity Fund - 15,202 shares at a net asset value of $11.91 per share (cost: 181,060
$178,340)
Global Income Fund - 3,147 shares at a net asset value of $10.32 per 32,473
share (cost: $32,660)
Investors Fund Series
(Kemper):
Kemper Dreman High Return Equity Portfolio - 102 shares at a net asset value of $1.03 per 105
share (cost: $100)
Kemper Small Cap Growth Portfolio - 22,750 shares at a net asset value of $1.97 per share 44,868
(cost: $40,879)
Kemper Small Cap Value Portfolio - 137,341 shares at a net asset value of $1.07 per share 146,329
(cost: $160,309)
Kemper Government Securities Portfolio - 22,204 shares at a net asset value of $1.21 per 26,826
share (cost: $26,620)
MFS Variable Insurance Trust (MFS):
MFS Bond Series - 9 shares at a net asset value of $11.38 per share 105
(cost: $100)
MFS Research Series - 16,619 shares at a net asset value of $19.05 per share (cost: 316,596
$292,024)
MFS Growth with Income Series - 38,905 shares at a net asset value of $20.11 per share 782,388
(cost: $727,399)
MFS Emerging Growth Series - 29,432 shares at a net asset value of $21.47 per share (cost: 631,907
$544,333)
MFS / Foreign & Colonial Emerging
Markets Equity Series - 4,723 shares at a net asset value of $5.90 per share (cost: 27,866
$35,551)
MFS High Income Series - 11,190 shares at a net asset value of $11.53 per share (cost: 129,019
$131,644)
MFS World Governments Series - 377 shares at a net asset value of $10.88 per share (cost: 4,100
$3,911)
Oppenheimer Variable Account Funds
(Oppenheimer):
Oppenheimer Growth Fund - 1,682 shares at a net asset value of $36.67 per share (cost: 61,672
$52,315)
Oppenheimer Growth & Income Fund - 7,514 shares at a net asset value of $20.48 per share 153,890
(cost: $154,661)
Oppenheimer High Income Fund - 9,471 shares at a net asset value of $11.02 per share (cost: 104,368
$106,439)
Oppenheimer Bond Fund - 39,722 shares at a net asset value of $12.32 per share (cost: 489,369
$476,866)
Oppenheimer Strategic Bond Fund - 5,328 shares at a net asset value of $5.12 per share 27,280
(cost: $27,409)
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Assets, continued:
Investments,
continued:
Putnam Variable Trust
(Putnam):
Putnam Growth and Income Fund - 31,755 shares at a net asset value of $28.77 per share $ 913,589
(cost: $868,940)
Putnam New Value Fund - 1,922 shares at a net asset value of $12.03 per share (cost: 23,120
$22,260)
Putnam Vista Fund - 5,452 shares at a net asset value of $14.72 per 80,256
share (cost: $72,441)
Putnam International Growth Fund - 49,076 shares at a net asset value of $13.52 per share 663,511
(cost: $665,808)
Putnam International New
Opportunities
Fund - 4,754 shares at a net asset value of $11.49 per share 54,628
(cost: $54,329)
Templeton Variable Products Series Fund
(Templeton):
Templeton International Fund - 2,937 shares at a net asset value of $20.69 per share (cost: 60,769
$56,058)
Templeton Developing Markets Fund - 10,379 shares at a net asset value of $5.13 per share 53,242
(cost: $49,672)
Mutual Shares Investments Fund - 937 shares at a net asset value of $9.72 per share (cost: 9,108
$8,845)
Variable Insurance Products Fund, Fund II, and Fund
III (Fidelity):
Growth Portfolio - 148 shares at a net asset value of $44.87 per share 6,637
(cost: $5,519)
Contrafund Portfolio - 40 shares at a net asset value of $24.44 per 976
share (cost: $877)
Growth Opportunities Portfolio - 59 shares at a net asset value of $22.88 per share (cost: 1,345
$1,326)
Growth & Income Portfolio - 1,584 shares at a net asset value of $16.15 per share (cost: 25,582
$21,798)
Equity-Income Portfolio - 325 shares at a net asset value of $25.42 per 8,251
share (cost: $7,616)
----------
Total $ 127,874,975
assets
==========
Liabilities:
Trust Quality Income $ 30
Trust Money Market 10
Trust Stock 89
Index
Trust VKAC Growth and Income 81
Trust Bond Debenture 352
Trust Developing 29
Growth
Trust Large Cap 23
Research
Trust Mid-Cap Value 34
Trust Quality 229
Bond
Trust Small Cap Stock 312
Trust Large Cap Stock 843
Trust Select 683
Equity
Trust International 385
Equity
Lord Abbett Growth and Income 1,423
GACC Money Market 54
Russell Multi-Style 22
Equity
Russell Aggressive 3
Equity
Russell Non-US 7
Russell Core 23
Bond
AIM Value 1
AIM Capital 2
Appreciation
AIM International 7
Equity
Alliance Premier 35
Growth
Alliance Real Estate 7
Investment
Liberty Newport Tiger 25
Goldman Sachs Growth and 5
Income
Goldman Sachs International 7
Equity
Goldman Sachs Global Income 1
Kemper Small Cap 111
Growth
Kemper Small Cap 386
Value
Kemper Government Securities 40
MFS Research 12
MFS Growth with 30
Income
MFS Emerging Growth 24
MFS / F&C Emerging Markets Equity 1
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Liabilities,
continued:
MFS High Income $ 5
Oppenheimer Growth 2
Oppenheimer Growth & Income 6
Oppenheimer High 4
Income
Oppenheimer 19
Bond
Oppenheimer Strategic Bond 1
Putnam Growth and Income 35
Putnam New 1
Value
Putnam Vista 3
Putnam International Growth 25
Putnam International New Opportunities 2
Templeton 138
International
Templeton Developing Markets 93
Templeton Mutual Shares Investments 3
Fidelity VIP 14
Growth
Fidelity VIP II 1
Contrafund
Fidelity VIP III Growth & 58
Income
Fidelity VIP 12
Equity-Income
----------
Total $ 5,748
liabilities
==========
Net
assets:
Trust Quality Income - 43,985 accumulation units at $17.539867 $ 771,491
per unit
Trust Money Market - 20,763 accumulation units at $12.882157 per 267,470
unit
Trust Stock Index - 73,167 accumulation units at 2,306,413
$31.522519 per unit
Trust VKAC Growth and Income - 86,842 accumulation units at 2,118,654
$24.396679 per unit
Trust Bond Debenture - 681,676 accumulation units at $13.496510 9,200,242
per unit
Trust Developing Growth - 70,926 accumulation units at $11.067868 784,997
per unit
Trust Large Cap Research - 49,894 accumulation units at 590,022
$11.825638 per unit
Trust Mid-Cap Value - 85,457 accumulation units at $10.437956 per 891,997
unit
Trust Quality Bond - 501,045 accumulation units at 5,969,705
$11.914509 per unit
Trust Small Cap Stock - 663,925 accumulation units at $12.582885 8,354,086
per unit
Trust Large Cap Stock - 1,132,390 accumulation units at 22,000,645
$19.428505 per unit
Trust Select Equity - 1,052,797 accumulation units at $16.987203 17,884,073
per unit
Trust International Equity - 779,375 accumulation units at 10,045,612
$12.889314 per unit
Lord Abbett Growth and Income - 1,080,766 accumulation units at $34.325431 37,097,768
per unit
GACC Money Market - 129,569 accumulation units at $11.109949 per 1,439,505
unit
Russell Multi-Style Equity - 48,388 accumulation units at 616,473
$12.740123 per unit
Russell Aggressive Equity - 8,651 accumulation units at 86,525
$10.001283 per unit
Russell Non-US - 18,259 accumulation units at 204,186
$11.182808 per unit
Russell Core Bond - 61,498 accumulation units at 653,798
$10.631124 per unit
AIM Value - 2,865 accumulation units at 37,459
$13.075597 per unit
AIM Capital Appreciation - 5,570 accumulation units at $11.800084 65,732
per unit
AIM International Equity - 15,257 accumulation units at 174,213
$11.418467 per unit
Alliance Premier Growth - 62,869 accumulation units at $14.620511 919,176
per unit
Alliance Real Estate Investment - 22,077 accumulation units at 176,625
$8.000583 per unit
Liberty Newport Tiger - 2,397 accumulation units at 22,242
$9.278784 per unit
Goldman Sachs Growth and Income - 13,107 accumulation units at $9.911702 129,917
per unit
Goldman Sachs International Equity - 15,859 accumulation units at 181,053
$11.416783 per unit
Goldman Sachs Global Income - 3,002 accumulation units at 32,472
$10.815310 per unit
Kemper Dreman High Return Equity - 10 accumulation units at 105
$10.489000 per unit
Kemper Small Cap Growth - 3,829 accumulation units at $11.687795 44,757
per unit
Kemper Small Cap Value - 16,641 accumulation units at $8.770360 145,943
per unit
Kemper Government Securities - 2,519 accumulation units at 26,786
$10.634608 per unit
MFS Bond - 10 accumulation units at $10.509000 105
per unit
MFS Research - 25,994 accumulation units at $12.179142 316,584
per unit
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Net assets,
continued:
MFS Growth with Income - 64,791 accumulation units at $12.075079 $ 782,358
per unit
MFS Emerging Growth - 47,710 accumulation units at $13.244101 per 631,883
unit
MFS / F&C Emerging Markets Equity - 4,234 accumulation units at $6.581757 27,865
per unit
MFS High Income - 13,080 accumulation units at 129,014
$9.863111 per unit
MFS World Governments - 385 accumulation units at $10.663503 per 4,100
unit
Oppenheimer Growth - 5,037 accumulation units at $12.244057 per 61,670
unit
Oppenheimer Growth & Income - 14,882 accumulation units at 153,884
$10.340279 per unit
Oppenheimer High Income - 10,533 accumulation units at $9.907918 104,364
per unit
Oppenheimer Bond - 46,377 accumulation units at 489,350
$10.551643 per unit
Oppenheimer Strategic Bond - 2,684 accumulation units at 27,279
$10.164797 per unit
Putnam Growth and Income - 80,114 accumulation units at 913,554
$11.403244 per unit
Putnam New Value - 2,202 accumulation units at 23,119
$10.498075 per unit
Putnam Vista - 6,799 accumulation units at $11.804097 80,253
per unit
Putnam International Growth - 56,566 accumulation units at 663,486
$11.729428 per unit
Putnam International New Opportunities - 4,783 accumulation units at 54,626
$11.420772 per unit
Templeton International - 6,626 accumulation units at $9.149729 60,631
per unit
Templeton Developing Markets - 7,033 accumulation units at 53,149
$7.557531 per unit
Templeton Mutual Shares Investments - 944 accumulation units at $9.646506 9,105
per unit
Fidelity VIP Growth - 505 accumulation units at 6,623
$13.115493 per unit
Fidelity VIP II Contrafund - 78 accumulation units at $12.429344 975
per unit
Fidelity VIP III Growth Opportunities - 114 accumulation units at 1,345
$11.814000 per unit
Fidelity VIP III Growth & Income - 2,082 accumulation units at 25,524
$12.259160 per unit
Fidelity VIP Equity-Income - 772 accumulation units at $10.674283 8,239
per unit
----------
Total net $ 127,869,227
assets
==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
TRUST
-------------------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND DEVELOPING LARGE CAP
INCOME MARKET INDEX INCOME DEBENTURE GROWTH RESEARCH
-------- -------- --------- ------------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 42,140 15,998 11,040 11,939 189,684 -- 384
-------- -------- --------- ------------ ----------- ------------ --------
Expenses:
Mortality and expense risk fee 9,698 3,687 25,580 24,244 86,643 4,541 2,202
Administrative fee 1,164 443 3,070 2,909 10,397 545 264
-------- -------- --------- ------------ ----------- ------------ --------
Total expenses 10,862 4,130 28,650 27,153 97,040 5,086 2,466
-------- -------- --------- ------------ ----------- ------------ --------
Net investment income (loss) 31,278 11,868 (17,610) (15,214) 92,644 (5,086) (2,082)
-------- -------- --------- ------------ ----------- ------------ --------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares 1,603 -- 18,221 15,618 13,448 (1,554) 25
Realized gain distributions -- -- 372,780 222,030 73,764 221 --
-------- -------- --------- ------------ ----------- ------------ --------
Net realized gain (loss) 1,603 -- 391,001 237,648 87,212 (1,333) 25
-------- -------- --------- ---------- --------- ------------ --------
Change in unrealized appreciation
during the year 4,531 -- 98,370 64,902 110,064 57,229 52,098
-------- -------- --------- ------------ ----------- ------------ --------
Net increase (decrease)
in net assets from operations $ 37,412 11,868 471,761 287,336 289,920 50,810 50,041
======== ======== ========= =========== =========== ============ ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
TRUST LORD ABBETT GACC
------------------------------------------------------------- ------------- ----------
GROWTH
MID-CAP QUALITY SMALL CAP LARGE CAP SELECT INTERNATIONAL AND MONEY
VALUE BOND STOCK STOCK EQUITY EQUITY INCOME MARKET
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 591 84,774 10,505 42,974 42,555 153,341 546,511 --
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Expenses:
Mortality and expense risk fee 5,492 49,714 94,997 196,151 173,752 106,326 389,208 6,233
Administrative fee 659 5,965 11,399 23,538 20,850 12,759 46,705 748
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Total expenses 6,151 55,679 106,396 219,689 194,602 119,085 435,913 6,981
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Net investment income (loss) (5,560) 29,095 (95,891) (176,715) (152,047) 34,256 110,598 (6,981)
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (4,501) 10,751 11,830 210,894 150,352 23,377 90,218 18,462
Realized gain distributions -- -- 268,696 141,495 849,129 1,945 1,757,243 --
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Net realized gain (loss) (4,501) 10,751 280,526 352,389 999,481 25,322 1,847,461 18,462
-------- --------- --------- ---------- ---------- ----------- ----------- ----------
Change in unrealized appreciation
during the year 11,980 212,005 (768,604) 4,086,693 1,878,770 827,333 1,268,706 8,306
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Net increase (decrease)
in net assets from operations $ 1,919 251,851 (583,969) 4,262,367 2,726,204 886,911 3,226,765 19,787
======== ========= ========= ========== ========== =========== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
RUSSELL AIM
-------------------------------------------- -----------------------------------
MULTI-STYLE AGGRESSIVE CORE CAPITAL INTERNATIONAL
EQUITY EQUITY NON-US BOND VALUE APPRECIATION EQUITY
------------ ----------- -------- ------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 714 22 2 3,287 174 72 1,368
------------ ----------- -------- ------- ------- ------------- -----------
Expenses:
Mortality and expense risk fee 2,550 346 791 1,166 181 224 1,054
Administrative fee 306 41 95 140 22 27 127
------------ ----------- -------- ------- ------- ------------- -----------
Total expenses 2,856 387 886 1,306 203 251 1,181
------------ ----------- -------- ------- ------- ------------- -----------
Net investment income (loss) (2,142) (365) (884) 1,981 (29) (179) 187
------------ ----------- -------- ------- ------- ------------- -----------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares 200 (52) (79) 2 (1,586) (22) (5,943)
Realized gain distributions 2 7 1 -- 1,539 1,278 --
------------ ----------- -------- ------- ------- ------------- -----------
Net realized gain (loss) 202 (45) (78) 2 (47) 1,256 (5,943)
------------ ----------- -------- ------- ------- ------------- ---------
Change in unrealized appreciation
during the year 37,385 (1,753) 1,844 3,543 1,376 5,386 (6,224)
------------ ----------- -------- ------- ------- ------------- -----------
Net increase (decrease)
in net assets from operations $ 35,445 (2,163) 882 5,526 1,300 6,463 (11,980)
============ =========== ======== ======= ======= ============= ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
ALLIANCE LIBERTY GOLDMAN SACHS KEMPER
-------------------- -------- ------------------------------- -----------------------
GROWTH
PREMIER REAL ESTATE NEWPORT AND INTERNATIONAL GLOBAL DREMAN HIGH SMALL CAP
GROWTH INVESTMENT TIGER INCOME EQUITY INCOME RETURN EQUITY GROWTH
--------- ---------- -------- --------- ------------ ------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 149 505 418 1,162 -- 1,211 -- --
--------- ---------- -------- --------- ------------ ------- --------- ------
Expenses:
Mortality and expense risk fee 4,043 933 56 926 938 163 -- 236
Administrative fee 485 112 7 111 113 19 -- 29
--------- ---------- -------- --------- ------------ ------- --------- --------
Total expenses 4,528 1,045 63 1,037 1,051 182 -- 265
--------- ---------- -------- --------- ------------ ------- --------- --------
Net investment income (loss) (4,379) (540) 355 125 (1,051) 1,029 -- (265)
--------- ---------- -------- --------- ------------ ------- --------- --------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (6,634) (2,987) 4 (4,119) (124) 5 -- (256)
Realized gain distributions -- 220 -- -- 1,326 325 -- 447
--------- ---------- -------- --------- ------------ ------- --------- --------
Net realized gain (loss) (6,634) (2,767) 4 (4,119) 1,202 330 -- 191
--------- ---------- -------- --------- ------------ ------- --------- --------
Change in unrealized appreciation
during the year 118,514 (17,191) 2,743 (11,213) 2,720 (187) 5 3,989
--------- ---------- -------- --------- ------------ ------- --------- ---------
Net increase (decrease)
in net assets from operations $ 107,501 (20,498) 3,102 (15,207) 2,871 1,172 5 3,915
========= ========== ======== ========= ============ ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
KEMPER MFS
----------------------- -------------------------------------------------------
GROWTH F&C EMERGING
SMALL CAP GOVERNMENT WITH EMERGING MARKETS
VALUE SECURITIES BOND RESEARCH INCOME GROWTH EQUITY
-------- ------------ ----- ----------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ -- 7 -- 18 -- -- 449
-------- ------------ ----- ----------- -------- ----------- ---------------
Expenses:
Mortality and expense risk fee 794 44 -- 1,355 4,299 3,162 290
Administrative fee 95 5 -- 163 516 379 35
-------- ------------ ----- ----------- -------- ----------- ---------------
Total expenses 889 49 -- 1,518 4,815 3,541 325
-------- ------------ ----- ----------- -------- ----------- ---------------
Net investment income (loss) (889) (42) -- (1,500) (4,815) (3,541) 124
-------- ------------ ----- ----------- -------- ----------- ---------------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (6,424) -- -- (91) (4,972) (2,781) (10,435)
Realized gain distributions 2 -- -- 236 -- 75 --
-------- ------------ ----- ----------- -------- ----------- ---------------
Net realized gain (loss) (6,422) -- -- 145 (4,972) (2,706) (10,435)
-------- ------------ ----- ----------- -------- ----------- ---------------
Change in unrealized appreciation
during the year (13,980) 206 5 24,572 54,989 87,574 (7,685)
-------- ------------ ----- ----------- -------- ----------- ---------------
Net increase (decrease)
in net assets from operations $ (21,291) 164 5 23,217 45,202 81,327 (17,996)
======== ============ ===== =========== ======== =========== ===============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
MFS OPPENHEIMER PUTNAM
------------------- -------------------------------------------- -----------------
GROWTH GROWTH
HIGH WORLD AND HIGH STRATEGIC AND NEW
INCOME GOVERNMENTS GROWTH INCOME INCOME BOND BOND INCOME VALUE
------- ----------- -------- -------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 234 26 87 -- 49 2 2 263 248
------- ---------- -------- -------- ------- ------- -------- -------- -------
Expenses:
Mortality and expense risk fee 692 31 333 668 543 2,348 150 4,870 131
Administrative fee 83 3 40 80 65 282 18 584 16
------- ----------- -------- -------- ------- ------- -------- -------- -------
Total expenses 775 34 373 748 608 2,630 168 5,454 147
------- ----------- -------- -------- ------- ------- -------- -------- -------
Net investment income (loss) (541) (8) (286) (748) (559) (2,628) (166) (5,191) 101
------- ---------- -------- -------- ------- ------- -------- -------- -------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (1,166) 1 (25) (163) (198) 236 (5) (6,532) 12
Realized gain distributions 80 -- 1,053 6 59 2 1 1,717 67
------- ---------- -------- -------- ------- ------- -------- -------- -------
Net realized gain (loss) (1,086) 1 1,028 (157) (139) 238 (4) (4,815) 79
------- ---------- -------- -------- ------- ------- -------- -------- -------
Change in unrealized appreciation
during the year (2,625) 189 9,357 (771) (2,071) 12,503 (129) 44,649 860
------- ---------- -------- -------- ------- ------- -------- -------- -------
Net increase (decrease)
in net assets from operations $ (4,252) 182 10,099 (1,676) (2,769) 10,113 (299) 34,643 1,040
======= ========== ======== ======== ======= ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
PUTNAM TEMPLETON
--------------------------------------------------------------- ---------------
INTERNATIONAL
INTERNATIONAL NEW DEVELOPING
VISTA GROWTH OPPORTUNITIES INTERNATIONAL MARKETS
--------- ---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ -- 2,161 5 -- --
--------- ---------------- ---------------- ---------------- --------------
Expenses:
Mortality and expense risk fee 389 3,701 242 124 83
Administrative fee 47 444 29 15 10
--------- ---------------- ---------------- ---------------- --------------
Total expenses 436 4,145 271 139 93
--------- ---------------- ---------------- ---------------- --------------
Net investment income (loss) (436) (1,984) (266) (139) (93)
--------- ---------------- ---------------- ---------------- --------------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (12) (8,326) (27) 9 8
Realized gain distributions -- -- -- -- --
--------- ---------------- ---------------- ---------------- --------------
Net realized gain (loss) (12) (8,326) (27) 9 8
--------- ---------------- ---------------- ---------------- --------------
Change in unrealized appreciation
during the year 7,815 (2,297) 299 4,711 3,570
--------- ---------------- ---------------- ---------------- --------------
Net increase (decrease)
in net assets from operations $ 7,367 (12,607) 6 4,581 3,485
========= ================ ================ ================ ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
TEMPLETON FIDELITY
---------- -------------------------------------------------------------
MUTUAL
SHARES GROWTH GROWTH & EQUITY-
INVESTMENTS GROWTH CONTRAFUND OPPORTUNITIES INCOME INCOME TOTAL
---------- --------- ----------- ------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ -- -- -- -- -- -- 1,165,071
---------- --------- ----------- ------------- ------------ ---------- -------------
Expenses:
Mortality and expense risk fee 3 15 1 -- 52 11 1,216,406
Administrative fee -- 2 -- -- 6 1 145,967
---------- --------- ----------- ------------- ------------ ---------- -------------
Total expenses 3 17 1 -- 58 12 1,362,373
---------- --------- ----------- ------------- ------------ ---------- -------------
Net investment income (loss) (3) (17) (1) -- (58) (12) (197,302)
---------- --------- ----------- ------------- ------------ ---------- -------------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares -- -- -- -- -- -- 496,262
Realized gain distributions -- -- -- -- -- -- 3,695,746
---------- --------- ----------- ------------- ------------ ---------- -------------
Net realized gain (loss) -- -- -- -- -- -- 4,192,008
---------- --------- ----------- ------------- ------------ ---------- -------------
Change in unrealized appreciation
during the year 263 1,118 99 19 3,784 635 8,280,979
---------- --------- ----------- ------------- ------------ ---------- -------------
Net increase (decrease)
in net assets from operations $ 260 1,101 98 19 3,726 623 12,275,685
========== ========= =========== ============= ============ ========== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
TRUST
-------------------------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND DEVELOPING LARGE CAP
INCOME MARKET INDEX INCOME DEBENTURE GROWTH RESEARCH
--------- --------- ---------- ------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 31,278 11,868 (17,610) (15,214) 92,644 (5,086) (2,082)
Net realized gain (loss) 1,603 -- 391,001 237,648 87,212 (1,333) 25
Change in unrealized appreciation
during the year 4,531 -- 98,370 64,902 110,064 57,229 52,098
--------- --------- ---------- ------------- ----------- ------------ ----------
Net increase (decrease) in
net assets from operations 37,412 11,868 471,761 287,336 289,920 50,810 50,041
--------- --------- ---------- ------------- ----------- ------------ ----------
Contract transactions:
Cova payments -- -- -- -- -- -- --
Cova transfers -- -- -- -- -- -- --
Payments received from contract
owners -- -- -- 1,000 1,051,661 334,325 237,270
Transfers between sub-accounts
(including fixed account), net 11,714 (111,191) 138,069 202,862 3,726,785 337,360 303,087
Transfers for contract benefits
and terminations (8,629) (3,863) (40,936) (52,497) (343,261) (1,070) (376)
--------- --------- ---------- ------------- ----------- ------------ ----------
Net increase (decrease) in
net assets from contract
transactions 3,085 (115,054) 97,133 151,365 4,435,185 670,615 539,981
--------- --------- ---------- ------------- ----------- ------------ ----------
Net increase (decrease)
in net assets 40,497 (103,186) 568,894 438,701 4,725,105 721,425 590,022
Net assets at beginning of period 730,994 370,656 1,737,519 1,679,953 4,475,137 63,572 --
--------- --------- ---------- ------------- ----------- ------------ ----------
Net assets at end of period $ 771,491 267,470 2,306,413 2,118,654 9,200,242 784,997 590,022
========= ========= ========== ============= =========== ============ ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
TRUST
----------------------------------------------------------
MID-CAP QUALITY SMALL CAP LARGE CAP
VALUE BOND STOCK STOCK
----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (5,560) 29,095 (95,891) (176,715)
Net realized gain (loss) (4,501) 10,751 280,526 352,389
Change in unrealized appreciation
during the year 11,980 212,005 (768,604) 4,086,693
----------- ------------- ------------ --------------
Net increase (decrease) in
net assets from operations 1,919 251,851 (583,969) 4,262,367
----------- ------------- ------------ --------------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- --
Payments received from contract
owners 593,364 828,237 664,035 1,433,747
Transfers between sub-accounts
(including fixed account), net 210,332 2,485,711 2,154,230 6,772,257
Transfers for contract benefits
and terminations (2,706) (213,576) (458,393) (691,973)
----------- ------------- ------------ --------------
Net increase (decrease) in
net assets from contract
transactions 800,990 3,100,372 2,359,872 7,514,031
----------- ------------- ------------ --------------
Net increase (decrease)
in net assets 802,909 3,352,223 1,775,903 11,776,398
Net assets at beginning of period 89,088 2,617,482 6,578,183 10,224,247
----------- ------------- ------------ --------------
Net assets at end of period $ 891,997 5,969,705 8,354,086 22,000,645
=========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
TRUST LORD ABBETT GACC
--------------------------------- --------------- -------------
GROWTH
SELECT INTERNATIONAL AND MONEY
EQUITY EQUITY INCOME MARKET
-------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (152,047) 34,256 110,598 (6,981)
Net realized gain (loss) 999,481 25,322 1,847,461 18,462
Change in unrealized appreciation
during the year 1,878,770 827,333 1,268,706 8,306
-------------- ---------------- --------------- -------------
Net increase (decrease) in
net assets from operations 2,726,204 886,911 3,226,765 19,787
-------------- ---------------- --------------- -------------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- --
Payments received from contract
owners 1,284,829 470,560 2,282,528 1,894,032
Transfers between sub-accounts
(including fixed account), net 4,674,806 2,712,309 8,659,268 (358,103)
Transfers for contract benefits
and terminations (646,951) (375,560) (1,472,455) (266,514)
-------------- ---------------- --------------- -------------
Net increase (decrease) in
net assets from contract
transactions 5,312,684 2,807,309 9,469,341 1,269,415
-------------- ---------------- --------------- -------------
Net increase (decrease)
in net assets 8,038,888 3,694,220 12,696,106 1,289,202
Net assets at beginning of period 9,845,185 6,351,392 24,401,662 150,303
-------------- ---------------- --------------- -------------
Net assets at end of period $ 17,884,073 10,045,612 37,097,768 1,439,505
============== ================ =============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
RUSSELL AIM
------------------------------------------------ -------------------------
MULTI-STYLE AGGRESSIVE CORE CAPITAL
EQUITY EQUITY NON-US BOND VALUE APPRECIATION
------------ ------------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (2,142) (365) (884) 1,981 (29) (179)
Net realized gain (loss) 202 (45) (78) 2 (47) 1,256
Change in unrealized appreciation
during the year 37,385 (1,753) 1,844 3,543 1,376 5,386
------------ ------------- --------- --------- -------- ---------------
Net increase (decrease) in
net assets from operations 35,445 (2,163) 882 5,526 1,300 6,463
------------ ------------- --------- --------- -------- ---------------
Contract transactions:
Cova payments 100 100 100 100 100 100
Cova transfers (127) (95) (93) (103) -- --
Payments received from contract
owners 550,062 80,621 187,582 578,539 33,651 57,937
Transfers between sub-accounts
(including fixed account), net 31,554 8,298 15,688 70,898 2,043 1,227
Transfers for contract benefits
and terminations (561) (236) 27 (1,162) 365 5
------------ ------------- --------- --------- -------- ---------------
Net increase (decrease) in
net assets from contract
transactions 581,028 88,688 203,304 648,272 36,159 59,269
------------ ------------- --------- --------- -------- ---------------
Net increase (decrease)
in net assets 616,473 86,525 204,186 653,798 37,459 65,732
Net assets at beginning of period -- -- -- -- -- --
------------ ----------- --------- --------- -------- ---------------
Net assets at end of period $ 616,473 86,525 204,186 653,798 37,459 65,732
============ ============= ========= ========= ======== ===============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
AIM ALLIANCE LIBERTY
----------------- ----------------------------- -----------
INTERNATIONAL PREMIER REAL ESTATE NEWPORT
EQUITY GROWTH INVESTMENT TIGER
----------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 187 (4,379) (540) 355
Net realized gain (loss) (5,943) (6,634) (2,767) 4
Change in unrealized appreciation
during the year (6,224) 118,514 (17,191) 2,743
----------------- ----------- --------------- -----------
Net increase (decrease) in
net assets from operations (11,980) 107,501 (20,498) 3,102
----------------- ----------- --------------- -----------
Contract transactions:
Cova payments 100 100 100 100
Cova transfers (100) (138) (81) --
Payments received from contract
owners 184,408 794,977 178,563 19,040
Transfers between sub-accounts
(including fixed account), net 3,073 20,139 19,454 --
Transfers for contract benefits
and terminations (1,288) (3,403) (913) --
----------------- ----------- --------------- -----------
Net increase (decrease) in
net assets from contract
transactions 186,193 811,675 197,123 19,140
----------------- ----------- --------------- -----------
Net increase (decrease)
in net assets 174,213 919,176 176,625 22,242
Net assets at beginning of period -- -- -- --
----------------- ----------- --------------- -----------
Net assets at end of period $ 174,213 919,176 176,625 22,242
================= =========== =============== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
GOLDMAN SACHS KEMPER
------------------------------------------ ----------------------------
GROWTH
AND INTERNATIONAL GLOBAL DREMAN HIGH SMALL CAP
INCOME EQUITY INCOME RETURN EQUITY GROWTH
------------ -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 125 (1,051) 1,029 -- (265)
Net realized gain (loss) (4,119) 1,202 330 -- 191
Change in unrealized appreciation
during the year (11,213) 2,720 (187) 5 3,989
------------ -------------- ---------- ------------- ------------
Net increase (decrease) in
net assets from operations (15,207) 2,871 1,172 5 3,915
------------ -------------- ---------- ------------- ------------
Contract transactions:
Cova payments 100 100 100 100 100
Cova transfers (97) (86) -- -- (108)
Payments received from contract
owners 128,899 154,193 31,200 -- 35,374
Transfers between sub-accounts
(including fixed account), net 16,047 23,975 -- -- 5,487
Transfers for contract benefits
and terminations 175 -- -- -- (11)
------------ -------------- ---------- ------------- ------------
Net increase (decrease) in
net assets from contract
transactions 145,124 178,182 31,300 100 40,842
------------ -------------- ---------- ------------- ------------
Net increase (decrease)
in net assets 129,917 181,053 32,472 105 44,757
Net assets at beginning of period -- -- -- -- --
------------ -------------- ---------- ------------- ------------
Net assets at end of period $ 129,917 181,053 32,472 105 44,757
============ ============== ========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
KEMPER MFS
------------------------- ----------------------------------------
GROWTH
SMALL CAP GOVERNMENT WITH EMERGING
VALUE SECURITIES BOND RESEARCH INCOME GROWTH
--------- ------------- ------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (889) (42) -- (1,500) (4,815) (3,541)
Net realized gain (loss) (6,422) -- -- 145 (4,972) (2,706)
Change in unrealized appreciation
during the year (13,980) 206 5 24,572 54,989 87,574
--------- ------------- ------ --------- --------- ----------
Net increase (decrease) in
net assets from operations (21,291) 164 5 23,217 45,202 81,327
--------- ------------- ------ --------- --------- ----------
Contract transactions:
Cova payments 100 100 100 100 100 100
Cova transfers (78) -- -- (123) (120) (126)
Payments received from contract
owners 184,026 23,032 -- 252,002 692,249 527,982
Transfers between sub-accounts
(including fixed account), net (15,831) 3,490 -- 42,134 48,220 24,659
Transfers for contract benefits
and terminations (983) -- -- (746) (3,293) (2,059)
--------- ------------- ------ --------- --------- ----------
Net increase (decrease) in
net assets from contract
transactions 167,234 26,622 100 293,367 737,156 550,556
--------- ------------- ------ --------- --------- ----------
Net increase (decrease)
in net assets 145,943 26,786 105 316,584 782,358 631,883
Net assets at beginning of period -- -- -- -- -- --
--------- ------------- ------ --------- --------- ----------
Net assets at end of period $ 145,943 26,786 105 316,584 782,358 631,883
========= ============= ====== ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
MFS OPPENHEIMER
------------------------------------------- ---------------------
F&C EMERGING GROWTH
MARKETS HIGH WORLD AND
EQUITY INCOME GOVERNMENTS GROWTH INCOME
---------------- ---------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 124 (541) (8) (286) (748)
Net realized gain (loss) (10,435) (1,086) 1 1,028 (157)
Change in unrealized appreciation
during the year (7,685) (2,625) 189 9,357 (771)
---------------- ---------- --------------- --------- ---------
Net increase (decrease) in
net assets from operations (17,996) (4,252) 182 10,099 (1,676)
---------------- ---------- --------------- --------- ---------
Contract transactions:
Cova payments 100 100 100 100 100
Cova transfers (65) (93) -- -- (89)
Payments received from contract
owners 71,508 125,820 3,193 42,486 144,121
Transfers between sub-accounts
(including fixed account), net (25,211) 8,401 625 9,440 11,637
Transfers for contract benefits
and terminations (471) (962) -- (455) (209)
---------------- ---------- --------------- --------- ---------
Net increase (decrease) in
net assets from contract
transactions 45,861 133,266 3,918 51,571 155,560
---------------- ---------- --------------- --------- ---------
Net increase (decrease)
in net assets 27,865 129,014 4,100 61,670 153,884
Net assets at beginning of period -- -- -- -- --
---------------- ---------- --------------- --------- ---------
Net assets at end of period $ 27,865 129,014 4,100 61,670 153,884
================ ========== =============== ========= =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
OPPENHEIMER PUTNAM
----------------------------------------- ----------------------
GROWTH
HIGH STRATEGIC AND NEW
INCOME BOND BOND INCOME VALUE
----------- ------------ -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (559) (2,628) (166) (5,191) 101
Net realized gain (loss) (139) 238 (4) (4,815) 79
Change in unrealized appreciation
during the year (2,071) 12,503 (129) 44,649 860
----------- ------------ -------------- ----------- ---------
Net increase (decrease) in
net assets from operations (2,769) 10,113 (299) 34,643 1,040
----------- ------------ -------------- ----------- ---------
Contract transactions:
Cova payments 100 100 100 100 100
Cova transfers (93) (105) -- (113) --
Payments received from contract
owners 93,367 407,896 22,655 787,874 4,669
Transfers between sub-accounts
(including fixed account), net 14,033 73,891 4,823 94,763 17,311
Transfers for contract benefits
and terminations (274) (2,545) -- (3,713) (1)
----------- ------------ -------------- ----------- ---------
Net increase (decrease) in
net assets from contract
transactions 107,133 479,237 27,578 878,911 22,079
----------- ------------ -------------- ----------- ---------
Net increase (decrease)
in net assets 104,364 489,350 27,279 913,554 23,119
Net assets at beginning of period -- -- -- -- --
----------- ------------ ---------- ----------- ---------
Net assets at end of period $ 104,364 489,350 27,279 913,554 23,119
=========== ============ ============== =========== =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
PUTNAM TEMPLETON
---------------------------------------- ----------------------------------------
INTERNATIONAL MUTUAL
INTERNATIONAL NEW DEVELOPING SHARES
VISTA GROWTH OPPORTUNITIES INTERNATIONAL MARKETS INVESTMENTS
--------- ------------ -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (436) (1,984) (266) (139) (93) (3)
Net realized gain (loss) (12) (8,326) (27) 9 8 --
Change in unrealized appreciation
during the year 7,815 (2,297) 299 4,711 3,570 263
--------- ------------ -------------- ------------- ------------ ----------
Net increase (decrease) in
net assets from operations 7,367 (12,607) 6 4,581 3,485 260
--------- ------------ -------------- ------------- ------------ ----------
Contract transactions:
Cova payments 100 100 100 100 100 100
Cova transfers (109) (127) (109) -- (133) --
Payments received from contract
owners 46,531 674,756 50,740 54,930 25,540 8,079
Transfers between sub-accounts
(including fixed account), net 26,352 5,031 3,797 1,153 24,157 666
Transfers for contract benefits
and terminations 12 (3,667) 92 (133) -- --
--------- ------------ -------------- ------------- ------------ ----------
Net increase (decrease) in
net assets from contract
transactions 72,886 676,093 54,620 56,050 49,664 8,845
--------- ------------ -------------- ------------- ------------ ----------
Net increase (decrease)
in net assets 80,253 663,486 54,626 60,631 53,149 9,105
Net assets at beginning of period -- -- -- -- -- --
--------- ------------ -------------- ------------- ------------ ----------
Net assets at end of period $ 80,253 663,486 54,626 60,631 53,149 9,105
========= ============ ============== ============= ============ ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
Fidelity
----------------------------------------------------------
Growth Growth & Equity-
Growth Contrafund Opportunities Income Income Total
------- ------------- --------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (17) (1) - (58) (12) (197,302)
Net realized gain (loss) - - - - - 4,192,008
Change in unrealized appreciation
during the year 1,118 99 19 3,784 635 8,280,979
------- ----------- -------------- --------- -------- -------------
Net increase (decrease) in
net assets from operations 1,101 98 19 3,726 623 12,275,685
------- ----------- -------------- --------- -------- -------------
Contract transactions:
Cova payments 100 100 100 100 100 4,200
Cova transfers - - - - - (2,511)
Payments received from contract
owners 990 777 - 3,746 2,968 18,342,571
Transfers between sub-accounts
(including fixed account), net 4,427 - 1,226 17,428 4,427 32,538,428
Transfers for contract benefits
and terminations 5 - - 524 121 (4,604,519)
------- ----------- -------------- --------- -------- -------------
Net increase (decrease) in
net assets from contract
transactions 5,522 877 1,326 21,798 7,616 46,278,169
------- ----------- -------------- --------- -------- -------------
Net increase (decrease)
in net assets 6,623 975 1,345 25,524 8,239 58,553,854
Net assets at beginning of period - - - - - 69,315,373
------- ----------- -------------- --------- -------- -------------
Net assets at end of period $ 6,623 975 1,345 25,524 8,239 127,869,227
======= =========== ============== ========= ======== =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1997
TRUST
---------------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND DEVELOPING
INCOME MARKET INDEX INCOME DEBENTURE GROWTH
--------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ 21,228 33,229 1,305 917 120,111 (65)
Net realized gain (loss) (265) -- 24,202 17,990 6,426 (15)
Change in unrealized appreciation
during the year 14,231 -- 311,158 213,640 154,943 404
--------- ----------- ----------- ----------- ----------- ------------
Net increase in net
assets from operations 35,194 33,229 336,665 232,547 281,480 324
--------- ----------- ----------- ----------- ----------- ------------
Contract transactions:
Payments received from contract
owners 5,588 5,425,271 21,617 145,535 986,444 15,000
Transfers between sub-accounts
(including fixed account), net 437,402 (5,336,710) 444,691 627,885 2,836,964 48,082
Transfers for contract benefits
and terminations (46,134) (73,008) (25,416) (12,290) (76,410) 166
--------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets
from contract transactions 396,856 15,553 440,892 761,130 3,746,998 63,248
--------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets 432,050 48,782 777,557 993,677 4,028,478 63,572
Net assets at beginning of period 298,944 321,874 959,962 686,276 446,659 --
--------- ----------- ----------- ----------- ----------- ------------
Net assets at end of period $ 730,994 370,656 1,737,519 1,679,953 4,475,137 63,572
========= =========== =========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1997
-----------------------------------------------------------------------------
MID-CAP QUALITY SMALL CAP LARGE CAP SELECT
VALUE BOND STOCK STOCK EQUITY
----------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ (17) 76,826 (29,973) (14,663) (32,802)
Net realized gain (loss) 50 12,743 19,329 566,223 50,103
Change in unrealized appreciation
during the year 2,536 39,803 731,752 574,012 1,183,581
----------- ------------- ------------- -------------- -------------
Net increase in net
assets from operations 2,569 129,372 721,108 1,125,572 1,200,882
----------- ------------- ------------- -------------- -------------
Contract transactions:
Payments received from contract
owners 32,249 283,752 965,134 1,764,924 1,672,740
Transfers between sub-accounts
(including fixed account), net 54,202 1,563,687 3,732,024 6,016,134 5,100,198
Transfers for contract benefits
and terminations 68 (28,465) (119,268) (113,206) (139,188)
----------- ------------- ------------- -------------- -------------
Net increase in net assets
from contract transactions 86,519 1,818,974 4,577,890 7,667,852 6,633,750
----------- ------------- ------------- -------------- -------------
Net increase in net assets 89,088 1,948,346 5,298,998 8,793,424 7,834,632
Net assets at beginning of period -- 669,136 1,279,185 1,430,823 2,010,553
----------- ------------- ------------- -------------- -------------
Net assets at end of period $ 89,088 2,617,482 6,578,183 10,224,247 9,845,185
=========== ============= ============= ============== =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1997
TRUST LORD ABBETT GACC
---------------- ---------------- -----------
GROWTH
INTERNATIONAL AND MONEY
EQUITY INCOME MARKET TOTAL
---------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ (1,201) 165,930 (119) 340,706
Net realized gain (loss) 6,340 1,595,470 74 2,298,670
Change in unrealized appreciation
during the year 24,972 1,139,321 440 4,390,793
---------------- ---------------- ----------- ---------------
Net increase in net
assets from operations 30,111 2,900,721 395 7,030,169
---------------- ---------------- ----------- ---------------
Contract transactions:
Payments received from contract
owners 1,161,490 1,887,670 178,947 14,546,361
Transfers between sub-accounts
(including fixed account), net 3,891,923 10,712,632 (29,039) 30,100,075
Transfers for contract benefits
and terminations (92,391) (515,567) -- (1,241,109)
---------------- ---------------- ----------- ---------------
Net increase in net assets
from contract transactions 4,961,022 12,084,735 149,908 43,405,327
---------------- ---------------- ----------- ---------------
Net increase in net assets 4,991,133 14,985,456 150,303 50,435,496
Net assets at beginning of period 1,360,259 9,416,206 -- 18,879,877
---------------- ---------------- ----------- ---------------
Net assets at end of period $ 6,351,392 24,401,662 150,303 69,315,373
================ ================ =========== ===============
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(1) ORGANIZATION
Cova Variable Annuity Account Five (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by Cova Financial Life Insurance Company (Cova)
and exists in accordance with the regulations of the California
Department of Insurance. The Separate Account is a funding vehicle for
variable annuity contracts issued by Cova.
<TABLE>
<CAPTION>
The Separate Account is divided into sub-accounts with the assets of
each sub-account invested in the corresponding portfolios of the
following investment companies:
<S> <C>
Cova Series Trust (Trust) 13 portfolios
Lord Abbett Series Fund, Inc. (Lord Abbett) 1 portfolio
General American Capital Company (GACC) 1 portfolio
Russell Insurance Funds (Russell) 4 portfolios
AIM Variable Insurance Funds, Inc. (AIM) 3 portfolios
Alliance Variable Products Series Funds, Inc. (Alliance) 2 portfolios
Liberty Variable Investment Trust (Liberty) 1 portfolio
Goldman Sachs Variable Insurance Trust (Goldman Sachs) 3 portfolios
Investors Fund Series (Kemper) 4 portfolios
MFS Variable Insurance Trust (MFS) 7 portfolios
Oppenheimer Variable Account Funds (Oppenheimer) 5 portfolios
Putnam Variable Trust (Putnam) 5 portfolios
Templeton Variable Products Series Fund (Templeton) 3 portfolios
Variable Insurance Products Fund, Fund II, and Fund III (Fidelity) 5 portfolios
</TABLE>
Each investment company is a diversified, open-end, management
investment company registered under the Investment Company Act of 1940
as amended. Not all sub-accounts are available for investment depending
upon the terms of the variable annuity contracts offered for sale by
Cova.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the
sale of portfolio shares owned by the sub-accounts. Income from
dividends and gains from realized gain distributions are recorded
on the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in
additional shares of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment
income and realized capital gains are deemed to pass through to
the Separate Account. As a result, GACC does not distribute
dividends and realized gains. During December of each year, the
accumulated net investment income and realized capital gains of
the GACC Money Market Fund are allocated to the Separate Account
by increasing the cost basis and recognizing a capital gain in the
Separate Account.
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the Federal
income tax return of Cova, which is taxed as a Life Insurance
Company under the provisions of the Internal Revenue Code (IRC).
Under current IRC provisions, Cova believes it will be treated as
the owner of the Separate Account assets for Federal income tax
purposes and does not expect to incur Federal income taxes on the
earnings of the Separate Account to the extent the earnings are
credited to the variable annuity contracts. Based on this, no
charge is being made currently to the Separate Account for Federal
income taxes. A charge may be made in future years for any Federal
income taxes that would be attributable to the contracts.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of the Separate Account
equivalent to an annual rate of 1.25% for the assumption of mortality
and expense risks and 0.15% for administrative expenses. The mortality
risks assumed by Cova arise from its contractual obligation to make
annuity payments after the annuity date for the life of the annuitant
and to waive the withdrawal fee in the event of the death of the
contract owner. The administrative fees cover the cost of establishing
and maintaining the variable annuity contracts and the Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at
the time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee is imposed on withdrawals of contract values
attributable to purchase payments within five years after receipt and is
equal to 5% of the purchase payment withdrawn. After the first contract
anniversary, provided the contract value exceeds $5,000, the contract
owner may make one withdrawal each contract year of up to 10% of the
aggregate purchase payments (on deposit for more than one year) without
incurring a surrender fee. In 1998, surrender fees of $60,272 were
deducted from the contract values in the Separate Account.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their policy
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the sub-accounts and the fixed
rate account to which the contract value is allocated.
Subject to certain restrictions, the contract owner may transfer all or
a part of the accumulated value of the contract among the available
sub-accounts of the Separate Account and the fixed rate account offered
by Cova. If more than 12 transfers have been made in the contract year,
a transfer fee of $25 per transfer or, if less, 2% of amount
transferred, will be deducted from the contract account value. Transfers
made in the Dollar Cost Averaging program are not subject to the
transfer fee.
In 1998, contract maintenance and transfer fees of $27,322 were deducted
from the contract values in the Separate Account.
Cova currently advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes from the contract value
at the time annuity payments begin. Cova reserves the right to deduct
premium taxes when incurred.
(5) SUBSEQUENT EVENT
On January 8, 1999, the four sub-accounts investing in the Trust
portfolios managed by Van Kampen American Capital Advisory Corp. (VKAC)
- Quality Income, Money Market, Stock Index, and VKAC Growth and Income
portfolios ceased operations and their assets were transferred to one
new and three existing sub-accounts in accordance with the substitution
order issued by the Securities and Exchange Commission.
On January 8, 1999, the Lord Abbett Growth and Income sub-account ceased
operations and its assets were transferred to the Trust Lord Abbett
Growth and Income sub-account which commenced operations on January 8,
1999. The Trust Lord Abbett Growth and Income sub-account invests in the
Trust Lord Abbett Growth and Income Portfolio which commenced operations
on January 8, 1999. The Trust Lord Abbett Growth and Income Portfolio is
managed by Lord Abbett who also manages the Lord Abbett Growth and
Income Portfolio.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
COMMENCED ACCUMULATION UNIT VALUE
---------------------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 $ 17.539867 16.716340 15.540286 15.331980
Trust Money Market* 06/19/95 12.882157 12.375227 11.879722 11.425132
Trust Stock Index* 07/20/95 31.522519 24.963612 19.036955 15.773909
Trust VKAC Growth and Income* 07/19/95 24.396679 20.978338 17.008156 14.608910
Trust Bond Debenture 05/20/96 13.496510 12.881799 11.294929 --
Trust Developing Growth 11/07/97 11.067868 10.527555 -- --
Trust Large Cap Research 02/17/98 11.825638 -- -- --
Trust Mid-Cap Value 11/07/97 10.437956 10.467957 -- --
Trust Quality Bond 05/20/96 11.914509 11.155144 10.368767 --
Trust Small Cap Stock 05/15/96 12.582885 13.491493 11.308427 --
Trust Large Cap Stock 05/16/96 19.428505 14.889464 11.334982 --
Trust Select Equity 05/15/96 16.987203 14.053503 10.838053 --
Trust International Equity 05/14/96 12.889314 11.462436 10.967004 --
Lord Abbett Growth and Income* 07/20/95 34.325431 30.837057 25.089540 21.306278
GACC Money Market 12/04/97 11.109949 10.667017 -- --
Russell Multi-Style Equity 12/31/97 12.740123 10.000000 -- --
Russell Aggressive Equity 12/31/97 10.001283 10.000000 -- --
Russell Non-US 12/31/97 11.182808 10.000000 -- --
Russell Core Bond 12/31/97 10.631124 10.000000 -- --
AIM Value 12/31/97 13.075597 10.000000 -- --
AIM Capital Appreciation 12/31/97 11.800084 10.000000 -- --
AIM International Equity 12/31/97 11.418467 10.000000 -- --
Alliance Premier Growth 12/31/97 14.620511 10.000000 -- --
Alliance Real Estate Investment 12/31/97 8.000583 10.000000 -- --
Liberty Newport Tiger 12/31/97 9.278784 10.000000 -- --
Goldman Sachs Growth and Income 03/31/98 9.911702 -- -- --
Goldman Sachs International Equity 03/31/98 11.416783 -- -- --
Goldman Sachs Global Income 03/31/98 10.815310 -- -- --
Kemper Dreman High Return Equity 05/15/98 10.489000 -- -- --
Kemper Small Cap Growth 12/31/97 11.687795 10.000000 -- --
Kemper Small Cap Value 12/31/97 8.770360 10.000000 -- --
Kemper Government Securities 12/31/97 10.634608 10.000000 -- --
MFS Bond 05/15/98 10.509000 -- -- --
MFS Research 12/31/97 12.179142 10.000000 -- --
MFS Growth with Income 12/31/97 12.075079 10.000000 -- --
MFS Emerging Growth 12/31/97 13.244101 10.000000 -- --
MFS / F&C Emerging Markets Equity 12/31/97 6.581757 10.000000 -- --
MFS High Income 12/31/97 9.863111 10.000000 -- --
MFS World Governments 12/31/97 10.663503 10.000000 -- --
Oppenheimer Growth 12/31/97 12.244057 10.000000 -- --
Oppenheimer Growth & Income 12/31/97 10.340279 10.000000 -- --
Oppenheimer High Income 12/31/97 9.907918 10.000000 -- --
Oppenheimer Bond 12/31/97 10.551643 10.000000 -- --
Oppenheimer Strategic Bond 12/31/97 10.164797 10.000000 -- --
Putnam Growth and Income 12/31/97 11.403244 10.000000 -- --
Putnam New Value 12/31/97 10.498075 10.000000 -- --
Putnam Vista 12/31/97 11.804097 10.000000 -- --
Putnam International Growth 12/31/97 11.729428 10.000000 -- --
Putnam International New Opportunities 12/31/97 11.420772 10.000000 -- --
Templeton International 09/21/98 9.149729 -- -- --
Templeton Developing Markets 09/21/98 7.557531 -- -- --
Templeton Mutual Shares Investments 09/21/98 9.646506 -- -- --
Fidelity VIP Growth 02/17/98 13.115493 -- -- --
Fidelity VIP II Contrafund 02/17/98 12.429344 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 11.814000 -- -- --
Fidelity VIP III Growth & Income 02/17/98 12.259160 -- -- --
Fidelity VIP Equity-Income 02/17/98 10.674283 -- -- --
=========== =========== ============ ============
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
COMMENCED NET ASSETS (IN 000'S)
------------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 $ 771 731 299 133
Trust Money Market* 06/19/95 267 371 322 326
Trust Stock Index* 07/20/95 2,306 1,738 960 211
Trust VKAC Growth and Income* 07/19/95 2,119 1,680 686 105
Trust Bond Debenture 05/20/96 9,200 4,475 447 --
Trust Developing Growth 11/07/97 785 64 -- --
Trust Large Cap Research 02/17/98 590 -- -- --
Trust Mid-Cap Value 11/07/97 892 89 -- --
Trust Quality Bond 05/20/96 5,970 2,617 669 --
Trust Small Cap Stock 05/15/96 8,354 6,578 1,279 --
Trust Large Cap Stock 05/16/96 22,001 10,224 1,431 --
Trust Select Equity 05/15/96 17,884 9,845 2,011 --
Trust International Equity 05/14/96 10,046 6,351 1,360 --
Lord Abbett Growth and Income* 07/20/95 37,098 24,402 9,416 2,675
GACC Money Market 12/04/97 1,440 150 -- --
Russell Multi-Style Equity 12/31/97 616 -- -- --
Russell Aggressive Equity 12/31/97 87 -- -- --
Russell Non-US 12/31/97 204 -- -- --
Russell Core Bond 12/31/97 654 -- -- --
AIM Value 12/31/97 37 -- -- --
AIM Capital Appreciation 12/31/97 66 -- -- --
AIM International Equity 12/31/97 174 -- -- --
Alliance Premier Growth 12/31/97 919 -- -- --
Alliance Real Estate Investment 12/31/97 177 -- -- --
Liberty Newport Tiger 12/31/97 22 -- -- --
Goldman Sachs Growth and Income 03/31/98 130 -- -- --
Goldman Sachs International Equity 03/31/98 181 -- -- --
Goldman Sachs Global Income 03/31/98 32 -- -- --
Kemper Dreman High Return Equity 05/15/98 -- -- -- --
Kemper Small Cap Growth 12/31/97 45 -- -- --
Kemper Small Cap Value 12/31/97 146 -- -- --
Kemper Government Securities 12/31/97 27 -- -- --
MFS Bond 05/15/98 -- -- -- --
MFS Research 12/31/97 317 -- -- --
MFS Growth with Income 12/31/97 782 -- -- --
MFS Emerging Growth 12/31/97 632 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 28 -- -- --
MFS High Income 12/31/97 129 -- -- --
MFS World Governments 12/31/97 4 -- -- --
Oppenheimer Growth 12/31/97 62 -- -- --
Oppenheimer Growth & Income 12/31/97 154 -- -- --
Oppenheimer High Income 12/31/97 104 -- -- --
Oppenheimer Bond 12/31/97 489 -- -- --
Oppenheimer Strategic Bond 12/31/97 27 -- -- --
Putnam Growth and Income 12/31/97 914 -- -- --
Putnam New Value 12/31/97 23 -- -- --
Putnam Vista 12/31/97 80 -- -- --
Putnam International Growth 12/31/97 663 -- -- --
Putnam International New Opportunities 12/31/97 55 -- -- --
Templeton International 09/21/98 61 -- -- --
Templeton Developing Markets 09/21/98 53 -- -- --
Templeton Mutual Shares Investments 09/21/98 9 -- -- --
Fidelity VIP Growth 02/17/98 7 -- -- --
Fidelity VIP II Contrafund 02/17/98 1 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 1 -- -- --
Fidelity VIP III Growth & Income 02/17/98 26 -- -- --
Fidelity VIP Equity-Income 02/17/98 8 -- -- --
======== ======== ======= =======
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
COMMENCED TOTAL RETURN**
---------------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 4.93 % 7.57 1.36 6.30
Trust Money Market* 06/19/95 4.10 4.17 3.98 2.61
Trust Stock Index* 07/20/95 26.27 31.13 20.69 11.65
Trust VKAC Growth and Income* 07/19/95 16.30 23.34 16.42 11.93
Trust Bond Debenture 05/20/96 4.77 14.05 11.32 --
Trust Developing Growth 11/07/97 5.13 (2.80) -- --
Trust Large Cap Research 02/17/98 9.94 -- -- --
Trust Mid-Cap Value 11/07/97 (.29) 4.17 -- --
Trust Quality Bond 05/20/96 6.81 7.58 4.20 --
Trust Small Cap Stock 05/15/96 (6.74) 19.31 3.69 --
Trust Large Cap Stock 05/16/96 30.49 31.36 11.62 --
Trust Select Equity 05/15/96 20.88 29.67 6.76 --
Trust International Equity 05/14/96 12.45 4.52 8.60 --
Lord Abbett Growth and Income* 07/20/95 11.31 22.91 17.76 9.05
GACC Money Market 12/04/97 4.15 .34 -- --
Russell Multi-Style Equity 12/31/97 27.40 -- -- --
Russell Aggressive Equity 12/31/97 .01 -- -- --
Russell Non-US 12/31/97 11.83 -- -- --
Russell Core Bond 12/31/97 6.31 -- -- --
AIM Value 12/31/97 30.76 -- -- --
AIM Capital Appreciation 12/31/97 18.00 -- -- --
AIM International Equity 12/31/97 14.19 -- -- --
Alliance Premier Growth 12/31/97 46.21 -- -- --
Alliance Real Estate Investment 12/31/97 (19.99) -- -- --
Liberty Newport Tiger 12/31/97 (7.21) -- -- --
Goldman Sachs Growth and Income 03/31/98 (11.60) -- -- --
Goldman Sachs International Equity 03/31/98 1.94 -- -- --
Goldman Sachs Global Income 03/31/98 6.53 -- -- --
Kemper Dreman High Return Equity 05/15/98 4.89 -- -- --
Kemper Small Cap Growth 12/31/97 16.88 -- -- --
Kemper Small Cap Value 12/31/97 (12.30) -- -- --
Kemper Government Securities 12/31/97 6.35 -- -- --
MFS Bond 05/15/98 5.09 -- -- --
MFS Research 12/31/97 21.79 -- -- --
MFS Growth with Income 12/31/97 20.75 -- -- --
MFS Emerging Growth 12/31/97 32.44 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 (34.18) -- -- --
MFS High Income 12/31/97 (1.37) -- -- --
MFS World Governments 12/31/97 6.63 -- -- --
Oppenheimer Growth 12/31/97 22.44 -- -- --
Oppenheimer Growth & Income 12/31/97 3.40 -- -- --
Oppenheimer High Income 12/31/97 (0.92) -- -- --
Oppenheimer Bond 12/31/97 5.52 -- -- --
Oppenheimer Strategic Bond 12/31/97 1.65 -- -- --
Putnam Growth and Income 12/31/97 14.03 -- -- --
Putnam New Value 12/31/97 4.98 -- -- --
Putnam Vista 12/31/97 18.04 -- -- --
Putnam International Growth 12/31/97 17.29 -- -- --
Putnam International New Opportunities 12/31/97 14.21 -- -- --
Templeton International 09/21/98 15.92 -- -- --
Templeton Developing Markets 09/21/98 33.87 -- -- --
Templeton Mutual Shares Investments 09/21/98 11.61 -- -- --
Fidelity VIP Growth 02/17/98 31.16 -- -- --
Fidelity VIP II Contrafund 02/17/98 24.29 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 18.14 -- -- --
Fidelity VIP III Growth & Income 02/17/98 22.59 -- -- --
Fidelity VIP Equity-Income 02/17/98 6.74 -- -- --
======= ======= ======= =======
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
SEPARATE ACCOUNT EXPENSES
COMMENCED TO AVERAGE NET ASSETS**
-----------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 1.40 1.40 1.40 1.40
Trust Money Market* 06/19/95 1.40 1.40 1.40 1.40
Trust Stock Index* 07/20/95 1.40 1.40 1.40 1.40
Trust VKAC Growth and Income* 07/19/95 1.40 1.40 1.40 1.40
Trust Bond Debenture 05/20/96 1.40 1.40 1.40 --
Trust Developing Growth 11/07/97 1.40 1.40 -- --
Trust Large Cap Research 02/17/98 1.40 -- -- --
Trust Mid-Cap Value 11/07/97 1.40 1.40 -- --
Trust Quality Bond 05/20/96 1.40 1.40 1.40 --
Trust Small Cap Stock 05/15/96 1.40 1.40 1.40 --
Trust Large Cap Stock 05/16/96 1.40 1.40 1.40 --
Trust Select Equity 05/15/96 1.40 1.40 1.40 --
Trust International Equity 05/14/96 1.40 1.40 1.40 --
Lord Abbett Growth and Income* 07/20/95 1.40 1.40 1.40 1.40
GACC Money Market 12/04/97 1.40 1.40 -- --
Russell Multi-Style Equity 12/31/97 1.40 -- -- --
Russell Aggressive Equity 12/31/97 1.40 -- -- --
Russell Non-US 12/31/97 1.40 -- -- --
Russell Core Bond 12/31/97 1.40 -- -- --
AIM Value 12/31/97 1.40 -- -- --
AIM Capital Appreciation 12/31/97 1.40 -- -- --
AIM International Equity 12/31/97 1.40 -- -- --
Alliance Premier Growth 12/31/97 1.40 -- -- --
Alliance Real Estate Investment 12/31/97 1.40 -- -- --
Liberty Newport Tiger 12/31/97 1.39 -- -- --
Goldman Sachs Growth and Income 03/31/98 1.40 -- -- --
Goldman Sachs International Equity 03/31/98 1.40 -- -- --
Goldman Sachs Global Income 03/31/98 1.40 -- -- --
Kemper Dreman High Return Equity 05/15/98 .55 -- -- --
Kemper Small Cap Growth 12/31/97 1.40 -- -- --
Kemper Small Cap Value 12/31/97 1.40 -- -- --
Kemper Government Securities 12/31/97 1.38 -- -- --
MFS Bond 05/15/98 .52 -- -- --
MFS Research 12/31/97 1.40 -- -- --
MFS Growth with Income 12/31/97 1.40 -- -- --
MFS Emerging Growth 12/31/97 1.40 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 1.40 -- -- --
MFS High Income 12/31/97 1.40 -- -- --
MFS World Governments 12/31/97 1.37 -- -- --
Oppenheimer Growth 12/31/97 1.40 -- -- --
Oppenheimer Growth & Income 12/31/97 1.40 -- -- --
Oppenheimer High Income 12/31/97 1.40 -- -- --
Oppenheimer Bond 12/31/97 1.40 -- -- --
Oppenheimer Strategic Bond 12/31/97 1.40 -- -- --
Putnam Growth and Income 12/31/97 1.40 -- -- --
Putnam New Value 12/31/97 1.40 -- -- --
Putnam Vista 12/31/97 1.40 -- -- --
Putnam International Growth 12/31/97 1.40 -- -- --
Putnam International New Opportunities 12/31/97 1.40 -- -- --
Templeton International 09/21/98 1.40 -- -- --
Templeton Developing Markets 09/21/98 1.40 -- -- --
Templeton Mutual Shares Investments 09/21/98 1.32 -- -- --
Fidelity VIP Growth 02/17/98 1.35 -- -- --
Fidelity VIP II Contrafund 02/17/98 .75 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 .52 -- -- --
Fidelity VIP III Growth & Income 02/17/98 1.39 -- -- --
Fidelity VIP Equity-Income 02/17/98 1.34 -- -- --
======= ======= ======= =======
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The table below summarizes the realized gain (loss) on the sale of fund
shares and the change in unrealized appreciation for each sub-account
during the year.
1998 1997
------------- -------------
<S> <C> <C>
Realized gain (loss) on sale of fund shares:
Trust Quality Income:
Aggregate proceeds from sales of fund shares $ 68,255 78,042
Aggregate cost of fund shares redeemed 66,652 78,307
------------- -------------
Realized gain (loss) $ 1,603 (265)
============= =============
Trust Money Market:
Aggregate proceeds from sales of fund shares $ 127,698 5,031,278
Aggregate cost of fund shares redeemed 127,698 5,031,278
------------- -------------
Realized gain (loss) $ -- --
============= =============
Trust Stock Index:
Aggregate proceeds from sales of fund shares $ 135,751 100,563
Aggregate cost of fund shares redeemed 117,530 81,687
------------- -------------
Realized gain (loss) $ 18,221 18,876
============= =============
Trust VKAC Growth and Income:
Aggregate proceeds from sales of fund shares $ 104,628 21,278
Aggregate cost of fund shares redeemed 89,010 18,280
------------- -------------
Realized gain (loss) $ 15,618 2,998
============= =============
Trust Bond Debenture:
Aggregate proceeds from sales of fund shares $ 670,935 109,027
Aggregate cost of fund shares redeemed 657,487 103,526
------------- -------------
Realized gain (loss) $ 13,448 5,501
============= =============
Trust Developing Growth:
Aggregate proceeds from sales of fund shares $ 59,769 15,035
Aggregate cost of fund shares redeemed 61,323 15,050
------------- -------------
Realized gain (loss) $ (1,554) (15)
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Trust Large Cap Research:
Aggregate proceeds from sales of fund shares $ 1,318 --
Aggregate cost of fund shares redeemed 1,293 --
------------- -------------
Realized gain (loss) $ 25 --
============= =============
Trust Mid-Cap Value:
Aggregate proceeds from sales of fund shares $ 121,779 5,141
Aggregate cost of fund shares redeemed 126,280 5,091
------------- -------------
Realized gain (loss) $ (4,501) 50
============= =============
Trust Quality Bond:
Aggregate proceeds from sales of fund shares $ 319,864 149,426
Aggregate cost of fund shares redeemed 309,113 147,472
------------- -------------
Realized gain (loss) $ 10,751 1,954
============= =============
Trust Small Cap Stock:
Aggregate proceeds from sales of fund shares $ 986,220 91,131
Aggregate cost of fund shares redeemed 974,390 81,824
------------- -------------
Realized gain (loss) $ 11,830 9,307
============= =============
Trust Large Cap Stock:
Aggregate proceeds from sales of fund shares $ 1,700,678 121,132
Aggregate cost of fund shares redeemed 1,489,784 106,386
------------- -------------
Realized gain (loss) $ 210,894 14,746
============= =============
Trust Select Equity:
Aggregate proceeds from sales of fund shares $ 1,190,393 150,731
Aggregate cost of fund shares redeemed 1,040,041 130,262
------------- -------------
Realized gain (loss) $ 150,352 20,469
============= =============
Trust International Equity:
Aggregate proceeds from sales of fund shares $ 652,667 185,858
Aggregate cost of fund shares redeemed 629,290 182,972
------------- -------------
Realized gain (loss) $ 23,377 2,886
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Lord Abbett Growth and Income:
Aggregate proceeds from sales of fund shares $ 1,839,293 585,935
Aggregate cost of fund shares redeemed 1,749,075 507,692
------------- -------------
Realized gain (loss) $ 90,218 78,243
============= =============
GACC Money Market:
Aggregate proceeds from sales of fund shares $ 2,053,922 29,146
Aggregate cost of fund shares redeemed 2,035,460 29,072
------------- -------------
Realized gain (loss) $ 18,462 74
============= =============
Russell Multi-Style Equity:
Aggregate proceeds from sales of fund shares $ 7,462 --
Aggregate cost of fund shares redeemed 7,262 --
------------- -------------
Realized gain (loss) $ 200 --
============= =============
Russell Aggressive Equity:
Aggregate proceeds from sales of fund shares $ 416 --
Aggregate cost of fund shares redeemed 468 --
------------- -------------
Realized gain (loss) $ (52) --
============= =============
Russell Non-US:
Aggregate proceeds from sales of fund shares $ 821 --
Aggregate cost of fund shares redeemed 900 --
------------- -------------
Realized gain (loss) $ (79) --
============= =============
Russell Core Bond:
Aggregate proceeds from sales of fund shares $ 1,162 --
Aggregate cost of fund shares redeemed 1,160 --
------------- -------------
Realized gain (loss) $ 2 --
============= =============
AIM Value:
Aggregate proceeds from sales of fund shares $ 26,188 --
Aggregate cost of fund shares redeemed 27,774 --
------------- -------------
Realized gain (loss) $ (1,586) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
AIM Capital Appreciation:
Aggregate proceeds from sales of fund shares $ 236 --
Aggregate cost of fund shares redeemed 258 --
------------- -------------
Realized gain (loss) $ (22) --
============= =============
AIM International Equity:
Aggregate proceeds from sales of fund shares $ 40,160 --
Aggregate cost of fund shares redeemed 46,103 --
------------- -------------
Realized gain (loss) $ (5,943) --
============= =============
Alliance Premier Growth:
Aggregate proceeds from sales of fund shares $ 67,438 --
Aggregate cost of fund shares redeemed 74,072 --
------------- -------------
Realized gain (loss) $ (6,634) --
============= =============
Alliance Real Estate:
Aggregate proceeds from sales of fund shares $ 14,746 --
Aggregate cost of fund shares redeemed 17,733 --
------------- -------------
Realized gain (loss) $ (2,987) --
============= =============
Liberty Newport Tiger:
Aggregate proceeds from sales of fund shares $ 37 --
Aggregate cost of fund shares redeemed 33 --
------------- -------------
Realized gain (loss) $ 4 --
============= =============
Goldman Sachs Growth and Income:
Aggregate proceeds from sales of fund shares $ 23,582 --
Aggregate cost of fund shares redeemed 27,701 --
------------- -------------
Realized gain (loss) $ (4,119) --
============= =============
Goldman Sachs International Equity:
Aggregate proceeds from sales of fund shares $ 999 --
Aggregate cost of fund shares redeemed 1,123 --
------------- -------------
Realized gain (loss) $ (124) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Goldman Sachs Global Income:
Aggregate proceeds from sales of fund shares $ 181 --
Aggregate cost of fund shares redeemed 176 --
------------- -------------
Realized gain (loss) $ 5 --
============= =============
Kemper-Dreman High Return Equity:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Kemper Small Cap Growth:
Aggregate proceeds from sales of fund shares $ 7,419 --
Aggregate cost of fund shares redeemed 7,675 --
------------- -------------
Realized gain (loss) $ (256) --
============= =============
Kemper Small Cap Value:
Aggregate proceeds from sales of fund shares $ 21,781 --
Aggregate cost of fund shares redeemed 28,205 --
------------- -------------
Realized gain (loss) $ (6,424) --
============= =============
Kemper Government Securities:
Aggregate proceeds from sales of fund shares $ 9 --
Aggregate cost of fund shares redeemed 9 --
------------- -------------
Realized gain (loss) $ -- --
============= =============
MFS Bond:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
MFS Research:
Aggregate proceeds from sales of fund shares $ 1,823 --
Aggregate cost of fund shares redeemed 1,914 --
------------- -------------
Realized gain (loss) $ (91) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
MFS Growth with Income:
Aggregate proceeds from sales of fund shares $ 40,854 --
Aggregate cost of fund shares redeemed 45,826 --
------------- -------------
Realized gain (loss) $ (4,972) --
============= =============
MFS Emerging Growth:
Aggregate proceeds from sales of fund shares $ 31,963 --
Aggregate cost of fund shares redeemed 34,744 --
------------- -------------
Realized gain (loss) $ (2,781) --
============= =============
MFS / F&C Emerging Markets Equity:
Aggregate proceeds from sales of fund shares $ 32,580 --
Aggregate cost of fund shares redeemed 43,015 --
------------- -------------
Realized gain (loss) $ (10,435) --
============= =============
MFS High Income:
Aggregate proceeds from sales of fund shares $ 18,006 --
Aggregate cost of fund shares redeemed 19,172 --
------------- -------------
Realized gain (loss) $ (1,166) --
============= =============
MFS World Governments:
Aggregate proceeds from sales of fund shares $ 34 --
Aggregate cost of fund shares redeemed 33 --
------------- -------------
Realized gain (loss) $ 1 --
============= =============
Oppenheimer Growth:
Aggregate proceeds from sales of fund shares $ 731 --
Aggregate cost of fund shares redeemed 756 --
------------- -------------
Realized gain (loss) $ (25) --
============= =============
Oppenheimer Growth & Income:
Aggregate proceeds from sales of fund shares $ 1,004 --
Aggregate cost of fund shares redeemed 1,167 --
------------- -------------
Realized gain (loss) $ (163) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Oppenheimer High Income:
Aggregate proceeds from sales of fund shares $ 2,657 --
Aggregate cost of fund shares redeemed 2,855 --
------------- -------------
Realized gain (loss) $ (198) --
============= =============
Oppenheimer Bond:
Aggregate proceeds from sales of fund shares $ 17,891 --
Aggregate cost of fund shares redeemed 17,655 --
------------- -------------
Realized gain (loss) $ 236 --
============= =============
Oppenheimer Strategic Bond:
Aggregate proceeds from sales of fund shares $ 160 --
Aggregate cost of fund shares redeemed 165 --
------------- -------------
Realized gain (loss) $ (5) --
============= =============
Putnam Growth and Income:
Aggregate proceeds from sales of fund shares $ 45,339 --
Aggregate cost of fund shares redeemed 51,871 --
------------- -------------
Realized gain (loss) $ (6,532) --
============= =============
Putnam New Value:
Aggregate proceeds from sales of fund shares $ 6,880 --
Aggregate cost of fund shares redeemed 6,868 --
------------- -------------
Realized gain (loss) $ 12 --
============= =============
Putnam Vista:
Aggregate proceeds from sales of fund shares $ 376 --
Aggregate cost of fund shares redeemed 388 --
------------- -------------
Realized gain (loss) $ (12) --
============= =============
Putnam International Growth:
Aggregate proceeds from sales of fund shares $ 64,381 --
Aggregate cost of fund shares redeemed 72,707 --
------------- -------------
Realized gain (loss) $ (8,326) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Putnam International New Opportunities:
Aggregate proceeds from sales of fund shares $ 378 --
Aggregate cost of fund shares redeemed 405 --
------------- -------------
Realized gain (loss) $ (27) --
============= =============
Templeton International:
Aggregate proceeds from sales of fund shares $ 133 --
Aggregate cost of fund shares redeemed 124 --
------------- -------------
Realized gain (loss) $ 9 --
============= =============
Templeton Developing Markets:
Aggregate proceeds from sales of fund shares $ 133 --
Aggregate cost of fund shares redeemed 125 --
------------- -------------
Realized gain (loss) $ 8 --
============= =============
Templeton Mutual Shares Investments:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Growth:
Aggregate proceeds from sales of fund shares $ 3 --
Aggregate cost of fund shares redeemed 3 --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Contrafund:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Growth Opportunities:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Fidelity Growth & Income:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Equity-Income:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Unrealized appreciation (depreciation):
Trust Quality Income:
Appreciation (Depreciation), end of period $ 19,209 14,678
Appreciation (Depreciation), beginning of period 14,678 447
------------- -------------
Unrealized appreciation (depreciation) $ 4,531 14,231
============= =============
Trust Money Market:
Appreciation (Depreciation), end of period $ -- --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ -- --
============= =============
Trust Stock Index:
Appreciation (Depreciation), end of period $ 491,713 393,343
Appreciation (Depreciation), beginning of period 393,343 82,185
------------- -------------
Unrealized appreciation (depreciation) $ 98,370 311,158
============= =============
Trust VKAC Growth & Income:
Appreciation (Depreciation), end of period $ 316,285 251,383
Appreciation (Depreciation), beginning of period 251,383 37,743
------------- -------------
Unrealized appreciation (depreciation) $ 64,902 213,640
============= =============
Trust Bond Debenture:
Appreciation (Depreciation), end of period $ 273,399 163,335
Appreciation (Depreciation), beginning of period 163,335 8,392
------------- -------------
Unrealized appreciation (depreciation) $ 110,064 154,943
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Trust Developing Growth:
Appreciation (Depreciation), end of period $ 57,633 404
Appreciation (Depreciation), beginning of period 404 --
------------- -------------
Unrealized appreciation (depreciation) $ 57,229 404
============= =============
Trust Large Cap Research:
Appreciation (Depreciation), end of period $ 52,098 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 52,098 --
============= =============
Trust Mid-Cap Value:
Appreciation (Depreciation), end of period $ 14,516 2,536
Appreciation (Depreciation), beginning of period 2,536 --
------------- -------------
Unrealized appreciation (depreciation) $ 11,980 2,536
============= =============
Trust Quality Bond:
Appreciation (Depreciation), end of period $ 254,121 42,116
Appreciation (Depreciation), beginning of period 42,116 2,313
------------- -------------
Unrealized appreciation (depreciation) $ 212,005 39,803
============= =============
Trust Small Cap Stock:
Appreciation (Depreciation), end of period $ (2,832) 765,772
Appreciation (Depreciation), beginning of period 765,772 34,020
------------- -------------
Unrealized appreciation (depreciation) $ (768,604) 731,752
============= =============
Trust Large Cap Stock:
Appreciation (Depreciation), end of period $ 4,717,561 630,868
Appreciation (Depreciation), beginning of period 630,868 56,856
------------- -------------
Unrealized appreciation (depreciation) $ 4,086,693 574,012
============= =============
Trust Select Equity:
Appreciation (Depreciation), end of period $ 3,163,743 1,284,973
Appreciation (Depreciation), beginning of period 1,284,973 101,392
------------- -------------
Unrealized appreciation (depreciation) $ 1,878,770 1,183,581
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Trust International Equity:
Appreciation (Depreciation), end of period $ 918,988 91,655
Appreciation (Depreciation), beginning of period 91,655 66,683
------------- -------------
Unrealized appreciation (depreciation) $ 827,333 24,972
============= =============
Lord Abbett Growth and Income:
Appreciation (Depreciation), end of period $ 2,782,796 1,514,090
Appreciation (Depreciation), beginning of period 1,514,090 374,769
------------- -------------
Unrealized appreciation (depreciation) $ 1,268,706 1,139,321
============= =============
GACC Money Market:
Appreciation (Depreciation), end of period $ 8,746 440
Appreciation (Depreciation), beginning of period 440 --
------------- -------------
Unrealized appreciation (depreciation) $ 8,306 440
============= =============
Russell Multi-Style Equity:
Appreciation (Depreciation), end of period $ 37,385 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 37,385 --
============= =============
Russell Aggressive Equity:
Appreciation (Depreciation), end of period $ (1,753) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (1,753) --
============= =============
Russell Non-US:
Appreciation (Depreciation), end of period $ 1,844 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 1,844 --
============= =============
Russell Core Bond:
Appreciation (Depreciation), end of period $ 3,543 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,543 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
AIM Value:
Appreciation (Depreciation), end of period $ 1,376 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 1,376 --
============= =============
AIM Capital Appreciation:
Appreciation (Depreciation), end of period $ 5,386 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 5,386 --
============= =============
AIM International Equity:
Appreciation (Depreciation), end of period $ (6,224) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (6,224) --
============= =============
Alliance Premier Growth:
Appreciation (Depreciation), end of period $ 118,514 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 118,514 --
============= =============
Alliance Real Estate Investment:
Appreciation (Depreciation), end of period $ (17,191) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (17,191) --
============= =============
Liberty Newport Tiger:
Appreciation (Depreciation), end of period $ 2,743 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 2,743 --
============= =============
Goldman Sachs Growth and Income:
Appreciation (Depreciation), end of period $ (11,213) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (11,213) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Goldman Sachs International Equity:
Appreciation (Depreciation), end of period $ 2,720 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 2,720 --
============= =============
Goldman Sachs Global Income:
Appreciation (Depreciation), end of period $ (187) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (187) --
============= =============
Kemper-Dreman High Return Equity:
Appreciation (Depreciation), end of period $ 5 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 5 --
============= =============
Kemper Small Cap Growth:
Appreciation (Depreciation), end of period $ 3,989 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,989 --
============= =============
Kemper Small Cap Value:
Appreciation (Depreciation), end of period $ (13,980) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (13,980) --
============= =============
Kemper Government Securities:
Appreciation (Depreciation), end of period $ 206 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 206 --
============= =============
MFS Bond:
Appreciation (Depreciation), end of period $ 5 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 5 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
MFS Research:
Appreciation (Depreciation), end of period $ 24,572 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 24,572 --
============= =============
MFS Growth with Income:
Appreciation (Depreciation), end of period $ 54,989 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 54,989 --
============= =============
MFS Emerging Growth:
Appreciation (Depreciation), end of period $ 87,574 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 87,574 --
============= =============
MFS / F&C Emerging Markets Equity:
Appreciation (Depreciation), end of period $ (7,685) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (7,685) --
============= =============
MFS High Income:
Appreciation (Depreciation), end of period $ (2,625) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (2,625) --
============= =============
MFS World Governments:
Appreciation (Depreciation), end of period $ 189 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 189 --
============= =============
Oppenheimer Growth:
Appreciation (Depreciation), end of period $ 9,357 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 9,357 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Oppenheimer Growth & Income:
Appreciation (Depreciation), end of period $ (771) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (771) --
============= =============
Oppenheimer High Income:
Appreciation (Depreciation), end of period $ (2,071) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (2,071) --
============= =============
Oppenheimer Bond:
Appreciation (Depreciation), end of period $ 12,503 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 12,503 --
============= =============
Oppenheimer Strategic Bond:
Appreciation (Depreciation), end of period $ (129) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (129) --
============= =============
Putnam Growth and Income:
Appreciation (Depreciation), end of period $ 44,649 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 44,649 --
============= =============
Putnam New Value:
Appreciation (Depreciation), end of period $ 860 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 860 --
============= =============
Putnam Vista:
Appreciation (Depreciation), end of period $ 7,815 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 7,815 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Putnam International Growth:
Appreciation (Depreciation), end of period $ (2,297) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (2,297) --
============= =============
Putnam International New Opportunities:
Appreciation (Depreciation), end of period $ 299 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 299 --
============= =============
Templeton International:
Appreciation (Depreciation), end of period $ 4,711 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 4,711 --
============= =============
Templeton Developing Markets:
Appreciation (Depreciation), end of period $ 3,570 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,570 --
============= =============
Templeton Mutual Shares Investments:
Appreciation (Depreciation), end of period $ 263 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 263 --
============= =============
Fidelity Growth:
Appreciation (Depreciation), end of period $ 1,118 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 1,118 --
============= =============
Fidelity Contrafund:
Appreciation (Depreciation), end of period $ 99 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 99 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Fidelity Growth Opportunities:
Appreciation (Depreciation), end of period $ 19 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 19 --
============= =============
Fidelity Growth & Income:
Appreciation (Depreciation), end of period $ 3,784 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,784 --
============= =============
Fidelity Equity-Income:
Appreciation (Depreciation), end of period $ 635 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 635 --
============= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
TRUST
----------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND
INCOME MARKET INDEX INCOME DEBENTURE
----------- ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 19,237 27,094 50,426 40,350 39,545
Contract units purchased 339 449,124 927 8,266 82,546
Contract units transferred, net 27,138 (440,275) 19,361 32,087 231,381
Contract units redeemed (2,985) (5,992) (1,112) (623) (6,072)
----------- ------------ ---------- --------------- -------------
Unit balance at December 31, 1997 43,729 29,951 69,602 80,080 347,400
Contract units purchased -- -- -- 48 83,877
Contract units transferred, net 763 (8,882) 5,039 9,020 280,852
Contract units redeemed (507) (306) (1,474) (2,306) (30,453)
----------- ------------ ---------- --------------- -------------
Unit balance at December 31, 1998 43,985 20,763 73,167 86,842 681,676
=========== ============ ========== =============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
TRUST
-----------------------------------------------------------------------------
DEVELOPING LARGE CAP MID-CAP QUALITY SMALL CAP
GROWTH RESEARCH VALUE BOND STOCK
----------------------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- 64,534 113,118
Contract units purchased 1,385 -- 3,163 26,745 81,088
Contract units transferred, net 4,654 -- 5,347 146,007 302,653
Contract units redeemed -- -- -- (2,643) (9,279)
----------------------------- ----------- ------------- -------------
Unit balance at December 31, 1997 6,039 -- 8,510 234,643 487,580
Contract units purchased 31,649 21,971 56,591 71,796 55,831
Contract units transferred, net 33,339 27,982 20,523 212,881 162,174
Contract units redeemed (101) (59) (167) (18,275) (41,660)
----------------------------- ----------- ------------- -------------
Unit balance at December 31, 1998 70,926 49,894 85,457 501,045 663,925
============================= =========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
LORD ABBETT GACC
--------------------------------------------------- --------------- -------------
GROWTH
LARGE CAP SELECT INTERNATIONAL AND MONEY
STOCK EQUITY EQUITY INCOME MARKET
----------------- -------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 126,231 185,509 124,032 375,304 --
Contract units purchased 131,724 133,310 100,609 66,936 16,814
Contract units transferred, net 436,729 392,067 337,714 366,957 (2,723)
Contract units redeemed (8,007) (10,336) (8,250) (17,887) --
----------------- -------------- ---------------- --------------- -------------
Unit balance at December 31, 1997 686,677 700,550 554,105 791,310 14,091
Contract units purchased 86,312 93,645 39,068 70,041 175,697
Contract units transferred, net 401,442 309,696 218,017 266,026 (33,948)
Contract units redeemed (42,041) (51,094) (31,815) (46,611) (26,271)
----------------- -------------- ---------------- --------------- -------------
Unit balance at December 31, 1998 1,132,390 1,052,797 779,375 1,080,766 129,569
================= ============== ================ =============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
RUSSELL AIM
----------------------------------------------- -------------------------------------
MULTI-STYLE AGGRESSIVE CORE CAPITAL INTERNATIONAL
EQUITY EQUITY NON-US BOND VALUE APPRECIATION EQUITY
------------ ------------ --------- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- -- --
Contract units purchased -- -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- -- --
------------ ------------ --------- --------- -------- --------------- ------------
Unit balance at December 31, 1997 -- -- -- -- -- -- --
Contract units purchased 45,702 7,795 16,824 54,877 2,811 5,456 15,482
Contract units transferred, net 2,780 887 1,475 6,720 44 104 (97)
Contract units redeemed (94) (31) (40) (99) -- -- (128)
------------ ------------ --------- --------- -------- --------------- ------------
Unit balance at December 31, 1998 48,388 8,651 18,259 61,498 2,855 5,560 15,257
============ ============ ========= ========= ======== =============== ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
ALLIANCE LIBERTY GOLDMAN SACHS
----------------------------- --------- -------------------------------------------
GROWTH
PREMIER REAL ESTATE NEWPORT AND INTERNATIONAL GLOBAL
GROWTH INVESTMENT TIGER INCOME EQUITY INCOME
------------ -------------- --------- ----------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
------------ -------------- --------- ----------- ---------------- ----------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 61,989 20,016 2,387 11,978 13,558 2,992
Contract units transferred, net 1,056 2,144 -- 1,129 2,301 --
Contract units redeemed (176) (83) -- -- -- --
------------ -------------- --------- ----------- ---------------- ----------
Unit balance at December 31, 1998 62,869 22,077 2,387 13,107 15,859 2,992
============ ============== ========= =========== ================ ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
KEMPER
---------------------------------
DREMAN HIGH SMALL CAP
RETURN EQUITY GROWTH
----------------- -------------
<S> <C> <C>
Unit balance at December 31, 1996 -- --
Contract units purchased -- --
Contract units transferred, net -- --
Contract units redeemed -- --
----------------- -------------
Unit balance at December 31, 1997 -- --
Contract units purchased -- 3,287
Contract units transferred, net -- 542
Contract units redeemed -- --
----------------- -------------
Unit balance at December 31, 1998 -- 3,829
================= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
KEMPER MFS
---------------------------- ----------------------------------------------------
GROWTH
SMALL CAP GOVERNMENT WITH EMERGING
VALUE SECURITIES BOND RESEARCH INCOME GROWTH
---------- --------------- ------ ----------- ------------------------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
---------- --------------- ------ ----------- ------------------------------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 18,879 2,180 -- 22,166 60,871 45,740
Contract units transferred, net (2,152) 329 -- 3,870 4,170 2,112
Contract units redeemed (86) -- -- (42) (250) (142)
---------- --------------- ------ ----------- ------------------------------
Unit balance at December 31, 1998 16,641 2,509 -- 25,994 64,791 47,710
========== =============== ====== =========== ==============================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
MFS OPPENHEIMER
----------------------------------------------------- ------------------------------------
F&C EMERGING GROWTH
MARKETS HIGH WORLD AND HIGH
EQUITY INCOME GOVERNMENTS GROWTH INCOME INCOME
-------------------- ----------- ------------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
-------------------- ----------- ------------------ ---------- ----------- -----------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 8,277 12,308 316 4,131 13,701 9,108
Contract units transferred, net (3,990) 826 59 938 1,202 1,436
Contract units redeemed (53) (54) -- (42) (21) (11)
-------------------- ----------- ------------------------------ ----------- -----------
Unit balance at December 31, 1998 4,234 13,080 375 5,027 14,882 10,533
==================== =========== ================== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
OPPENHEIMER PUTNAM
------------------------ -----------------------
GROWTH
STRATEGIC AND NEW
BOND BOND INCOME VALUE
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------- ----------- ----------- ----------
Unit balance at December 31, 1997 -- -- -- --
Contract units purchased 39,444 2,196 72,178 487
Contract units transferred, net 7,160 478 8,219 1,705
Contract units redeemed (227) -- (283) --
----------- ----------- ----------- ----------
Unit balance at December 31, 1998 46,377 2,674 80,114 2,192
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
PUTNAM TEMPLETON
----------------------------- ---------------------------------------------------------
INTERNATIONAL
INTERNATIONAL NEW DEVELOPING
VISTA GROWTH OPPORTUNITIES INTERNATIONAL MARKETS
---------- ---------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
---------- ---------------- ----------------------------------- ----------------
Unit balance at December 31, 1997 -- -- -- -- --
Contract units purchased 4,298 56,707 4,416 6,502 3,871
Contract units transferred, net 2,501 107 367 126 3,162
Contract units redeemed -- (248) -- (15) --
---------- ---------------- ----------------------------------- ----------------
Unit balance at December 31, 1998 6,799 56,566 4,783 6,613 7,033
========== ================ =================================== ================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
TEMPLETON FIDELITY
-------------- --------------------------------------------------------------------
MUTUAL
SHARES GROWTH GROWTH & EQUITY-
INVESTMENTS GROWTH CONTRAFUND OPPORTUNITIES INCOME INCOME
-------------- -------- ----------- ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
-------------- -------- ----------- ----------------- --------- ----------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 863 89 68 -- 325 296
Contract units transferred, net 69 406 -- 104 1,747 466
Contract units redeemed -- -- -- -- -- --
-------------- -------- ----------- ----------------- --------- ----------
Unit balance at December 31, 1998 932 495 68 104 2,072 762
============== ======== =========== ================= ========= ==========
</TABLE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Financial Statements
December 31, 1998, 1997, and 1996
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
Cova Financial Life Insurance Company:
We have audited the accompanying balance sheets of Cova Financial Life
Insurance Company (a wholly owned subsidiary of Cova Financial Services
Life Insurance Company) (the Company) as of December 31, 1998 and 1997, and
the related statements of income, shareholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cova Financial Life
Insurance Company as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
March 4, 1999
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Balance Sheets
December 31, 1998 and 1997
ASSETS 1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Investments:
Debt securities available-for-sale, at fair value
(cost of $99,228 in 1998 and $96,884 in 1997) $ 100,658 97,520
Mortgage loans, net of allowance for potential loan
loss of $10 in 1998 and $-0- in 1997 5,245 1,786
Policy loans 1,223 1,083
----------- -----------
Total investments 107,126 100,389
Cash and cash equivalents - interest-bearing 5,789 756
Cash - noninterest-bearing 1,200 1,392
Accrued investment income 1,641 1,826
Deferred policy acquisition costs 9,142 6,774
Present value of future profits 854 900
Goodwill 1,813 1,923
Deferred tax asset, net 585 1,042
Receivable from OakRe 35,312 68,533
Reinsurance receivables 118 114
Other assets 398 14
Separate account assets 127,873 69,318
----------- -----------
Total assets $ 291,851 252,981
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Balance Sheets, Continued
December 31, 1998 and 1997
LIABILITIES AND SHAREHOLDER'S EQUITY 1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Policyholder deposits $ 135,106 157,566
Future policy benefits 6,191 5,381
Payable on purchase of securities 27 92
Accounts payable and other liabilities 1,653 1,462
Federal and state income taxes payable 172 106
Future purchase price payable to OakRe 342 565
Guaranty fund assessments 1,000 1,000
Separate account liabilities 127,871 69,318
----------- -----------
Total liabilities 272,362 235,490
----------- -----------
Shareholder's equity:
Common stock, $233.34 par value. (Authorized
30,000 shares; issued and outstanding
12,000 shares in 1998 and 1997) 2,800 2,800
Additional paid-in capital 14,523 13,523
Retained earnings 1,833 1,023
Accumulated other comprehensive income,
net of tax 333 145
----------- -----------
Total shareholder's equity 19,489 17,491
----------- -----------
Total liabilities and shareholder's equity $ 291,851 252,981
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Income
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenues:
Premiums $ 1,308 1,191 488
Net investment income 7,516 6,761 4,176
Net realized gains (losses) on sales of
investments 178 158 (28)
Separate account fees 1,392 599 134
Other income 66 45 35
---------- ---------- ----------
Total revenues 10,460 8,754 4,805
---------- ---------- ----------
Benefits and expenses:
Interest on policyholder deposits 5,486 4,837 2,563
Current and future policy benefits 1,549 1,481 722
Operating and other expenses 1,614 1,203 570
Amortization of purchased intangible
assets 194 165 66
Amortization of deferred policy
acquisition costs 530 320 187
---------- ---------- ----------
Total benefits and expenses 9,373 8,006 4,108
---------- ---------- ----------
Income before income taxes 1,087 748 697
---------- ---------- ----------
Income tax expense (benefit):
Current (80) 310 351
Deferred 357 (5) (66)
---------- ---------- ----------
Total income tax expense 277 305 285
---------- ---------- ----------
Net income $ 810 443 412
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Common stock, at beginning
and end of period $ 2,800 2,800 2,800
---------- ---------- ----------
Additional paid-in capital:
Balance at beginning of period 13,523 13,523 13,523
Capital contribution 1,000 -- --
---------- ---------- ----------
Balance at end of period 14,523 13,523 13,523
---------- ---------- ----------
Retained earnings:
Balance at beginning of period 1,023 580 168
Net income 810 443 412
---------- ---------- ----------
Balance at end of period 1,833 1,023 580
---------- ---------- ----------
Accumulated other comprehensive income:
Balance at beginning of period 145 1 192
Change in unrealized appreciation (depreciation)
of debt and equity securities 794 630 (840)
Deferred federal income tax impact (101) (77) 103
Change in deferred policy acquisition costs
attributable to unrealized appreciation (513) (144) (69)
Change in present value of future profits
attributable to unrealized depreciation (appreciation) 8 (265) 615
---------- ---------- ----------
Balance at end of period 333 145 1
---------- ---------- ----------
Total shareholder's equity $ 19,489 17,491 16,904
========== ========== ==========
Total comprehensive income:
Net income $ 810 443 412
Other comprehensive income (change in net unrealized
appreciation (depreciation) of debt and equity securities) 188 144 (191)
---------- ---------- ----------
Total comprehensive income $ 998 587 221
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ -----------
(in thousands)
<S> <C> <C> <C>
Reconciliation of net income to net cash provided by (used in) operating
activities:
Net income $ 810 443 412
Adjustments to reconcile net
income (loss) to net cash provided by
(used in) operating activities:
Increase in future policy benefits 810 820 192
Increase in payables and
accrued liabilities 191 82 95
Decrease (increase) in accrued
investment income 185 (704) (556)
Amortization of intangible assets and
deferred policy acquisition costs 724 485 253
Amortization and accretion of
securities, premiums, and discounts (87) (10) 73
Net realized (gain) loss on sale of investments (178) (158) 28
Interest on policyholder deposits 5,486 4,837 2,563
Increase (decrease) in current and
deferred federal income taxes 523 91 (66)
Recapture commissions paid to OakRe (223) (159) (273)
Commissions and expenses deferred (3,411) (3,917) (2,413)
Due to/from affiliates -- -- 44
Other 219 (498) (452)
------------ ------------ -----------
Net cash provided by (used in) operating activities 5,049 1,312 (100)
------------ ------------ -----------
Cash flows from investing activities:
Cash used in the purchase of
investment securities (56,673) (53,534) (42,655)
Proceeds from investment securities
sold and matured 50,661 25,379 10,635
Other (121) (81) (90)
------------ ------------ -----------
Net cash used in investing activities (6,133) (28,236) (32,110)
------------ ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Cash Flows, Continued
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Policyholder deposits $ 69,459 81,788 38,348
Transfers from OakRe 35,590 25,060 36,553
Transfer to separate accounts (60,181) (56,144) (13,669)
Return of policyholder deposits (39,943) (28,267) (28,521)
Capital contributions received 1,000 -- --
------------ ------------ -----------
Net cash provided by financing activities 5,925 22,437 32,711
------------ ------------ -----------
Increase (decrease) in cash and cash equivalents 4,841 (4,487) 501
Cash and cash equivalents - beginning of period 2,148 6,635 6,134
------------ ------------ -----------
Cash and cash equivalents - end of period $ 6,989 2,148 6,635
============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Notes to Financial Statements
December 31, 1998, 1997, and 1996
(1) NATURE OF BUSINESS AND ORGANIZATION
NATURE OF THE BUSINESS
Cova Financial Life Insurance Company (the Company) markets and
services single premium deferred annuities, immediate annuities,
variable annuities, term life, single premium variable universal
life, and single premium whole life insurance policies. The
Company is licensed to conduct business in the state of
California. Most of the policies issued present no significant
mortality or longevity risk to the Company, but rather represent
investment deposits by the policyholders. Life insurance policies
provide policy beneficiaries with mortality benefits amounting to
a multiple, which declines with age, of the original premium.
Under the deferred fixed annuity contracts, interest rates
credited to policyholder deposits are guaranteed. The Company may
assess surrender fees against amounts withdrawn prior to scheduled
rate reset and adjust account values based on current crediting
rates. Policyholders also may incur certain federal income tax
penalties on withdrawals.
Under the variable annuity contracts, policyholder deposits are
allocated to various separate account sub-accounts or the general
account. A sub-account is valued at the sum of market values of
the securities in its underlying investment portfolio. The
contract value allocated to a sub-account will fluctuate based on
the performance of the sub-accounts. The contract value allocated
to the general account is credited with a fixed interest rate for
a specified period. The Company may assess surrender fees against
amounts withdrawn prior to the end of the withdrawal charge
period. Policyholders may also incur certain federal income tax
penalties on withdrawals.
Under the single premium variable life contracts, policyholder
deposits are allocated to various separate account sub-accounts.
The account value allocated to a sub-account will fluctuate based
on the performance of the sub-accounts. The Company guarantees a
minimum death benefit to be paid to the beneficiaries upon the
death of the insured. The Company may assess surrender fees
against amounts withdrawn prior to the end of the surrender charge
period. A deferred premium tax may also be assessed against
amounts withdrawn in the first ten years. Policyholders may also
incur certain federal income tax penalties on withdrawals.
Under the term life insurance policies, policyholders pay a level
premium over a certain period of time to guarantee a death benefit
will be paid to the beneficiaries upon the death of the insured.
This policy has no cash accumulation available to the
policyholder.
Although the Company markets its products through numerous
distributors, including regional brokerage firms, national
brokerage firms, and banks, approximately 97%, 85%, and 81% of the
Company's sales have been through two specific brokerage firms, A.
G. Edwards & Sons, Incorporated, and Edward Jones & Company,
Incorporated, in 1998, 1997, and 1996, respectively.
ORGANIZATION
The Company, formerly Xerox Financial Life Insurance Company
(XFLIC), is a wholly owned subsidiary of Cova Financial Services
Life Insurance Company (CFSLIC). On December 31, 1996, Cova
Corporation, an insurance holding company wholly owned by General
American Life Insurance Company (GALIC), transferred 100% of the
outstanding shares of the Company to CFSLIC, an affiliated life
insurer domiciled in Missouri. The transfer of direct ownership
had no effect on the operations of the Company as both CFSLIC and
the Company had existed under common management and control prior
to the transfer.
Cova Corporation purchased the Company from Xerox Financial
Services, Inc. (XFSI), a wholly owned subsidiary of Xerox
Corporation, on June 1, 1995. In conjunction with the purchase,
Cova Corporation entered into a financing reinsurance transaction
with OakRe Life Insurance Company (OakRe), a subsidiary of XFSI,
to assume the economic benefits and risks of the existing single
premium deferred annuity deposits (SPDAs) of the Company. The
receivable from OakRe to the Company that was created by this
transaction will be liquidated over the remaining crediting rate
guaranty periods which will be substantially expired by the end of
the year 2000, from the transfer of cash in the amount of the then
current account value, less a recapture commission fee to OakRe on
policies retained beyond their 30-day-no-fee surrender window by
the Company, upon the next crediting rate reset date of each
annuity policy. The Company may then reinvest that cash for those
policies that are retained and thereafter assume the benefits and
risks of those deposits.
In the event that both OakRe and XFSI default on the receivable,
the Company may draw funds from a standby bank irrevocable letter
of credit established by XFSI in the amount of $500 million. No
funds were drawn on this letter of credit during the periods
ending December 31, 1998 and 1997.
In substance, terms of the agreement have allowed the seller,
XFSI, to retain substantially all of the existing financial
benefits and risks of the existing business, while the purchaser,
GALIC, obtained the corporate operating and product licenses,
marketing, and administrative capabilities of the Company, and
access to the retention of the policyholder deposit base that
persists beyond the next crediting rate reset date.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEBT SECURITIES
Investments in all debt securities with readily determinable fair
values are classified into one of three categories:
held-to-maturity, trading, or available-for-sale. Classification
of investments is based on management's current intent. All debt
securities and short-term investments at December 31, 1998 and
1997 were classified as available-for-sale. Securities
available-for-sale are carried at fair value, with unrealized
holding gains and losses reported as accumulated other
comprehensive income of shareholder's equity, net of deferred
effects of income tax and related effects on deferred acquisition
costs and present value of future profits.
Amortization of the discount or premium from the purchase of
mortgage-backed bonds is recognized using a level-yield method
which considers the estimated timing and amount of prepayments of
the underlying mortgage loans. Actual prepayment experience is
periodically reviewed and effective yields are recalculated when
differences arise between the prepayments previously anticipated
and the actual prepayments received and currently anticipated.
When such a difference occurs, the net investment in the
mortgage-backed bond is adjusted to the amount that would have
existed had the new effective yield been applied since the
acquisition of the bond, with a corresponding charge or credit to
interest income (the "retrospective method").
Investment income is recorded when earned. Realized capital gains
and losses on the sale of investments are determined on the basis
of specific costs of investments and are credited or charged to
income.
A realized loss is recognized and charged against income if the
Company's carrying value in a particular investment in the
available-for-sale category has experienced a significant decline
in market value that is deemed to be other than temporary.
MORTGAGE LOANS AND POLICY LOANS
Mortgage loans and policy loans are carried at their unpaid
principal balances. An allowance for mortgage loan losses is
established based on an evaluation of the mortgage loan portfolio,
past credit loss experience, and current economic conditions.
Reserves for loans are established when the Company determines
that collection of all amounts due under the contractual terms is
doubtful and are calculated in conformity with Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures.
The Company had no impaired loans, and the valuation allowance for
potential losses on mortgage loans was $10,000 and $319, at
December 31, 1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency and demand deposits in
banks, U.S. Treasury bills, money market accounts, and commercial
paper with maturities under 90 days, which are not otherwise
restricted.
SEPARATE ACCOUNT ASSETS
Separate accounts contain segregated assets of the Company that
are specifically assigned to variable annuity policyholders in the
separate accounts and are not available to other creditors of the
Company. The earnings of separate account investments are also
assigned to the policyholders in the separate accounts, and are
not guaranteed or supported by the other general investments of
the Company. The Company earns mortality and expense risk fees
from the separate accounts and assesses withdrawal charges in the
event of early withdrawals. Separate accounts assets are valued at
fair market value.
In order to provide for optimum policyholder returns and to allow
for the replication of the investment performance of existing
"cloned" mutual funds, the Company has periodically transferred
capital to the separate accounts to provide for the initial
purchase of investments in new portfolios. As additional funds
have been received through policyholder deposits, the Company has
periodically reduced its capital investment in the separate
accounts. The Company's capital investment in the separate
accounts as of December 31, 1998 and 1997, are presented in note
3.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business which vary with and are
directly related to the production of new business, principally
commissions, premium taxes, sales costs, and certain policy
issuance and underwriting costs, are deferred. These deferred
costs are amortized in proportion to estimated future gross
profits derived from investment income, realized gains and losses
on sales of securities, unrealized securities gains and losses,
interest credited to accounts, surrender fees, mortality costs,
and policy maintenance expenses. The estimated gross profit
streams are periodically reevaluated and the unamortized balance
of deferred policy acquisition costs is adjusted to the amount
that would have existed had the actual experience and revised
estimates been known and applied from the inception of the
policies and contracts. The amortization and adjustments resulting
from unrealized gains and losses are not recognized currently in
income but as an offset to the accumulated other comprehensive
income of shareholder's equity. The amortization period is the
remaining life of the policies, which is approximately 20 years
from the date of original policy issue.
<TABLE>
<CAPTION>
The components of deferred policy acquisition costs are shown
below:
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred policy acquisition costs, beginning of period $ 6,774 3,321 1,164
Commissions and expenses deferred 3,411 3,917 2,413
Amortization (530) (320) (187)
Deferred policy acquisition costs attributable to
unrealized appreciation (513) (144) (69)
------------ ------------ ------------
Deferred policy acquisition costs, end of period $ 9,142 6,774 3,321
============ ============ ============
</TABLE>
PURCHASE RELATED INTANGIBLE ASSETS AND LIABILITIES
In accordance with the purchase method of accounting for business
combinations, two intangible assets and a future payable related
to accrued purchase price consideration were established as of the
purchase date.
Present Value of Future Profits
The Company established an intangible asset which represents
the present value of future profits (PVFP) to be derived from
both the purchased and transferred blocks of business. Certain
estimates were utilized in the computation of this asset,
including estimates of future policy retention, investment
income, interest credited to policyholders, surrender fees,
mortality costs, and policy maintenance costs discounted at a
pretax rate of 18% (12% net after tax).
In addition, as the Company has the option of retaining its
SPDA policies after they reach their next interest rate reset
date and are recaptured from OakRe, a component of this asset
represents estimates of future profits on recaptured business.
This asset will be amortized in proportion to estimated future
gross profits derived from investment income, realized gains
and losses on sales of securities, unrealized securities
appreciation and depreciation, interest credited to accounts,
surrender fees, mortality costs, and policy maintenance
expenses. The estimated gross profit streams are periodically
reevaluated and the unamortized balance of PVFP will be
adjusted to the amount that would have existed had the actual
experience and revised estimates been known and applied from
the inception. The amortization and adjustments resulting from
unrealized appreciation and depreciation is not recognized
currently in income but as an offset to the accumulated other
comprehensive income of shareholder's equity. The amortization
period is the remaining life of the policies, which is
estimated to be 20 years from the date of original policy
issue.
Based on current assumptions, amortization of the original
in-force PVFP asset, expressed as a percentage of the original
in-force asset, is projected to be 4.9%, 7.2%, 7.8%, 7.7%, and
7.2% for the years ended December 31, 1999 through 2003,
respectively. Actual amortization incurred during these years
may be more or less as assumptions are modified to incorporate
actual results.
During 1996, the Company adjusted its original purchase
accounting to include a revised estimate of the ultimate
renewal (recapture) rate. This adjustment resulted in a
reallocation of the net purchased intangible asset between
PVFP, goodwill, future payable, and deferred taxes. This final
allocation and the resulting impact on inception to date
amortization was recorded, in its entirety, in 1996.
<TABLE>
<CAPTION>
The components of PVFP are shown below:
1998 1997 1996
-------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
PVFP - beginning of period $ 900 1,178 576
Net amortization (54) (13) 78
Adjustment due to revised push-down purchase
accounting -- -- (91)
PVFP attributable to unrealized
depreciation (appreciation) 8 (265) 615
-------- ---------- ---------
PVFP - end of period $ 854 900 1,178
======== ========== =========
</TABLE>
Goodwill
Under the push-down method of purchase accounting, the excess
of purchase price over the fair value of tangible and
intangible assets and liabilities acquired is established as
an asset and referred to as goodwill. The Company has elected
to amortize goodwill on the straight-line basis over a 20-year
period.
<TABLE>
<CAPTION>
The components of goodwill are shown below:
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill - beginning of period $ 1,923 2,034 2,306
Amortization (110) (111) (105)
Adjustment due to revised push-down purchase
accounting -- -- (167)
------------ ------------ ------------
Future payable - end of period $ 1,813 1,923 2,034
============ ============ ============
</TABLE>
Future Payable
Pursuant to the financial reinsurance agreement, the
receivable from OakRe becomes due in installments when the
SPDA policies reach their next crediting rate reset date. For
any recaptured policies that continue in force with OakRe into
the next rate guarantee period, the Company will pay a
commission to OakRe of 1.75% up to 40% of policy account
values originally reinsured and 3.5% thereafter. On policies
that are recaptured and subsequently exchanged to a variable
annuity policy, the Company will pay a commission to OakRe of
0.50%.
The Company has recorded a future payable that represents the
present value of the anticipated future commission payments
payable to OakRe over the remaining life of the financial
reinsurance agreement discounted at an estimated borrowing
rate of 6.5%. This liability represents a contingent purchase
price payable for the policies transferred to OakRe on the
purchase date and has been pushed down to the Company through
the financial reinsurance agreement. The Company expects that
this payable will be substantially extinguished by the end of
the year 2000.
<TABLE>
<CAPTION>
The components of this future payable are shown below:
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future payable - beginning of period $ 565 683 1,265
Interest added 29 41 39
Payments to OakRe (252) (159) (273)
Adjustment due to revised push-down purchase
accounting -- -- (348)
---------- ---------- ----------
Future payable - end of period $ 342 565 683
========== ========== ==========
</TABLE>
DEFERRED TAX ASSETS AND LIABILITIES
XFSI and GALIC agreed to file an election to treat the acquisition
of the Company as an asset acquisition under the provisions of
Internal Revenue Code Section 338(h)(10). As a result of that
election, the tax basis of the Company's assets as of the date of
acquisition was revalued based upon fair market values as of June
1, 1995. The principal effect of the election was to establish a
tax asset on the tax-basis balance sheet of approximately $2.9
million for the value of the business acquired that is amortizable
for tax purposes over ten to fifteen years.
POLICYHOLDER DEPOSITS
The Company recognizes its liability for policy amounts that are
not subject to policyholder mortality nor longevity risk at the
stated contract value, which is the sum of the original deposit
and accumulated interest, less any withdrawals. The average
weighted interest crediting rate on the Company's policyholder
deposits as of December 31, 1998 was 6.05%.
FUTURE POLICY BENEFITS
Reserves are held for policy annuity benefits that subject the
Company to risks to make payments contingent upon the continued
survival of an individual or couple (longevity risk). These
reserves are valued at the present value of estimated future
benefits discounted for interest, expenses, and mortality. The
assumed mortality is the 1983 Individual Annuity Mortality Tables
discounted at 5.50% to 8.50%, depending upon year of issue.
Current mortality benefits payable are recorded for reported
claims and estimates of amounts incurred but not reported.
PREMIUM REVENUE
The Company recognizes premium revenue at the time of issue on
annuity policies that subject it to longevity risks. Amounts
collected on annuity policies not subject to longevity risk are
recorded as increases in the policyholder deposits liability. For
term and single premium variable life products, premiums are
recognized as revenue when due.
FEDERAL INCOME TAXES
Beginning in 1997, the Company files a consolidated income tax
return with its immediate parent, CFSLIC. Allocations of federal
income taxes are based upon separate return calculations.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
RISKS AND UNCERTAINTIES
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly
from those estimates.
The following elements of the financial statements are most
affected by the use of estimates and assumptions:
- Investment valuation
- Amortization of deferred policy acquisition costs
- Amortization of present value of future profits
- Recoverability of goodwill
The fair value of the Company's investments is subject to the risk
that interest rates will change and cause a temporary increase or
decrease in the liquidation value of debt securities. To the
extent that fluctuations in interest rates cause the cash flows of
assets and liabilities to change, the Company might have to
liquidate assets prior to their maturity and recognize a gain or
loss. Interest rate exposure for the investment portfolio is
managed through asset/liability management techniques which
attempt to control the risks presented by differences in the
probable cash flows and reinvestment of assets with the timing of
crediting rate changes in the Company's policies and contracts.
Changes in the estimated prepayments of mortgage-backed securities
also may cause retrospective changes in the amortization period of
securities and the related recognition of income.
The amortization of deferred acquisition costs is based on
estimates of long-term future gross profits from existing
policies. These gross profits are dependent upon policy retention
and lapses, the spread between investment earnings and crediting
rates, and the level of maintenance expenses. Changes in
circumstances or estimates may cause retrospective adjustment to
the periodic amortization expense and the carrying value of the
deferred expense.
In a similar manner, the amortization of PVFP is based on
estimates of long-term future profits from existing and recaptured
policies. These gross profits are dependent upon policy retention
and lapses, the spread between investment earnings and crediting
rates, and the level of maintenance expenses. Changes in
circumstances or estimates may cause retrospective adjustment to
the periodic amortization expense and the carrying value of the
asset.
The Company has considered the recoverability of goodwill and has
concluded that no circumstances have occurred which would give
rise to impairment of goodwill at December 31, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, applies fair value disclosure practices with regard
to financial instruments, both assets and liabilities, for which
it is practical to estimate fair value. In cases where quoted
market prices are not readily available, fair values are based on
estimates that use present value or other valuation techniques.
These techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash
flows. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in
assumptions could cause these estimates to vary materially. In
that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many
cases, might not be realized in the immediate settlement of the
instruments. SFAS No. 107 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements.
Because of this, and further because a value of a business is also
based upon its anticipated earning power, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents, Short-term Investments,
and Accrued Investment Income
The carrying value amounts reported in the balance sheets for
these instruments approximate their fair values. Short-term
debt securities are considered "available-for-sale" and are
carried at fair value.
Investments Securities and Mortgage Loans
(Including Mortgage-backed Securities)
Fair values of debt securities are based on quoted market
prices, where available. For debt securities not actively
traded, fair value estimates are obtained from independent
pricing services. In some cases, such as private placements,
certain mortgage-backed securities, and mortgage loans, fair
values are estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit
quality, and maturity of the investments (see note 3 for fair
value disclosures).
Policy Loans
Fair values of policy loans approximate carrying value as the
interest rates on the majority of policy loans are reset
periodically and therefore approximate current interest rates.
Investment Contracts
The Company's policy contracts require the beneficiaries to
commence receipt of payments by the later of age 85 or 10
years after purchase, and substantially all contracts permit
earlier surrenders, generally subject to fees and adjustments.
Fair values for the Company's liabilities for investment type
contracts (policyholder deposits) are estimated as the amount
payable on demand. As of December 31, 1998 and 1997, the cash
surrender value of policyholder deposits was $4,707,689 and
$7,204,647, respectively, less than their stated carrying
value. Of the contracts permitting surrender, substantially
all provide the option to surrender without fee or adjustment
during the 30 days following reset of guaranteed crediting
rates. The Company has not determined a practical method to
determine the present value of this option.
All of the Company's deposit obligations are fully guaranteed
by its ultimate parent, GALIC, and the receivable from OakRe
equal to the SPDA obligations is guaranteed by OakRe's parent,
XFSI.
REINSURANCE
The impact of reinsurance on the December 31, 1998 financial
statements is not considered material.
The financing reinsurance agreement entered into with OakRe does
not meet the conditions for reinsurance accounting under generally
accepted accounting principles (GAAP). The net assets initially
transferred to OakRe were established as a receivable and then are
subsequently increased as interest is accrued on the underlying
liabilities and decreased as funds are transferred back to the
Company when policies reach their crediting rate reset date or
benefits are claimed.
RECENTLY ADOPTED ACCOUNTING STANDARDS
On June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income
and its components in the financial statements. SFAS No. 130 is
effective for the fiscal year beginning after December 15, 1997.
Reclassification of financial statements for earlier periods
provided is required for comparative purposes. The Company has
elected to adopt SFAS No. 130 in 1998. The adoption of SFAS No.
130 has no impact on the Company's net income or shareholder's
equity. The Company's only component of accumulated other
comprehensive income relates to unrealized appreciation and
depreciation on debt securities.
RECENTLY ISSUED ACCOUNTING STANDARD
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued in June 1998. SFAS No. 133 requires all
derivative instruments to be recorded on the balance sheet at
estimated fair value. The Company's present accounting policies
would apply such accounting treatment only to marketable
securities as defined under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and to off-balance
sheet derivative instruments. SFAS No. 133 will broaden the
definition of derivative instruments to include all classes of
financial assets and liabilities. It also will require separate
disclosure of identifiable derivative instruments embedded in
hybrid securities. Change in the fair value of derivative
instruments is to be recorded each period either in current
earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it
is, on the type of hedge transaction.
SFAS No. 133 is effective for the Company beginning January 1,
2000. The Company's management is currently evaluating the impact
of SFAS No. 133; at present, the management does not believe it
will have a material effect on the Company's financial position or
results of operations.
OTHER
Certain 1997 and 1996 amounts have been reclassified to conform to
the 1998 presentation.
<TABLE>
<CAPTION>
(3) INVESTMENTS
The Company's investments in debt securities and short-term investments
are considered available-for-sale and carried at estimated fair value,
with the aggregate unrealized appreciation or depreciation being
recorded as a separate component of shareholder's equity. The amortized
cost, estimated fair value, and carrying value of investments at
December 31, 1998 and 1997, are as follows:
1998
-------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 100 1 -- 101 101
Collateralized
mortgage obligations 15,260 161 (32) 15,389 15,389
Corporate, state,
municipalities, and
political subdivisions 83,868 1,733 (433) 85,168 85,168
--------------- -------------- -------------- -------------- --------------
Total debt
securities 99,228 1,895 (465) 100,658 100,658
Mortgage loans (net) 5,245 204 -- 5,449 5,245
Policy loans 1,223 -- -- 1,223 1,223
--------------- -------------- -------------- -------------- --------------
Total investments $ 105,696 2,099 (465) 107,330 107,126
=============== ============== ============== ============== ==============
Company's beneficial
interest in separate
accounts $ 2 -- -- 2 2
=============== ============== ============== ============== ==============
</TABLE>
<TABLE>
1997
-------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 100 1 -- 101 101
Collateralized
mortgage obligations 24,018 305 (64) 24,259 24,259
Corporate, state,
municipalities, and
political subdivisions 72,766 1,500 (1,106) 73,160 73,160
--------------- -------------- -------------- -------------- --------------
Total debt
securities 96,884 1,806 (1,170) 97,520 97,520
Mortgage loans (net) 1,786 143 -- 1,929 1,786
Policy loans 1,083 -- -- 1,083 1,083
--------------- -------------- -------------- -------------- --------------
$ 99,753 1,949 (1,170) 100,532 100,389
=============== ============== ============== ============== ==============
Company's beneficial
interest in separate
accounts $ -- -- -- -- --
=============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of debt securities at
December 31, 1998, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties. Maturities of mortgage-backed securities will be
substantially shorter than their contractual maturity because they
require monthly principal installments and mortgagees may prepay
principal.
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Less than one year $ 2,341 2,362
Due after one year through five years 34,579 35,067
Due after five years through ten years 32,584 33,321
Due after ten years 14,464 14,519
Mortgage-backed securities 15,260 15,389
--------------- ---------------
Total $ 99,228 100,658
=============== ===============
</TABLE>
At December 31, 1998, approximately 95.1% of the Company's debt
securities are investment grade or are nonrated but considered to be of
investment grade. Of the 4.9% noninvestment grade debt securities, 4.3%
are rated as BB or its equivalent, and 0.6% are rated B or its
equivalent.
All debt securities were income producing during the years ended
December 31, 1998 and 1997. As of December 31, 1998 and 1997, the
Company had no impaired investments.
<TABLE>
<CAPTION>
The components of investment income, realized gains (losses), and
unrealized appreciation are as follows:
1998 1997 1996
------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income on debt securities $ 6,928 6,575 3,926
Income on short-term investments 305 186 243
Income on policy loans 92 83 86
Interest on mortgage loans 308 32 --
Miscellaneous interest 2 -- 8
------------ ------------- ------------
Total investment income 7,635 6,876 4,263
Investment expenses (119) (115) (87)
------------ ------------- ------------
Net investment income $ 7,516 6,761 4,176
============ ============= ============
Net realized capital gains (losses) -
debt securities $ 178 158 (28)
============ ============= ============
Unrealized appreciation
is as follows:
Debt securities $ 1,430 633 6
Short-term investments -- 3 --
Effects on deferred acquisition
costs amortization (726) (213) (69)
Effects on PVFP amortization (192) (200) 65
------------ ------------- ------------
Unrealized appreciation before income taxes 512 223 2
Unrealized income tax expenses (179) (78) (1)
------------ ------------- ------------
Net unrealized appreciation on
investments $ 333 145 1
============ ============= ============
</TABLE>
Proceeds from sales, redemptions, and paydowns of investments in debt
securities during 1998 were $50,660,583. Gross gains of $591,755 and
gross losses of $413,588 were realized on those sales. Included in these
amounts were $133,138 of gross gains and $106,165 of gross losses
realized on the sale of noninvestment grade securities.
Proceeds from sales, redemptions, and paydowns for investments in debt
securities during 1997 were $25,379,783. Gross gains of $166,335 and
gross losses of $8,658 were realized on those sales. Included in these
amounts were $47,391 of gross gains and $7,300 of gross losses realized
on the sale of noninvestment grade securities.
Proceeds from sales, redemptions, and paydowns for investments in debt
securities during 1996 were $10,635,608. Gross gains of $16,757 and
gross losses of $44,311 were realized on those sales. Included in these
amounts were $1,355 of gross gains realized on the sale of noninvestment
grade securities.
<TABLE>
<CAPTION>
(4) SECURITY GREATER THAN 10% OF SHAREHOLDER'S EQUITY
As of December 31, 1998 and 1997, the Company held the following
individual security which exceeded 10% of shareholder's equity:
1998 1997
--------------- ---------------
<S> <C> <C>
Colonial Realty, at carrying value $ 1,997,287 2,017,400
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
(5) COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income $ 810 443 412
------------ ------------ ------------
Other comprehensive income (loss), before tax -
unrealized appreciation (depreciation) on
investments arising during period:
Unrealized appreciation (depreciation)
on investments 616 472 (812)
Adjustment to deferred acquisition
costs attributable to unrealized
(appreciation) depreciation (398) (108) (67)
Adjustment to PVFP attributable to
unrealized (appreciation) depreciation 6 (198) 594
------------ ------------ ------------
Total unrealized appreciation (depreciation) on
investments arising during period 224 166 (285)
------------ ------------ ------------
Less reclassification adjustments for realized (gains) losses included
in net income:
Adjustment for (gains) losses included in
net realized gains (losses) on sales
of investments (178) (158) 28
Adjustment for (gains) losses included in
amortization of PVFP 115 36 2
Adjustment for (gains) losses included in
amortization of deferred acquisition costs (2) 67 (21)
------------ ------------ ------------
Total reclassification adjustments for (gains) losses
included in net income (65) (55) 9
------------ ------------ ------------
Other comprehensive income (loss), before related income tax
expense (benefits) 289 221 (294)
Related income tax expense (benefit) 101 77 (103)
------------ ------------ ------------
Other comprehensive income (loss), net of tax 188 144 (191)
------------ ------------ ------------
Comprehensive income $ 998 587 221
============ ============ ============
</TABLE>
(6) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company has no direct employees and no retired employees. All
personnel used to support the operations of the Company are supplied by
contract by Cova Life Management Company (CLMC), a wholly owned
subsidiary of Cova Corporation. The Company is allocated a portion of
certain health care and life insurance benefits for future retired
employees of CLMC. In 1998, 1997, and 1996, the Company was allocated a
portion of benefit costs including severance pay, accumulated vacations,
and disability benefits. At December 31, 1998, CLMC had no retired
employees nor any employees fully eligible for retirement, and had no
disbursements for such benefit commitments. The expense arising from
these allocations is not material.
<TABLE>
<CAPTION>
(7) INCOME TAXES
The Company will file a consolidated federal income tax return with its
immediate parent, CFSLIC. Income taxes are recorded in the statements of
income and directly in certain shareholder's equity accounts. Income
tax expense for the years ended December 31 was allocated as follows:
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Statements of income:
Operating income (excluding realized investment gains and losses) $ 215 250 295
Realized investment gains (losses) 62 55 (10)
--------- --------- ---------
Income tax expense included in the statements of
income 277 305 285
Shareholder's equity - change in deferred federal income taxes
related to unrealized appreciation (depreciation) on securities 101 77 (103)
--------- --------- ---------
Total income tax expense $ 378 382 182
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
The actual federal income tax expense differed from the expected tax
expense computed by applying the U.S. federal statutory rate to income
before taxes on income as follows:
1998 1997 1996
-------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $ 380 35.0% $ 262 35.0% $ 244 35.0%
Dividends received deduction - separate
account (150) (13.9) -- -- -- --
Amortization of intangible assets 39 3.6 39 5.2 37 5.3
Other 8 0.8 4 0.5 4 0.6
-------- ---------- -------- ---------- -------- ---------
Total $ 277 25.5% $ 305 40.7% $ 285 40.9%
======== ========== ======== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are as follows:
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Tax basis of intangible assets purchased $ 624 679
Liability for commission on recaptures 120 198
Policy reserves 2,477 1,898
DAC "Proxy Tax" 1,252 977
Other deferred tax assets (359) --
------------ ------------
Total deferred tax assets 4,114 3,752
------------ ------------
Deferred tax liabilities:
Unrealized gains in investments 179 78
PVFP 150 144
Deferred acquisition costs 3,200 2,371
Other deferred tax liabilities -- 117
------------ ------------
Total deferred tax liabilities 3,529 2,710
------------ ------------
Net deferred tax asset $ 585 1,042
============ ============
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. Management
believes the deferred tax assets will be fully realized in the future
based upon consideration of the reversal of existing temporary
differences, anticipated future earnings, and all other available
evidence. Accordingly, no valuation allowance was established at
December 31, 1998 or 1997.
(8) RELATED-PARTY TRANSACTIONS
On December 31, 1997, CLMC and Navisys Incorporated, affiliated
companies, purchased certain assets of Johnson & Higgins/Kirke Van
Orsdel, Inc. (J&H/KVI), an unaffiliated Delaware corporation, for
$2,500,000. The purchased assets are the administrative and service
systems that provide the marketing, underwriting, claims, and
administrative functions for the Company's life and annuity products. On
January 1, 1998, the purchased assets of J&H/KVI were merged into Cova
Life Administrative Service Company (CLASC). Navisys Incorporated
purchased 51% of CLASC, the remaining 49% was purchased by CLMC.
The Company has entered into management, operations, and servicing
agreements with its affiliated companies. The affiliated companies are
CLMC, a Delaware Corporation, which provides management services and
the employees necessary to conduct the activities of the Company; and
Conning Asset Management, which provides investment advice.
Additionally, a portion of overhead and other corporate expenses are
allocated by the Company's ultimate parent, GALIC. CLASC provides
various services for the Company including underwriting, claims, and
administrative functions. Expenses and fees paid to affiliated
companies in 1998, 1997, and 1996 for the Company were $1,587,833,
$396,806, and $303,694 respectively.
(9) STATUTORY SURPLUS AND DIVIDEND RESTRICTION
GAAP differs in certain respects from accounting practices prescribed or
permitted by insurance regulatory authorities (statutory accounting
principles).
The major differences arise principally from the immediate expense
recognition of policy acquisition costs and intangible assets for
statutory reporting, determination of policy reserves based on different
discount rates and methods, the recognition of deferred taxes under GAAP
reporting, the nonrecognition of financial reinsurance for GAAP
reporting, and the establishment of an asset valuation reserve as a
contingent liability based on the credit quality of the Company's
investment securities and an interest maintenance reserve as an unearned
liability to defer the realized gains and losses of fixed income
investments presumably resulting from changes to interest rates and
amortize them into income over the remaining life of the investment sold
under statutory accounting principles. In addition, adjustments to
record the carrying values of debt securities and certain equity
securities at estimated fair value are applied only under GAAP reporting
and capital contributions in the form of notes receivable from an
affiliated company are not recognized under GAAP reporting.
Purchase accounting creates another difference as it requires the
restatement of GAAP assets and liabilities to their established fair
values, and shareholder's equity to the net purchase price. Statutory
accounting does not recognize the purchase method of accounting.
<TABLE>
<CAPTION>
As of December 31, the differences between statutory capital and surplus
and shareholder's equity determined in conformity with GAAP were as
follows:
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Statutory capital and surplus $ 10,411 10,389
Reconciling items:
Statutory asset valuation reserve 1,078 1,151
Statutory interest maintenance reserve 190 111
GAAP investment adjustments to fair value 1,430 636
GAAP deferred policy acquisition costs 9,142 6,774
GAAP basis policy reserves (4,670) (3,871)
GAAP deferred federal income taxes (net) 585 1,042
GAAP guarantee assessment adjustment (1,000) (1,000)
GAAP goodwill 1,813 1,923
GAAP present value of future profits 854 900
GAAP future purchase price payable (342) (565)
Other (2) 1
------------ ------------
GAAP shareholder's equity $ 19,489 17,491
============ ============
</TABLE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova
Financial Services Life Insurance Company)
Notes to Financial Statements
December 31, 1998, 1997, and 1996
Statutory net loss for the years ended December 31, 1998, 1997, and 1996
was $142,046, $461,118, and $113,236, respectively.
The maximum amount of dividends which can be paid by State of California
insurance companies to shareholders without prior approval of the
insurance commissioner is the greater of 10% of statutory surplus or
statutory net gain from operations for the preceding year. The maximum
dividend permissible during 1998 will be $761,109, which is 10% of the
Company's December 31, 1998 statutory surplus of $7,611,089.
The National Association of Insurance Commissioners has developed
certain risk based capital (RBC) requirements for life insurers. If
prescribed levels of RBC are not maintained, certain actions may be
required on the part of the Company or its regulators. At December 31,
1998, the Company's Total Adjusted Capital and Authorized Control Level
RBC were $11,488,766 and $1,619,495, respectively. This level of
adjusted capital qualifies under all tests.
(10) GUARANTY FUND ASSESSMENTS
The Company participates with life insurance companies licensed in
California in an association formed to guaranty benefits to
policyholders of insolvent life insurance companies. Under state law, as
a condition for maintaining the Company's authority to issue new
business, the Company is contingently liable for its share of claims
covered by the guaranty association for insolvencies incurred through
1998, but for which assessments have not yet been determined or
assessed, to a maximum generally of 1% of statutory premiums per annum.
In November 1998, the National Organization of Life and Health Guaranty
Associations distributed a study of the major outstanding industry
insolvencies, with estimates of future assessments by state. Based on
this study, the Company has accrued a liability for $1.0 million in
future assessments on insolvencies that occurred before December 31,
1998. Under the coinsurance agreement between the Company and OakRe (see
note 1), OakRe is required to reimburse the Company for any future
assessments that it pays which relate to insolvencies occurring prior to
June 1, 1995. The Company paid $33,505, $460,167, and $265,760 in
guaranty fund assessment in 1998, 1997, and 1996, respectively. These
payments were substantially reimbursed by OakRe.
At the same time, the Company is liable to OakRe for 80% of any future
premium tax recoveries that are realized from any such assessments and
may retain the remaining 20%. The credits to be retained for 1998 were
not material.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. FINANCIAL STATEMENTS
The following financial statements of the Separate Account are included in Part
B hereof:
1. Independent Auditors' Report.
2. Statement of Assets and Liabilities as of December 31, 1998.
3. Statement of Operations for the year ended December 31, 1998.
4. Statements of Changes in Net Assets for the years ended December 31,
1998 and 1997.
5. Notes to Financial Statements - December 31, 1998 and 1997.
The following financial statements of the Company are included in Part B hereof:
1. Independent Auditors' Report.
2. Balance Sheets as of December 31, 1998 and 1997.
3. Statements of Income for the years ended December 31, 1998, 1997, and
1996.
4. Statements of Shareholder's Equity for the Years Ended December 31,
1998, 1997, and 1996.
5. Statements of Cash Flows for the Years Ended December 31, 1998, 1997,
and 1996.
6. Notes to Financial Statements - December 31, 1998, 1997, and 1996.
b. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account+++
2. Not Applicable
3. (i) Form of Principal Underwriter's Agreement +
(ii) Form of Selling Agreement +
4. (i) Individual Flexible Purchase Payment Deferred Variable and Fixed
Annuity Contract**
(ii) Death Benefit Rider**
(iii) Rider - Nursing Home Waiver**
(iv) Death Benefit Endorsements
(v) Charitable Remainder Trust Endorsement
5. Application for Variable Annuity +
6. (i) Copy of Articles of Incorporation of the Company +
(ii) Copy of the Bylaws of the Company +
7. Not Applicable
8.(i) Form of Fund Participation Agreement among MFS Variable Insurance
Trust, Cova Financial Insurance Company and Massachusetts
Financial Services Company +
(ii) Form of Fund Participation Agreement among Cova Financial
Life Insurance Company, Cova Life Sales Company, Alliance
Capital Management LP and Alliance Fund Distributors, Inc. +
(iii) Form of Fund Participation Agreement among Oppenheimer Variable
Account Funds, OppenheimerFunds, Inc. and Cova Financial Life
Insurance Company++
(iv) Form of Fund Participation Agreement among Putnam Variable Trust,
Putnam Mutual Funds Corp. and Cova Financial Life Insurance
Company++
(v) Form of Fund Participation Agreement by and among AIM Variable
Insurance Funds, Inc., A I M Distributors, Inc., Cova Financial
Life Insurance Company, on behalf of itself and its Separate
Accounts, and Cova Life Sales Company++
(vi) Form of Fund Participation Agreement among Investors Fund Series,
Zurich Kemper Investments, Inc., Zurich Kemper Distributors, Inc.
and Cova Financial Life Insurance Company++
(vii) Form of Participation Agreement by and between Goldman Sachs
Variable Insurance Trust, Goldman, Sachs & Co. and Cova Financial
Life Insurance Company++
(viii) Form of Participation Agreement among Russell Insurance Funds,
Russell Fund Distributors, Inc. and Cova Financial Life
Insurance Company++
(ix) Form of Participation Agreement among Liberty Variable Investment
Trust, Liberty Financial Investments, Inc. and Cova Financial
Life Insurance Company++
(x) Form of Participation Agreement among Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and Cova
Financial Services Life Insurance Company
9. Opinion and Consent of Counsel
10. Consent of Independent Auditors
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information
14. Company Organizational Chart**
27. Not Applicable
** incorporated by reference to Registrant's Form N-4 ,(File Nos.
333- 34817 and 811-07060) electronically filed on September 2,
1997.
+ Incorporated by reference to Registrant's Pre-Effective Amendment
No. 1 to Form N-4 electronically filed on November 19, 1997.
++ Incorporated by reference to Post-Effective Amendment No. 1 to
Form N-4 electronically filed on February 11, 1998.
+++ Incorporated by reference to Cova Variable Life Account Five,
Initial Registration Statement on Form S-6 (File No. 333-37559)
electronically filed on October 9, 1997.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
The following are the Officers and Directors who are engaged directly or
indirectly in activities relating to the Registrant or the variable annuity
contracts offered by the Registrant and the executive officers of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
- -------------------------------- --------------------------------
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Leonard M. Rubenstein Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Mark E. Reynolds Executive Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Rd.
St. Louis, MO 63128
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Frances S. Cook Secretary
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Constance A. Doern Vice President
1776 West Lakes Parkway
West Des Moines, IA 50266
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Executive Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer and Director
700 Market Street
St. Louis, MO 63101
Lisa O. Kirchner Vice President
1776 West Lakes Parkway
West Des Moines, IA 50266
Douglas E. Jacobs Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
William C. Mair Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market Street
St. Louis, MO 63101
Myron H. Sandberg Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Schaus Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Bernard J. Spaulding Senior Vice President and
One Tower Lane, Suite 3000 General Counsel
Oakbrook Terrace, IL 60181-4644
Joann T. Tanaka Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Peter L. Witkewiz Vice President and
One Tower Lane, Suite 300 Controller
Oakbrook Terrace, IL 60181-4644
Patricia M. Wersching Assistant Treasurer
700 Market Street
St. Louis, MO 63101
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
A company organizational chart was filed as Exhibit 14 to Registrant's Form N-4
(File Nos. 333-34817 and 811-07060) filed on September 2, 1997 and is
incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 22, 1999 there were 48 Qualified Contract Owners and 198
Non-Qualified Contract Owners.
ITEM 28. INDEMNIFICATION.
The Bylaws of the Company (Article V, Section 9) provide that:
This corporation shall indemnify, to the fullest extent allowed by California
law, its present and former directors and officers against expenses, judgments,
fines, settlements, and other amounts incurred in connection with any proceeding
or threatened proceeding brought against such directors or officers in their
capacity as such. Such indemnification shall be made in accordance with
procedures set forth by California law. Sums for expenses incurred in defending
any such proceeding may also be advanced to any such director or officer to the
extent and under the conditions provided by California law.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Cova Life Sales Company is the principal underwriter for the following
investment companies (other than Registrant):
Cova Variable Annuity Account One
First Cova Variable Annuity Account One
Cova Variable Life Account One
Cova Variable Life Account Five
Cova Variable Annuity Account Four
General American Separate Account Twenty-Eight
General American Separate Account Twenty-Nine
(b) Cova Life Sales Company is the principal underwriter for the Contracts. The
following persons are the officers and directors of Cova Life Sales Company. The
principal business address for each officer and director of Cova Life Sales
Company is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181- 4644.
<TABLE>
<CAPTION>
<S> <C>
(b) Name and Principal Positions and Offices
Business Address with Underwriter
- ----------------------- ---------------------------
Lorry J. Stensrud Director
Patricia E. Gubbe President, Chief Compliance
Officer and Director
William C. Mair Director
Philip A. Haley Vice President
Frances S. Cook Secretary
Shari Ruecker Vice President
Mark E. Reynolds Treasurer
James W. Koeger Assistant Treasurer
Mark A. Kowalczyk Vice President
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
William Flory, whose address is One Tower Lane, Suite 3000, Oakbrook Terrace,
Illinois 60181-4644 maintains physical possession of the accounts, books or
documents of the Variable Account required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
d. Cova Financial Life Insurance Company ("Company") hereby represents that
the fees and charges deducted under the Contracts described in the Prospectus,
in the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Oakbrook
Terrace, and State of Illinois on this 23rd day of March, 1999.
<TABLE>
<CAPTION>
<S> <C>
COVA VARIABLE ANNUITY ACCOUNT FIVE
(Registrant)
By: COVA FINANCIAL LIFE INSURANCE COMPANY
By: /S/ LORRY J. STENSRUD
_________________________________________
COVA FINANCIAL LIFE INSURANCE COMPANY
Depositor
By: /S/ LORRY J. STENSRUD
_________________________________________
</TABLE>
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board and
- ---------------------- Director --------
Richard A. Liddy Date
/S/ LORRY J. STENSRUD President and Director 3/23/99
- --------------------- --------
Lorry J. Stensrud Date
- ---------------------- Director --------
Leonard M. Rubenstein Date
Director
- ---------------------- --------
J. Robert Hopson Date
William C. Mair* Controller and Director 3/23/99
- ---------------------- --------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 3/23/99
- ---------------------- --------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 3/23/99
- ---------------------- --------
Matthew P. McCauley Date
John W. Barber* Director 3/23/99
- ---------------------- --------
John W. Barber Date
/S/ MARK E. REYNOLDS Director 3/23/99
- ---------------------- --------
Mark E. Reynolds Date
</TABLE>
*By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 4 (FILE NO. 333-34817)
TO
FORM N-4
COVA VARIABLE ANNUITY ACCOUNT FIVE
EXHIBIT NO. PAGE NO.
EX-99.B4(iv) Death Benefit Endorsements
EX-99.B4(v) Charitable Remainder Trust Endorsement
EX-99.B8(x) Form of Participation Agreement - Templeton
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Auditors
EX-99.B13 Calculation of Performance Information
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is July 1, 1999.
The DEATH OF OWNER section of the DEATH BENEFIT provision is deleted in its
entirety and replaced with the following:
"DEATH OF OWNER -- Upon death of the Owner prior to the Annuity Date, the
Death Benefit will be paid to the Beneficiary designated by the Owner.
Before the Owner, or a Joint Owner, attains age 80, the Death Benefit will
be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3. the greatest Contract Value on any Contract Anniversary on or after
July 1, 1999, prior to the death of the Owner or Joint Owner, plus any
Purchase Payments made subsequent to that Contract Anniversary, less
any subsequent Withdrawals and any applicable Withdrawal Charge.
After the Owner, or a Joint Owner, attains age 80, the Death Benefit will
be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3. the greatest Contract Value on any Contract Anniversary on or after
July 1, 1999, on or before the Owner's or Joint Owner's 80th birthday,
plus any Purchase Payments made subsequent to that Contract
Anniversary, less any subsequent Withdrawals and any applicable
Withdrawal Charge.
If Joint Owners are named:
1) The Death Benefit is determined based on the age of the oldest Joint
Owner; and
2) The Death Benefit is payable upon the first death of a Joint Owner.
The Death Benefit will be paid following receipt by the Company of both due
proof of death and an election for a single sum payment or election under
an Annuity Option.
If a single sum payment is requested, the proceeds will be paid within
seven (7) days of receipt of proof of death and the election. Payment under
an Annuity Option may only be elected during the 60-day period beginning
with the date of receipt of proof of death or a single sum payment will be
made to the Beneficiary at the end of the 60-day period.
The entire Death Benefit must be paid within five (5) years of the date of
death unless the Beneficiary elects to have the Death Benefit payable under
an Annuity Option over the Beneficiary's lifetime or for a period not
extending beyond the Beneficiary's life expectancy, beginning within one
(1) year of the date of death.
If the Beneficiary is the spouse of the Owner, the spouse may elect to
become the Owner and continue this Contract in effect at the then current
Contract Value."
All other terms and conditions of the Contract remain unchanged.
Cova Financial Life Insurance Company has caused this Endorsement to be signed
by its President and Secretary.
CC-4207 (4/99)
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Issue Date of the Contract. The
Contract is amended in the following manner:
The DEATH OF OWNER section of the DEATH BENEFIT provision is deleted in its
entirety and replaced with the following:
"DEATH OF OWNER -- Upon death of the Owner prior to the Annuity Date, the
Death Benefit will be paid to the Beneficiary designated by the Owner.
Before the Owner, or a Joint Owner, attains age 80, the Death Benefit will
be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3. the greatest Contract Value on any Contract Anniversary prior to the
death of the Owner or Joint Owner, plus any Purchase Payments made
subsequent to that Contract Anniversary, less any subsequent
Withdrawals and any applicable Withdrawal Charge.
After the Owner, or a Joint Owner, attains age 80, the Death Benefit will
be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3. the greatest Contract Value on any Contract Anniversary on or before
the Owner's or Joint Owner's 80th birthday, plus any Purchase Payments
made subsequent to that Contract Anniversary, less any subsequent
Withdrawals and any applicable Withdrawal Charge.
If Joint Owners are named:
1) The Death Benefit is determined based on the age of the oldest Joint
Owner; and
2) The Death Benefit is payable upon the first death of a Joint Owner.
The Death Benefit will be paid following receipt by the Company of both due
proof of death and an election for a single sum payment or election under
an Annuity Option.
If a single sum payment is requested, the proceeds will be paid within
seven (7) days of receipt of proof of death and the election. Payment under
an Annuity Option may only be elected during the 60-day period beginning
with the date of receipt of proof of death or a single sum payment will be
made to the Beneficiary at the end of the 60-day period.
The entire Death Benefit must be paid within five (5) years of the date of
death unless the Beneficiary elects to have the Death Benefit payable under
an Annuity Option over the Beneficiary's lifetime or for a period not
extending beyond the Beneficiary's life expectancy, beginning within one
(1) year of the date of death.
If the Beneficiary is the spouse of the Owner, the spouse may elect to
become the Owner and continue this Contract in effect at the then current
Contract Value."
All other terms and conditions of the Contract remain unchanged.
Cova Financial Life Insurance Company has caused this Endorsement to be signed
by its President and Secretary.
CC-4208 (4/99)
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
CHARITABLE REMAINDER TRUST ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Issue Date shown on the Contract Data
Page.
The Contract is amended in the following manner:
1. The last sentence of the first paragraph of the Annuity Date section is
deleted and replaced by the following:
"The Annuity Date may not be later than the first day of the calendar month
following the Annuitant's 100th birthday."
2. The first sentence in the second paragraph of the Withdrawals section is
deleted and replaced with the following:
"Each partial withdrawal, unless for the payment of charitable remainder
trust administration fees, must be for an amount which is not less than
$500.00 or, if smaller, the remaining Withdrawal Value."
3. The following sentence is added to the Waiver of Withdrawal Charge section:
"A withdrawal for the payment of charitable remainder trust administration
fees may be made once during the first Contract Year free from the
Withdrawal Charge."
All other terms and conditions of the Contract remain unchanged.
Cova Financial Life Insurance Company has caused this Endorsement to be signed
by its President and Secretary.
CC-4214 (4/99)
PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC. and
COVA FINANCIAL LIFE INSURANCE COMPANY
THIS AGREEMENT made as of May 1, 1998, among Templeton Variable
Products Series Fund (the "Trust"), an open-end management investment company
organized as a business trust under Massachusetts law, Franklin Templeton
Distributors, Inc., a California corporation, the Trust's principal underwriter
("Underwriter"), and COVA Financial Life Insurance Company, a life insurance
company organized as a corporation under California law (the "Company"), on its
own behalf and on behalf of each segregated asset account of the Company set
forth in Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act" );
WHEREAS, the Trust and the Underwriter desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated November
16, 1993 (File No. 812-8546), granting Participating Insurance Companies and
their separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a) and 15(b) of the 1940 Act, and Rules 6e-2 (b) (15) and 6e-3 (T) (b) (15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised; and has
registered or will register certain variable annuity contracts and variable life
insurance policies, listed on Schedule C attached hereto, under which the
portfolios are to be made available as investment vehicles (the "Contracts")
under the 1933 Act unless such interests under the Contracts in the Accounts are
exempt from registration under the 1933 Act and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such account on Schedule A hereto, to set aside
and invest assets attributable to one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an
"Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended ("Advisers Act") and any applicable state
securities laws;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as each Account
at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's
agent for receipt of purchase orders and requests for redemption relating to
each Portfolio from each Account, provided that the Company notifies the Trust
of such purchase orders and requests for redemption by 9:00 a.m. Eastern time on
the next following Business Day, as defined in Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to
the Accounts for purchase at the net asset value per share next computed after
receipt of a purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust
describing Portfolio purchase procedures on those days on which the Trust
calculates its net asset value pursuant to rules of the SEC, and the Trust shall
use its best efforts to calculate such net asset value on each day on which the
New York Stock Exchange ("NYSE") is open for trading. The Company will transmit
orders from time to time to the Trust for the purchase of shares of the
Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, such action is deemed in the best interests of the shareholders of
such Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust or its designated
custodian. Upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall mean any day
on which the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption procedures.
The Trust shall make payment for such shares in the manner established from time
to time by the Trust. Redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire to the
Company before the close of business on the next Business Day after the receipt
of the request for redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market conditions
exist, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by
the Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be by
book entry only. Stock certificates will not be issued to the Company or the
Account. Portfolio Shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
1.7 The Trust shall furnish, on or before the ex-dividend date, notice
to the Company of any income dividends or capital gain distributions payable on
the shares of any Portfolio of the Trust. The Company hereby elects to receive
all such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net asset
value per share for each Portfolio available to the Company or its designated
agent on a daily basis as soon as reasonably practical after the net asset value
per share is calculated (normally by 6:30 p.m. Eastern time) and shall use
reasonable efforts to make such net asset value per share available by 7:00 p.m.
Eastern time each Business Day.
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans as provided for under Section 817(h)(4)
of the Internal Revenue Code of 1986, as amended, (the "Code"), and to the
extent permitted by the Shared Funding Exemptive Order. No shares of any
Portfolio will be sold directly to the general public. The Company agrees that
it will use Trust shares only for the purposes of funding the Contracts through
the Accounts listed in Schedule A, as amended from time to time.
1.10 The Company agrees that all net amounts available under the
Contracts shall be invested in the Trust, in such other Funds advised by an
Adviser or its affiliates as may be mutually agreed to in writing by the parties
hereto, or in the Company's general account, provided that such amounts may also
be invested in an investment company other than the Trust if: (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
the Portfolios; or (b) the Company gives the Trust and the Underwriter 45 days
written notice of its intention to make such other investment company available
as a funding vehicle for the Contracts; or (c) such other investment company is
available as a funding vehicle for the Contracts at the date of this Agreement
and the Company so informs the Trust and the Underwriter prior to their signing
this Agreement (a list of such investment companies appearing on Schedule D to
this Agreement); or (d) the Trust or Underwriter consents to the use of such
other investment company.
1.11 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.10 and
Article IV of this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any affiliate of
any other party), and shall not be liable in the event that an error results
from any incorrect information or confirmations supplied by any other party. If
an error is made in reliance upon incorrect information or confirmations, any
amount required to make a Contract owner's account whole shall be borne by the
party who provided the incorrect information or confirmation.
ARTICLE II.
Obligations of the Parties; Fees and Expenses
2.1 The Trust shall prepare and be responsible for filing with the SEC
and any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration and qualification of its shares
of the Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance and
transfer of its shares.
2.2 The Trust or its designee shall provide the Company, free of
charge, with as many copies of the current prospectus (or prospectuses),
statements of additional information, annual and semi-annual reports and proxy
statements for the shares of the portfolios as the Company may reasonably
request for distribution to existing Contract owners whose Contracts are funded
by such shares, for non-marketing purposes. The Trust or its designee shall
provide the Company, at the Company's expense, with as many copies of the
current prospectus (or prospectuses) for the shares as the Company may
reasonably request for distribution to prospective purchasers of the Contracts.
If requested by the Company, the Trust or its designee shall provide such
documents in a "camera ready," digital or other form, and other assistance as is
reasonably necessary in order for the parties hereto once a year (or more
frequently if necessary) to have the prospectus for the Contracts and the
prospectus (or prospectuses) for the Trust shares printed together in one
document. The expenses of printing such a combined document for existing
Contract owners for non-marketing purposes will be apportioned between the
Company and the Trust in proportion to the number of pages of the Contract, the
Trust prospectus, and the prospectus of other funds, although such expenses
shall not exceed the regular costs for printing the Trust prospectus. The Trust
shall bear the cost of printing the Trust prospectus portion of such document
for distribution only to owners of existing Contracts, for non-marketing
purposes, funded by the Trust shares and the Company shall bear the expense of
printing the portion of such documents relating to the Separate Account. The
Company shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing Contracts
not funded by the shares.
2.3 The Company shall bear the costs of distributing proxy materials
(or similar materials such as voting solicitation instructions), prospectuses
and statements of additional information to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i)
solicit voting instructions from Contract owners; (ii) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares for which no instructions have been received in the same proportion
as Trust shares of such Portfolio for which instructions have been received; so
long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Trust shares held in any segregated asset account in
its own right, to the extent permitted by law.
2.5 Except as provided in section 2.7, the Company shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Templeton" or any other Trademark relating to the Trust or Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
the Company shall cease all use of any such name or mark as soon as reasonably
practicable.
2.6 Except as provided in section 2.7, the Trust or the Underwriter
shall not use any designation comprised in whole or in part of the name or mark
"COVA" or any other Trademark relating to the Company without prior written
consent, and upon termination of this Agreement for any reason, the Trust or the
Underwriter shall cease all use of such name or mark as soon as reasonably
practicable.
2.7 The Company shall furnish, or cause to be furnished to the Trust
or its designee, at least one complete copy of each registration statement,
prospectus, statement of additional information, retirement plan disclosure
information or other disclosure documents or similar information, as applicable
(collectively "disclosure documents"), as well as any report, solicitation for
voting instructions, sales literature and other promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts
prior to its first use. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee each piece of sales literature or other
promotional material in which the Trust or an Adviser is named, at least 15
Business Days prior to its use. No such material shall be used if the Trust or
its designee reasonably objects to such use within five Business Days after
receipt of such material. For purposes of this paragraph, "sales literature or
other promotional material" includes, but is not limited to, portions of the
following that use any Trademark related to the Trust or Underwriter or refer to
the Trust or affiliates of the Trust: advertisements (such as material published
or designed for use in a newspaper, magazine or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures or electronic communication or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
any other advertisement, sales literature or published article or electronic
communication), educational or training materials or other communications
distributed or made generally available to some or all agents or employees, and
disclosure documents, shareholder reports and proxy materials.
The Trust shall furnish or cause to be furnished, to the Company or
its designee each piece of sales literature or other promotional material (as
defined above) in which the Company is named, at least 15 Business Days prior to
its use. No such material shall be used if the Company or its designee
reasonably objects to such use within five Business Days after receipt of such
material.
2.8 The Company and its agents shall not give any information or make
any representations or statements on behalf of the Trust or concerning the
Trust, the Underwriter or an Adviser in connection with the sale of the
Contracts other than information or representations contained in and accurately
derived from the registration statement or prospectus for the Trust shares (as
such registration statement and prospectus may be amended or supplemented from
time to time), annual and semi-annual reports of the Trust, Trust-sponsored
proxy statements, or in sales literature or other promotional material approved
by the Trust or its designee, except as required by legal process or regulatory
authorities or with the written permission of the Trust or its designee.
2.9 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of disclosure
documents and annual and semi-annual reports pertaining to the Contracts.
2.10 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from disclosure documents for the Contracts
(as such disclosure documents may be amended or supplemented from time to time),
or in materials approved by the Company for distribution including sales
literature or other promotional materials, except as required by legal process
or regulatory authorities or with the written permission of the Company.
2.11 So long as, and to the extent that, the SEC interprets the 1940
Act to require pass-through voting privileges for Contract owners, the Company
will provide pass-through voting privileges to Contract owners whose Contract
values are invested, through the registered Accounts, in shares of one or more
Portfolios of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each registered Account,
the Company will vote shares of each Portfolio of the Trust held by a registered
Account and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares held by that registered Account
for which voting instructions are received. The Company and its agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without the prior written consent of
the Trust, which consent may be withheld in the Trust's sole discretion.
2.12 The Trust and Underwriter shall pay no fee or other compensation
to the Company under this Agreement except as provided on Schedule E, if
attached. Nevertheless, the Trust or the Underwriter or an affiliate may make
payments (other than pursuant to a Rule 12b-1 Plan) to the Company or its
affiliates or to the Contracts' underwriter in amounts agreed to by the
Underwriter in writing and such payments may be made out of fees otherwise
payable to the Underwriter or its affiliates, profits of the Underwriter or its
affiliates, or other resources available to the Underwriter or its affiliates.
ARTICLE III.
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Missouri and
that it has legally and validly established each Account as a segregated asset
account under such law as of the date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to each
Account, (1) the Company has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated asset account for
the Contracts, or (2) if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, the Company will make
every effort to maintain such exemption and will notify the Trust and the
Adviser immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to each
Contract, (1) the Contract will be registered under the 1933 Act, or (2) if the
Contract is exempt from registration under Section 3(a)(2) of the 1933 Act or
under Section 4(2) and Regulation D of the 1933 Act, the Company will make every
effort to maintain such exemption and will notify the Trust and the Adviser
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future. The Company further represents
and warrants that the Contracts will be sold by broker-dealers, or their
registered representatives, who are registered with the SEC under the 1934 Act
and who are members in good standing of the NASD; the Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Massachusetts and that it does
and will comply in all material respects with the 1940 Act and the rules and
regulations thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall register
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Code, and the rules and regulations thereunder, including without limitation
Treasury Regulation 1.817-5, and will notify the Company immediately upon having
a reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will in that event immediately take all reasonable steps to
adequately diversify the Portfolio to achieve compliance within the grace period
afforded by Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently qualified as
a "regulated investment company" under Subchapter M of the Code, that it will
maintain such qualification and will notify the Company immediately upon having
a reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
3.8 The Trust represents and warrants that should it ever desire to
make any payments to finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act, the Trustees, including a majority who are not "interested
persons" of the Trust under the 1940 Act ( "disinterested Trustees" ), will
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
3.9 The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less that the minimum
coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such
bond shall include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Trust and the Underwriter in the event that such coverage
no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized and
validly existing under applicable corporate law and that it is registered and
will during the term of this Agreement remain registered as an investment
adviser under the Advisers Act.
3.12 The Underwriter represents that it is a member in good standing of
the NASD and is registered as a broker-dealer with the SEC. The Underwriter
represents that it will sell and distribute the shares in accordance with all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act and the 1940 Act.
3.13 The Trust currently intends for one or more Classes to make
payments to finance its distribution expenses, including service fees, pursuant
to a Plan adopted under Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although
it may determine to discontinue such practice in the future. To the extent that
any Class of the Trust finances its distribution expenses pursuant to a Plan
adopted under Rule 12b-1, the Trust undertakes to comply with any then current
SEC and SEC staff interpretations concerning Rule 12b-1 or any successor
provisions.
ARTICLE IV.
Potential Conflicts
4.1 The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trust shall promptly inform the Company of any determination by the
Trustees that an irreconcilable material conflict exists and of the implications
thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its own expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such withdrawal should be implemented to a vote of all affected
Contract owners and, as appropriate, withdrawal of the assets of any appropriate
group (i.e. , annuity contract owners, life insurance policy owners, or variable
contract owners of one or more Participating Insurance Companies) that votes in
favor of such withdrawal, or offering to the affected Contract owners the option
of making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end of such
six (6) month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Trust be required to establish a new funding medium for the Contracts.
In the event that the Trustees determine that any proposed action does not
adequately remedy any irreconcilable material conflict, then the Company will
withdraw the Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable.
ARTICLE V.
Indemnification
5.1 Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the Trust and each
of its Trustees, officers, employees and agents and each person, if
any, who controls the Trust within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" and individually the
"Indemnified Party" for purposes of this Article V) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to which
the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses are
related to the sale or acquisition of Trust Shares or the Contracts
and
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a disclosure
document for the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company on behalf
of the Contracts or Accounts (or any amendment or supplement to
any of the foregoing) (collectively, "Company Documents" for the
purposes of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and was accurately derived from written information
furnished to the Company by or on behalf of the Trust for use in
Company Documents or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(ii) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2 (a)(i)) or
wrongful conduct of the Company or persons under its control,
with respect to the sale or acquisition of the Contracts or Trust
shares; or
(iii)arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents
as defined in Section 5.2(a)(i) or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance
upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
(b) The Company shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or
to the Trust or Underwriter, whichever is applicable. The Company
shall also not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure
to notify the Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
(c) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Trust shares or the
Contracts or the operation of the Trust.
5.2 Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the Company, the
underwriter of the Contracts and each of its directors and officers
and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually an "Indemnified Party" for purposes of this Section
5.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter, which consent shall not be unreasonably withheld) or
expenses (including the reasonable costs of investigating or defending
any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses") to which the Indemnified Parties may become subject under
any statute, at common law or otherwise, insofar as such Losses are
related to the sale or acquisition of the Trust's Shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
Registration Statement, prospectus or sales literature of the
Trust (or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") or arise out of or are
based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission of such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on behalf
of the Company for use in the Registration Statement or
prospectus for the Trust or in sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
disclosure documents or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or
wrongful conduct of the Trust, Adviser or Underwriter or persons
under their control, with respect to the sale or distribution of
the Contracts or Trust shares; or
(iii)arise out of any untrue statement or alleged untrue statement of
a material fact contained in a disclosure document or sales
literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the
Trust; or
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the qualification
representation specified in Section 3.7 of this Agreement and the
diversification requirements specified in Section 3.6 of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 5.2(b) and 5.2(c)
hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement or to each Company or the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Underwriter of any such claim shall
not relieve the Underwriter from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Underwriter
will be entitled to participate, at its own expense, in the defense
thereof. The Underwriter also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Underwriter to such party of the Underwriter's
election to assume the defense thereof, the Indemnified Party shall
bear the expenses of any additional counsel retained by it, and the
Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
5.3 Indemnification By The Trust
(a) The Trust agrees to indemnify and hold harmless the Company, and each
of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust, which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Trust, and arise out of
or result from any material breach of any representation and/or
warranty made by the Trust in this Agreement or arise out of or result
from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Section 5.3(b) and
5.3(c) hereof. It is understood and expressly stipulated that neither
the holders of shares of the Trust nor any Trustee, officer, agent or
employee of the Trust shall be personally liable hereunder, nor shall
any resort to be had to other private property for the satisfaction of
any claim or obligation hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement or to the Company, the Trust, the
Underwriter or each Account, whichever is applicable.
(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within
a reasonable time after the summons or other first legal process
giving information of the nature of the claims shall have been served
upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be
entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such
party of the Trust's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Trust will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the Trust of
the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the
operation of either the Account, or the sale or acquisition of share
of the Trust.
ARTICLE VI.
Termination
6.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios or any reason by ninety (90) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
6.2 This Agreement may be terminated immediately by either the Trust or the
Underwriter following consultation with the Trustees upon written notice to the
Company:
(a) if the Company notifies the Trust or the Underwriter that the
exemption from registration under Section 3(c) of the 1940 Act no
longer applies, or might not apply in the future, to the unregistered
Accounts, or that the exemption from registration under Section 4(2)
or Regulation D promulgated under the 1933 Act no longer applies or
might not apply in the future, to interests under the unregistered
Contracts; or
(b) if either one or both of the Trust or the Underwriter respectively,
shall determine, in their sole judgment exercised in good faith, that
the Company or the Contracts' underwriter has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(c) if the Company gives the Trust and the Underwriter the written notice
specified in Section 1.10 hereof and at the same time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, that any termination
under this Section 6.2(c) shall be effective forty-five (45) days
after the notice specified in Section 1.10 was given; or
(d) upon the Company's or the Contracts' underwriter's material breach of
any provision of this Agreement; but no termination shall be effective
under this section 6.2(d) until the Trust has stated in writing the
nature of the breach and the Company or the Contracts' underwriter has
been afforded a reasonable opportunity to cure the breach; or
(e) upon the institution of formal proceedings against the Company or the
Contracts' underwriter by the NASD, the SEC, or any state securities
or insurance department or any other regulatory body regarding the
Company's or the Contracts' underwriter's duties under this Agreement
or related to the sale of its Contracts.
6.3 This Agreement may be terminated immediately by the Company upon
written notice to the Trust and the Underwriter:
(a) if the Company shall determine, in its sole judgment exercised in good
faith, that either the Trust or the Underwriter has suffered a
material adverse change in its business, operations, financial
conditions or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(b) upon the Trust's or the Underwriter's material breach of any provision
of this Agreement; but no termination shall be effective under this
section 6.3(b) until the Company has specified the nature of the
breach in writing and Trust or the Underwriter has been afforded a
reasonable opportunity to cure the breach; or
(c) upon the institution of formal proceedings against the Trust or the
Underwriter by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body regarding the Trust's or the
Underwriter's duties under this Agreement or related to the sale of
its shares.
6.4 If this Agreement is terminated for any reason, except under
Article IV (Potential Conflicts) above, the Trust shall, at the option of the
Company, continue to make available additional shares of any Portfolio and
redeem shares of any Portfolio pursuant to all of the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement. If this Agreement is terminated pursuant to Article IV, the
provisions of Article IV shall govern.
6.5 The provisions of Articles II (Representations and Warranties) and
V (Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 6.4, except that the Trust and the Underwriter shall
have no further obligation to sell Trust shares with respect to Contracts issued
after termination.
6.6 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE VII.
Notices.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust or the Underwriter:
Templeton Variable Products Series Fund or
Franklin Templeton Distributors, Inc.
500 E. Broward Boulevard
Fort Lauderdale, FL 33394-3091
Attention: Barbara J. Green, Trust Secretary
WITH A COPY TO
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404
Attention: Karen L. Skidmore, Senior Corporate Counsel
If to the Company:
COVA Financial Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Attention: Ms. Shari Ruecker, Vice President,
Product Development Manager
ARTICLE VIII.
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Florida. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of such orders. Copies of any such orders
shall be promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
8.7 Each party hereto shall treat as confidential the names and
addresses of the Contract owners and all information reasonably identified as
confidential in writing by any other party hereto, and, except as permitted by
this Agreement or as required by legal process or regulatory authorities, shall
not disclose, disseminate, or utilize such names and addresses and other
confidential information until such time as they may come into the public
domain, without the express written consent of the affected party. Without
limiting the foregoing, no party hereto shall disclose any information that such
party has been advised is proprietary, except such information that such party
is required to disclose by any appropriate governmental authority (including,
without limitation, the SEC, the NASD, and state securities and insurance
regulators).
8.8 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.9 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in Section
1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute this Participation Agreement as of the date and
year first above written.
The Company:______________________________________
COVA Financial Life Insurance Company
By its authorized officer
By: ______________________________________________
Name:_____________________________________________
Title:____________________________________________
The Trust:________________________________________
Templeton Variable Products Series Fund
By its authorized officer
By:_______________________________________________
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
By its authorized officer
By: _______________________________________________
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant Secretary
SCHEDULE A
Separate Accounts of COVA Financial
Life Insurance Company
1. COVA Variable Annuity Account Five
Date Established: March 24, 1992
SEC Registration Number: 811-07060
SCHEDULE B
Trust Portfolios and Classes Available
--------------------------------------
Templeton Variable Products Series Adviser
- ---------------------------------- -------
Templeton Developing Markets Fund Templeton Asset Management Ltd.
-Class 1
Templeton International Fund Templeton Investment Counsel, Inc.
-Class 1
Mutual Shares Investments Fund Franklin Mutual Advisers, Inc.
-Class 1
SCHEDULE C
Variable Annuity Contracts
Issued by COVA Financial Life Insurance Company
Representative
Contract Form Number
-------- -----------
1. COVA Variable Annuity Account Five
Title: Custom Select Variable Annuity Form: XLCC-648
SEC Registration Number: 333-34817 XLCC-833
SCHEDULE D
Other Portfolios Available under the Contracts
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY AIM 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
Large Cap Research Portfolio
Developing Growth Portfolio
Mid Cap Value Portfolio
Lord Abbett Growth & Income Portfolio
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 OPPENHEIMER FUNDS, 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
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 29, 1999
Board of Directors
Cova Financial Life Insurance Company
4100 Newport Place Drive, Suite 840
Newport Beach, CA 92600
RE: Opinion of Counsel - Cova Variable Annuity Account Five
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-4 for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts (the "Contracts") to be issued by Cova
Financial Life Insurance Company and its separate account, Cova Variable Annuity
Account Five.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. Cova Variable Annuity Account Five is a Unit Investment Trust as that
term is defined in Section 4(2) of the Investment Company Act of 1940 (the
"Act"), and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by an Owner pursuant to a
Contract issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable law, such an Owner will have a
legally-issued, fully paid, non-assessable contractual interest under such
Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/RAYMOND A. O'HARA III
-----------------------------
Raymond A. O'Hara III
Consent of Independent Auditors
The Board of Directors
Cova Financial Life Insurance Company
We consent to the use of our reports on the financial statements of Cova
Financial Life Insurance Company (the Company) dated March 4, 1999, and on
the financial statements of the sub-accounts of Cova Variable Annuity
Account Five dated March 1, 1999, and to the reference to our firm under
the heading "Experts" in the Statement of Additional Information, in the
Post-Effective Amendment No. 4 to the Registration Statement (Form N-4,
No. 333-34817) of Cova Variable Annuity Account Five.
/s/KPMG LLP
KPMG LLP
Chicago, Illinois
April 29, 1999
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Standard 1 Year Return Data
As of 12/31/98
Date Transaction Amount Unit Unit BalanceTransaction Unit
Value Before Units Balance
Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 12/31/97 purchase 1,000.00 12.881799 0.0000 77.6289 77.6289
12/31/98 annual fee (1.05) 13.496510 77.6289 (0.0778) 77.5511
12/31/98 surrender fee (45.00) 13.496510 77.5511 (3.3342) 74.2169
GACC Money Market 12/31/97 purchase 1,000.00 10.667017 0.0000 93.7469 93.7469
12/31/98 annual fee (1.04) 11.109949 93.7469 (0.0936) 93.6533
12/31/98 surrender fee (45.00) 11.109949 93.6533 (4.0504) 89.6029
LA Developing Growth 12/31/97 purchase 1,000.00 10.527555 0.0000 94.9888 94.9888
12/31/98 annual fee (1.05) 11.067868 94.9888 (0.0949) 94.8939
12/31/98 surrender fee (45.00) 11.067868 94.8939 (4.0658) 90.8281
LA Mid-Cap Value 12/31/97 purchase 1,000.00 10.467957 0.0000 95.5296 95.5296
12/31/98 annual fee (1.00) 10.437956 95.5296 (0.0958) 95.4338
12/31/98 surrender fee (45.00) 10.437956 95.4338 (4.3112) 91.1226
JPM Quality Bond 12/31/97 purchase 1,000.00 11.155144 0.0000 89.6447 89.6447
12/31/98 annual fee (1.07) 11.914509 89.6447 (0.0898) 89.5549
12/31/98 surrender fee (45.00) 11.914509 89.5549 (3.7769) 85.7780
JPM Small Cap Stock 12/31/97 purchase 1,000.00 13.491493 0.0000 74.1208 74.1208
12/31/98 annual fee (0.93) 12.582885 74.1208 (0.0739) 74.0469
12/31/98 surrender fee (45.00) 12.582885 74.0469 (3.5763) 70.4706
JPM Large Cap Stock 12/31/97 purchase 1,000.00 14.889464 0.0000 67.1616 67.1616
12/31/98 annual fee (1.30) 19.428505 67.1616 (0.0669) 67.0947
12/31/98 surrender fee (45.00) 19.428505 67.0947 (2.3162) 64.7785
JPM Select Equity 12/31/97 purchase 1,000.00 14.053503 0.0000 71.1566 71.1566
12/31/98 annual fee (1.21) 16.987203 71.1566 (0.0712) 71.0854
12/31/98 surrender fee (45.00) 16.987203 71.0854 (2.6491) 68.4363
JPM International Equity 12/31/97 purchase 1,000.00 11.462436 0.0000 87.2415 87.2415
12/31/98 annual fee (1.12) 12.889314 87.2415 (0.0869) 87.1546
12/31/98 surrender fee (45.00) 12.889314 87.1546 (3.4913) 83.6633
Russell Multi-Style Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.27) 12.740123 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 12.740123 99.9003 (3.5321) 96.3682
Russell Aggressive Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.00) 10.001283 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 10.001283 99.9000 (4.4994) 95.4006
Russell Non-U.S. 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.12) 11.182808 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 11.182808 99.8998 (4.0240) 95.8758
Russell Core Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.631124 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.631124 99.9003 (4.2329) 95.6674
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.31) 13.075597 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 13.075597 99.8998 (3.4415) 96.4583
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.18) 11.800084 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 11.800084 99.9000 (3.8135) 96.0865
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.418467 100.0000 (0.0998) 99.9002
12/31/98 surrender fee (45.00) 11.418467 99.9002 (3.9410) 95.9592
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.46) 14.620511 100.0000 (0.0999) 99.9001
12/31/98 surrender fee (45.00) 14.620511 99.9001 (3.0779) 96.8222
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.80) 8.000583 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 8.000583 99.9000 (5.6246) 94.2754
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.93) 9.278784 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 9.278784 99.8998 (4.8498) 95.0500
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.17) 11.687795 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 11.687795 99.8999 (3.8502) 96.0497
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.88) 8.770360 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 8.770360 99.8997 (5.1309) 94.7688
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.634608 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.634608 99.9003 (4.2315) 95.6688
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.179142 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 12.179142 99.8998 (3.6948) 96.2050
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.21) 12.075079 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 12.075079 99.8998 (3.7267) 96.1731
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.32) 13.244101 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 13.244101 99.9003 (3.3977) 96.5026
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.66) 6.581757 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 6.581757 99.8997 (6.8371) 93.0626
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.99) 9.863111 100.0000 (0.1004) 99.8996
12/31/98 surrender fee (45.00) 9.863111 99.8996 (4.5625) 95.3371
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.07) 10.663503 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 10.663503 99.8997 (4.2200) 95.6797
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.244057 100.0000 (0.0996) 99.9004
12/31/98 surrender fee (45.00) 12.244057 99.9004 (3.6753) 96.2251
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.03) 10.340279 100.0000 (0.0996) 99.9004
12/31/98 surrender fee (45.00) 10.340279 99.9004 (4.3519) 95.5485
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.99) 9.907918 100.0000 (0.0999) 99.9001
12/31/98 surrender fee (45.00) 9.907918 99.9001 (4.5418) 95.3583
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.551643 100.0000 (0.1005) 99.8995
12/31/98 surrender fee (45.00) 10.551643 99.8995 (4.2647) 95.6348
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.02) 10.164797 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 10.164797 99.8997 (4.4270) 95.4727
Putnam Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.403244 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 11.403244 99.9000 (3.9462) 95.9538
Putnam New Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.05) 10.498075 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 10.498075 99.9000 (4.2865) 95.6135
Putnam Vista 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.18) 11.804097 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 11.804097 99.9000 (3.8122) 96.0878
Putnam International Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.17) 11.729428 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 11.729428 99.9003 (3.8365) 96.0638
Putnam International New Opportunities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.420772 100.0000 (0.0998) 99.9002
12/31/98 surrender fee (45.00) 11.420772 99.9002 (3.9402) 95.9600
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,047.72 1,046.67
1,046.67 1,001.67
0.00 1,000.00
1,041.52 1,040.48
1,040.48 995.48
0.00 1,000.00
1,051.32 1,050.27
1,050.27 1,005.27
0.00 1,000.00
997.13 996.13
996.13 951.13
0.00 1,000.00
1,068.07 1,067.00
1,067.00 1,022.00
0.00 1,000.00
932.65 931.72
931.72 886.72
0.00 1,000.00
1,304.85 1,303.55
1,303.55 1,258.55
0.00 1,000.00
1,208.75 1,207.54
1,207.54 1,162.54
0.00 1,000.00
1,124.48 1,123.36
1,123.36 1,078.36
0.00 1,000.00
1,274.01 1,272.74
1,272.74 1,227.74
0.00 1,000.00
1,000.13 999.13
999.13 954.13
0.00 1,000.00
1,118.28 1,117.16
1,117.16 1,072.16
0.00 1,000.00
1,063.11 1,062.05
1,062.05 1,017.05
0.00 1,000.00
1,307.56 1,306.25
1,306.25 1,261.25
0.00 1,000.00
1,180.01 1,178.83
1,178.83 1,133.83
0.00 1,000.00
1,141.85 1,140.71
1,140.71 1,095.71
0.00 1,000.00
1,462.05 1,460.59
1,460.59 1,415.59
0.00 1,000.00
800.06 799.26
799.26 754.26
0.00 1,000.00
927.88 926.95
926.95 881.95
0.00 1,000.00
1,168.78 1,167.61
1,167.61 1,122.61
0.00 1,000.00
877.04 876.16
876.16 831.16
0.00 1,000.00
1,063.46 1,062.40
1,062.40 1,017.40
0.00 1,000.00
1,217.91 1,216.69
1,216.69 1,171.69
0.00 1,000.00
1,207.51 1,206.30
1,206.30 1,161.30
0.00 1,000.00
1,324.41 1,323.09
1,323.09 1,278.09
0.00 1,000.00
658.18 657.52
657.52 612.52
0.00 1,000.00
986.31 985.32
985.32 940.32
0.00 1,000.00
1,066.35 1,065.28
1,065.28 1,020.28
0.00 1,000.00
1,224.41 1,223.19
1,223.19 1,178.19
0.00 1,000.00
1,034.03 1,033.00
1,033.00 988.00
0.00 1,000.00
990.79 989.80
989.80 944.80
0.00 1,000.00
1,055.16 1,054.10
1,054.10 1,009.10
0.00 1,000.00
1,016.48 1,015.46
1,015.46 970.46
0.00 1,000.00
1,140.32 1,139.18
1,139.18 1,094.18
0.00 1,000.00
1,049.81 1,048.76
1,048.76 1,003.76
0.00 1,000.00
1,180.41 1,179.23
1,179.23 1,134.23
0.00 1,000.00
1,172.94 1,171.77
1,171.77 1,126.77
0.00 1,000.00
1,142.08 1,140.94
1,140.94 1,095.94
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Standard 1 Year Returns
As of 12/31/98
Total Account 12/31/98 Initial Inception Days Since
Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 0.17% 1,001.67 13.496510 1,000.00 5/20/96 955
GACC Money Market -0.45% 995.48 11.109949 1,000.00 12/4/97 392
LA Developing Growth 0.53% 1,005.27 11.067868 1,000.00 11/7/97 419
LA Mid-Cap Value -4.89% 951.13 10.437956 1,000.00 11/7/97 419
JPM Quality Bond 2.20% 1,022.00 11.914509 1,000.00 5/20/96 955
JPM Small Cap Stock -11.33% 886.72 12.582885 1,000.00 5/15/96 960
JPM Large Cap Stock 25.86% 1,258.55 19.428505 1,000.00 5/16/96 959
JPM Select Equity 16.25% 1,162.54 16.987203 1,000.00 5/15/96 960
JPM International Equity 7.84% 1,078.36 12.889314 1,000.00 5/14/96 961
Russell Multi-Style Equity 22.77% 1,227.74 12.740123 1,000.00 12/31/97 365
Russell Aggressive Equity -4.59% 954.13 10.001283 1,000.00 12/31/97 365
Russell Non-U.S. 7.22% 1,072.16 11.182808 1,000.00 12/31/97 365
Russell Core Bond 1.71% 1,017.05 10.631124 1,000.00 12/31/97 365
AIM Value 26.13% 1,261.25 13.075597 1,000.00 12/31/97 365
AIM Capital Appreciation 13.38% 1,133.83 11.800084 1,000.00 12/31/97 365
AIM International Equity 9.57% 1,095.71 11.418467 1,000.00 12/31/97 365
Alliance Premier Growth 41.56% 1,415.59 14.620511 1,000.00 12/31/97 365
Alliance Real Estate Investment -24.57% 754.26 8.000583 1,000.00 12/31/97 365
Liberty Newport Tiger -11.81% 881.95 9.278784 1,000.00 12/31/97 365
Kemper Small Cap Growth 12.26% 1,122.61 11.687795 1,000.00 12/31/97 365
Kemper Small Cap Value -16.88% 831.16 8.770360 1,000.00 12/31/97 365
Kemper Government Securities 1.74% 1,017.40 10.634608 1,000.00 12/31/97 365
MFS Research 17.17% 1,171.69 12.179142 1,000.00 12/31/97 365
MFS Growth with Income 16.13% 1,161.30 12.075079 1,000.00 12/31/97 365
MFS Emerging Growth 27.81% 1,278.09 13.244101 1,000.00 12/31/97 365
MFS F&C Emerging Markets -38.75% 612.52 6.581757 1,000.00 12/31/97 365
MFS High Income -5.97% 940.32 9.863111 1,000.00 12/31/97 365
MFS World Governments 2.03% 1,020.28 10.663503 1,000.00 12/31/97 365
Oppenheimer Growth 17.82% 1,178.19 12.244057 1,000.00 12/31/97 365
Oppenheimer Growth & Income -1.20% 988.00 10.340279 1,000.00 12/31/97 365
Oppenheimer High Income -5.52% 944.80 9.907918 1,000.00 12/31/97 365
Oppenheimer Bond 0.91% 1,009.10 10.551643 1,000.00 12/31/97 365
Oppenheimer Strategic Bond -2.95% 970.46 10.164797 1,000.00 12/31/97 365
Putnam Growth & Income 9.42% 1,094.18 11.403244 1,000.00 12/31/97 365
Putman New Value 0.38% 1,003.76 10.498075 1,000.00 12/31/97 365
Putnam Vista 13.42% 1,134.23 11.804097 1,000.00 12/31/97 365
Putnam International Growth 12.68% 1,126.77 11.729428 1,000.00 12/31/97 365
Putnam Int'l New Opportunities 9.59% 1,095.94 11.420772 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Standard Inception to Date Return Data
As of 12/31/98
Date Transaction Amount Unit Units Transaction Units
Value Before Units After
Transaction Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 5/20/96 purchase 1,000.00 10.146329 0.0000 98.5578 98.5578
5/20/97 annual fee (1.16) 11.758378 98.5578 (0.0987) 98.4591
5/20/98 annual fee (1.33) 13.473825 98.4591 (0.0987) 98.3604
12/31/98 annual fee (1.33) 13.496510 98.3604 (0.0985) 98.2619
12/31/98 surrender fee (45.00) 13.496510 98.2619 (3.3342) 94.9277
GACC Money Market 12/4/97 purchase 1,000.00 10.630827 0.0000 94.0661 94.0661
12/4/98 annual fee (1.04) 11.081985 94.0661 (0.0938) 93.9723
12/31/98 annual fee (1.04) 11.109949 93.9723 (0.0936) 93.8787
12/31/98 surrender fee (45.00) 11.109949 93.8787 (4.0504) 89.8283
LA Developing Growth 11/7/97 purchase 1,000.00 10.830809 0.0000 92.3292 92.3292
11/9/98 annual fee (0.92) 9.967264 92.3292 (0.0923) 92.2369
12/31/98 annual fee (1.02) 11.067868 92.2369 (0.0922) 92.1447
12/31/98 surrender fee (45.00) 11.067868 92.1447 (4.0658) 88.0789
LA Large Cap Research 2/17/98 purchase 1,000.00 10.756077 0.0000 92.9707 92.9707
12/31/98 annual fee (1.10) 11.825638 92.9707 (0.0930) 92.8777
12/31/98 surrender fee (50.00) 11.825638 92.8777 (4.2281) 88.6496
LA Mid-Cap Value 11/7/97 purchase 1,000.00 10.048781 0.0000 99.5146 99.5146
11/9/98 annual fee (1.03) 10.358485 99.5146 (0.0994) 99.4152
12/31/98 annual fee (1.04) 10.437956 99.4152 (0.0996) 99.3156
12/31/98 surrender fee (45.00) 10.437956 99.3156 (4.3112) 95.0044
JPM Quality Bond 5/20/96 purchase 1,000.00 9.951189 0.0000 100.4905 100.4905
5/20/97 annual fee (1.05) 10.440361 100.4905 (0.1006) 100.3899
5/20/98 annual fee (1.15) 11.413235 100.3899 (0.1008) 100.2891
12/31/98 annual fee (1.19) 11.914509 100.2891 (0.0999) 100.1892
12/31/98 surrender fee (45.00) 11.914509 100.1892 (3.7769) 96.4123
JPM Small Cap Stock 5/15/96 purchase 1,000.00 10.905675 0.0000 91.6954 91.6954
5/15/97 annual fee (1.01) 10.995232 91.6954 (0.0919) 91.6035
5/15/98 annual fee (1.35) 14.699217 91.6035 (0.0918) 91.5117
12/31/98 annual fee (1.15) 12.582885 91.5117 (0.0914) 91.4203
12/31/98 surrender fee (45.00) 12.582885 91.4203 (3.5763) 87.8440
JPM Large Cap Stock 5/16/96 purchase 1,000.00 10.155238 0.0000 98.4714 98.4714
5/16/97 annual fee (1.26) 12.753841 98.4714 (0.0988) 98.3726
5/18/98 annual fee (1.71) 17.363858 98.3726 (0.0985) 98.2741
12/31/98 annual fee (1.91) 19.428505 98.2741 (0.0983) 98.1758
12/31/98 surrender fee (45.00) 19.428505 98.1758 (2.3162) 95.8596
JPM Select Equity 5/15/96 purchase 1,000.00 10.151958 0.0000 98.5032 98.5032
5/15/97 annual fee (1.19) 12.101835 98.5032 (0.0983) 98.4049
5/15/98 annual fee (1.58) 16.090569 98.4049 (0.0982) 98.3067
12/31/98 annual fee (1.67) 16.987203 98.3067 (0.0983) 98.2084
12/31/98 surrender fee (45.00) 16.987203 98.2084 (2.6491) 95.5593
JPM International Equity 5/14/96 purchase 1,000.00 10.098675 0.0000 99.0229 99.0229
5/14/97 annual fee (1.16) 11.696691 99.0229 (0.0992) 98.9237
5/14/98 annual fee (1.30) 13.129981 98.9237 (0.0990) 98.8247
12/31/98 annual fee (1.27) 12.889314 98.8247 (0.0985) 98.7262
12/31/98 surrender fee (45.00) 12.889314 98.7262 (3.4913) 95.2349
Russell Multi-Style Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.27) 12.740123 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 12.740123 99.9003 (3.5321) 96.3682
Russell Aggressive Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.00) 10.001283 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 10.001283 99.9000 (4.4994) 95.4006
Russell Non-U.S. 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.12) 11.182808 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 11.182808 99.8998 (4.0240) 95.8758
Russell Core Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.631124 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.631124 99.9003 (4.2329) 95.6674
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.31) 13.075597 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 13.075597 99.8998 (3.4415) 96.4583
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.18) 11.800084 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 11.800084 99.9000 (3.8135) 96.0865
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.418467 100.0000 (0.0998) 99.9002
12/31/98 surrender fee (45.00) 11.418467 99.9002 (3.9410) 95.9592
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.46) 14.620511 100.0000 (0.0999) 99.9001
12/31/98 surrender fee (45.00) 14.620511 99.9001 (3.0779) 96.8222
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.80) 8.000583 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 8.000583 99.9000 (5.6246) 94.2754
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.93) 9.278784 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 9.278784 99.8998 (4.8498) 95.0500
Goldman Sachs Growth & Income 3/31/98 purchase 1,000.00 11.212646 0.0000 89.1850 89.1850
12/31/98 annual fee (0.88) 9.911702 89.1850 (0.0888) 89.0962
12/31/98 surrender fee (50.00) 9.911702 89.0962 (5.0445) 84.0517
Goldman Sachs International Equity 3/31/98 purchase 1,000.00 11.199710 0.0000 89.2880 89.2880
12/31/98 annual fee (1.02) 11.416783 89.2880 (0.0893) 89.1987
12/31/98 surrender fee (50.00) 11.416783 89.1987 (4.3795) 84.8192
Goldman Sachs Global Income 3/31/98 purchase 1,000.00 10.152000 0.0000 98.5028 98.5028
12/31/98 annual fee (1.07) 10.815310 98.5028 (0.0989) 98.4039
12/31/98 surrender fee (50.00) 10.815310 98.4039 (4.6231) 93.7808
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.17) 11.687795 100.0000 (0.1001) 99.8999
12/31/98 surrender fee (45.00) 11.687795 99.8999 (3.8502) 96.0497
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.88) 8.770360 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 8.770360 99.8997 (5.1309) 94.7688
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.634608 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 10.634608 99.9003 (4.2315) 95.6688
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.179142 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 12.179142 99.8998 (3.6948) 96.2050
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.21) 12.075079 100.0000 (0.1002) 99.8998
12/31/98 surrender fee (45.00) 12.075079 99.8998 (3.7267) 96.1731
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.32) 13.244101 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 13.244101 99.9003 (3.3977) 96.5026
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.66) 6.581757 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 6.581757 99.8997 (6.8371) 93.0626
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.99) 9.863111 100.0000 (0.1004) 99.8996
12/31/98 surrender fee (45.00) 9.863111 99.8996 (4.5625) 95.3371
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.07) 10.663503 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 10.663503 99.8997 (4.2200) 95.6797
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.22) 12.244057 100.0000 (0.0996) 99.9004
12/31/98 surrender fee (45.00) 12.244057 99.9004 (3.6753) 96.2251
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.03) 10.340279 100.0000 (0.0996) 99.9004
12/31/98 surrender fee (45.00) 10.340279 99.9004 (4.3519) 95.5485
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (0.99) 9.907918 100.0000 (0.0999) 99.9001
12/31/98 surrender fee (45.00) 9.907918 99.9001 (4.5418) 95.3583
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.06) 10.551643 100.0000 (0.1005) 99.8995
12/31/98 surrender fee (45.00) 10.551643 99.8995 (4.2647) 95.6348
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.02) 10.164797 100.0000 (0.1003) 99.8997
12/31/98 surrender fee (45.00) 10.164797 99.8997 (4.4270) 95.4727
Putnam Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.403244 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 11.403244 99.9000 (3.9462) 95.9538
Putnam New Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.05) 10.498075 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 10.498075 99.9000 (4.2865) 95.6135
Putnam Vista 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.18) 11.804097 100.0000 (0.1000) 99.9000
12/31/98 surrender fee (45.00) 11.804097 99.9000 (3.8122) 96.0878
Putnam International Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.17) 11.729428 100.0000 (0.0997) 99.9003
12/31/98 surrender fee (45.00) 11.729428 99.9003 (3.8365) 96.0638
Putnam International New Opportunities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee (1.14) 11.420772 100.0000 (0.0998) 99.9002
12/31/98 surrender fee (45.00) 11.420772 99.9002 (3.9402) 95.9600
Templeton International 9/21/98 purchase 1,000.00 7.893131 0.0000 126.6924 126.6924
12/31/98 annual fee (1.16) 9.149729 126.6924 (0.1268) 126.5656
12/31/98 surrender fee (50.00) 9.149729 126.5656 (5.4646) 121.1010
Templeton Developing Markets 9/21/98 purchase 1,000.00 5.645520 0.0000 177.1316 177.1316
12/31/98 annual fee (1.34) 7.557531 177.1316 (0.1773) 176.9543
12/31/98 surrender fee (50.00) 7.557531 176.9543 (6.6159) 170.3384
Mutual Shares Investments 9/21/98 purchase 1,000.00 8.643412 0.0000 115.6951 115.6951
12/31/98 annual fee (1.12) 9.646506 115.6951 (0.1161) 115.5790
12/31/98 surrender fee (50.00) 9.646506 115.5790 (5.1832) 110.3958
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,158.88 1,157.72
1,326.62 1,325.29
1,327.52 1,326.19
1,326.19 1,281.19
0.00 1,000.00
1,042.44 1,041.40
1,044.03 1,042.99
1,042.99 997.99
0.00 1,000.00
920.27 919.35
1,020.87 1,019.85
1,019.85 974.85
0.00 1,000.00
1,099.44 1,098.34
1,098.34 1,048.34
0.00 1,000.00
1,030.82 1,029.79
1,037.69 1,036.65
1,036.65 991.65
0.00 1,000.00
1,049.16 1,048.11
1,145.77 1,144.62
1,194.90 1,193.71
1,193.71 1,148.71
0.00 1,000.00
1,008.21 1,007.20
1,346.50 1,345.15
1,151.48 1,150.33
1,150.33 1,105.33
0.00 1,000.00
1,255.89 1,254.63
1,708.13 1,706.42
1,909.32 1,907.41
1,907.41 1,862.41
0.00 1,000.00
1,192.07 1,190.88
1,583.39 1,581.81
1,669.96 1,668.29
1,668.29 1,623.29
0.00 1,000.00
1,158.24 1,157.08
1,298.87 1,297.57
1,273.78 1,272.51
1,272.51 1,227.51
0.00 1,000.00
1,274.01 1,272.74
1,272.74 1,227.74
0.00 1,000.00
1,000.13 999.13
999.13 954.13
0.00 1,000.00
1,118.28 1,117.16
1,117.16 1,072.16
0.00 1,000.00
1,063.11 1,062.05
1,062.05 1,017.05
0.00 1,000.00
1,307.56 1,306.25
1,306.25 1,261.25
0.00 1,000.00
1,180.01 1,178.83
1,178.83 1,133.83
0.00 1,000.00
1,141.85 1,140.71
1,140.71 1,095.71
0.00 1,000.00
1,462.05 1,460.59
1,460.59 1,415.59
0.00 1,000.00
800.06 799.26
799.26 754.26
0.00 1,000.00
927.88 926.95
926.95 881.95
0.00 1,000.00
883.98 883.09
883.09 833.10
0.00 1,000.00
1,019.38 1,018.36
1,018.36 968.36
0.00 1,000.00
1,065.34 1,064.27
1,064.27 1,014.27
0.00 1,000.00
1,168.78 1,167.61
1,167.61 1,122.61
0.00 1,000.00
877.04 876.16
876.16 831.16
0.00 1,000.00
1,063.46 1,062.40
1,062.40 1,017.40
0.00 1,000.00
1,217.91 1,216.69
1,216.69 1,171.69
0.00 1,000.00
1,207.51 1,206.30
1,206.30 1,161.30
0.00 1,000.00
1,324.41 1,323.09
1,323.09 1,278.09
0.00 1,000.00
658.18 657.52
657.52 612.52
0.00 1,000.00
986.31 985.32
985.32 940.32
0.00 1,000.00
1,066.35 1,065.28
1,065.28 1,020.28
0.00 1,000.00
1,224.41 1,223.19
1,223.19 1,178.19
0.00 1,000.00
1,034.03 1,033.00
1,033.00 988.00
0.00 1,000.00
990.79 989.80
989.80 944.80
0.00 1,000.00
1,055.16 1,054.10
1,054.10 1,009.10
0.00 1,000.00
1,016.48 1,015.46
1,015.46 970.46
0.00 1,000.00
1,140.32 1,139.18
1,139.18 1,094.18
0.00 1,000.00
1,049.81 1,048.76
1,048.76 1,003.76
0.00 1,000.00
1,180.41 1,179.23
1,179.23 1,134.23
0.00 1,000.00
1,172.94 1,171.77
1,171.77 1,126.77
0.00 1,000.00
1,142.08 1,140.94
1,140.94 1,095.94
0.00 1,000.00
1,159.20 1,158.04
1,158.04 1,108.04
0.00 1,000.00
1,338.68 1,337.34
1,337.34 1,287.34
0.00 1,000.00
1,116.05 1,114.93
1,114.93 1,064.93
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Standard Inception to Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 9.92% 28.12% 1,281.19 13.496510 1,000.00 5/20/96 956
GACC Money Market -0.19% -0.20% 997.99 11.109949 1,000.00 12/4/97 392
LA Developing Growth -2.19% -2.52% 974.85 11.067868 1,000.00 11/7/97 420
LA Large Cap Research 4.83% 1,048.34 11.825638 1,000.00 2/17/98 318
LA Mid-Cap Value -0.73% -0.83% 991.65 10.437956 1,000.00 11/7/97 420
JPM Quality Bond 5.44% 14.87% 1,148.71 11.914509 1,000.00 5/20/96 956
JPM Small Cap Stock 3.88% 10.53% 1,105.33 12.582885 1,000.00 5/15/96 961
JPM Large Cap Stock 26.67% 86.24% 1,862.41 19.428505 1,000.00 5/16/96 960
JPM Select Equity 20.20% 62.33% 1,623.29 16.987203 1,000.00 5/15/96 961
JPM International Equity 8.09% 22.75% 1,227.51 12.889314 1,000.00 5/14/96 962
Russell Multi-Style Equity 22.77% 22.77% 1,227.74 12.740123 1,000.00 12/31/97 365
Russell Aggressive Equity -4.59% -4.59% 954.13 10.001283 1,000.00 12/31/97 365
Russell Non-U.S. 7.22% 7.22% 1,072.16 11.182808 1,000.00 12/31/97 365
Russell Core Bond 1.71% 1.71% 1,017.05 10.631124 1,000.00 12/31/97 365
AIM Value 26.13% 26.13% 1,261.25 13.075597 1,000.00 12/31/97 365
AIM Capital Appreciation 13.38% 13.38% 1,133.83 11.800084 1,000.00 12/31/97 365
AIM International Equity 9.57% 9.57% 1,095.71 11.418467 1,000.00 12/31/97 365
Alliance Premier Growth 41.56% 41.56% 1,415.59 14.620511 1,000.00 12/31/97 365
Alliance Real Estate Investment -24.57% -24.57% 754.26 8.000583 1,000.00 12/31/97 365
Liberty Newport Tiger -11.81% -11.81% 881.95 9.278784 1,000.00 12/31/97 365
Goldman Sachs Growth & Income -16.69% 833.10 9.911702 1,000.00 3/31/98 275
Goldman Sachs International Equity -3.16% 968.36 11.416783 1,000.00 3/31/98 275
Goldman Sachs Global Income 1.43% 1,014.27 10.815310 1,000.00 3/31/98 275
Kemper Small Cap Growth 12.26% 12.26% 1,122.61 11.687795 1,000.00 12/31/97 365
Kemper Small Cap Value -16.88% -16.88% 831.16 8.770360 1,000.00 12/31/97 365
Kemper Government Securities 1.74% 1.74% 1,017.40 10.634608 1,000.00 12/31/97 365
MFS Research 17.17% 17.17% 1,171.69 12.179142 1,000.00 12/31/97 365
MFS Growth with Income 16.13% 16.13% 1,161.30 12.075079 1,000.00 12/31/97 365
MFS Emerging Growth 27.81% 27.81% 1,278.09 13.244101 1,000.00 12/31/97 365
MFS F&C Emerging Markets -38.75% -38.75% 612.52 6.581757 1,000.00 12/31/97 365
MFS High Income -5.97% -5.97% 940.32 9.863111 1,000.00 12/31/97 365
MFS World Governments 2.03% 2.03% 1,020.28 10.663503 1,000.00 12/31/97 365
Oppenheimer Growth 17.82% 17.82% 1,178.19 12.244057 1,000.00 12/31/97 365
Oppenheimer Growth & Income -1.20% -1.20% 988.00 10.340279 1,000.00 12/31/97 365
Oppenheimer High Income -5.52% -5.52% 944.80 9.907918 1,000.00 12/31/97 365
Oppenheimer Bond 0.91% 0.91% 1,009.10 10.551643 1,000.00 12/31/97 365
Oppenheimer Strategic Bond -2.95% -2.95% 970.46 10.164797 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Standard Inception to Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Putnam Growth & Income 9.42% 9.42% 1,094.18 11.403244 1,000.00 12/31/97 365
Putman New Value 0.38% 0.38% 1,003.76 10.498075 1,000.00 12/31/97 365
Putnam Vista 13.42% 13.42% 1,134.23 11.804097 1,000.00 12/31/97 365
Putnam International Growth 12.68% 12.68% 1,126.77 11.729428 1,000.00 12/31/97 365
Putnam Int'l New Opportunities 9.59% 9.59% 1,095.94 11.420772 1,000.00 12/31/97 365
Templeton International 10.80% 1,108.04 9.149729 1,000.00 9/21/98 101
Templeton Developing Markets 28.73% 1,287.34 7.557531 1,000.00 9/21/98 101
Mutual Shares Investments 6.49% 1,064.93 9.646506 1,000.00 9/21/98 101
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Non-Standard 1 Year Return Data
As of 12/31/98
Date Transaction Amount Unit Units Transaction Units
Value Before Units After
Transaction Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 12/31/97 purchase 1,000.00 12.881799 0.0000 77.6289 77.6289
12/31/98 annual fee 13.496510 77.6289 0.0000 77.6289
12/31/98 surrender fee 13.496510 77.6289 0.0000 77.6289
GACC Money Market 12/31/97 purchase 1,000.00 10.667017 0.0000 93.7469 93.7469
12/31/98 annual fee 11.109949 93.7469 0.0000 93.7469
12/31/98 surrender fee 11.109949 93.7469 0.0000 93.7469
LA Developing Growth 12/31/97 purchase 1,000.00 10.527555 0.0000 94.9888 94.9888
12/31/98 annual fee 11.067868 94.9888 0.0000 94.9888
12/31/98 surrender fee 11.067868 94.9888 0.0000 94.9888
LA Mid-Cap Value 12/31/97 purchase 1,000.00 10.467957 0.0000 95.5296 95.5296
12/31/98 annual fee 10.437956 95.5296 0.0000 95.5296
12/31/98 surrender fee 10.437956 95.5296 0.0000 95.5296
JPM Quality Bond 12/31/97 purchase 1,000.00 11.155144 0.0000 89.6447 89.6447
12/31/98 annual fee 11.914509 89.6447 0.0000 89.6447
12/31/98 surrender fee 11.914509 89.6447 0.0000 89.6447
JPM Small Cap Stock 12/31/97 purchase 1,000.00 13.491493 0.0000 74.1208 74.1208
12/31/98 annual fee 12.582885 74.1208 0.0000 74.1208
12/31/98 surrender fee 12.582885 74.1208 0.0000 74.1208
JPM Large Cap Stock 12/31/97 purchase 1,000.00 14.889464 0.0000 67.1616 67.1616
12/31/98 annual fee 19.428505 67.1616 0.0000 67.1616
12/31/98 surrender fee 19.428505 67.1616 0.0000 67.1616
JPM Select Equity 12/31/97 purchase 1,000.00 14.053503 0.0000 71.1566 71.1566
12/31/98 annual fee 16.987203 71.1566 0.0000 71.1566
12/31/98 surrender fee 16.987203 71.1566 0.0000 71.1566
JPM International Equity 12/31/97 purchase 1,000.00 11.462436 0.0000 87.2415 87.2415
12/31/98 annual fee 12.889314 87.2415 0.0000 87.2415
12/31/98 surrender fee 12.889314 87.2415 0.0000 87.2415
Russell Multi-Style Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.740123 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.740123 100.0000 0.0000 100.0000
Russell Aggressive Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.001283 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.001283 100.0000 0.0000 100.0000
Russell Non-U.S. 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.182808 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.182808 100.0000 0.0000 100.0000
Russell Core Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.631124 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.631124 100.0000 0.0000 100.0000
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.075597 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.075597 100.0000 0.0000 100.0000
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.800084 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.800084 100.0000 0.0000 100.0000
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.418467 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.418467 100.0000 0.0000 100.0000
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 14.620511 100.0000 0.0000 100.0000
12/31/98 surrender fee 14.620511 100.0000 0.0000 100.0000
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 8.000583 100.0000 0.0000 100.0000
12/31/98 surrender fee 8.000583 100.0000 0.0000 100.0000
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.278784 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.278784 100.0000 0.0000 100.0000
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.687795 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.687795 100.0000 0.0000 100.0000
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 8.770360 100.0000 0.0000 100.0000
12/31/98 surrender fee 8.770360 100.0000 0.0000 100.0000
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.634608 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.634608 100.0000 0.0000 100.0000
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.179142 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.179142 100.0000 0.0000 100.0000
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.075079 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.075079 100.0000 0.0000 100.0000
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.244101 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.244101 100.0000 0.0000 100.0000
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 6.581757 100.0000 0.0000 100.0000
12/31/98 surrender fee 6.581757 100.0000 0.0000 100.0000
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.863111 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.863111 100.0000 0.0000 100.0000
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.663503 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.663503 100.0000 0.0000 100.0000
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.244057 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.244057 100.0000 0.0000 100.0000
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.340279 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.340279 100.0000 0.0000 100.0000
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.907918 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.907918 100.0000 0.0000 100.0000
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.551643 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.551643 100.0000 0.0000 100.0000
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.164797 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.164797 100.0000 0.0000 100.0000
Putnam Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.403244 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.403244 100.0000 0.0000 100.0000
Putnam New Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.498075 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.498075 100.0000 0.0000 100.0000
Putnam Vista 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.804097 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.804097 100.0000 0.0000 100.0000
Putnam International Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.729428 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.729428 100.0000 0.0000 100.0000
Putnam International New Opportunities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.420772 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.420772 100.0000 0.0000 100.0000
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,047.72 1,047.72
1,047.72 1,047.72
0.00 1,000.00
1,041.52 1,041.52
1,041.52 1,041.52
0.00 1,000.00
1,051.32 1,051.32
1,051.32 1,051.32
0.00 1,000.00
997.13 997.13
997.13 997.13
0.00 1,000.00
1,068.07 1,068.07
1,068.07 1,068.07
0.00 1,000.00
932.65 932.65
932.65 932.65
0.00 1,000.00
1,304.85 1,304.85
1,304.85 1,304.85
0.00 1,000.00
1,208.75 1,208.75
1,208.75 1,208.75
0.00 1,000.00
1,124.48 1,124.48
1,124.48 1,124.48
0.00 1,000.00
1,274.01 1,274.01
1,274.01 1,274.01
0.00 1,000.00
1,000.13 1,000.13
1,000.13 1,000.13
0.00 1,000.00
1,118.28 1,118.28
1,118.28 1,118.28
0.00 1,000.00
1,063.11 1,063.11
1,063.11 1,063.11
0.00 1,000.00
1,307.56 1,307.56
1,307.56 1,307.56
0.00 1,000.00
1,180.01 1,180.01
1,180.01 1,180.01
0.00 1,000.00
1,141.85 1,141.85
1,141.85 1,141.85
0.00 1,000.00
1,462.05 1,462.05
1,462.05 1,462.05
0.00 1,000.00
800.06 800.06
800.06 800.06
0.00 1,000.00
927.88 927.88
927.88 927.88
0.00 1,000.00
1,168.78 1,168.78
1,168.78 1,168.78
0.00 1,000.00
877.04 877.04
877.04 877.04
0.00 1,000.00
1,063.46 1,063.46
1,063.46 1,063.46
0.00 1,000.00
1,217.91 1,217.91
1,217.91 1,217.91
0.00 1,000.00
1,207.51 1,207.51
1,207.51 1,207.51
0.00 1,000.00
1,324.41 1,324.41
1,324.41 1,324.41
0.00 1,000.00
658.18 658.18
658.18 658.18
0.00 1,000.00
986.31 986.31
986.31 986.31
0.00 1,000.00
1,066.35 1,066.35
1,066.35 1,066.35
0.00 1,000.00
1,224.41 1,224.41
1,224.41 1,224.41
0.00 1,000.00
1,034.03 1,034.03
1,034.03 1,034.03
0.00 1,000.00
990.79 990.79
990.79 990.79
0.00 1,000.00
1,055.16 1,055.16
1,055.16 1,055.16
0.00 1,000.00
1,016.48 1,016.48
1,016.48 1,016.48
0.00 1,000.00
1,140.32 1,140.32
1,140.32 1,140.32
0.00 1,000.00
1,049.81 1,049.81
1,049.81 1,049.81
0.00 1,000.00
1,180.41 1,180.41
1,180.41 1,180.41
0.00 1,000.00
1,172.94 1,172.94
1,172.94 1,172.94
0.00 1,000.00
1,142.08 1,142.08
1,142.08 1,142.08
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Non-Standard 1 Year Returns
As of December 31, 1998
Total Account 12/31/98 Initial Inception Days Since
Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 4.77% 1,047.72 13.496510 1,000.00 5/20/96 956
GACC Money Market 4.15% 1,041.52 11.109949 1,000.00 12/4/97 392
LA Developing Growth 5.13% 1,051.32 11.067868 1,000.00 11/7/97 420
LA Mid-Cap Value -0.29% 997.13 10.437956 1,000.00 11/7/97 420
JPM Quality Bond 6.81% 1,068.07 11.914509 1,000.00 5/20/96 956
JPM Small Cap Stock -6.74% 932.65 12.582885 1,000.00 5/15/96 961
JPM Large Cap Stock 30.49% 1,304.85 19.428505 1,000.00 5/16/96 960
JPM Select Equity 20.88% 1,208.75 16.987203 1,000.00 5/15/96 961
JPM International Equity 12.45% 1,124.48 12.889314 1,000.00 5/14/96 962
Russell Multi-Style Equity 27.40% 1,274.01 12.740123 1,000.00 12/31/97 365
Russell Aggressive Equity 0.01% 1,000.13 10.001283 1,000.00 12/31/97 365
Russell Non-U.S. 11.83% 1,118.28 11.182808 1,000.00 12/31/97 365
Russell Core Bond 6.31% 1,063.11 10.631124 1,000.00 12/31/97 365
AIM Value 30.76% 1,307.56 13.075597 1,000.00 12/31/97 365
AIM Capital Appreciation 18.00% 1,180.01 11.800084 1,000.00 12/31/97 365
AIM International Equity 14.19% 1,141.85 11.418467 1,000.00 12/31/97 365
Alliance Premier Growth 46.21% 1,462.05 14.620511 1,000.00 12/31/97 365
Alliance Real Estate Investment -19.99% 800.06 8.000583 1,000.00 12/31/97 365
Liberty Newport Tiger -7.21% 927.88 9.278784 1,000.00 12/31/97 365
Kemper Small Cap Growth 16.88% 1,168.78 11.687795 1,000.00 12/31/97 365
Kemper Small Cap Value -12.30% 877.04 8.770360 1,000.00 12/31/97 365
Kemper Government Securities 6.35% 1,063.46 10.634608 1,000.00 12/31/97 365
MFS Research 21.79% 1,217.91 12.179142 1,000.00 12/31/97 365
MFS Growth with Income 20.75% 1,207.51 12.075079 1,000.00 12/31/97 365
MFS Emerging Growth 32.44% 1,324.41 13.244101 1,000.00 12/31/97 365
MFS F&C Emerging Markets -34.18% 658.18 6.581757 1,000.00 12/31/97 365
MFS High Income -1.37% 986.31 9.863111 1,000.00 12/31/97 365
MFS World Governments 6.63% 1,066.35 10.663503 1,000.00 12/31/97 365
Oppenheimer Growth 22.44% 1,224.41 12.244057 1,000.00 12/31/97 365
Oppenheimer Growth & Income 3.40% 1,034.03 10.340279 1,000.00 12/31/97 365
Oppenheimer High Income -0.92% 990.79 9.907918 1,000.00 12/31/97 365
Oppenheimer Bond 5.52% 1,055.16 10.551643 1,000.00 12/31/97 365
Oppenheimer Strategic Bond 1.65% 1,016.48 10.164797 1,000.00 12/31/97 365
Putnam Growth & Income 14.03% 1,140.32 11.403244 1,000.00 12/31/97 365
Putman New Value 4.98% 1,049.81 10.498075 1,000.00 12/31/97 365
Putnam Vista 18.04% 1,180.41 11.804097 1,000.00 12/31/97 365
Putnam International Growth 17.29% 1,172.94 11.729428 1,000.00 12/31/97 365
Putnam Int'l New Opportunities 14.21% 1,142.08 11.420772 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Non-Standard Inception to Date Return Data
As of 12/31/98
Date Transaction Amount Unit Units Transaction Units
Value Before Units After
Transaction Transaction
<S> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 5/20/96 purchase 1,000.00 10.146329 0.0000 98.5578 98.5578
5/20/97 annual fee 11.758378 98.5578 0.0000 98.5578
5/20/98 annual fee 13.473825 98.5578 0.0000 98.5578
12/31/98 annual fee 13.496510 98.5578 0.0000 98.5578
12/31/98 surrender fee 13.496510 98.5578 0.0000 98.5578
GACC Money Market 12/4/97 purchase 1,000.00 10.630827 0.0000 94.0661 94.0661
12/4/98 annual fee 11.081985 94.0661 0.0000 94.0661
12/31/98 annual fee 11.109949 94.0661 0.0000 94.0661
12/31/98 surrender fee 11.109949 94.0661 0.0000 94.0661
LA Developing Growth 11/7/97 purchase 1,000.00 10.830809 0.0000 92.3292 92.3292
11/9/98 annual fee 9.967264 92.3292 0.0000 92.3292
12/31/98 annual fee 11.067868 92.3292 0.0000 92.3292
12/31/98 surrender fee 11.067868 92.3292 0.0000 92.3292
LA Large Cap Research 2/17/98 purchase 1,000.00 10.756077 0.0000 92.9707 92.9707
12/31/98 annual fee 11.825638 92.9707 0.0000 92.9707
12/31/98 surrender fee 11.825638 92.9707 0.0000 92.9707
LA Mid-Cap Value 11/7/97 purchase 1,000.00 10.048781 0.0000 99.5146 99.5146
11/9/98 annual fee 10.358485 99.5146 0.0000 99.5146
12/31/98 annual fee 10.437956 99.5146 0.0000 99.5146
12/31/98 surrender fee 10.437956 99.5146 0.0000 99.5146
JPM Quality Bond 5/20/96 purchase 1,000.00 9.951189 0.0000 100.4905 100.4905
5/20/97 annual fee 10.440361 100.4905 0.0000 100.4905
5/20/98 annual fee 11.413235 100.4905 0.0000 100.4905
12/31/98 annual fee 11.914509 100.4905 0.0000 100.4905
12/31/98 surrender fee 11.914509 100.4905 0.0000 100.4905
JPM Small Cap Stock 5/15/96 purchase 1,000.00 10.905675 0.0000 91.6954 91.6954
5/15/97 annual fee 10.995232 91.6954 0.0000 91.6954
5/15/98 annual fee 14.699217 91.6954 0.0000 91.6954
12/31/98 annual fee 12.582885 91.6954 0.0000 91.6954
12/31/98 surrender fee 12.582885 91.6954 0.0000 91.6954
JPM Large Cap Stock 5/16/96 purchase 1,000.00 10.155238 0.0000 98.4714 98.4714
5/16/97 annual fee 12.753841 98.4714 0.0000 98.4714
5/18/98 annual fee 17.363858 98.4714 0.0000 98.4714
12/31/98 annual fee 19.428505 98.4714 0.0000 98.4714
12/31/98 surrender fee 19.428505 98.4714 0.0000 98.4714
JPM Select Equity 5/15/96 purchase 1,000.00 10.151958 0.0000 98.5032 98.5032
5/15/97 annual fee 12.101835 98.5032 0.0000 98.5032
5/15/98 annual fee 16.090569 98.5032 0.0000 98.5032
12/31/98 annual fee 16.987203 98.5032 0.0000 98.5032
12/31/98 surrender fee 16.987203 98.5032 0.0000 98.5032
JPM International Equity 5/14/96 purchase 1,000.00 10.098675 0.0000 99.0229 99.0229
5/14/97 annual fee 11.696691 99.0229 0.0000 99.0229
5/14/98 annual fee 13.129981 99.0229 0.0000 99.0229
12/31/98 annual fee 12.889314 99.0229 0.0000 99.0229
12/31/98 surrender fee 12.889314 99.0229 0.0000 99.0229
Russell Multi-Style Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.740123 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.740123 100.0000 0.0000 100.0000
Russell Aggressive Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.001283 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.001283 100.0000 0.0000 100.0000
Russell Non-U.S. 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.182808 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.182808 100.0000 0.0000 100.0000
Russell Core Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.631124 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.631124 100.0000 0.0000 100.0000
AIM Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.075597 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.075597 100.0000 0.0000 100.0000
AIM Capital Appreciation 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.800084 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.800084 100.0000 0.0000 100.0000
AIM International Equity 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.418467 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.418467 100.0000 0.0000 100.0000
Alliance Premier Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 14.620511 100.0000 0.0000 100.0000
12/31/98 surrender fee 14.620511 100.0000 0.0000 100.0000
Alliance Real Estate Investment 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 8.000583 100.0000 0.0000 100.0000
12/31/98 surrender fee 8.000583 100.0000 0.0000 100.0000
Liberty Newport Tiger 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.278784 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.278784 100.0000 0.0000 100.0000
Goldman Sachs Growth & Income 3/31/98 purchase 1,000.00 11.212646 0.0000 89.1850 89.1850
12/31/98 annual fee 9.911702 89.1850 0.0000 89.1850
12/31/98 surrender fee 9.911702 89.1850 0.0000 89.1850
Goldman Sachs International Equity 3/31/98 purchase 1,000.00 11.199710 0.0000 89.2880 89.2880
12/31/98 annual fee 11.416783 89.2880 0.0000 89.2880
12/31/98 surrender fee 11.416783 89.2880 0.0000 89.2880
Goldman Sachs Global Income 3/31/98 purchase 1,000.00 10.152000 0.0000 98.5028 98.5028
12/31/98 annual fee 10.815310 98.5028 0.0000 98.5028
12/31/98 surrender fee 10.815310 98.5028 0.0000 98.5028
Kemper Small Cap Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.687795 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.687795 100.0000 0.0000 100.0000
Kemper Small Cap Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 8.770360 100.0000 0.0000 100.0000
12/31/98 surrender fee 8.770360 100.0000 0.0000 100.0000
Kemper Government Securities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.634608 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.634608 100.0000 0.0000 100.0000
MFS Research 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.179142 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.179142 100.0000 0.0000 100.0000
MFS Growth with Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.075079 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.075079 100.0000 0.0000 100.0000
MFS Emerging Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 13.244101 100.0000 0.0000 100.0000
12/31/98 surrender fee 13.244101 100.0000 0.0000 100.0000
MFS F&C Emerging Markets 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 6.581757 100.0000 0.0000 100.0000
12/31/98 surrender fee 6.581757 100.0000 0.0000 100.0000
MFS High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.863111 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.863111 100.0000 0.0000 100.0000
MFS World Governments 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.663503 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.663503 100.0000 0.0000 100.0000
Oppenheimer Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 12.244057 100.0000 0.0000 100.0000
12/31/98 surrender fee 12.244057 100.0000 0.0000 100.0000
Oppenheimer Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.340279 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.340279 100.0000 0.0000 100.0000
Oppenheimer High Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 9.907918 100.0000 0.0000 100.0000
12/31/98 surrender fee 9.907918 100.0000 0.0000 100.0000
Oppenheimer Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.551643 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.551643 100.0000 0.0000 100.0000
Oppenheimer Strategic Bond 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.164797 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.164797 100.0000 0.0000 100.0000
Putnam Growth & Income 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.403244 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.403244 100.0000 0.0000 100.0000
Putnam New Value 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 10.498075 100.0000 0.0000 100.0000
12/31/98 surrender fee 10.498075 100.0000 0.0000 100.0000
Putnam Vista 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.804097 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.804097 100.0000 0.0000 100.0000
Putnam International Growth 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.729428 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.729428 100.0000 0.0000 100.0000
Putnam International New Opportunities 12/31/97 purchase 1,000.00 10.000000 0.0000 100.0000 100.0000
12/31/98 annual fee 11.420772 100.0000 0.0000 100.0000
12/31/98 surrender fee 11.420772 100.0000 0.0000 100.0000
Templeton International 9/21/98 purchase 1,000.00 7.893131 0.0000 126.6924 126.6924
12/31/98 annual fee 9.149729 126.6924 0.0000 126.6924
12/31/98 surrender fee 9.149729 126.6924 0.0000 126.6924
Templeton Developing Markets 9/21/98 purchase 1,000.00 5.645520 0.0000 177.1316 177.1316
12/31/98 annual fee 7.557531 177.1316 0.0000 177.1316
12/31/98 surrender fee 7.557531 177.1316 0.0000 177.1316
Mutual Shares Investments 9/21/98 purchase 1,000.00 8.643412 0.0000 115.6951 115.6951
12/31/98 annual fee 9.646506 115.6951 0.0000 115.6951
12/31/98 surrender fee 9.646506 115.6951 0.0000 115.6951
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
0.00 1,000.00
1,158.88 1,158.88
1,327.95 1,327.95
1,330.19 1,330.19
1,330.19 1,330.19
0.00 1,000.00
1,042.44 1,042.44
1,045.07 1,045.07
1,045.07 1,045.07
0.00 1,000.00
920.27 920.27
1,021.89 1,021.89
1,021.89 1,021.89
0.00 1,000.00
1,099.44 1,099.44
1,099.44 1,099.44
0.00 1,000.00
1,030.82 1,030.82
1,038.73 1,038.73
1,038.73 1,038.73
0.00 1,000.00
1,049.16 1,049.16
1,146.92 1,146.92
1,197.29 1,197.29
1,197.29 1,197.29
0.00 1,000.00
1,008.21 1,008.21
1,347.85 1,347.85
1,153.79 1,153.79
1,153.79 1,153.79
0.00 1,000.00
1,255.89 1,255.89
1,709.84 1,709.84
1,913.15 1,913.15
1,913.15 1,913.15
0.00 1,000.00
1,192.07 1,192.07
1,584.97 1,584.97
1,673.29 1,673.29
1,673.29 1,673.29
0.00 1,000.00
1,158.24 1,158.24
1,300.17 1,300.17
1,276.34 1,276.34
1,276.34 1,276.34
0.00 1,000.00
1,274.01 1,274.01
1,274.01 1,274.01
0.00 1,000.00
1,000.13 1,000.13
1,000.13 1,000.13
0.00 1,000.00
1,118.28 1,118.28
1,118.28 1,118.28
0.00 1,000.00
1,063.11 1,063.11
1,063.11 1,063.11
0.00 1,000.00
1,307.56 1,307.56
1,307.56 1,307.56
0.00 1,000.00
1,180.01 1,180.01
1,180.01 1,180.01
0.00 1,000.00
1,141.85 1,141.85
1,141.85 1,141.85
0.00 1,000.00
1,462.05 1,462.05
1,462.05 1,462.05
0.00 1,000.00
800.06 800.06
800.06 800.06
0.00 1,000.00
927.88 927.88
927.88 927.88
0.00 1,000.00
883.98 883.98
883.98 883.98
0.00 1,000.00
1,019.38 1,019.38
1,019.38 1,019.38
0.00 1,000.00
1,065.34 1,065.34
1,065.34 1,065.34
0.00 1,000.00
1,168.78 1,168.78
1,168.78 1,168.78
0.00 1,000.00
877.04 877.04
877.04 877.04
0.00 1,000.00
1,063.46 1,063.46
1,063.46 1,063.46
0.00 1,000.00
1,217.91 1,217.91
1,217.91 1,217.91
0.00 1,000.00
1,207.51 1,207.51
1,207.51 1,207.51
0.00 1,000.00
1,324.41 1,324.41
1,324.41 1,324.41
0.00 1,000.00
658.18 658.18
658.18 658.18
0.00 1,000.00
986.31 986.31
986.31 986.31
0.00 1,000.00
1,066.35 1,066.35
1,066.35 1,066.35
0.00 1,000.00
1,224.41 1,224.41
1,224.41 1,224.41
0.00 1,000.00
1,034.03 1,034.03
1,034.03 1,034.03
0.00 1,000.00
990.79 990.79
990.79 990.79
0.00 1,000.00
1,055.16 1,055.16
1,055.16 1,055.16
0.00 1,000.00
1,016.48 1,016.48
1,016.48 1,016.48
0.00 1,000.00
1,140.32 1,140.32
1,140.32 1,140.32
0.00 1,000.00
1,049.81 1,049.81
1,049.81 1,049.81
0.00 1,000.00
1,180.41 1,180.41
1,180.41 1,180.41
0.00 1,000.00
1,172.94 1,172.94
1,172.94 1,172.94
0.00 1,000.00
1,142.08 1,142.08
1,142.08 1,142.08
0.00 1,000.00
1,159.20 1,159.20
1,159.20 1,159.20
0.00 1,000.00
1,338.68 1,338.68
1,338.68 1,338.68
0.00 1,000.00
1,116.05 1,116.05
1,116.05 1,116.05
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Non-Standard Inception to Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 11.51% 33.02% 1,330.19 13.496510 1,000.00 5/20/96 956
GACC Money Market 4.19% 4.51% 1,045.07 11.109949 1,000.00 12/4/97 392
LA Developing Growth 1.90% 2.19% 1,021.89 11.067868 1,000.00 11/7/97 420
LA Large Cap Research 9.94% 1,099.44 11.825638 1,000.00 2/17/98 318
LA Mid-Cap Value 3.36% 3.87% 1,038.73 10.437956 1,000.00 11/7/97 420
JPM Quality Bond 7.12% 19.73% 1,197.29 11.914509 1,000.00 5/20/96 956
JPM Small Cap Stock 5.58% 15.38% 1,153.79 12.582885 1,000.00 5/15/96 961
JPM Large Cap Stock 27.97% 91.32% 1,913.15 19.428505 1,000.00 5/16/96 960
JPM Select Equity 21.59% 67.33% 1,673.29 16.987203 1,000.00 5/15/96 961
JPM International Equity 9.70% 27.63% 1,276.34 12.889314 1,000.00 5/14/96 962
Russell Multi-Style Equity 27.40% 27.40% 1,274.01 12.740123 1,000.00 12/31/97 365
Russell Aggressive Equity 0.01% 0.01% 1,000.13 10.001283 1,000.00 12/31/97 365
Russell Non-U.S. 11.83% 11.83% 1,118.28 11.182808 1,000.00 12/31/97 365
Russell Core Bond 6.31% 6.31% 1,063.11 10.631124 1,000.00 12/31/97 365
AIM Value 30.76% 30.76% 1,307.56 13.075597 1,000.00 12/31/97 365
AIM Capital Appreciation 18.00% 18.00% 1,180.01 11.800084 1,000.00 12/31/97 365
AIM International Equity 14.19% 14.19% 1,141.85 11.418467 1,000.00 12/31/97 365
Alliance Premier Growth 46.21% 46.21% 1,462.05 14.620511 1,000.00 12/31/97 365
Alliance Real Estate Investment -19.99% -19.99% 800.06 8.000583 1,000.00 12/31/97 365
Liberty Newport Tiger -7.21% -7.21% 927.88 9.278784 1,000.00 12/31/97 365
Goldman Sachs Growth & Income -11.60% 883.98 9.911702 1,000.00 3/31/98 275
Goldman Sachs International Equity 1.94% 1,019.38 11.416783 1,000.00 3/31/98 275
Goldman Sachs Global Income 6.53% 1,065.34 10.815310 1,000.00 3/31/98 275
Kemper Small Cap Growth 16.88% 16.88% 1,168.78 11.687795 1,000.00 12/31/97 365
Kemper Small Cap Value -12.30% -12.30% 877.04 8.770360 1,000.00 12/31/97 365
Kemper Government Securities 6.35% 6.35% 1,063.46 10.634608 1,000.00 12/31/97 365
MFS Research 21.79% 21.79% 1,217.91 12.179142 1,000.00 12/31/97 365
MFS Growth with Income 20.75% 20.75% 1,207.51 12.075079 1,000.00 12/31/97 365
MFS Emerging Growth 32.44% 32.44% 1,324.41 13.244101 1,000.00 12/31/97 365
MFS F&C Emerging Markets -34.18% -34.18% 658.18 6.581757 1,000.00 12/31/97 365
MFS High Income -1.37% -1.37% 986.31 9.863111 1,000.00 12/31/97 365
MFS World Governments 6.63% 6.63% 1,066.35 10.663503 1,000.00 12/31/97 365
Oppenheimer Growth 22.44% 22.44% 1,224.41 12.244057 1,000.00 12/31/97 365
Oppenheimer Growth & Income 3.40% 3.40% 1,034.03 10.340279 1,000.00 12/31/97 365
Oppenheimer High Income -0.92% -0.92% 990.79 9.907918 1,000.00 12/31/97 365
Oppenheimer Bond 5.52% 5.52% 1,055.16 10.551643 1,000.00 12/31/97 365
Oppenheimer Strategic Bond 1.65% 1.65% 1,016.48 10.164797 1,000.00 12/31/97 365
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Non-Standard Inception to Date Returns
As of 12/31/98
Annualized
Total Total Account 12/31/98 Initial Inception Days Since
Return Return Value AUV Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Putnam Growth & Income 14.03% 14.03% 1,140.32 11.403244 1,000.00 12/31/97 365
Putman New Value 4.98% 4.98% 1,049.81 10.498075 1,000.00 12/31/97 365
Putnam Vista 18.04% 18.04% 1,180.41 11.804097 1,000.00 12/31/97 365
Putnam International Growth 17.29% 17.29% 1,172.94 11.729428 1,000.00 12/31/97 365
Putnam Int'l New Opportunities 14.21% 14.21% 1,142.08 11.420772 1,000.00 12/31/97 365
Templeton International 15.92% 1,159.20 9.149729 1,000.00 9/21/98 101
Templeton Developing Markets 33.87% 1,338.68 7.557531 1,000.00 9/21/98 101
Mutual Shares Investments 11.61% 1,116.05 9.646506 1,000.00 9/21/98 101
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Pro Forma 1 Year Returns
As of 12/31/98
Less: 1 Year Less:
Portfolio Sub-Account 1 Year M & E / Non- Annual
Incept Incept Portfolio Admin Standard Contract
Date Date Return Fees Return Fee
-------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LA Large Cap Research 8/20/97 2/17/98 21.04% 19.46%
Templeton International 5/1/92 9/21/98 9.33% 1.40% 7.93% 0.10%
Templeton Developing Markets 3/1/96 9/21/98 -20.94% 1.40% -22.34% 0.10%
</TABLE>
<TABLE>
<CAPTION>
Less: 1 Year
Withdrawal Standard
Fee Return
- ------------------------
<S> <C>
14.84%
4.50% 3.33%
4.50% -26.94%
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Pro Forma 5 Year Returns
As of 12/31/98
5 Year
5 Year Less: Annualized Less:
Portfolio Sub-Account Annualized M & E / Non- Annual
Incept Incept Portfolio Admin Standard Contract
Date Date Return Fees Return Fee
-------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GACC Money Market 10/1/87 12/4/97 5.40% 1.40% 4.00% 0.10%
AIM Value 5/5/93 12/31/97 21.70% 1.40% 20.30% 0.10%
AIM Capital Appreciation 5/5/93 12/31/97 17.23% 1.40% 15.83% 0.10%
AIM International Equity 5/5/93 12/31/97 11.33% 1.40% 9.93% 0.10%
Alliance Premier Growth 6/26/92 12/31/97 27.85% 1.40% 26.45% 0.10%
Kemper Government Securities 9/3/87 12/31/97 6.72% 1.40% 5.32% 0.10%
Oppenheimer Growth 4/3/85 12/31/97 22.10% 1.40% 20.70% 0.10%
Oppenheimer High Income 4/30/86 12/31/97 8.62% 1.40% 7.22% 0.10%
Oppenheimer Bond 4/3/85 12/31/97 7.01% 1.40% 5.61% 0.10%
Oppenheimer Strategic Bond 5/3/93 12/31/97 6.83% 1.40% 5.43% 0.10%
Putnam Growth & Income 2/1/88 12/31/97 19.10% 1.40% 17.70% 0.10%
Templeton International 5/1/92 9/21/98 11.84% 1.40% 10.44% 0.10%
</TABLE>
<TABLE>
<CAPTION>
5 Year
Less: Annualized
Withdrawal Standard
Fee Return
- ------------------------
<S> <C>
0.00% 3.90%
0.00% 20.20%
0.00% 15.73%
0.00% 9.83%
0.00% 26.35%
0.00% 5.22%
0.00% 20.60%
0.00% 7.12%
0.00% 5.51%
0.00% 5.33%
0.00% 17.60%
0.00% 10.34%
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Pro Forma Inception to Date Returns
As of 12/31/98
Incept
Incept Less: Annualized Less:
Portfolio Sub-Account Annualized M & E / Non- Annual
Incept Incept Portfolio Admin Standard Contract
Date Date Return Fees Return Fee
-------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LA Bond Debenture 5/1/96 5/20/96 13.03% 11.47%
LA Developing Growth 8/20/97 11/7/97 8.99% 7.70%
LA Large Cap Research 8/20/97 2/17/98 14.37% 13.05%
LA Mid-Cap Value 8/20/97 11/7/97 4.40% 3.18%
JPM Quality Bond 5/1/96 5/20/96 8.68% 7.19%
JPM Small Cap Stock 5/1/96 5/15/96 8.47% 6.96%
JPM Large Cap Stock 5/1/96 5/16/96 30.02% 28.21%
JPM Select Equity 5/1/96 5/15/96 23.30% 21.56%
JPM International Equity 5/1/96 5/14/96 10.66% 9.10%
GACC Money Market 10/1/87 12/4/97 5.78% 1.40% 4.38% 0.10%
Russell Multi-Style Equity 1/2/97 12/31/97 28.73% 1.40% 27.33% 0.10%
Russell Aggressive Equity 1/2/97 12/31/97 16.87% 1.40% 15.47% 0.10%
Russell Non-U.S. 1/2/97 12/31/97 6.47% 1.40% 5.07% 0.10%
Russell Core Bond 1/2/97 12/31/97 8.58% 1.40% 7.18% 0.10%
AIM Value 5/5/93 12/31/97 21.90% 1.40% 20.50% 0.10%
AIM Capital Appreciation 5/5/93 12/31/97 18.77% 1.40% 17.37% 0.10%
AIM International Equity 5/2/93 12/31/97 13.36% 1.40% 11.96% 0.10%
Alliance Premier Growth 6/26/92 12/31/97 25.42% 1.40% 24.02% 0.10%
Alliance Real Estate Investment 1/9/97 12/31/97 -0.06% 1.40% -1.46% 0.10%
Liberty Newport Tiger 5/1/95 12/31/97 -5.01% 1.40% -6.41% 0.10%
Goldman Sachs Growth & Income 1/12/98 3/31/98 5.47% 1.35% 4.12% 0.10%
Goldman Sachs International Equity 1/12/98 3/31/98 20.07% 1.35% 18.72% 0.10%
Goldman Sachs Global Income 1/12/98 3/31/98 8.29% 1.35% 6.94% 0.10%
Kemper Small Cap Growth 5/2/94 12/31/97 24.20% 1.40% 22.80% 0.10%
Kemper Small Cap Value 5/1/96 12/31/97 3.65% 1.40% 2.25% 0.10%
Kemper Government Securities 9/3/87 12/31/97 8.37% 1.40% 6.97% 0.10%
MFS Research 7/26/95 12/31/97 22.52% 1.40% 21.12% 0.10%
MFS Growth with Income 10/9/95 12/31/97 25.98% 1.40% 24.58% 0.10%
MFS Emerging Growth 7/24/95 12/31/97 26.55% 1.40% 25.15% 0.10%
MFS F&C Emerging Markets 10/16/97 12/31/97 -34.51% 1.40% -35.91% 0.10%
MFS High Income 7/26/95 12/31/97 8.77% 1.40% 7.37% 0.10%
MFS World Governments 6/14/94 12/31/97 5.57% 1.40% 4.17% 0.10%
</TABLE>
<TABLE>
<CAPTION>
Incept
Less: Annualized
Withdrawal Standard
Fee Return
- ------------------------
<S> <C>
9.92%
4.32%
9.72%
-0.24%
5.55%
5.31%
26.95%
20.19%
7.50%
0.00% 4.28%
4.50% 22.73%
4.50% 10.87%
4.50% 0.47%
4.50% 2.58%
0.00% 20.40%
0.00% 17.27%
0.00% 11.86%
0.00% 23.92%
4.50% -6.06%
4.50% -11.01%
5.00% -0.98%
5.00% 13.62%
5.00% 1.84%
4.50% 18.20%
4.50% -2.35%
0.00% 6.87%
4.50% 16.52%
4.50% 19.98%
4.50% 20.55%
4.50% -40.51%
4.50% 2.77%
4.50% -0.43%
</TABLE>
<TABLE>
<CAPTION>
Cova Variable Annuity Account Five
Pro Forma Inception to Date Returns
As of 12/31/98
Incept
Incept Less: Annualized Less:
Portfolio Sub-Account Annualized M & E / Non- Annual
Incept Incept Portfolio Admin Standard Contract
Date Date Return Fees Return Fee
-------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oppenheimer Growth 4/3/85 12/31/97 16.85% 1.40% 15.45% 0.10%
Oppenheimer Growth & Income 7/5/95 12/31/97 27.00% 1.40% 25.60% 0.10%
Oppenheimer High Income 4/30/86 12/31/97 12.71% 1.40% 11.31% 0.10%
Oppenheimer Bond 4/3/85 12/31/97 9.28% 1.40% 7.88% 0.10%
Oppenheimer Strategic Bond 5/3/93 12/31/97 6.79% 1.40% 5.39% 0.10%
Putnam Growth & Income 2/1/88 12/31/97 16.04% 1.40% 14.64% 0.10%
Putman New Value 1/2/97 12/31/97 11.85% 1.40% 10.45% 0.10%
Putnam Vista 1/2/97 12/31/97 21.45% 1.40% 20.05% 0.10%
Putnam International Growth 1/2/97 12/31/97 17.50% 1.40% 16.10% 0.10%
Putnam Int'l New Opportunities 1/2/97 12/31/97 7.49% 1.40% 6.09% 0.10%
Templeton International 5/1/92 9/21/98 14.17% 1.40% 12.77% 0.10%
Templeton Developing Markets 3/4/96 9/21/98 -20.25% 1.40% -21.65% 0.10%
Mutual Shares Investments 5/1/98 9/21/98 -2.80% 0.94% -3.74% 0.10%
</TABLE>
<TABLE>
<CAPTION>
Incept
Less: Annualized
Withdrawal Standard
Fee Return
- ------------------------
<S> <C>
0.00% 15.35%
4.50% 21.00%
0.00% 11.21%
0.00% 7.78%
0.00% 5.29%
0.00% 14.54%
4.50% 5.85%
4.50% 15.45%
4.50% 11.50%
4.50% 1.49%
12.67%
4.50% -26.25%
5.00% -8.84%
</TABLE>
