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 43 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 42 investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios (except as noted). 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 24 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 3
SUMMARY 4
Fee Table 6
Examples 11
1. THE ANNUITY CONTRACT 14
2. ANNUITY PAYMENTS (THE INCOME PHASE) 14
Annuity Date 14
Annuity Payments 14
Annuity Options 14
3. PURCHASE 15
Purchase Payments 15
Allocation of Purchase Payments 15
Free Look 15
Accumulation Units 15
4. INVESTMENT OPTIONS 16
AIM Variable Insurance Funds, Inc. 16
Alliance Variable Products Series Fund, Inc. 16
Cova Series Trust 16
General American Capital Company 16
Goldman Sachs Variable Insurance Trust 16
Kemper Variable Series 16
Liberty Variable Investment Trust 16
MFS Variable Insurance Trust 17
Oppenheimer Variable Account Funds 17
Putnam Variable Trust 17
Templeton Variable Products Series Fund 17
Transfers 17
Dollar Cost Averaging Program 18
Automatic Rebalancing Program 18
Approved Asset Allocation Programs 18
Voting Rights 18
Substitution 18
5. EXPENSES 18
Insurance Charges 19
Contract Maintenance Charge 19
Withdrawal Charge 19
Reduction or Elimination of the Withdrawal Charge 19
Premium Taxes 20
Transfer Fee 20
Income Taxes 20
Investment Portfolio Expenses 20
6. TAXES 20
Annuity Contracts in General 20
Qualified and Non-Qualified Contracts 20
Withdrawals - Non-Qualified Contracts 20
Withdrawals - Qualified Contracts 21
Withdrawals - Tax-Sheltered Annuities 21
Diversification 21
7. ACCESS TO YOUR MONEY 21
Systematic Withdrawal Program 21
Suspension of Payments or Transfers 22
8. PERFORMANCE 22
9. DEATH BENEFIT 22
Upon Your Death 22
Death of Annuitant 23
10. OTHER INFORMATION 23
Cova 23
Year 2000 24
The Separate Account 24
Distributor 24
Ownership 24
Beneficiary 24
Assignment 24
Financial Statements 24
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION 24
APPENDIX A
Condensed Financial Information A-1
APPENDIX B
Performance Information B-1
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable 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 14
Accumulation Unit 15
Annuitant 14
Annuity Date 14
Annuity Options 14
Annuity Payments 14
Annuity Unit 15
Beneficiary 24
Fixed Account 14
Income Phase 14
Investment Portfolios 16
Joint Owner 24
Non-Qualified 20
Owner 24
Purchase Payment 15
Qualified 20
Tax Deferral 20
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
1. THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by Cova is a contract between
you, the owner, and Cova, an insurance company. The contract provides a means
for investing on a tax-deferred basis. 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 42 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.
2. 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.
3. 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.
4. INVESTMENT OPTIONS:
You can put your money in the investment portfolios which are described herein
and 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.
Depending upon market conditions and the performance of the portfolio(s) you
select, you can make or lose money in any of these portfolios.
5. EXPENSES:
The contract has insurance features and investment features, and there are costs
related to each.
* Each year Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, Cova currently waives this charge
if the value of your contract is at least $50,000.
* Cova also deducts for its insurance charges which total 1.40% of the
average daily value of your contract allocated to the investment
portfolios.
* If you take your money out, Cova may assess a withdrawal charge which is
equal to 5% of the purchase payment you withdraw. 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.
6. TAXES:
Your earnings are not taxed until you take them out. If you take money out
during the accumulation phase, earnings come out first and are taxed as income.
If you are younger than 59-1/2 when you take money out, you may be charged a 10%
federal tax penalty on the earnings. Payments during the income phase are
considered partly a return of your original investment. That part of each
payment is not taxable as income.
7. ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from Cova. Withdrawals 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.
8. DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
9. 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.
10. 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 of 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)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund .62% .05% .67%
AIM V.I. International Equity Fund .75% .16% .91%
AIM V.I. Value Fund .61% .05% .66%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Other Expenses Total Annual Portfolio
(after expense reimbursement Expenses (after expense
Management for Real Estate reimbursement for Real Estate
Fees Investment Portfolio) Investment Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
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%
- ------------------------------------------------------------------------------------------------------------------------------------
<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>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees certain Portfolios)(1) certain 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
under California insurance regulations) .75% .10% .85%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
Large Cap Research Portfolio 1.00% .30% 1.30%
Developing Growth Portfolio .90% .30% 1.20%
Lord Abbett Growth and Income Portfolio(2) .65% .07% .72%
- ------------------------------------------------------------------------------------------------------------------------------------
<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>
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>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
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%
- ------------------------------------------------------------------------------------------------------------------------------------
<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>
Other Expenses Total Annual Portfolio
(after expense Expenses (after expense
reimbursement for reimbursement for
Management Small Cap Value Small Cap Value
Fees Portfolio) 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>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
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>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees certain Series) certain 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(2) 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 and the
MFS/Foreign & Colonial Emerging Markets Equity Series, subject to
reimbursement by these series, such that each series' "Other Expenses"
shall not exceed 0.25% of the average daily net assets of the series during
the current fiscal year. Absent the expense reimbursement, the Total Annual
Portfolio Expenses for the year ended December 31, 1998, would have been
1.11% for the MFS Global Governments Series and 3.26% for the MFS/Foreign &
Colonial Emerging Markets Equity Series. The payments made by MFS on behalf
of each 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 for
that series. The obligation of MFS to bear a 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 each 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>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
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% .05% .79%
Oppenheimer Strategic Bond Fund/VA .74% .06% .80%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees one Portfolio) one Portfolio)
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
<S> <C> <C> <C>
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>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees 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>
<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
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
<S> <C> <C> <C> <C>
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
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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
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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
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</TABLE>
<TABLE>
<CAPTION>
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
<S> <C> <C> <C> <C>
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 (b) $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
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
<S> <C> <C> <C> <C>
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) $81.28 (a) $140.49 (a) $206.96 (a) $338.60
(b) $31.28 (b) $ 95.49 (b) $161.96 (b) $338.60
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 to10% 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.
1. THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case Cova), where the insurance company promises to pay 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."
2. 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.
3. 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.
4. INVESTMENT OPTIONS
The Contract offers 42 investment portfolios which are listed 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.
5. EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
Insurance Charges
Each day, Cova makes a deduction for its insurance charges. Cova does this as
part of its calculation of the value of the accumulation units and the annuity
units. The insurance charge has two parts:
1) the mortality and expense risk premium, and
2) the administrative expense charge.
Mortality and Expense Risk Premium. This charge is equal, on an annual basis, to
1.25% of the daily value of the contracts invested in an investment portfolio,
after 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 insufficient 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 once
a year 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
for purposes of payment 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,
becomes 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.
6. TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included 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.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
Under most circumstances, withdrawals can only be made during the accumulation
phase.
When you make a complete withdrawal you will receive the 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.
8. PERFORMANCE
Cova periodically advertises performance of the various investment portfolios.
Cova will calculate performance by determining the percentage change in the
value of an accumulation unit by dividing the increase (decrease) for that unit
by the value of the accumulation unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges and the
investment portfolio expenses. It does not reflect the deduction of any
applicable contract maintenance charge and withdrawal charge. The deduction of
any applicable contract maintenance charge and withdrawal charges would reduce
the percentage increase or make greater any percentage decrease. Any
advertisement will also include total return figures which reflect the deduction
of the insurance charges, contract maintenance charges, withdrawal charges and
the investment portfolio expenses.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios, performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
Cova may, from time to time, include in its advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
The Appendix contains performance information that you may find informative. 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.
9. DEATH BENEFIT
Upon Your Death
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). If you have a joint owner, the death benefit will be
paid when the first of you dies. Joint owners must be spouses. The surviving
joint owner will be treated as the beneficiary.
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 your 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.
10. OTHER INFORMATION
Cova
Cova Financial Life Insurance Company ("Cova") was originally incorporated on
September 6, 1972 as Industrial Indemnity Life Insurance Company, a California
corporation and changed its name to Xerox Financial Life Insurance Company in
1986. On June 1, 1995, a wholly-owned subsidiary of General American Life
Insurance Company purchased Cova which on that date changed its name to Cova
Financial Life Insurance Company.
Cova is presently licensed to do business in the state of California.
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. When this occurs, some ownership
rights may be limited.
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
<TABLE>
<CAPTION>
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 Period Year or Period Year or Period
Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
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AIM Variable Insurance Funds, Inc.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Sub-Account
<S> <C>
Beginning of Period $10.00 * *
End of Period 11.80
Number of Accum. Units Outstanding 5,570
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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
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Real Estate Investment Sub-Account
Beginning of Period $10.00 * *
End of Period 8.00
Number of Accum. Units Outstanding 22,077
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</TABLE>
<TABLE>
<CAPTION>
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period
Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
<S> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
Large Cap Research Sub-Account
Beginning of Period $10.76 * *
End of Period 11.83
Number of Accum. Units Outstanding 49,894
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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 Outstanding 1,052,797 700,550 185,509
- ----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period
Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
Money Market Sub-Account
<S> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period
Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management, Inc.
Newport Tiger Fund, Variable Sub-Account
<S> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period
Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
Oppenheimer High Income Sub-Account
<S> <C>
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period
Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income Sub-Account
<S> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period
Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund,
Class 1 Shares
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Sub-Account
<S> <C>
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
- ----------------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------------
<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, Bond Debenture, Developing Growth,
Mid-Cap Value and Large Cap Research Portfolios reflect the dates
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; May 20, 1996 for
the Quality Bond and Bond Debenture Portfolios; November 7, 1997 for
the Developing Growth and Mid-Cap Value Portfolios; and February 17,
1998 for the Large Cap Research Portfolio. The Lord Abbett Growth and
Income Portfolio commenced regular investment operations on January 8,
1999. Separate Account inception dates in the other investment
portfolios are as follows: AIM Variable Insurance Funds, Inc.,
Alliance Variable Products Series Fund, Inc., Kemper Variable Series,
Liberty Variable Investment Trust, MFS Variable Insurance Trust,
Oppenheimer Variable Account Funds and Putnam Variable Trust -
December 31, 1997; General American Capital Company - December 4,
1997; Goldman Sachs Variable Insurance Trust - March 31, 1998; and
Templeton Variable Products Series Fund - September 21, 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
portfolio expenses) 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
<S> <C> <C> <C> <C> <C> <C>
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)%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX B
PERFORMANCE INFORMATION (continued)
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
portfolio expenses) expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr inception 1 yr inception
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
<S> <C> <C> <C> <C> <C> <C>
Small Cap Stock 5/15/96 (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%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX B
PERFORMANCE INFORMATION (continued)
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
portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
<S> <C> <C> <C> <C> <C> <C>
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%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX B
PERFORMANCE INFORMATION (continued)
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
portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date Since Since
Portfolio in Portfolio 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth and
<S> <C> <C> <C> <C> <C> <C>
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 B
PERFORMANCE INFORMATION (continued)
PART 2 - HISTORICAL FUND PERFORMANCE
The contracts are relatively new and therefore have a limited 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 information 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 portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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)%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX B
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 portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5yrs inception
- -----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 B
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 portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5yrs inception
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX B
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 portfolio
Column A portfolio expenses) expenses)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5yrs inception
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth
and Income -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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)%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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)
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Name
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Address
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City State Zip Code
CC-3043 (5/99) CUST-CA
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Cova Financial Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
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
800-343-8496
CC-3035 (5/99) Policy Form Series XLCC-648, XLCC-833 21-CSA-CA (5/99)
