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 52 investment choices -- a fixed account which offers
an interest rate which is guaranteed by Cova, and 51 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:
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 (Class A)
Real Estate Investment Portfolio (Class A)
American Century Variable Portfolios, Inc.:
Managed by American Century Investment Management, Inc.
VP Income & Growth Fund
VP International Fund
VP Value Fund
Cova Series Trust:
Managed by J.P. Morgan Investment Management Inc.
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio
(a "high yield" portfolio under California insurance
regulations)
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value Portfolio
Dreyfus Stock Index Fund:
Managed by The Dreyfus Corporation
(Index Fund Manager: Mellon Equity Associates)
Dreyfus Variable Investment Fund:
Managed by The Dreyfus Corporation
Dreyfus VIF - Appreciation Portfolio
(Sub-Investment Adviser: Fayez Sarofim & Co.)
Dreyfus VIF - Disciplined Stock Portfolio
Franklin Templeton Variable Insurance
Products Trust*, Class 1 Shares:
Managed by Franklin Advisers, Inc.
Franklin Small Cap Fund(the surviving fund
of the merger with Franklin Small Cap Investments Fund)
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund (the surviving fund
of the merger with Mutual Shares Investments Fund)
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities Fund
(formerly, Templeton Developing Markets Fund)
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities Fund
(formerly, Templeton International Fund)
*Effective May 1, 2000, the portfolios of the Templeton Variable Products Series
Fund were merged into similar portfolios of Franklin Templeton Variable
Insurance Products Trust.
General American Capital Company:
Managed by Conning Asset Management Company
Money Market Fund
Goldman Sachs Variable Insurance Trust ("VIT"):
Managed by Goldman Sachs Asset Management, a unit of the Investment
Management Division of Goldman, Sachs & Co.
Goldman Sachs VIT Growth and Income Fund
Goldman Sachs VIT Internet Tollkeeper FundSM
(available as of July 3, 2000)
Managed by Goldman Sachs
Asset Management International
Goldman Sachs VIT Global Income Fund
Goldman Sachs VIT International Equity Fund
INVESCO Variable Investment Funds, Inc.:
Managed by INVESCO Funds Group, Inc.
INVESCO VIF - Dynamics Fund
INVESCO VIF - High Yield Fund
Kemper Variable Series:
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
Scudder Variable Life Investment Fund:
Managed by Scudder Kemper Investments, Inc.
International 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 Global Governments Series
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
PIMCO Variable Insurance Trust:
Managed by Pacific Investment Management Company
PIMCO High Yield Bond Portfolio
PIMCO Low Duration Bond Portfolio
PIMCO StocksPLUS Growth and Income Portfolio
PIMCO Total Return Bond Portfolio
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
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, 2000. 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 28 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:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o 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, 2000
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS 3
SUMMARY 4
FEE TABLE 6
EXAMPLES 13
1. THE ANNUITY CONTRACT 17
2. ANNUITY PAYMENTS (THE INCOME PHASE) 17
Annuity Date 17
Annuity Payments 17
Annuity Options 17
3. PURCHASE 18
Purchase Payments 18
Allocation of Purchase Payments 18
Free Look 18
Accumulation Units 18
4. INVESTMENT OPTIONS 19
AIM Variable Insurance Funds 19
Alliance Variable Products Series Fund, Inc. 19
American Century Variable Portfolios, Inc. 19
Cova Series Trust 19
Dreyfus Stock Index Fund 20
Dreyfus Variable Investment Fund 20
Franklin Templeton Variable Insurance Products Trust 20
General American Capital Company 20
Goldman Sachs Variable Insurance Trust 20
INVESCO Variable Investment Funds, Inc. 20
Kemper Variable Series 20
Scudder Variable Life Investment Fund 20
Liberty Variable Investment Trust 20
MFS Variable Insurance Trust 21
PIMCO Variable Insurance Trust 21
Putnam Variable Trust 21
Transfers 21
Dollar Cost Averaging Program 21
Automatic Rebalancing Program 21
Approved Asset Allocation Programs 22
Voting Rights 22
Substitution 22
5. EXPENSES 22
Insurance Charges 22
Contract Maintenance Charge 23
Withdrawal Charge 23
Reduction or Elimination of the Withdrawal Charge 23
Premium Taxes 23
Transfer Fee 23
Income Taxes 24
Investment Portfolio Expenses 24
6. TAXES 24
Annuity Contracts in General 24
Qualified and Non-Qualified Contracts 24
Withdrawals - Non-Qualified Contracts 24
Withdrawals - Qualified Contracts 24
Withdrawals - Tax-Sheltered Annuities 25
Diversification 25
7. ACCESS TO YOUR MONEY 25
Systematic Withdrawal Program 26
Suspension of Payments or Transfers 26
8. PERFORMANCE 26
9. DEATH BENEFIT 26
Upon Your Death 26
Death of Annuitant 27
10. OTHER INFORMATION 27
Cova 27
The Separate Account 27
Distributor 27
Ownership 27
Beneficiary 28
Assignment 28
Financial Statements 28
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION 28
APPENDIX A
Condensed Financial Information A-1
APPENDIX B
Participating Investment Portfolios B-1
APPENDIX C
Performance Information C-1
INDEX OF SPECIAL TERMS
Because of the complex nature of the contract, we have used certain words or
terms in this prospectus which may need an explanation. We have identified the
following as some of these words or terms. The page that is indicated here is
where we believe you will find the best explanation for the word or term. These
words and terms are in italics on the indicated page.
Page
Accumulation Phase 17
Accumulation Unit 18
Annuitant 17
Annuity Date 17
Annuity Options 17
Annuity Payments 17
Annuity Unit 18
Beneficiary 28
Fixed Account 17
Income Phase 17
Investment Portfolios 19
Joint Owner 27
Non-Qualified 24
Owner 27
Purchase Payment 18
Qualified 24
Tax Deferral 24
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 51 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 briefly described
in Appendix B and more fully described in the prospectuses for the funds.
Currently, if you are not participating in an asset allocation program, you can
only invest in 15 investment portfolios at any one time.
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.
o 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.
o Cova also deducts for its insurance charges which total 1.40% of the average
daily value of your contract allocated to the investment portfolios.
o 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.
o 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.
o 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.
o There are also investment charges which currently range from .205% to 1.56%
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 591/2 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:
o 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.
o 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.
o You can arrange to automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
o 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. Expenses of the
investment portfolios are not fixed or specified under the terms of the contract
and actual expenses may vary.
Owner Transaction Expenses
Withdrawal Charge (see Note 1 below)
5% of purchase payment withdrawn
Transfer Fee (see Note 2 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
Contract Maintenance Charge (see Note 3 below)
$30 per contract per year
Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
---
TOTAL SEPARATE ACCOUNT
ANNUAL EXPENSES 1.40%
<TABLE>
<CAPTION>
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Total Annual
Management Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Managed by A I M Advisors, Inc.
<S> <C> <C> <C>
A I M V.I. Capital Appreciation Fund .62% .11% .73%
A I M V.I. International Equity Fund .75% .22% .97%
A I M V.I. Value Fund .61% .15% .76%
-------------------------------------------------------------------------------------------------------------------
Other Expenses (after Total Annual Portfolio
expense reimbursement Expenses (after expense
Management for Real Estate reimbursement for Real
Fees Investment Portfolio) Estate Investment Portfolio)
-------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Portfolio (Class A) 1.00% .05% 1.05%
Real Estate Investment Portfolio (Class A)* .49% .46% .95%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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. For the year ended December 31, 1999, the expenses for the
Real Estate Investment Portfolio, before reimbursement, were: .90% management
fees and .82% for other expenses.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Total Annual
Management Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.
Managed by American Century Investment Management, Inc.
<S> <C> <C> <C>
VP Income & Growth Fund .70% .0% .70%
VP International Fund 1.34% .0% 1.34%
VP Value Fund 1.00% .0% 1.00%
-------------------------------------------------------------------------------------------------------------------
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.
International Equity Portfolio .79% .31% 1.10%
Large Cap Stock Portfolio .65% .10% .75%
Quality Bond Portfolio .54% .10% .64%
Select Equity Portfolio .67% .10% .77%
Small Cap Stock Portfolio .85% .19% 1.04%
Managed by Lord, Abbett &Co.
Bond Debenture Portfolio .75% .10% .85%
Developing Growth Portfolio .90% .30% 1.20%
Large Cap Research Portfolio 1.00% .30% 1.30%
Lord Abbett Growth and Income Portfolio (2) .65% .05% .70%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Cova reimburses the investment portfolios, except the Select Equity, Small
Cap Stock and International Equity Portfolios, for all operating expenses
(exclusive of the management fees) in excess of approximately .30% for the
Mid-Cap Value, Large Cap Research and Developing Growth Portfolios and in excess
of approximately .10% for the other investment portfolios. Prior to May 1, 1999,
Cova had reimbursed expenses in excess of approximately .10% with respect to the
Select Equity, Small Cap Stock, International Equity, Mid-Cap Value, Large Cap
Research and Developing Growth Portfolios. Therefore, the amounts shown above
under "Other Expenses" have been restated to reflect the estimated expenses for
the Select Equity, Small Cap Stock and International Equity Portfolios for the
year ending December 31, 2000. Absent these expense reimbursement arrangements,
the total annual portfolio expenses for the year ended December 31, 1999 were:
1.09% for the Small Cap Stock Portfolio; 1.15% for the International Equity
Portfolio; .71% for the Quality Bond Portfolio; .76% for the Large Cap Stock
Portfolio; .86% for the Bond Debenture Portfolio; 1.41% for the Mid-Cap Value
Portfolio; 1.38% for the Large Cap Research Portfolio; and 1.34% for the
Developing Growth Portfolio.
(2) The Portfolio commenced investment operations on January 8, 1999.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Total Annual
Management Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund
Managed by The Dreyfus Corporation
<S> <C> <C> <C>
.25% .01% .26%
-------------------------------------------------------------------------------------------------------------------
Total Annual
Management Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund
Managed by The Dreyfus Corporation
Dreyfus VIF - Appreciation Portfolio .75% .03% .78%
Dreyfus VIF - Disciplined Stock Portfolio .75% .06% .81%
-------------------------------------------------------------------------------------------------------------------
Management Total Annual
Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust, Class 1 Shares Managed by
Franklin Advisers, Inc.
Franklin Small Cap Fund* .55% .27% .82%
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund** .60% .19% .79%
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities Fund*** 1.25% .31% 1.56%
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities Fund**** .69% .19% .88%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* On 2/8/00, a merger and reorganization was approved that combined the assets
of the fund with a similar fund of Templeton Variable Products Series Fund,
effective 5/1/00. On 2/8/00, fund shareholders approved new management fees,
which apply to the combined fund effective 5/1/00. The table shows restated
total expenses based on the new fees and assets of the fund as of 12/31/99, and
not the assets of the combined fund. However, if the table reflected both the
new fees and the combined assets, the fund's expenses after 5/1/00 would be
estimated as: Management Fees 0.55%, Other Expenses 0.27%, and Total Fund
Operating Expenses 0.82%.
** On 2/8/00, a merger and reorganization was approved that combined the fund
with a similar fund of Templeton Variable Products Series Fund, effective
5/1/00. The table shows total expenses based on the fund's assets as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected combined assets, the fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.60%, Other Expenses 0.19%, and Total Fund Operating
Expenses 0.79%.
*** On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton Developing Markets Equity Fund, effective 5/1/00.
The shareholders of that fund had approved new management fees, which apply to
the combined fund effective 5/1/00. The table shows restated total expenses
based on the new fees and the assets of the fund as of 12/31/99, and not the
assets of the combined fund. However, if the table reflected both the new fees
and the combined assets, the fund's expenses after 5/1/00 would be estimated as:
Management Fees 1.25%, Other Expenses 0.29%, and Total Fund Operating Expenses
1.54%.
**** On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton International Equity Fund, effective 5/1/00. The
shareholders of that fund had approved new management fees, which apply to the
combined fund effective 5/1/00. The table shows restated total expenses based on
the new fees and the assets of the fund as of 12/31/99, and not the assets of
the combined fund. However, if the table reflected both the new fees and the
combined assets, the fund's expenses after 5/1/00 would be estimated as:
Management Fees 0.65%, Other Expenses 0.20%, and Total Fund Operating Expenses
0.85%.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Total Annual
Management Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
<S> <C> <C> <C>
Money Market Fund .125% .08% .205%
-------------------------------------------------------------------------------------------------------------------
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement)* reimbursement)*
-------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs VIT Growth and Income Fund .75% .25% 1.00%
Goldman Sachs VIT Internet Tollkeeper Fund 1.00% .25% 1.25%
Managed by Goldman Sachs Asset Management International
Goldman Sachs VIT Global Income Fund .90% .25% 1.15%
Goldman Sachs VIT International Equity Fund 1.00% .35% 1.35%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* The investment advisers to the Goldman Sachs VIT Growth and Income, Internet
Tollkeeper, International Equity and Global Income Funds have voluntarily agreed
to reduce or limit certain "Other Expenses" of such Funds (excluding management
fees, taxes, interest, brokerage fees, litigation, indemnification and other
extraordinary expenses) to the extent such expenses exceed 0.25%, 0.25%, 0.35%
and 0.25% 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 .47% and 1.22%, .77% and
1.77% and 1.78% and 2.68%, respectively. The reductions or limitations may be
discontinued or modified by the investment advisers in their discretion at any
time. The Fund's expenses shown in the fee table are based on estimated expenses
for the fiscal year ending December 31, 2000.
<TABLE>
<CAPTION>
Other Expenses Total Annual
(after expense Portfolio Expenses
Management Fees reimbursement)* (after expense reimbursement)*
-------------------------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc.
Managed by INVESCO Funds Group, Inc.
<S> <C> <C> <C>
INVESCO VIF - Dynamics Fund .75% .51% 1.26%
INVESCO VIF - High Yield Fund .60% .47% 1.07%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
*Certain expenses of the Fund were absorbed voluntarily by INVESCO in order to
ensure that "Other Expenses" for the Fund did not exceed 1.05% of the High Yield
Fund's average net assets and 1.15% of the Dynamics Fund's average net assets
pursuant to an agreement between the Fund and INVESCO. This commitment may be
changed at any time following consultation with the board of directors. Absent
the expense absorption, the Fund's "Other Expenses" and "Total Annual Portfolio
Expenses" for the fiscal year ended December 31, 1999 were 0.48% and 1.08%,
respectively, of the High Yield Fund's average net assets and 1.53% and 2.28%,
respectively, of the Dynamics Fund's average net assets.
<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 Small Cap Value Portfolio) Small Cap Value Portfolio)
-------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
<S> <C> <C> <C>
Kemper Government Securities Portfolio .55% .08% .63%
Kemper Small Cap Growth Portfolio .65% .06% .71%
Kemper Small Cap Value Portfolio .75% .09%* .84%
-------------------------------------------------------------------------------------------------------------------
* Pursuant to its agreement with Kemper Variable Series, the investment manager
and the accounting agent have agreed, for the one year period commencing on May
1, 2000, 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 at or lower than these expense
limits, after the benefit of any custodial credits.
Total Annual
Management Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund
Managed by Scudder Kemper Investments, Inc.
International Portfolio .853% .18% 1.03%
-------------------------------------------------------------------------------------------------------------------
Total Annual
Management Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Series .90% .31% 1.21%
-------------------------------------------------------------------------------------------------------------------
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement reimbursement
Fees for certain Series) for certain Series)
-------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust (1)
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Series .75% .09% .84%
MFS Global Governments Series (2) .75% .16% .91%
MFS Growth With Income Series .75% .13% .88%
MFS High Income Series (2) .75% .16% .91%
MFS Research Series .75% .11% .86%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(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. The expenses shown above do not take
into account these expense reductions, and are therefore higher than the actual
expenses of the series.
(2) MFS has contractually agreed to bear expenses for these series, subject to
reimbursement by the series, such that the series' "Other Expenses" do not
exceed 0.15% 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, 1999, would have been 1.05% for the MFS
Global Governments Series and .97% with respect to the MFS High Income Series.
The payments made by MFS on behalf of the series under this arrangement are
subject to reimbursement by the series to MFS, which will be accomplished by the
payment of an expense reimbursement fee by the series to MFS computed and paid
monthly at a percentage of the series' average daily net assets for its then
current fiscal year, with a limitation that immediately after such payment, the
series' "Other Expenses" will not exceed the percentage set forth above for the
series. The obligation of MFS to bear the series' "Other Expenses" pursuant to
this arrangement, and the series' obligation to pay the reimbursement fee to
MFS, terminates on the earlier of the date on which payments made by the series
equal the prior payment of such reimbursable expenses by MFS or December 31,
2004. MFS may, in its discretion, terminate this arrangement at an earlier date
provided that the arrangement will continue for the series until at least May 1,
2001, unless terminated with the consent of the board of trustees which oversees
the series.
<TABLE>
<CAPTION>
Total Annual
Management Fees Service Fees Other Expenses* Portfolio Expenses**
-------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
Managed by Pacific Investment Management Company
<S> <C> <C> <C> <C>
PIMCO High Yield Bond Portfolio .25% .15% .35% .75%
PIMCO Low Duration Bond Portfolio .25% .15% .25% .65%
PIMCO StocksPLUS Growth and Income Portfolio .40% .15% .10% .65%
PIMCO Total Return Bond Portfolio .25% .15% .25% .65%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
*"Other Expenses" reflects a 0.35% administrative fee for High Yield Bond, a
0.25% administrative fee for Low Duration Bond and Total Return Bond, and a
0.10% administrative fee for StocksPLUS Growth and Income Portfolio.
**PIMCO has contractually agreed to reduce total annual Portfolio operating
expenses for the Administrative Class shares to the extent they would exceed,
due to the payment of organizational expenses and Trustees' fees, 0.75%, 0.65%,
0.65% and 0.65% of the High Yield Bond, Low Duration Bond, StocksPLUS Growth and
Income and Total Return Bond Portfolios, respectively, of average daily net
assets. Without such reductions, the Total Annual Portfolio Expenses would have
been .78% and .69% for the Low Duration Bond and Total Return Bond Portfolios,
respectively. Management Fees, Service Fees and Other Expenses are restated as
of April 1, 2000.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE (continued)
Management Total Annual
Fees Other Expenses Portfolio Expenses
-------------------------------------------------------------------------------------------------------------------
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% .22% 1.02%
Putnam VT International New Opportunities Fund - Class IA Shares 1.08% .33% 1.41%
Putnam VT New Value Fund - Class IA Shares .70% .10% .80%
Putnam VT Vista Fund - Class IA Shares .65% .10% .75%
-------------------------------------------------------------------------------------------------------------------
</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 Managed by A I M Advisors, Inc.
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation (a) $72.59 (a) $114.54 (a) $163.94 (a) $254.10
(b) $22.59 (b) $ 69.54 (b) $118.94 (b) $254.10
AIM V.I. International Equity (a) $75.00 (a) $121.77 (a) $176.00 (a) $278.22
(b) $25.00 (b) $ 76.77 (b) $131.00 (b) $278.22
AIM V.I. Value (a) $72.90 (a) $115.45 (a) $165.46 (a) $257.15
(b) $22.90 (b) $ 70.45 (b) $120.46 (b) $257.15
-------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth (Class A) (a) $75.80 (a) $124.17 (a) $179.99 (a) $286.12
(b) $25.80 (b) $ 79.17 (b) $134.99 (b) $286.12
Real Estate Investment (Class A) (a) $74.80 (a) $121.17 (a) $175.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
-------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.
Managed by American Century Investment Management, Inc.
VP Income & Growth (a) $72.29 (a) $113.63
(b) $22.29 (b) $ 68.63
VP International (a) $78.69 (a) $132.81
(b) $28.69 (b) $ 87.81
VP Value (a) $75.30 (a) $122.67
(b) $25.30 (b) $ 77.67
-------------------------------------------------------------------------------------------------------------------
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
International Equity (a) $76.30 (a) $125.66 (a) $182.48 (a) $291.02
(b) $26.30 (b) $ 80.66 (b) $137.48 (b) $291.02
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
Quality Bond (a) $71.69 (a) $111.82 (a) $159.38 (a) $244.89
(b) $21.69 (b) $ 66.82 (b) $114.38 (b) $244.89
Select Equity (a) $73.00 (a) $115.75 (a) $165.96 (a) $258.16
(b) $23.00 (b) $ 70.75 (b) $120.96 (b) $258.16
Small Cap Stock (a) $75.70 (a) $123.87 (a) $179.49 (a) $285.14
(b) $25.70 (b) $ 78.87 (b) $134.49 (b) $285.14
-------------------------------------------------------------------------------------------------------------------
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
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
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
Lord Abbett Growth and Income (a) $72.29 (a) $113.63 (a) $162.42 (a) $251.04
(b) $22.29 (b) $ 68.63 (b) $117.42 (b) $251.04
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
-------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund
Managed by The Dreyfus Corporation
(Index Fund Manager: Mellon Equity Associates (a) $67.87 (a) $100.23 (a) $139.87 (a) $205.00
(b) $17.87 (b) $ 55.23 (b) $ 94.87 (b) $205.00
-------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund
Managed by The Dreyfus Corporation
Dreyfus VIF - Appreciation (a) $73.10 (a) $116.05 (a) $166.47 (a) $259.18
(b) $23.10 (b) $ 71.05 (b) $121.47 (b) $259.18
Dreyfus VIF - Disciplined Stock (a) $73.40 (a) $116.96 (a) $167.98 (a) $262.21
(b) $23.40 (b) $ 71.96 (b) $122.98 (b) $262.21
-------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust, Class 1 Shares
Managed by Franklin Advisers, Inc.
Franklin Small Cap (a) $73.50 (a) $117.26 (a) $168.48 (a) $263.22
(b) $23.50 (b) $ 72.26 (b) $123.48 (b) $263.22
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Securities (a) $73.20 (a) $116.35 (a) $166.97 (a) $260.19
(b) $23.20 (b) $ 71.35 (b) $121.97 (b) $260.19
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities (a) $80.89 (a) $139.31 (a) $205.03 (a) $334.89
(b) $30.89 (b) $ 94.31 (b) $160.03 (b) $334.89
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities (a) $74.10 (a) $119.07 (a) $171.50 (a) $269.25
(b) $24.10 (b) $ 74.07 (b) $126.50 (b) $269.25
-------------------------------------------------------------------------------------------------------------------
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
Money Market (a) $67.31 (a) $ 98.54 (a) $137.02 (a) $199.08
(b) $17.31 (b) $ 53.54 (b) $ 92.02 (b) $199.08
-------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs VIT Growth and Income Fund (a) $75.30 (a) $122.67 (a) $177.50 (a) $281.19
(b) $25.30 (b) $ 77.67 (b) $132.50 (b) $281.19
Goldman Sachs VIT Internet Tollkeeper Fund (a) $77.80 (a) $130.14
(b) $27.80 (b) $ 85.14
Managed by Goldman Sachs Asset Management International
Goldman Sachs VIT Global Income Fund (a) $76.80 (a) $127.16 (a) $184.95 (a) $295.90
(b) $26.80 (b) $ 82.16 (b) $139.95 (b) $295.90
Goldman Sachs VIT International Equity Fund (a) $78.79 (a) $133.11 (a) $194.80 (a) $315.14
(b) $28.79 (b) $ 88.11 (b) $149.80 (b) $315.14
-------------------------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc.
Managed by INVESCO Funds Group, Inc.
INVESCO VIF - Dynamics (a) $77.90 (a) $130.43 (a) $190.38 (a) $306.53
(b) $27.90 (b) $ 85.43 (b) $145.38 (b) $306.53
INVESCO VIF - High Yield (a) $76.00 (a) $124.77 (a) $180.99 (a) $288.08
(b) $26.00 (b) $ 79.55 (b) $135.99 (b) $288.08
-------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities (a) $71.59 (a) $111.51 (a) $158.87 (a) $243.86
(b) $21.59 (b) $ 66.51 (b) $113.87 (b) $243.86
Kemper Small Cap Growth (a) $72.39 (a) $113.94 (a) $162.93 (a) $252.06
(b) $22.39 (b) $ 68.94 (b) $117.93 (b) $252.06
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
-------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund
Managed by Scudder Kemper Investments, Inc.
International (a) $75.63 (a) $123.66
(b) $25.63 (b) $ 78.66
-------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Series (a) $77.40 (a) $128.94 (a) $187.92 (a) $301.71
(b) $27.40 (b) $ 83.94 (b) $142.92 (b) $301.71
-------------------------------------------------------------------------------------------------------------------
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $73.70 (a) $117.86 (a) $169.49 (a) $265.23
(b) $23.70 (b) $ 72.86 (b) $124.49 (b) $265.23
MFS Global Governments (a) $74.40 (a) $119.97 (a) $173.00 (a) $272.25
(b) $24.40 (b) $ 74.97 (b) $128.00 (b) $272.25
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) $74.40 (a) $119.97 (a) $173.00 (a) $272.25
(b) $24.40 (b) $ 74.97 (b) $128.00 (b) $272.25
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
-------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
Managed by Pacific Investment Management Company
PIMCO High Yield Bond (a) $72.80 (a) $115.15
(b) $22.80 (b) $ 70.15
PIMCO Low Duration Bond (a) $71.79 (a) $112.12
(b) $21.79 (b) $ 67.12
PIMCO StocksPLUS Growth and Income (a) $71.79 (a) $112.12
(b) $21.79 (b) $ 67.12
PIMCO Total Return Bond (a) $71.79 (a) $112.12
(b) $21.79 (b) $ 67.12
-------------------------------------------------------------------------------------------------------------------
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) $75.50 (a) $123.27 (a) $178.50 (a) $283.17
(b) $25.50 (b) $ 78.27 (b) $133.50 (b) $283.17
Putnam VT International New Opportunities - Class IA Shares (a) $79.39 (a) $134.88 (a) $197.73 (a) $320.83
(b) $29.39 (b) $ 89.88 (b) $152.73 (b) $320.83
Putnam VT New Value - Class IA Shares (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 VT Vista - Class IA Shares (a) $72.80 (a) $115.15 (a) $164.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Explanation of Fee Table
1. The withdrawal charge is 5% of the purchase payments you withdraw. After Cova
has had a purchase payment for 5 years, there is no charge by Cova for a
withdrawal of that purchase payment. You may also have to pay income tax and
a tax penalty on any money you take out. After the first year, you can take
up to 10% of your total purchase payments each year without a charge from
Cova.
2. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is for the Dollar Cost Averaging,
Automatic Rebalancing or Approved Asset Allocation Programs.
3. During the accumulation phase, Cova will not charge the contract maintenance
charge if the value of your contract is $50,000 or more, although, if you
make a complete withdrawal, Cova will charge the contract maintenance charge.
4. Premium taxes are not reflected. Premium taxes may apply depending on the
state where you live.
There is an accumulation unit value history (Condensed Financial Information)
contained in Appendix A.
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:
o fixed account,
o the investment portfolio(s), or
o 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%, 662/3% 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 51 investment portfolios which are listed below. Currently,
if you are not participating in an asset allocation program, you can only invest
in 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. Copies of these
prospectuses will be sent to you with your contract. Certain portfolios
contained in the fund prospectuses may not be available with your contract. (See
Appendix B which contains a summary of investment objectives and strategies for
each investment portfolio.)
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.
A fund's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a fund with a small asset base. A
fund may not experience similar performance as its assets grow.
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.
AIM VARIABLE INSURANCE FUNDS
AIM Variable Insurance Funds is a mutual fund with multiple portfolios. AIM
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 (Class A)
Real Estate Investment Portfolio (Class A)
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Investment Management, Inc. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
VP Income & Growth Fund
VP International Fund
VP Value Fund
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:
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolios:
Bond Debenture Portfolio
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value Portfolio
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and provide day-to-day management of the Fund's investments.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is a mutual fund with multiple portfolios. The
Dreyfus Corporation serves as the investment adviser. Fayez Sarofim & Co. serves
as sub-investment adviser for the Appreciation Portfolio. The following
portfolios are available under the contract:
Dreyfus VIF - Appreciation Portfolio
Dreyfus VIF - Disciplined Stock Portfolio
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Templeton Variable Insurance Products Trust is a mutual fund with
multiple portfolios. Effective May 1, 2000, the portfolios of Templeton Variable
Products Series Fund were merged into similar portfolios of Franklin Templeton
Variable Insurance Products Trust. Each portfolio has two classes of shares:
Class 1 and Class 2. The portfolios available in connection with your contract
are Class 1 shares. Franklin Advisers, Inc. is the investment adviser to the
Franklin Small Cap Fund, Templeton Asset Management Ltd. is the investment
adviser for the Templeton Developing Markets Securities Fund, Templeton
Investment Counsel, Inc. is the investment adviser for the Templeton
International Securities Fund and Franklin Mutual Advisers, LLC is the
investment adviser for the Mutual Shares Securities Fund. The following
portfolios are available under the contract:
Franklin Small Cap Fund (the surviving fund of the merger with
Franklin Small Cap Investments Fund)
Mutual Shares Securities Fund (the surviving fund of the merger with
Mutual Shares Investments Fund)
Templeton Developing Markets Securities Fund
(formerly, Templeton Developing Markets Fund)
Templeton International Securities Fund
(formerly, Templeton International Fund)
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 VIT Growth and Income Fund and the Goldman Sachs VIT Internet
Tollkeeper Fund and Goldman Sachs Asset Management International is the
investment adviser for the Goldman Sachs VIT International Equity Fund and the
Goldman Sachs VIT Global Income Fund. The following portfolios are available
under the contract:
Goldman Sachs VIT Global Income Fund
Goldman Sachs VIT Growth and Income Fund
Goldman Sachs VIT International Equity Fund
Goldman Sachs VIT Internet Tollkeeper Fund
(available as of July 3, 2000)
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
portfolios are available under the contract:
INVESCO VIF - Dynamics Fund
INVESCO VIF - High Yield 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 Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
SCUDDER VARIABLE LIFE INVESTMENT FUND
Scudder Variable Life Investment Fund is a mutual fund with multiple portfolios.
Scudder Kemper Investments, Inc. is the investment adviser to each portfolio.The
following portfolio is available under the contract:
International 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
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 Global Governments Series
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
PIMCO VARIABLE INSURANCE TRUST
PIMCO Variable Insurance Trust is a mutual fund with multiple portfolios.
Pacific Investment Management Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PIMCO High Yield Bond Portfolio
PIMCO Low Duration Bond Portfolio
PIMCO StocksPLUS Growth and Income Portfolio
PIMCO Total Return Bond Portfolio
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
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. Cova will waive the minimum transfer amount and
the minimum amount required to establish dollar cost averaging if you establish
dollar cost averaging for 6 or 12 months at the time you buy the contract.
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 21/2 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 all the insurance
benefits e.g., guarantee of annuity rates, the death benefits, for certain
expenses of the contract, and for assuming the risk (expense risk) that the
current charges will be 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 it makes 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.
o 10% of purchase payments free.
o Remaining purchase payments that are over 5 years old and not subject to a
withdrawal charge.
o Earnings in the contract free.
o 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 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.
A qualified contract will not provide any necessary or additional tax deferral
if it is used to fund a qualified plan that is tax deferred. However, the
contract has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing a qualified contract.
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
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio of
pre-tax purchase payments to the after-tax purchase payments in your contract.
If all of your purchase payments were made with pre-tax money then the full
amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified contracts.
The Code also provides that any amount received under a qualified 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 you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the Code);
(4) paid to you after leaving your employment in a series of substantially
equal periodic payments made annually (or more frequently) under a lifetime
annuity;
(5) paid to you after you have attained age 55 and you have left your
employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order;
(8) paid on account of an IRS levy upon the qualified contract;
(9) paid from an IRA for medical insurance (as defined in the Code);
(10) paid from an IRA for qualified higher education expenses; or
(11) paid from an IRA for up to $10,000 for qualified first-time homebuyer
expenses (as defined in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in (4)
above applies to IRAs but without the requirement of leaving employment.
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:
o less any applicable withdrawal charge,
o less any premium tax, and
o 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 charge, 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.
Appendix C 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 results shown are not necessarily
representative of future results.
9. DEATH BENEFIT
Upon Your Death
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). If you have a joint owner, the death benefit will be
paid when the first of you dies. Joint owners must be spouses. The surviving
joint owner will be treated as the beneficiary.
The death benefit is 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:
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.
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. On January 6, 2000, Metropolitan Life
Insurance Company (MetLife) acquired GenAmerica Corporation, the ultimate parent
company of Cova Financial Services Life Insurance Company (Cova Life), the
parent company of Cova. The acquisition of GenAmerica Corporation does not
affect policy benefits or any other terms or conditions under your contract.
MetLife, headquartered in New York City since 1868, is a leading provider of
insurance and financial products and services to individual and group customers.
Cova is licensed to do business in the District of Columbia and all states
except California, Maine, New Hampshire, New York and Vermont.
The Separate Account
Cova has established a separate account, Cova Variable Annuity Account One
(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
Missouri insurance law on February 24, 1987. 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 5.63% of purchase payments
but, under certain circumstances, may be paid up to 6.0%. 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 consolidated financial statements of Cova and the Separate Account have been
included in the Statement of Additional Information.
Table of Contents of the
Statement of Additional Information
Company
Experts
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
APPENDIX A
Condensed Financial Information
Accumulation Unit Value History
The following schedule includes accumulation unit values for the periods
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
-------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Sub-Account
<S> <C> <C>
Beginning of Period $11.80 $10.00 * *
End of Period 16.83 11.80
Number of Accum. Units Outstanding 63,264 5,570
-------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Sub-Account
Beginning of Period $11.42 $10.00 * *
End of Period 17.46 11.42
Number of Accum. Units Outstanding 19,322 15,257
-------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Sub-Account
Beginning of Period $13.08 $10.00 * *
End of Period 16.75 13.08
Number of Accum. Units Outstanding 158,759 2,865
-------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc. (Class A)
Managed by Alliance Capital Management L.P.
Premier Growth Sub-Account
Beginning of Period $14.62 $10.00 * *
End of Period 19.08 14.62
Number of Accum. Units Outstanding 130,836 62,869
-------------------------------------------------------------------------------------------------------------------
Real Estate Investment Sub-Account
Beginning of Period $8.00 $10.00 * *
End of Period 7.49 8.00
Number of Accum. Units Outstanding 29,380 22,077
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
-------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.
Managed by American Century Investment Management, Inc.
VP Income & Growth Sub-Account
Beginning of Period $10.00 * * *
End of Period 10.32
Number of Accum. Units Outstanding 1,017
-------------------------------------------------------------------------------------------------------------------
VP International Sub-Account
Beginning of Period $10.00 * * *
End of Period 12.52
Number of Accum. Units Outstanding 10
-------------------------------------------------------------------------------------------------------------------
VP Value Sub-Account
Beginning of Period $10.00 * * *
End of Period 9.59
Number of Accum. Units Outstanding 546
-------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $13.50 $12.88 $11.30 $10.15
End of Period 13.77 13.50 12.88 11.30
Number of Accum. Units Outstanding 859,300 681,676 347,400 39,545
-------------------------------------------------------------------------------------------------------------------
Developing Growth Sub-Account
Beginning of Period $11.07 $10.53 $10.83 *
End of Period 14.45 11.07 10.53
Number of Accum. Units Outstanding 130,053 70,926 6,039
-------------------------------------------------------------------------------------------------------------------
Large Cap Research Sub-Account
Beginning of Period $11.83 $10.76 * *
End of Period 14.64 11.83
Number of Accum. Units Outstanding 142,370 49,894
-------------------------------------------------------------------------------------------------------------------
Lord Abbett Growth and Income Sub-Account
(Sub-Account commenced operations during 1999. The value denoted is the initial AUV)
Beginning of Period $35.90 * * *
End of Period 39.46
Number of Accum. Units Outstanding 1,241,056
-------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Sub-Account
Beginning of Period $10.44 $10.47 $10.05 *
End of Period 10.88 10.44 10.47
Number of Accum. Units Outstanding 132,159 85,457 8,510
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
-------------------------------------------------------------------------------------------------------------------
Cova Series Trust (continued)
Managed by J.P. Morgan Investment Management Inc.
International Equity Sub-Account
Beginning of Period $12.89 $11.46 $10.97 $10.10
End of Period 16.33 12.89 11.46 10.97
Number of Accum. Units Outstanding 838,996 779,375 554,105 124,032
-------------------------------------------------------------------------------------------------------------------
Large Cap Stock Sub-Account
Beginning of Period $19.43 $14.89 $11.34 $10.16
End of Period 22.55 19.43 14.89 11.34
Number of Accum. Units Outstanding 1,531,957 1,132,390 686,677 126,231
-------------------------------------------------------------------------------------------------------------------
Quality Bond Sub-Account
Beginning of Period $11.91 $11.16 $10.37 $9.95
End of Period 11.57 11.91 11.16 10.37
Number of Accum. Units Outstanding 629,401 501,045 234,643 64,534
-------------------------------------------------------------------------------------------------------------------
Select Equity Sub-Account
Beginning of Period $16.99 $14.05 $10.84 $10.15
End of Period 18.38 16.99 14.05 10.84
Number of Accum. Units Outstanding 1,237,436 1,052,797 700,550 185,509
-------------------------------------------------------------------------------------------------------------------
Small Cap Stock Sub-Account
Beginning of Period $12.58 $13.49 $11.31 $10.91
End of Period 17.93 12.58 13.49 11.31
Number of Accum. Units Outstanding 632,695 663,925 487,580 113,118
-------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund
Managed by The Dreyfus Corporation
Dreyfus Stock Index Fund Sub-Account
Beginning of Period $10.00 * * *
End of Period 10.34
Number of Accum. Units Outstanding 10
-------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund
Managed by The Dreyfus Corporation
Dreyfus VIF - Appreciation Sub-Account
Beginning of Period $10.00 * * *
End of Period 10.13
Number of Accum. Units Outstanding 10
-------------------------------------------------------------------------------------------------------------------
Dreyfus VIF - Disciplined Stock Sub-Account
Beginning of Period $10.00 * * *
End of Period 10.31
Number of Accum. Units Outstanding 10
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
-------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust, Class 1 Shares Managed by
Franklin Advisers, Inc.
Franklin Small Cap Sub-Account
(Sub-Account commenced operations during 1999. The value denoted is the initial
AUV.)
Beginning of Period $10.00 * * *
End of Period 17.72
Number of Accum. Units Outstanding 7,226
-------------------------------------------------------------------------------------------------------------------
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Securities Sub-Account
Beginning of Period $9.65 $8.64 * *
End of Period 10.43 9.65
Number of Accum. Units Outstanding 9,448 944
-------------------------------------------------------------------------------------------------------------------
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities Sub-Account
Beginning of Period $7.56 $5.65 * *
End of Period 11.48 7.56
Number of Accum. Units Outstanding 13,256 7,033
-------------------------------------------------------------------------------------------------------------------
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities Sub-Account
Beginning of Period $9.15 $7.89 * *
End of Period 11.16 9.15
Number of Accum. Units Outstanding 50,837 6,626
-------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
Money Market Sub-Account
Beginning of Period $11.11 $10.67 $10.63 *
End of Period 11.53 11.11 10.67
Number of Accum. Units Outstanding 157,984 129,569 14,091
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
-------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs VIT Growth and Income Sub-Account
Beginning of Period $9.91 $11.21 * *
End of Period 10.30 9.91
Number of Accum. Units Outstanding 27,398 13,107
-------------------------------------------------------------------------------------------------------------------
Managed by Goldman Sachs Asset Management International
Goldman Sachs VIT Global Income Sub-Account
Beginning of Period $10.82 $10.15 * *
End of Period 10.56 10.82
Number of Accum. Units Outstanding 3,165 3,002
-------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT International Equity Sub-Account
Beginning of Period $11.42 $11.20 * *
End of Period 14.84 11.42
Number of Accum. Units Outstanding 27,069 15,859
-------------------------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc.
Managed by INVESCO Funds Group, Inc.
INVESCO VIF - Dynamics Sub-Account
Beginning of Period $10.00 * * *
End of Period 11.15
Number of Accum. Units Outstanding 1,951
-------------------------------------------------------------------------------------------------------------------
INVESCO VIF - High Yield Sub-Account
Beginning of Period $10.00 * * *
End of Period 10.12
Number of Accum. Units Outstanding 996
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
-------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities Sub-Account
Beginning of Period $10.63 $10.00 * *
End of Period 10.56 10.63
Number of Accum. Units Outstanding 20,807 2,519
-------------------------------------------------------------------------------------------------------------------
Kemper Small Cap Growth Sub-Account
Beginning of Period $11.69 $10.00 * *
End of Period 15.51 11.69
Number of Accum. Units Outstanding 8,195 3,829
-------------------------------------------------------------------------------------------------------------------
Kemper Small Cap Value Sub-Account
Beginning of Period $8.77 $10.00 * *
End of Period 8.89 8.77
Number of Accum. Units Outstanding 27,733 16,641
Liberty Variable Investment Trust
Managed by Newport Fund Management, Inc.
Newport Tiger Fund, Variable Sub-Account
Beginning of Period $9.28 $10.00 * *
End of Period 15.40 9.28
Number of Accum. Units Outstanding 2,639 2,397
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97 Ended 12/31/96
-------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Sub-Account
Beginning of Period $13.24 $10.00 * *
End of Period 23.08 13.24
Number of Accum. Units Outstanding 62,562 47,710
-------------------------------------------------------------------------------------------------------------------
MFS Global Governments Sub-Account
Beginning of Period $10.66 $10.00 * *
End of Period 10.25 10.66
Number of Accum. Units Outstanding 1,050 385
-------------------------------------------------------------------------------------------------------------------
MFS Growth With Income Sub-Account
Beginning of Period $12.08 $10.00 * *
End of Period 12.70 12.08
Number of Accum. Units Outstanding 112,973 64,791
-------------------------------------------------------------------------------------------------------------------
MFS High Income Sub-Account
Beginning of Period $9.86 $10.00 * *
End of Period 10.35 9.86
Number of Accum. Units Outstanding 21,540 13,080
-------------------------------------------------------------------------------------------------------------------
MFS Research Sub-Account
Beginning of Period $12.18 $10.00 * *
End of Period 14.90 12.18
Number of Accum. Units Outstanding 62,149 25,994
-------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust
Managed by Pacific Investment Management Company
PIMCO High Yield Bond Sub-Account
Beginning of Period $10.00 * * *
End of Period 10.08
Number of Accum. Units Outstanding 10
-------------------------------------------------------------------------------------------------------------------
PIMCO Low Duration Bond Sub-Account
Beginning of Period $10.00 * * *
End of Period 9.97
Number of Accum. Units Outstanding 10
-------------------------------------------------------------------------------------------------------------------
PIMCO StocksPLUS Growth and Income Sub-Account
Beginning of Period $10.00 * * *
End of Period 10.31
Number of Accum. Units Outstanding 10
-------------------------------------------------------------------------------------------------------------------
PIMCO Total Return Bond Sub-Account
Beginning of Period $10.00 * * *
End of Period 9.90
Number of Accum. Units Outstanding 1,525
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Value History (continued)
Year or Period Year or Period Year or Period Year or Period
Ended 12/31/99 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
Beginning of Period $11.40 $10.00 * *
End of Period 11.42 11.40
Number of Accum. Units Outstanding 131,527 80,114
-------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Sub-Account
Beginning of Period $11.73 $10.00 * *
End of Period 18.52 11.73
Number of Accum. Units Outstanding 81,982 56,566
-------------------------------------------------------------------------------------------------------------------
Putnam VT International New Opportunities Sub-Account
Beginning of Period $11.42 $10.00 * *
End of Period 22.86 11.42
Number of Accum. Units Outstanding 8,721 4,783
Putnam VT New Value Sub-Account
Beginning of Period $10.50 $10.00 * *
End of Period 10.38 10.50
Number of Accum. Units Outstanding 2,342 2,202
-------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Sub-Account
Beginning of Period $11.80 $10.00 * *
End of Period 17.80 11.80
Number of Accum. Units Outstanding 17,707 6,799
-------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund
Managed by Scudder Kemper Investments, Inc.
International Sub-Account
Beginning of Period $10.00 * * *
End of Period 11.64
Number of Accum. Units Outstanding 624
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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, 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 Franklin Templeton Variable
Insurance Products Trust -- September 21, 1998 (except March 1, 1999 for the
Franklin Small Cap Fund); American Century Variable Portfolios Inc., Dreyfus
Stock Index Fund, Dreyfus Variable Investment Fund, INVESCO Variable Investment
Funds, Inc., Scudder Variable Life Investment Fund and PIMCO Variable Insurance
Trust -- November 19, 1999).
APPENDIX B
PARTICIPATING INVESTMENT PORTFOLIOS
Below are the investment objectives and strategies of each investment portfolio
available under the contract. The fund prospectuses contain more complete
information, including a description of the investment objectives, policies,
restrictions and risks. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT OBJECTIVES
WILL BE ACHIEVED.
AIM VARIABLE INSURANCE FUNDS:
AIM Variable Insurance Funds 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
Investment Objective: The Fund's investment objective is growth of capital
through investment in common stocks, with emphasis on medium- and small-sized
companies. The portfolio managers focus on companies they believe are likely to
benefit from new or innovative products, services or processes as well as those
that have experienced above-average, long-term growth in earnings and have
excellent prospects for future growth.
AIM V.I. International Equity Fund
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing in a diversified portfolio of international
equity securities whose issuers are considered to have strong earnings momentum.
AIM V.I. Value Fund
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in equity securities judged by the
Fund's investment advisor to be undervalued relative to the investment advisor's
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
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 (Class A)
Investment Objective: The Portfolio's investment objective is growth of capital
by pursuing aggressive investment policies. The Portfolio invests primarily in
equity securities of U.S. companies. Normally, the Portfolio invests in about
40-50 companies, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Portfolio's net assets.
Real Estate Investment Portfolio (Class A)
Investment Objective: The Portfolio's investment objective is total return from
long-term growth of capital and income principally through investing in equity
securities of companies that are primarily engaged in or related to the real
estate industry.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.:
American Century Investment Management, Inc. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
VP Income & Growth Fund
Investment Objective: The Fund seeks dividend growth, current income and capital
appreciation by investing in common stocks.
VP International Fund
Investment Objective: The Fund seeks capital growth by investing in
internationally diversified stocks of companies that the adviser believes will
increase in value over time.
VP Value Fund
Investment Objective: The Fund seeks long-term capital growth by investing
primarily in common stocks. Income is a secondary objective.
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:
Portfolios Managed by J.P. Morgan
Investment Management Inc.:
International Equity Portfolio
Investment Objective: The International Equity Portfolio seeks to provide a high
total return from a portfolio of equity securities of foreign corporations.
Large Cap Stock Portfolio
Investment Objective: The Large Cap Stock Portfolio seeks to provide long-term
growth of capital and income.
Quality Bond Portfolio
Investment Objective: The Quality Bond Portfolio seeks to provide a high total
return consistent with moderate risk of capital and maintenance of liquidity.
Select Equity Portfolio
Investment Objective: The Select Equity Portfolio seeks to provide long-term
growth of capital and income.
Small Cap Stock Portfolio
Investment Objective: The Small Cap Stock Portfolio seeks to provide a high
total return from a portfolio of equity securities of small companies.
Portfolios Managed by Lord, Abbett & Co.:
Bond Debenture Portfolio
Investment Objective: The Bond Debenture Portfolio seeks to provide high current
income and the opportunity for capital appreciation to produce a high total
return.
Developing Growth Portfolio
Investment Objective: The Developing Growth Portfolio seeks long-term growth of
capital through a diversified and actively-managed portfolio consisting of
developing growth companies, many of which are traded over the counter.
Large Cap Research Portfolio
Investment Objective: The Large Cap Research Portfolio seeks growth of capital
and growth of income consistent with reasonable risk.
Lord Abbett Growth and Income Portfolio
Investment Objective: The Lord Abbett Growth and Income Portfolio seeks to
achieve long-term growth of capital and income without excessive fluctuation in
market value.
Mid-Cap Value Portfolio
Investment Objective: The Mid-Cap Value Portfolio seeks capital appreciation
through investments, primarily in equity securities, which are believed to be
undervalued in the marketplace.
DREYFUS STOCK INDEX FUND:
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and provide day-to-day management of the Fund's investments.
Investment Objective: The Fund seeks to match the total return of the Standard &
Poor's 500 Composite Stock Price Index. To pursue this goal, the Fund generally
invests in all 500 stocks in the S&P 500 in proportion to their weighting in the
index.
DREYFUS VARIABLE INVESTMENT FUND:
The Dreyfus Variable Investment Fund is a mutual fund with multiple portfolios.
The Dreyfus Corporation serves as the investment adviser. Fayez Sarofim & Co.
serves as sub-investment adviser to the Appreciation Portfolio. The following
portfolios are available under the contract:
Appreciation Portfolio
Investment Objective: The Portfolio seeks long-term capital growth consistent
with the preservation of capital; current income is a secondary goal. To pursue
these goals, the Portfolio invests in common stocks focusing on "blue chip"
companies with total market values of more than $5 billion at the time of
purchase. These established companies have demonstrated sustained patterns of
profitability, strong balance sheets, an expanding global presence and the
potential to achieve predictable, above-average earnings growth.
Disciplined Stock Portfolio
Investment Objective: The Portfolio seeks investment returns (consisting of
capital appreciation and income) that are greater than the total return
performance of stocks represented by the Standard & Poor's 500 Composite Stock
Price Index (S&P 500). To pursue this goal, the Portfolio invests in a blended
portfolio of growth and value stocks chosen through a disciplined investment
process. Consistency of returns and stability of the Portfolio's share price
compared to the S&P 500 are primary goals of the process.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST, CLASS 1 SHARES:
Franklin Templeton Variable Insurance Products Trust is a mutual fund with
multiple portfolios. Effective May 1, 2000 the portfolios of Templeton Variable
Products Series Fund were merged into similar portfolios of Franklin Templeton
Variable Insurance Products Trust. Each portfolio has two classes of shares:
Class 1 and Class 2. The portfolios available in connection with your contract
are Class 1 shares. Franklin Advisers, Inc. is the investment adviser for the
Franklin Small Cap Fund, Franklin Mutual Advisers, LLC is the investment adviser
for the Mutual Shares Securities Fund, Templeton Investment Counsel, Inc. is the
investment adviser for the Templeton International Securities Fund, and
Templeton Asset Management Ltd. is the investment adviser for the Templeton
Developing Markets Securities Fund. The following portfolios are available under
the contract:
Mutual Shares Securities Fund (the surviving fund of the merger with Mutual
Shares Investments Fund)
Investment Objective and Principal Investments: The Fund's principal goal
is capital appreciation. Its secondary goal is income. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of companies that the manager believes are available at market
prices less than their value based on certain recognized or objective
criteria (intrinsic value).
Franklin Small Cap Fund (the surviving fund of the
merger with Franklin Small Cap Investments Fund)
Investment Objective and Principal Investments: The Fund's investment goal is
long-term capital growth. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of U.S. small
capitalization (small cap) growth companies.
Templeton International Securities Fund
(formerly, Templeton International Fund)
Investment Objective and Principal Investments: The Fund's investment goal is
long-term capital growth. Under normal market conditions, the Fund will invest
at least 65% of its total assets in the equity securities of companies located
outside the U.S., including in emerging markets.
Templeton Developing Markets Securities Fund
(formerly, Templeton Developing Markets Fund)
Investment Objective: The Fund's investment goal is long-term capital
appreciation. Under normal market conditions, the Fund will invest at least 65%
of its total assets in emerging market equity securities. Emerging market equity
securities generally include equity securities that trade in emerging markets or
are issued by companies that derive revenue from goods or services produced, or
that have their principal activities or assets in, emerging market countries.
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
Investment Objective: The Money Market Fund's investment objective is to provide
investors with current income while preserving capital and maintaining
liquidity. The Fund seeks to achieve this objective by investing primarily in
high-quality, short-term money market instruments. The Fund purchases securities
that meet the quality, maturity, and diversification requirements applicable to
money market funds.
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Variable Insurance Trust is a mutual fund with multiple
portfolios. Goldman Sachs Asset Management, a unit of the Investment Management
Division of Goldman, Sachs & Co., is the investment adviser for the Goldman
Sachs VIT Growth and Income Fund and Goldman Sachs VIT Internet Tollkeeper Fund
and Goldman Sachs Asset Management International is the investment adviser for
the Goldman Sachs VIT International Equity Fund and the Goldman Sachs VIT Global
Income Fund. The following portfolios are available under the contract:
Goldman Sachs VIT Global Income Fund
Investment Objective: The Fund seeks a high total return, emphasizing current
income, and, to a lesser extent, providing opportunities for capital
appreciation. The Fund invests primarily in a portfolio of high quality
fixed-income securities of U.S. and foreign issuers and enters into transactions
in foreign currencies.
Goldman Sachs VIT Internet Tollkeeper Fund
Investment Objective: The Fund seeks long-term growth of capital by investing,
under normal circumstances, at least 90% of its total assets in equity
securities and at least 65% of its total assets in equity securities of
"Internet Tollkeeper" companies, which are companies in the media,
telecommunications, technology and Internet sectors which provide access,
infrastructure, content and services to Internet companies and Internet users.
Goldman Sachs VIT Growth and Income Fund
Investment Objective: The Fund seeks long-term growth of capital and growth of
income by investing in large capitalization U.S. stocks that are believed to be
undervalued or undiscovered in the marketplace.
Goldman Sachs VIT International Equity Fund
Investment Objective: The Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies organized outside the United States
or whose securities are principally traded outside the United States. The Fund
intends to invest in companies with public stock market capitalizations that are
larger than $1 billion at the time of investment.
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
portfolios are available under the contract:
INVESCO VIF - Dynamics Fund
Investment Objective: The Fund tries to buy securities that will increase in
value over the long term. It is aggressively managed. Because its strategy
includes many short-term factors -- including current information about a
company, investor interest, price movements of a company's securities and
general market and monetary conditions -- securities in its portfolio usually
are bought and sold relatively frequently. The Fund invests in a variety of
securities that the adviser believes present opportunities for capital growth --
primarily common stocks of companies traded on U.S. securities exchanges, as
well as over-the-counter. The Fund also may invest in preferred stocks (which
generally pay higher dividends than common stocks) and debt instruments that are
convertible into common stocks, as well as in securities of foreign companies.
INVESCO VIF - High Yield Fund
Investment Objective: The Fund seeks to provide a high level of current income,
with growth of capital as a secondary objective. It invests substantially all of
its assets in lower-rated debt securities, commonly called "junk bonds," and
preferred stock, including securities issued by foreign companies. These debt
securities are highly sensitive to changes in interest rates; in general, as
interest rates rise, the value of these securities will decline. Because the
debt securities held by the Fund tend to be lower rated, they are more
susceptible to the impact of overall fluctuations in the economy than other,
higher-rated debt securities. Although these securities carry with them higher
risks, they generally provide higher yields -- and therefore higher income --
than higher-rated debt securities.
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 Government Securities Portfolio
Investment Objective: Kemper Government Securities seeks high current return
consistent with preservation of capital. The Portfolio pursues its objective by
investing at least 65% of its total assets in U.S. Government securities and
repurchase agreements of U.S. Government securities.
Kemper Small Cap Growth Portfolio
Investment Objective: Kemper Small Cap Growth Portfolio seeks maximum
appreciation of investors' capital. The Portfolio pursues its objective by
investing at least 65% of its total assets in small capitalization stocks
similar in size to those companies comprising the Russell 2000 Index. Many of
these companies would be in the early stages of their life cycle. Equity
securities in which the Portfolio invests consist primarily of common stocks,
but may include convertible securities, including warrants and rights.
Kemper Small Cap Value Portfolio
Investment Objective: Kemper Small Cap Value Portfolio seeks long-term capital
appreciation. The Portfolio pursues its investment objective by investing
primarily in a diversified portfolio of the stocks of small U.S. companies,
which are those similar in size to those comprising the Russell 2000 Index and
that the investment manager believes to be undervalued. Under normal market
conditions, the Portfolio invests at least 65% of its assets in small
capitalization stocks similar in size to those comprising the Russell 2000
Index.
SCUDDER VARIABLE LIFE INVESTMENT FUND:
The Scudder Variable Life Investment Fund is a mutual fund with multiple
portfolios. Scudder Kemper Investments, Inc. is the investment adviser to each
portfolio. The following portfolio is available under the contract:
International Portfolio
Investment Objective: The International Portfolio seeks long-term growth of
capital primarily through diversified holdings of marketable foreign equity
investments.
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
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund invests primarily in stocks of companies
located in the nine Tiger countries of Asia. The Tigers of Asia are Hong Kong,
Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The People's
Republic of China and the Philippines. The Fund typically invests in stocks of
larger, well-established companies.
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
Investment Objective: The Series' investment objective is long term growth of
capital. The Series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities of emerging growth
companies.
MFS Global Governments Series
Investment Objective: The Series' investment objective is to provide income and
capital appreciation. The Series invests primarily in U.S. and foreign
government securities.
MFS Growth With Income Series
Investment Objective: The Series' investment objective is to provide reasonable
current income and long-term growth of capital and income. The Series invests,
under normal market conditions, at least 65% of its total assets in common
stocks and related securities.
MFS High Income Series
Investment Objective: The Series' investment objective is to provide high
current income by investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve equity features.
The Series invests, under normal market conditions, at least 80% of its total
assets in high yield fixed income securities which generally are lower rated
bonds commonly known as junk bonds. Junk bonds are subject to a substantially
higher degree of risk than higher rated bonds.
MFS Research Series
Investment Objective: The Series' investment objective is long-term growth of
capital and future income. The Series invests, under normal market conditions,
at least 80% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts.
PIMCO VARIABLE INSURANCE TRUST:
PIMCO Variable Insurance Trust is a mutual fund with multiple portfolios.
Pacific Investment Management Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PIMCO High Yield Bond Portfolio
Investment Objective: The High Yield Bond Portfolio seeks to maximize total
return, consistent with preservation of capital and prudent investment
management. The High Yield Bond Portfolio invests under normal circumstances at
least 65% of its assets in a diversified portfolio of high yield securities
rated at least B by Moody's or S&P, or, if unrated, determined by the adviser to
be of comparable quality.
PIMCO Low Duration Bond Portfolio
Investment Objective: The Low Duration Bond Portfolio seeks to maximize total
return, consistent with preservation of capital and prudent investment
management. The Low Duration Bond Portfolio invests under normal circumstances
at least 65% of its assets in a diversified portfolio of fixed income
instruments of varying maturities.
PIMCO StocksPLUS Growth and Income Portfolio
Investment Objective: The StocksPLUS Growth and Income Portfolio seeks to
achieve a total return which exceeds the total return performance of the S&P
500. The StocksPLUS Growth and Income Portfolio invests in common stocks,
options, futures, options on futures and swaps. Under normal market conditions,
the Portfolio invests substantially all of its assets in S&P 500 derivatives,
backed by a portfolio of fixed income instruments.
PIMCO Total Return Bond Portfolio
Investment Objective: The PIMCO Total Return Bond Portfolio seeks to maximize
total return, consistent with preservation of capital and prudent investment
management. The Total Return Bond Portfolio invests under normal circumstances
at least 65% of its assets in a diversified portfolio of fixed income
instruments of varying maturities.
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
Investment Objective: The Fund seeks capital growth and current income.
PUTNAM VT International Growth Fund - Class IA Shares
Investment Objective: The Fund seeks capital appreciation.
PUTNAM VT International New Opportunities Fund - Class IA Shares
Investment Objective: The Fund seeks long-term capital appreciation.
PUTNAM VT New Value Fund - Class IA Shares
Investment Objective: The Fund seeks long-term capital appreciation.
PUTNAM VT Vista Fund - Class IA Shares
Investment Objective: The Fund seeks capital appreciation.
APPENDIX C
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, 1999. 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, 1999 may
be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
The portfolios listed below began operations before December 31, 1999. As a
result, performance information is available for the accumulation units
investing in these portfolios.
o 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.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges and fees and expenses of each portfolio.
o Performance figures shown for sub-accounts in existence for less than one
year are not annualized.
<TABLE>
<CAPTION>
Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
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 5 yrs inception 1 yr 5 yrs inception
-------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C>
Appreciation 12/31/97 37.96% N/A 27.84% 42.60% N/A 29.72%
AIM V.I. International
Equity 12/31/97 48.25% N/A 30.28% 52.90% N/A 32.13%
AIM V.I. Value 12/31/97 23.46% N/A 27.53% 28.09% N/A 29.42%
-------------------------------------------------------------------------------------------------------------------
Alliance Variable Products
Series Fund, Inc.
Premier Growth (Class A) 12/31/97 25.84% N/A 36.34% 30.47% N/A 38.12%
Real Estate Investment
(Class A) 12/31/97 -11.03% N/A -16.21% -6.43% N/A -13.48%
-------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued) Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
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 5 yrs inception 1 yr 5 yrs inception
-------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Bond Debenture 5/20/96 -2.61% N/A 7.67% 1.99% N/A 8.80%
Developing Growth 11/7/97 25.95% N/A 12.40% 30.58% N/A 14.38%
International Equity 5/14/96 22.10% N/A 13.14% 26.73% N/A 14.15%
Large Cap Research 2/17/98 19.14% N/A 15.69% 23.76% N/A 17.92%
Large Cap Stock 5/16/96 11.45% N/A 23.76% 16.06% N/A 24.60%
Lord Abbett Growth and Income 1/8/99 N/A N/A 4.79% N/A N/A 9.90%
Mid-Cap Value 11/7/97 -0.41% N/A 1.57% 4.19% N/A 3.75%
Quality Bond 5/20/96 -7.51% N/A 3.00% -2.92% N/A 4.25%
Select Equity 5/15/96 3.62% N/A 16.83% 8.23% N/A 17.77%
Small Cap Stock 5/15/96 37.87% N/A 13.68% 42.52% N/A 14.68%
-------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance
Products Trust, Class 1 Shares
Mutual Shares Securities (1) 9/21/98 7.23% N/A 20.52% 11.85% N/A 25.27%
Templeton Developing
Markets Securities (2) 9/21/98 47.24% N/A 71.08% 51.89% N/A 74.34%
Templeton International
Securities (3) 9/21/98 17.33% N/A 27.66% 21.95% N/A 31.15%
Franklin Small Cap (4) 3/1/99 N/A N/A 99.28% N/A N/A 104.48%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective May 1, 2000, the Mutual Shares Investments Fund (previously
offered under the contract) merged into the Mutual Shares Securities Fund.
Performance shown reflects historical performance of the Mutual Shares
Securities Fund.
(2) Previously, the Templeton Developing Markets Securities Fund was known as
the Templeton Developing Markets Fund. Effective May 1, 2000, the Templeton
Developing Markets Securities Fund merged into the Templeton Developing
Markets Equity Fund. Performance shown reflects historical performance of
the Templeton Developing Markets Securities Fund.
(3) Previously, the Templeton International Securities Fund was known as the
Templeton International Fund. Effective May 1, 2000, the Templeton
International Securities Fund merged into the Templeton International
Equity Fund. Performance shown reflects historical performance of the
Templeton International Securities Fund.
(4) Effective May 1, 2000, the Franklin Small Cap Investments Fund (previously
offered under the contract) merged into the Franklin Small Cap Fund.
Performance shown reflects historical performance of the Franklin Small Cap
Fund.
<TABLE>
<CAPTION>
APPENDIX C
PERFORMANCE INFORMATION (continued) Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
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 5 yrs inception 1 yr 5 yrs inception
-------------------------------------------------------------------------------------------------------------------
General American Capital Company
<S> <C> <C> <C> <C> <C> <C>
Money Market 12/4/97 -0.86% N/A 1.72% 3.74% N/A 3.97%
-------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable
Insurance Trust
Goldman Sachs VIT
Global Income 3/31/98 -6.99% N/A -0.41% -2.39% N/A 2.26%
Goldman Sachs VIT
Growth and Income 3/31/98 -0.66% N/A -7.51% 3.94% N/A -4.71%
Goldman Sachs VIT
International Equity 3/31/98 25.39% N/A 15.00% 30.02% N/A 17.43%
-------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Government
Securities 12/31/97 -5.32% N/A 0.44% -0.72% N/A 2.75%
Kemper Small Cap Growth 12/31/97 28.03% N/A 22.57% 32.66% N/A 24.52%
Kemper Small Cap Value 12/31/97 -3.28% N/A -8.25% 1.32% N/A -5.73%
-------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 12/31/97 61.28% N/A 22.13% 65.94% N/A 24.09%
-------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued) Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
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 5 yrs inception 1 yr 5 yrs inception
-------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging Growth 12/31/97 69.59% N/A 50.28% 74.26% N/A 51.92%
MFS Global Governments 12/31/97 -8.45% N/A -1.10% -3.85% N/A 1.26%
MFS Growth With Income 12/31/97 0.60% N/A 10.58% 5.21% N/A 12.71%
MFS High Income 12/31/97 0.36% N/A -0.59% 4.97% N/A 1.75%
MFS Research 12/31/97 17.70% N/A 20.07% 22.32% N/A 22.06%
-------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth and
Income - Class IA Shares 12/31/97 -4.43% N/A 4.64% 0.17% N/A 6.88%
Putnam VT International
Growth - Class IA Shares 12/31/97 53.26% N/A 34.30% 57.92% N/A 36.10%
Putnam VT International
New Opportunities -
Class IA Shares 12/31/97 95.45% N/A 49.54% 100.15% N/A 51.19%
Putnam VT New Value -
Class IA Shares 12/31/97 -5.73% N/A -0.46% -1.13% N/A 1.88%
Putnam VT Vista -
Class IA Shares 12/31/97 46.12% N/A 31.57% 50.77% N/A 33.41%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
APPENDIX C
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.
o The performance figures in Column A reflect the fees and expenses paid by
each portfolio.
o 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.
o Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
o Performance figures shown for portfolios in existence for less than one
year are not annualized.
<TABLE>
<CAPTION>
Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
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 5 yrs inception
-------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation 5/5/93 44.61% 25.59% 22.33% 37.96% 24.09% 20.83% 42.60% 24.19% 20.93%
AIM V.I.
International Equity5/5/93 55.04% 21.93% 18.82% 48.25% 20.43% 17.32% 52.90% 20.53% 17.42%
AIM V.I. Value 5/5/93 29.90% 27.23% 23.07% 23.46% 25.73% 21.57% 28.09% 25.83% 21.67%
-------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth
(Class A) 6/26/92 32.32% 36.03% 26.31% 25.84% 34.53% 24.81% 30.47% 34.63% 24.91%
Real Estate Investment
(Class A) 1/9/97 -5.11% N/A -1.79% -11.03% N/A -4.83% -6.43% N/A -3.19%
-------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.
VP Income & Growth 10/30/97 18.02% N/A 24.69% 12.02% N/A 21.09% 16.62% N/A 23.29%
VP International 5/1/94 64.04% 24.28% 20.07% 58.04% 22.78% 18.57% 62.64% 22.88% 18.67%
VP Value 5/1/96 -0.85% N/A 11.10% -6.85% N/A 8.35% -2.25% N/A 9.70%
-------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 9/29/89 20.60% 28.07% 17.70% 14.60% 26.57% 16.20% 19.20% 26.67% 16.30%
-------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund
Dreyfus VIF -
Appreciation 4/5/93 11.46% 25.52% 20.05% 5.46% 24.02% 18.55% 10.06% 24.12% 18.65%
Dreyfus VIF -
Disciplined Stock 5/1/96 18.45% N/A 26.16% 12.45% N/A 23.41% 17.05% N/A 24.76%
-------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued) Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
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 5 yrs inception
-------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable
Insurance Products Trust, Class 1 Shares
Mutual Shares
Securities (1) 11/8/96 13.40% N/A 10.86% 7.40% N/A 7.91% 12.00% N/A 9.46%
Templeton Developing Markets
Securities (2) 3/1/96 53.84% N/A -5.30% 47.84% N/A -7.99% 52.44% N/A -6.70%
Templeton International
Securities (3) 5/1/92 23.61% 17.21% 15.36% 17.61% 15.71% 13.86% 22.21% 15.81% 13.96%
Franklin Small
Cap (4) 11/1/95 96.94% N/A 30.41% 90.94% N/A 27.81% 95.54% N/A 29.01%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective May 1, 2000, the Mutual Shares Investments Fund (previously
offered under the contract) merged into the Mutual Shares Securities Fund.
Performance shown reflects historical performance and inception date of the
Mutual Shares Securities Fund.
(2) Previously, the Templeton Developing Markets Fund. Effective May 1, 2000,
the Templeton Developing Markets Fund merged into the Templeton Developing
Markets Equity Fund. Performance shown reflects historical performance and
inception date of the Templeton Developing Markets Securities Fund.
(3) Previously, the Templeton International Fund. Effective May 1, 2000, the
Templeton International Securities Fund merged into the Templeton
International Equity Fund. Performance shown reflects historical
performance and inception date of the Templeton International Securities
Fund.
(4) Effective May 1, 2000, the Franklin Small Cap Investments Fund (previously
offered under the contract) merged into the Franklin Small Cap Fund.
Performance shown reflects historical performance and inception date of the
Franklin Small Cap Fund.
<TABLE>
<CAPTION>
APPENDIX C
PERFORMANCE INFORMATION (continued) Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
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 5 yrs inception
-------------------------------------------------------------------------------------------------------------------
General American Capital Company
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market 10/1/87 5.20% 5.60% 5.35% -0.86% 4.10% 3.85% 3.74% 4.20% 3.95%
-------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Goldman Sachs VIT
Global Income 1/12/98 -1.01% N/A 3.59% -6.99% N/A -0.22% -2.39% N/A 2.19%
Goldman Sachs VIT
Growth and Income 1/12/98 5.41% N/A 5.53% -0.66% N/A 1.72% 3.94% N/A 4.13%
Goldman Sachs VIT
International Equity1/12/98 31.85% N/A 26.26% 25.39% N/A 22.45% 30.02% N/A 24.86%
-------------------------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc.
INVESCO VIF -
Dynamics 8/25/97 55.60% N/A 31.95% 49.60% N/A 28.51% 54.20% N/A 30.55%
INVESCO VIF -
High Yield 5/27/94 9.20% 12.65% 11.34% 3.20% 11.15% 9.84% 7.80% 11.25% 9.94%
-------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Government
Securities 9/3/87 0.68% 7.46% 7.12% -5.32% 5.96% 5.62% -0.72% 6.06% 5.72%
Kemper Small
Cap Growth 5/2/94 34.56% 28.92% 25.97% 28.03% 27.42% 24.47% 32.66% 27.52% 24.57%
Kemper Small
Cap Value 5/1/96 2.80% N/A 3.42% -3.28% N/A 0.67% 1.32% N/A 2.02%
-------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund
International 5/1/87 54.51% 20.56% 13.25% 48.51% 19.06% 11.75% 53.11% 19.16% 11.85%
-------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 5/1/95 68.01% N/A 7.31% 61.28% N/A 4.83% 65.94% N/A 5.91%
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MFS Variable Insurance Trust
MFS Emerging
Growth 7/24/95 76.71% N/A 36.44% 69.59% N/A 33.91% 74.26% N/A 35.04%
MFS Global
Governments 6/14/94 -2.50% 4.36% 4.07% -8.45% 2.86% 2.57% -3.85% 2.96% 2.67%
MFS Growth
With Income 10/9/95 6.69% N/A 21.12% 0.60% N/A 18.54% 5.21% N/A 19.72%
MFS High Income 7/26/95 6.44% N/A 8.24% 0.36% N/A 5.71% 4.97% N/A 6.84%
MFS Research 7/26/95 24.05% N/A 22.86% 17.70% N/A 20.33% 22.32% N/A 21.46%
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APPENDIX C
PERFORMANCE INFORMATION (continued) Total Return for the periods ended 12/31/99:
-------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
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Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
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PIMCO Variable Insurance Trust
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PIMCO High Yield Bond 4/30/98 3.01% N/A 2.88% -2.99% N/A -1.34% 1.61% N/A 1.48%
PIMCO Low
Duration Bond 2/16/99 N/A N/A 2.56% N/A N/A -3.76% N/A N/A 1.34%
PIMCO StocksPLUS
Growth and Income 12/31/97 19.85% N/A 24.87% 13.85% N/A 21.09% 18.45% N/A 23.47%
PIMCO Total
Return Bond 12/31/97 -0.58% N/A 3.91% -6.58% N/A 0.13% -1.98% N/A 2.51%
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Putnam Variable Trust
Putnam VT Growth
and Income -
Class IA Shares 2/1/88 1.59% 19.40% 14.00% -4.43% 17.90% 12.50% 0.17% 18.00% 12.60%
Putnam VT International
Growth - Class
IA Shares 1/2/97 60.13% N/A 30.29% 53.26% N/A 27.26% 57.92% N/A 28.89%
Putnam VT International
New Opportunities -
Class IA Shares 1/2/97 102.95% N/A 32.92% 95.45% N/A 29.89% 100.15% N/A 31.52%
Putnam VT New Value -
Class IA Shares 1/2/97 0.27% N/A 7.83% -5.73% N/A 4.80% -1.13% N/A 6.43%
Putnam VT Vista -
Class IA Shares 1/2/97 52.90% N/A 31.14% 46.12% N/A 28.11% 50.77% N/A 29.74%
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</TABLE>
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Cova Financial Life
Insurance Company
Attn: Variable Products
One Tower Lane
Suite 3000
Oakbrook Terrace, Illinois 60181-4644
Please send me, at no charge, the Statement of Additional Information dated
May 1, 2000, for the annuity contract issued by Cova.
(Please print or type and fill in all information)
- ------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------------
City State Zip Code
CC-4283 (5/00) NAVI-CA
[back cover]
COVA
A MetLife(R) 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-4283 (5/00) Policy Form Series XLCC-648, XLCC-833 21-NAVI-CAS (5/00)
