File Nos. 333-90407
811-7060
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 20 [X]
(Check appropriate box or boxes.)
COVA VARIABLE ANNUITY ACCOUNT FIVE
__________________________________
(Exact Name of Registrant)
COVA FINANCIAL LIFE INSURANCE COMPANY
_______________________________________________
(Name of Depositor)
4100 Newport Place Drive, Suite 840, Newport Beach, CA 92600
______________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 831-5433
Name and Address of Agent for Service
Lorry J. Stensrud, President
Cova Financial Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 831-5433
Copies to:
Judith A. Hasenauer and Bernard J. Spaulding
Blazzard, Grodd & Hasenauer, P.C. Senior Vice President,
P.O Box 5108 General Counsel and Secretary
Westport, CT 06881 Cova Financial
(203) 226-7866 Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Title of Securities Registered:
Individual Variable Annuity Contracts
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------------------------------
PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Summary
Item 4. Condensed Financial Information . . . Not Applicable
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Investment
Options
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Annuity Contract
Item 8. Annuity Period . . . . . . . . . . . . Income Phase
Item 9. Death Benefit. . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . Table of Contents of the
Statement of Additional
Information
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -----------------------
PART B
Item 15. Cover Page . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . Company
Item 18. Services . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . Financial Statements
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PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
THE SERIES A FIXED AND VARIABLE ANNUITY
ISSUED BY
COVA VARIABLE ANNUITY ACCOUNT FIVE
AND
COVA FINANCIAL LIFE INSURANCE COMPANY
This prospectus describes the Series A Fixed and Variable Annuity Contract
offered by Cova Financial Life Insurance Company (Cova).
The annuity contract has 19 investment choices - a fixed account which offers an
interest rate which is guaranteed by Cova, and 18 investment portfolios listed
below. You can put your money in the fixed account and/or any of these
investment portfolios (except as noted).
AIM VARIABLE INSURANCE FUNDS, INC.:
MANAGED BY A I M ADVISORS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
COVA SERIES TRUST:
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
MANAGED BY LORD, ABBETT & CO.:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
GENERAL AMERICAN CAPITAL
COMPANY:
MANAGED BY CONNING
ASSET MANAGEMENT COMPANY
Money Market Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES:
MANAGED BY FRANKLIN ADVISERS, INC.
Franklin Small Cap Investments Fund
Franklin Growth Investments Fund*
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
Templeton International Fund
Templeton Stock Fund
Templeton Bond Fund
*Effective December 15, 1999 the fund's name changed to Franklin Large Cap
Growth Investments Fund.
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 Series A Fixed and Variable Annuity Contract, you
can obtain a copy of the Statement of Additional Information (SAI) dated
February ___, 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
__ of this prospectus. For a free copy of the SAI, call us at (800) 523-1661
or write us at: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-
4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
February ___, 2000
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
SUMMARY
FEE TABLE
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds, Inc.
Cova Series Trust
General American Capital Company
Templeton Variable Products Series Fund
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Sales Charge
Reduction or Elimination of the Sales Charge
Premium Taxes
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Withdrawals - Tax-Sheltered Annuities
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
Cova
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Suspension of Payments or Transfers
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX - Performance Information
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.......................................................
Accumulation Unit........................................................
Annuitant................................................................
Annuity Date.............................................................
Annuity Options..........................................................
Annuity Payments.........................................................
Annuity Unit.............................................................
Beneficiary..............................................................
Fixed Account............................................................
Income Phase.............................................................
Investment Portfolios....................................................
Joint Owner..............................................................
Non-Qualified............................................................
Owner....................................................................
Purchase Payment (including Gross Purchase Payment and
Net Purchase Payment).................................................
Qualified................................................................
Tax Deferral.............................................................
SUMMARY
The sections in this summary correspond to sections in this prospectus which
discuss the topics in more detail.
THE ANNUITY CONTRACT. The fixed and variable annuity contract offered by Cova is
a contract between you, the owner, and Cova, an insurance company. The contract
provides a means for investing on a tax-deferred basis. The contract is intended
for retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
This contract offers 18 investment portfolios. These portfolios are designed to
offer a better return than the fixed account. However, this is NOT guaranteed.
You can also lose your money.
The contract also offers a fixed account with an interest rate that is
guaranteed by Cova. While your money is in the fixed account, we guarantee the
interest your money will earn as well as your principal.
You can put money into any or all of the investment portfolios (except as noted)
and the fixed account. You can transfer between accounts up to 12 times a year
without charge or tax implications. After 12 transfers, the charge is $25.
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.
ANNUITY PAYMENTS (THE INCOME PHASE). If you want to receive regular income from
your annuity, you can choose one of three payment plans (we call them annuity
options). Once you begin receiving regular payments, you cannot change your
annuity option.
PURCHASE. You can buy this contract with $5,000 or more under most
circumstances. You can add $500 or more any time you like during the
accumulation phase. We will not issue a contract to someone over age 90. Your
registered representative can help you complete the proper forms.
INVESTMENT OPTIONS. You can put your money in any or all of the investment
portfolios which are described in the prospectuses for the funds.
Depending upon market conditions and the performance of the portfolio(s) you
select, you can make or lose money in any of these portfolios.
EXPENSES. The contract has insurance and investment features. There are costs
related to each.
Each year Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, Cova currently waives this charge if
the value of your contract is at least $50,000.
Cova also deducts a mortality and expense risk charge which is equivalent,
on an annual basis, to .85% of the average daily value of your contract
allocated to the investment portfolios.
Cova will deduct a sales charge from each purchase payment you make before
it allocates your money to the investment portfolios and/or the fixed account.
The amount of the sales charge varies depending upon the amount of the purchase
payments you make and the value of your contract at the time Cova receives your
purchase payment. Cova will also take into account the amount of purchase
payments which you represent in writing will be made during a 13-month period.
The larger your purchase payments and contract value are, the less your sales
charge will be. The charge ranges from 5.75% to 1.00%.
When you begin receiving regular income payments from your annuity, Cova
may assess a state premium tax charge which ranges from 0%-4%, depending upon
the state.
There are also investment charges which currently range from .205% to 1.30%
of the average daily value of the investment portfolio depending upon the
investment portfolio.
TAXES. Your earnings are not taxed until you take them out. If you take money
out during the accumulation phase, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on the earnings. Payments during the income
phase are considered partly a return of your original investment. That part of
each payment is not taxable as income.
ACCESS TO YOUR MONEY. You can take money out at any time during the accumulation
phase. Of course, you may also have to pay income tax and a tax penalty on any
money you take out.
DEATH BENEFIT. If you die before moving to the income phase, the person you have
chosen as your beneficiary will receive a death benefit.
OTHER INFORMATION.
Free Look. If you cancel the contract within 10 days after receiving it, we
will send your money back. Cova will refund the value of your contract plus the
sales charge determined as of the business day that the refund is made. If you
are 60 or older when we issue your contract, you can cancel it within 30 days
from the date you received it for a refund of the value of your contract plus
the sales charge. If you buy the contract as an IRA, we may be required to
refund the gross purchase payment.
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
Who should purchase the Contract? This contract is designed for people
seeking long-term tax-deferred accumulation of assets, generally for retirement
or other long-term purposes. The tax-deferred feature is most attractive to
people in high federal and state income tax brackets. You should not buy this
contract if you are looking for a short-term investment or if you cannot take
the risk of getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
Systematic Withdrawal Program - You can arrange to have money automatically
sent to you each month while your contract is still in the accumulation phase.
Of course, you may have to pay taxes on money you receive.
Dollar Cost Averaging Program - You can arrange to have a regular amount of
money automatically invested in investment portfolios each month, theoretically
giving you a lower average cost per unit over time than a single one time
purchase.
Automatic Rebalancing - You can arrange to automatically readjust the money
between investment portfolios periodically to keep the blend you select.
These features may not be suitable for your particular situation.
INQUIRIES. If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
Service Office
P.O. Box 10366
Des Moines, IA 50306-0366
800-343-8496
For Express Mail Only:
4700 Westown Parkway, Suite 200
West Des Moines, IA 50266-6718
COVA VARIABLE ANNUITY ACCOUNT FIVE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will
incur directly or indirectly with the contract. The Fee Table reflects expenses
of the separate account as well as the investment portfolios.
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OWNER TRANSACTION EXPENSES
Sales Charge (See Note 1 below)
(as a percentage of gross purchase payment)
Owner's Investment Sales Charge
------------------ -------------
Less than $50,000 5.75%
$50,000-$99,999.99 4.50%
$100,000 - $249,999.99 3.50%
$250,000-$499,999.99 2.50%
$500,000-$999,999.99 2.00%
$1,000,000 or greater 1.00%
Transfer Fee (see Note 2 below) No charge for first 12 transfers in a
contract year; thereafter, the fee is
$25 per transfer.
CONTRACT MAINTENANCE CHARGE (see Note 3 below) $30 per contract per year
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SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge .85%
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Total Separate Account Annual Expenses .85%
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INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an investment portfolio)
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Other Expenses
(after expense
Management reimbursement for Total Annual
Fees certain Portfolios) Portfolio Expenses
----------- ---------------------- ------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund .62% .05% .67%
AIM V.I. Value Fund .61% .05% .66%
COVA SERIES TRUST(a)
Managed by J.P. Morgan Investment Management Inc.
Select Equity Portfolio .68% .18% .86%
Small Cap Stock Portfolio .85% .27% 1.12%
International Equity Portfolio .80% .28% 1.08%
Quality Bond Portfolio .55% .10% .65%
Large Cap Stock Portfolio .65% .10% .75%
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio .75% .10% .85%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
Large Cap Research Portfolio 1.00% .30% 1.30%
Developing Growth Portfolio .90% .30% 1.20%
Lord Abbett Growth and Income Portfolio(b) .65% .07% .72%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset
Management Company
Money Market Fund .125% .08% .205%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund(c) .15% .85% 1.00%
Franklin Growth Investments Fund(d) .00% 1.00% 1.00%
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund .69% .17% .86%
Templeton Stock Fund .70% .19% .89%
Templeton Bond Fund .50% .23% .73%
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(a) Since May 1, 1996, Cova has been reimbursing the investment portfolios
of Cova Series Trust for all operating expenses (exclusive of the management
fees) in excess of approximately .10%. Beginning May 1, 1999, Cova has
discontinued this reimbursement arrangement for the Select Equity, Small Cap
Stock and International Equity Portfolios. Therefore, the amounts shown above
under "Other Expenses" have been restated to reflect the actual expenses for
these Portfolios for the year ended December 31, 1998. Also effective May 1,
1999, Cova began reimbursing the Mid-Cap Value, Large Cap Research and
Developing Growth Portfolios for all operating expenses (exclusive of the
management fees) in excess of approximately .30%,instead of .10%. This change is
reflected above under "Other Expenses" for these three Portfolios. Absent the
expense reimbursement, the percentages shown for total annual portfolio expenses
for the year ended December 31, 1998 would have been .86% for the Quality Bond
Portfolio, .94% for the Large Cap Stock Portfolio, .93% for the Bond Debenture
Portfolio, 1.68% for the Mid-Cap Value Portfolio, 1.95% for the Large Cap
Research Portfolio, and 1.70% for the Developing Growth Portfolio.
(b) Estimated. The Portfolio commenced investment operations on January 8,
1999.
(c) Figures reflect expenses from the Fund's inception on May 1, 1998,
which have been annualized for the management fees and estimated for other
expenses. The investment manager agreed in advance to limit management fees and
make certain payments to reduce Fund expenses as necessary so that Total Annual
Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets in
1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were .75%, 1.00% and 1.75% for the Franklin Small Cap
Investments Fund.
(d) Figures reflect expenses from the Fund's inception on May 1, 1998,
which have been annualized for the management fees and estimated for other
expenses. The investment manager agreed in advance to limit management fees and
make certain payments to reduce Fund expenses as necessary so that Total Annual
Portfolio Expenses did not exceed 1.00% of the Fund's Class 1 net assets in
1998. The investment manager has agreed to continue this arrangement through
1999. Management Fees, Other Expenses and Total Annual Portfolio Expenses in
1998 before any waivers were .60%, 4.08% and 4.68% for the Franklin Growth
Investments Fund.
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 regardless of whether you surrender your contract at the
end of each time period:
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Time Periods
1 year 3 years 5 years 10 years
AIM VARIABLE INSURANCE FUNDS, INC.
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund $74.02 $108.57 $145.24 $247.19
AIM V.I. Value Fund $73.92 $108.28 $144.75 $246.17
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity Portfolio $75.82 $114.05 $154.50 $266.26
Small Cap Stock Portfolio $78.29 $121.50 $167.01 $291.73
International Equity Portfolio $77.91 $120.36 $165.10 $287.86
Quality Bond Portfolio $73.83 $107.99 $144.26 $245.16
Large Cap Stock Portfolio $74.78 $110.88 $149.15 $255.27
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio $75.73 $113.76 $154.01 $265.27
Mid-Cap Value Portfolio $79.99 $126.62 $175.58 $308.94
Large Cap Research Portfolio $79.99 $126.62 $175.58 $308.94
Developing Growth Portfolio $79.04 $123.78 $170.83 $299.42
Lord Abbett Growth and Income Portfolio $74.49 $110.01 $147.69 $252.24
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company
Money Market Fund $69.59 $ 95.01 $122.20 $198.80
TEMPLETON VARIABLE PRODUCTS SERIES FUND,
CLASS 1 SHARES
Managed by Franklin Advisers, Inc.
Franklin Small Cap Investments Fund $77.15 $118.07 $161.26 $280.06
Franklin Growth Investments Fund $77.15 $118.07 $161.26 $280.06
Managed by Templeton Investment Counsel, Inc.
Templeton International Fund $75.82 $114.05 $154.50 $266.26
Templeton Stock Fund $76.11 $114.91 $155.95 $269.24
Templeton Bond Fund $74.59 $110.30 $148.17 $253.25
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EXPLANATION OF FEE TABLE
1. You may be entitled to a reduced sales charge if: 1) you indicate in
writing that you will make additional purchase payments to your contract during
a 13-month period; and 2) if the amount of the owner's investment (purchase
payments plus contract value) falls within certain dollar ranges. See "Expenses"
for a discussion of how the sales charge is determined.
2. Cova will not charge you the transfer fee even if there are more than 12
transfers in a year if the transfer is under the Dollar Cost Averaging or
Automatic Rebalancing 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.
THE ANNUITY CONTRACT
This Prospectus describes the Series A 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
one month after we issue your contract. 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 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 account assets of
Cova. If you select the fixed account, the amount of money you are able to
accumulate in your contract during the accumulation phase depends upon the total
interest credited to your contract. The amount of the annuity payments you
receive during the income phase from the fixed account portion of the contract
will remain level for the entire income phase.
As owner of the contract, you exercise all rights under the contract. You can
change the owner at any time by notifying Cova in writing. You and your spouse
can be named joint owners. We have described more information on this under
"Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Selecting an 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 must begin by the first day of a calendar month following the
annuitant's 85th birthday or 10 years from the date the contract was issued,
whichever is later.
Annuity Payments
Unless you designate another person to receive the annuity payments, Cova will
pay you the annuity payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from:
the fixed account (fixed annuity payout);
the investment portfolio(s) (variable annuity payout); or
a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the 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 assumed investment rate (AIR), your
annuity payments will increase. Similarly, if the performance is less than the
AIR, your annuity payments will decrease. Currently, the AIR is 3%. Cova may
change the AIR or add AIRs in the future.
Annuity payments will be paid in monthly installments or at any frequency
acceptable to Cova. Each annuity payment will be reduced by a pro-rata portion
of the contract maintenance charge. (See "Expenses").
Annuity payments are made monthly unless you have less than $5,000 to apply
toward a payment. In that case, Cova may pay 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.
Selecting an Annuity Option
You can choose among income plans. We call those annuity options. We ask you to
choose an annuity option when you purchase the contract. 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 change the annuity option at any time before the annuity date
with 30 days notice to us.
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 periodic annuity
payments 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 periodic annuity payments 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. If you do not want to receive annuity
payments, you can ask us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
periodic annuity payments so long as the annuitant and a second person are both
alive. When either of these people dies, we will continue to make annuity
payments so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you give us to purchase the contract. When you
make a purchase payment (we call this the "gross purchase payment"), we will
deduct the sales charge and any applicable premium taxes before we allocate it
to the investment portfolio(s) and/or the fixed account (we call this the "net
purchase payment"). See "Expenses" for a discussion of the sales charge.
The minimum gross purchase payment 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 gross purchase payment we will accept is $2,000. The maximum gross
purchase payments we accept are $1 million without our prior approval. You can
make additional gross purchase payments of $500 or more to any type of contract
any time during the accumulation phase.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your net 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. Currently, you may
allocate your money to any of the investment portfolios. Cova reserves the right
to limit the number of investment portfolios you may invest in at any one time
in the future. There is a $500 minimum allocation requirement for the fixed
account and for each investment portfolio.
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. Cova will refund the contract value plus the sales
charge determined as of the business day that the refund is made, which may be
less than your gross purchase payment. If you are 60 or older when we issue your
contract, you can cancel it within 30 days from the date you received it for a
refund of the value of your contract plus the sales charge. If you have
purchased the contract as an IRA, we may be required to refund your gross
purchase payment if you decide to cancel your contract within 10 days after
receiving it.
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 business 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 the mortality and expense risk charge 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 business day to
business 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 net 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 from you. The amount of the
net purchase payment is $5,000. You have told us you want this to go to the
Quality Bond Portfolio. When the New York Stock Exchange closes on that Monday,
we determine that the value of an accumulation unit for the Quality Bond
Portfolio is $13.90. We then divide $5,000 by $13.90 and credit your contract on
Monday night with 359.71 accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The contract offers 18 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
The investment objectives and policies of certain 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.
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 that it provides to the portfolios.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is a management investment company with
multiple portfolios. A I M Advisors, Inc. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. 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. Each investment portfolio has a different investment
objective. Cova Advisory has engaged sub-advisers to provide investment advice
for the individual investment portfolios. The following investment portfolios
are available under the contract:
J.P. MORGAN INVESTMENT MANAGEMENT INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is a mutual fund with multiple
portfolios. Templeton Variable Products Series Fund issues two classes of shares
- - Class 1 and Class 2. Only shares of Class 1 are available under your contract.
Franklin Advisers, Inc. is the investment manager of the Franklin Growth
Investments Fund and the Franklin Small Cap Investments Fund. Templeton
Investment Counsel, Inc. is the investment manager of the Templeton
International Fund, the Templeton Bond Fund and the Templeton Stock Fund. The
following portfolios are available under the contract:
Franklin Small Cap Investments Fund
Franklin Growth Investments Fund *
Templeton International Fund
Templeton Stock Fund
Templeton Bond Fund
* Effective December 15, 1999 the fund's name changed to Franklin Large Cap
Growth Investments Fund and its principal strategies and risks were restated
to those of investing primarily in large cap growth companies.
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.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The fee is $25 per transfer. The following apply to any
transfer during the accumulation phase:
1. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio or fixed account. The minimum amount which must
remain in an investment portfolio and/or the fixed account after a transfer is
$500.
2. Your request for transfer must clearly state which investment
portfolio(s) or the fixed account are involved in the transfer.
3. Your request for transfer must clearly state how much the transfer is
for.
4. We will process your transfer as of the end of the business day when our
Service Office receives an acceptable transfer request which contains all
required information (including the amount which is to be transferred and the
investment portfolio(s) and/or fixed account involved in the transfer).
5. Neither Cova nor its Service Office is liable for a transfer made in
accordance with your instructions.
6. Cova reserves the right to restrict the number of transfers per year and
to restrict transfers from being made on consecutive business days.
7. Your right to make transfers is subject to modification if Cova
determines, in Cova's sole opinion, that the exercise of the right by one or
more owners is or would be to the disadvantage of other owners. Restrictions may
be applied in any manner reasonably designed to prevent any use of the transfer
right which is considered by Cova to be to the disadvantage of other owners. A
modification could be applied to transfers to or from one or more of the
investment portfolios and could include, but not be limited to:
the requirement of a minimum time period between each transfer;
not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one owner; or
limiting the dollar amount that may be transferred between the investment
portfolios by an owner at any one time.
8. 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 a fixed annuity payout
to a variable annuity payout, but you can transfer from a variable annuity
payout to a fixed annuity payout at any time.
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.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund or the fixed account to any of the
other investment portfolio(s). By allocating amounts on a regular schedule as
opposed to allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations. The Dollar Cost Averaging
Program is available only during the accumulation phase.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program.
Cova reserves the right, without notice, to modify, terminate or suspend the
Dollar Cost Averaging Program. Cova does not currently charge for participating
in this program.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
AUTOMATIC REBALANCING PROGRAM
Once your money has been allocated 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 business day after the end of the period you selected. The
Automatic Rebalancing Program is available only during the accumulation phase.
Cova does not currently charge for participating in this program.
If you participate in the Automatic Rebalancing Program, the transfers made
under the program are not taken into account in determining any transfer fee.
EXAMPLE:
Assume that you want your initial purchase payment split between 2 investment
portfolios. You want 40% to be in the Quality Bond Portfolio and 60% to be in
the Select Equity Portfolio. Over the next 2 1/2 months the bond market does
very well while the stock market performs poorly. At the end of the first
quarter, the Quality Bond Portfolio now represents 50% of your holdings because
of its increase in value. If you had chosen to have your holdings rebalanced
quarterly, on the first business day of the next quarter, Cova would sell some
of your units in the Quality Bond Portfolio to bring its value back to 40% and
use the money to buy more units in the Select Equity Portfolio to increase those
holdings to 60%.
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 or more 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. Cova may limit further purchases in an investment
portfolio if it deems the investment inappropriate.
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:
MORTALITY AND EXPENSE RISK CHARGE
This charge is equivalent, on an annual basis, to .85% 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. This charge is
also for administrative expenses. Cova may use any profits it makes from this
charge to pay for the costs of distributing the contract.
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 out of each annuity payment.
SALES CHARGE
Cova deducts a sales charge from a gross purchase payment before the payment is
allocated to an investment portfolio and/or the fixed account. The amount of the
sales charge depends on the "owner's investment." The owner's investment for the
initial purchase payment equals the amount of the initial gross purchase
payment. The owner's investment for subsequent purchase payments equals the
gross subsequent purchase payment and the value of your contract on the day Cova
receives the subsequent gross purchase payment. The charge is:
<TABLE>
<CAPTION>
<S> <C>
Sales Charge (as a
percentage of gross
Owner's Investment purchase payment)
- -------------------- --------------------
Less than $50,000 5.75%
$50,000-$99,999.99 4.50%
$100,000-$249,999.99 3.50%
$250,000-$499,999.99 2.50%
$500,000-$999,999.99 2.00%
$1,000,000 or greater 1.00%
</TABLE>
HOW TO REDUCE THE SALES CHARGE
You may be able to lower the sales charge you pay by indicating in writing
the amount of gross purchase payments you intend to make during a 13 month
period. You have 13 months from the date Cova receives the written indication to
make the purchase payments you chose as your goal. We will deduct the sales
charge based on the total of the purchase payments intended to be made plus the
value of your contract on the date the first purchase payment is made. You are
not obligated to reach your purchase payment goal. If you do not make the amount
of purchase payments you indicated during the 13-month period, we will deduct an
additional charge from your contract in the 14th month based on: (1) the actual
gross purchase payments made during the 13 months; plus (2) the value of the
contract on the date the first gross purchase payment was made. Any additional
sales charge will be deducted during the 14th month from the investment
portfolios and the fixed account in the ratio that they bear to the value of
your contract. Cova reserves the right to modify, suspend or terminate this
feature at any time.
In addition, Cova will reduce or eliminate the amount of the sales 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 may not deduct a sales charge under a contract issued to an officer,
director or employee of Cova or any of its affiliates.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. Cova is responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, others are due when annuity
payments begin. It is Cova's current practice to not charge anyone for these
taxes until annuity payments begin. Cova may some time in the future discontinue
this practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 4%, depending on the state.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 per transfer. We will deduct the transfer fee from the
investment portfolio and/or the fixed account from which the transfer is made or
from the amount transferred if the entire amount in the investment portfolio
and/or the fixed account is transferred.
If the transfer is part of the Dollar Cost Averaging Program or the Automatic
Rebalancing 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.
TAXES
NOTE: Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. Cova has
included in the Statement of Additional Information an additional discussion
regarding taxes.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,corporation
or certain other entities other than a trust holding the contract as an agent
for a natural person), the contract will generally not be treated as an annuity
for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts), and
pension and profit-sharing plans, which include 401(k) plans and H.R. 10 plans.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of amounts attributable to purchase payments made
under a salary reduction agreement by owners from Tax-Sheltered Annuities.
Withdrawals can only be made when an owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Cova believes that the investment portfolios are being managed
so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Cova would be
considered the owner of the shares of the investment portfolios. If you are
considered the owner of the shares, it will result in the loss of the favorable
tax treatment for the contract. It is unknown to what extent owners are
permitted to select investment portfolios, to make transfers among the
investment portfolios or the number and type of investment portfolios owners may
select from without being considered the owner of the shares. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as the
owner of the contract, could be treated as the owner of the investment
portfolios.
Due to the uncertainty in this area, Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
by making a withdrawal (either a partial or a complete withdrawal);
by electing to receive annuity payments; or
when a death benefit is paid to your beneficiary.
Under most circumstances, withdrawals can only be made during the accumulation
phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal, less any contract maintenance charge. Cova
will pay the amount of a withdrawal from the investment portfolios within 7 days
of the withdrawal request unless the Suspension of Payments or Transfers
provision is in effect (see below).
Unless you instruct Cova in advance otherwise, any partial withdrawal will be
made pro rata from all the investment portfolios and the fixed account. 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 or the fixed account.
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.
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.
SYSTEMATIC WITHDRAWAL PROGRAM
You may use the Systematic Withdrawal Program. This program provides automatic
monthly payments to you. Cova does not charge for participation in this program,
but reserves the right to charge in the future.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
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 mortality and expense risk
charge and the operating expenses of the portfolios. It does not reflect the
deduction of any applicable contract maintenance charge and sales charge. The
deduction of any applicable contract maintenance charge and sales charge 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 sales charge, mortality and expense risk charge, contract maintenance
charge and the operating expenses of the portfolios.
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.
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 B contains performance information that you may find informative. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and the results shown are not necessarily
representative of future results.
DEATH BENEFIT
UPON YOUR DEATH
If you die before annuity payments begin, Cova will pay a death benefit to your
beneficiary (see below). Joint owners must be spouses. The surviving joint owner
will be treated as the beneficiary.
If you, or a joint owner, who is not the annuitant, die during the income phase,
any remaining payments under the annuity option elected will continue at least
as rapidly as under the method of distribution in effect at your death. If you
die during the income phase, the beneficiary will become the owner of the
contract.
At the time you buy the contract, you can select the Annual Step-Up Option or
the Five Year Step-Up with 4% Accumulation Option. If you do not choose a death
benefit option on the forms provided by Cova, the Annual Step-Up Option will be
your death benefit.
The death benefits are described below. 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.
ANNUAL STEP-UP OPTION:
The death benefit will be the greatest of:
1. Gross purchase payments less any withdrawals; or
2. The value of your contract determined on the business day following the
day when Cova receives both due proof of death and an election for payment; or
3. The greatest contract value (as explained below).
The greatest contract value is evaluated at each contract anniversary prior to
the date of your or your joint owner's death. On the contract anniversary, if
the current contract value exceeds the greatest contract value, the greatest
contract value will be increased to the current value of your contract. If a
purchase payment is made, the amount of the gross purchase payment will increase
the greatest contract value. If a withdrawal is made, the greatest contract
value will be reduced by the amount withdrawn.
After you or your joint owner attains age 80, the greatest contract value is
evaluated at each contract anniversary on or before your, or your joint owner's,
80th birthday. On the contract anniversary on or before your, or your joint
owner's, 80th birthday, if the current contract value exceeds the greatest
contract value, the greatest contract value will be increased to the current
contract value. If a purchase payment is made, the amount of the gross
purchase payment will increase the greatest contract value. If a withdrawal
is made, the greatest contract value will be reduced by the amount withdrawn.
FIVE YEAR STEP-UP WITH 4% ACCUMULATION OPTION:
The death benefit will be the greatest of:
1. Gross purchase payments, less any withdrawals made on or before you or
your joint owner's 80th birthday, accumulated at an effective annual rate of 4%
until the owner's or joint owner's 80th birthday or death; plus any subsequent
gross purchase payments less any subsequent withdrawals made subsequent to the
owner's or a joint owner's 80th birthday; or
2. The value of your contract determined on the business day following the
day when Cova receives both due proof of death and an election for payment; or
3. The greatest of the values of your contract resulting from taking the
contract value on any 5 year contract anniversary while the owner, or a joint
owner is living, on or before your, or your joint owner's 80th birthday, plus
any gross purchase payments you made subsequent to that contract anniversary,
less any withdrawals subsequent to that contract anniversary.
In certain states, one or both of the death benefit options described above may
not be available. Check your contract for your applicable death benefit
provision.
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.
The amount of the death benefit is determined as of the end of the business day
during which Cova receives both due proof of death and an election for the
payment option. The death benefit amount remains in the investment portfolios
and/or the fixed account until distribution begins. From the time we determine
the death benefit until we make a complete distribution, any amount in an
investment portfolio will be subject to investment risk which is borne by the
beneficiary.
DEATH OF ANNUITANT
If the annuitant, not an owner or joint owner, dies during the accumulation
phase, you, as the owner automatically become the annuitant. You can name a new
annuitant, subject to Cova's administrative rules then in effect. 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 during the income phase, the death benefit, if
any, will be as provided for in the annuity option selected and will be paid at
least as rapidly as under the method of distribution in effect at the
annuitant's death.
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 ("General American Life") 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 State of California.
THE SEPARATE ACCOUNT
Cova has established a separate account, Cova Variable Annuity Account Five
(Separate Account), to hold the assets that underlie the contracts (except the
assets allocated to the fixed account). The Board of Directors of Cova adopted a
resolution to establish the Separate Account under Missouri insurance law on
March 24, 1992. We have registered the Separate Account with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940. The Separate Account is divided into sub-accounts.
The assets of the Separate Account are held in Cova's name on behalf of the
Separate Account and legally belong to Cova. However, those assets that underlie
the contracts are not chargeable with liabilities arising out of any other
business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts Cova may issue.
DISTRIBUTOR
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the contracts. Life
Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions ranging up to 5.0% of purchase payments,
depending on the size of the purchase payment. Commissions are reduced once
certain breakpoints in purchase payments and/or contract value are achieved for
a contract. In addition, broker-dealers will be paid annual trail commissions in
the amount of .25% of purchase payments, beginning in year 2. Additional
compensation will be paid through a marketing fee and asset-based fee
arrangements.
OWNERSHIP
OWNER. You, as the owner of the contract, have all the interest and rights under
the contract. The owner is as designated at the time the contract is issued,
unless changed. You can change the owner at any time. A change will
automatically revoke any prior designation of an owner.
The change must be:
made in writing; and
received at Cova's Service Office.
The change will become effective as of the date when the written request is
signed. A new designation of owner will not apply to any payment Cova makes or
action it takes before it receives the change.
JOINT OWNER. The contract can be owned by joint owners. Any joint owner must be
the spouse of the other owner (except in states which do not allow this
limitation on joint owners). Upon the death of either joint owner, the surviving
joint owner will be the primary 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. Joint owners
must both authorize exercising any ownership rights (except telephone transfers)
unless Cova permits otherwise.
ANNUITANT
The annuitant is the person whose life we look to when we make annuity payments.
You may change the annuitant at any time prior to the annuity date unless the
contract is owned by a non-natural person (e.g. a corporation). On or after the
annuity date, any reference to the annuitant includes any joint annuitant.
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 by written request at
Cova's Service Office. The change is effective as of the date you signed the
notice.
ASSIGNMENT
You can assign the contract at any time before the annuity date. Cova will not
be bound by the assignment until it receives the written notice of the
assignment at its Service Office. 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
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
PART 1 SEPARATE ACCOUNT PERFORMANCE
Column A presents performance figures for the accumulation units which
reflect the mortality and expense risk charge, the contract maintenance
charge, the sales charge, and the fees and expenses of the investment
portfolio. The performance shown in Column A is standardized average
annual total return performance calculated according to SEC requirements.
Column B presents performance figures for the accumulation units which
reflect the mortality and expense risk charge as well as the expenses of
the investment portfolio.
The inception dates shown below reflect the dates the Separate Account
first invested in the Portfolio. The performance returns for accumulation
units investing in the portfolios in existence for less than one year are
not annualized.
<TABLE>
<CAPTION>
PART 1 AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Column A Unit Performance
(reflects Column B
all charges (reflects mortality
and expense risk charge
and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
AIM VI Capital
Appreciation Fund 12/31/97 23.21% 9.78% 30.82% 13.68%
AIM VI Value Fund 12/31/97 30.68% 18.84% 38.76% 23.05%
</TABLE>
PART 1 COVA SERIES TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
Select Equity Portfolio 5/15/96 10.03% 13.52% 16.83% 15.63%
Small Cap Stock Portfolio 5/15/96 14.93% 5.76% 22.03% 7.72%
International Equity
Portfolio 5/14/96 20.59% 7.86% 28.04% 9.86%
Quality Bond Portfolio 5/20/96 -8.15% 3.41% -2.48% 5.33%
Large Cap Stock Portfolio 5/16/96 20.37% 21.11% 27.80% 23.36%
Bond Debenture Portfolio 5/20/96 -2.33% 6.95% 3.70% 8.93%
Mid-Cap Value Portfolio 11/7/97 8.82% .60% 15.54% 3.59%
Large Cap Research Portfolio 2/17/98 22.07% 9.61% 29.61% 12.87%
Developing Growth Portfolio 11/7/97 28.36% 6.23% 36.29% 9.39%
Lord Abbett Growth and
Income Portfolio 1/8/99 - -5.59% - 0.24%
</TABLE>
PART 1 GENERAL AMERICAN CAPITAL COMPANY
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
Money Market Fund 12/4/97 -1.85% 2.62% 4.21% 4.58%
PART 1 TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation
Unit Performance
Column B
Column A (reflects mortality
(reflects all and expense risk charge
charges and and portfolio
Separate Account portfolio expenses)
Inception Date expenses)
Portfolio in Portfolio 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ----------
inception inception
------------- ----------
Franklin Small Cap
Investments Fund 3/1/99 - 19.76% - 27.18%
Franklin Growth -
Investments Fund 3/1/99 - 9.60% 16.38%
Templeton International Fund 9/21/98 16.26% -4.70% 23.44% -0.52%
Templeton Stock Fund 3/2/99 - 1.47% - 7.75%
Templeton Bond Fund 3/1/99 - -7.65% - -1.94%
</TABLE>
PART 2 HISTORICAL FUND PERFORMANCE
Shares of certain portfolios have been offered prior to the time the Separate
Account first invested in them and therefore have an investment performance
history. In order to show how investment performance of certain portfolios
affect accumulation unit values, we have developed performance information.
The chart below shows the investment performance of the portfolio and the
accumulation unit performance calculated by assuming that accumulation units
were invested in the portfolio for the same periods.
The performance figures in Column A for the portfolio reflect the fees and
expenses paid by the portfolio.
Column B presents performance figures for the accumulation units which
reflect the mortality and expense risk charge, the contract maintenance
charge, the sales charge and the expenses of the portfolio.
Column C presents performance figures for the accumulation units which
reflect the mortality and expense risk charge as well as the fees and
expenses of the portfolio.
<TABLE>
<CAPTION>
PART 2
AIM VARIABLE INSURANCE FUNDS, INC.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects mortality and
Portfolio charges and expense risk charge and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
AIM V.I. Capital
Appreciation Fund 5/5/93 32.11% 18.15% 17.56% 23.21% 16.02% 15.69% 30.82% 17.30% 16.71%
AIM V.I. Value Fund 5/5/93 40.15% 22.94% 20.96% 30.68% 20.81% 19.09% 38.76% 22.09% 20.11%
</TABLE>
<TABLE>
<CAPTION>
PART 2 COVA SERIES TRUST
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation
Unit Performance
Column C
Column A Column B (reflects mortality and
(reflects all charges expense risk charge and
and portfolio portfolio expenses)
expenses)
Portfolio
Portfolio Inception Date 1 yr since 1 yr since 1 yr since
- ----------------- ---------------- ---------- ------------- ---------- ---------- --------- -----------
inception inception inception
------------- ---------- -----------
Lord Abbett Growth and
Income Portfolio 1/8/99 - 0.83% - -5.59% - 0.24%
Bond Debenture Portfolio 5/1/96 4.66% 9.91% -2.33% 6.95% 3.70% 8.93%
Developing Growth
Portfolio 8/20/97 37.67% 10.24% 28.36% 6.23% 36.29% 9.39%
Large Cap Research
Portfolio 8/20/97 30.85% 13.74% 22.07% 9.61% 29.61% 12.87%
Mid-Cap Value Portfolio 8/20/97 16.60% 4.34% 8.82% 0.60% 15.54% 3.59%
Quality Bond Portfolio 5/1/96 -1.63% 6.23% -8.15% 3.41% -2.48% 5.33%
Small Cap Stock Portfolio 5/1/96 23.11% 8.68% 14.93% 5.76% 22.03% 7.72%
Large Cap Stock Portfolio 5/1/96 29.08% 24.53% 20.37% 21.11% 27.80% 23.36%
Select Equity Portfolio 5/1/96 17.87% 16.70% 10.03% 13.52% 16.83% 15.63%
International Equity
Portfolio 5/1/96 29.28% 10.87% 20.59% 7.86% 28.04% 9.86%
</TABLE>
PART 2 GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects mortality and
Portfolio charges and expense risk charge and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Money Market Fund 10/1/87 5.12% 5.57% 5.44% -1.85% 3.44% 3.90% 4.21% 4.72% 4.59%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, CLASS 1 SHARES
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED SEPTEMBER 30, 1999:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Performance Accumulation Unit Performance
Column A Column B Column C
(reflects all (reflects mortality and
Portfolio charges and expense risk charge and
Inception portfolio expenses) portfolio expenses)
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- --------- ------- ------ ------------ ------- ----------- ------------- ------- --------- --------
Templeton
International Fund 5/1/92 24.62% 13.30% 13.95% 16.26% 11.17% 12.20% 23.44% 12.45% 13.10%
Templeton Stock Fund 8/24/88 27.47% 12.79% 11.76% 20.77% 10.66% 10.22% 26.62% 11.94% 10.91%
Templeton Bond Fund 8/24/88 -1.94% 5.62% 6.31% -8.64% 3.49% 4.77% -2.79% 4.77% 5.46%
Franklin Small Cap
Investments Fund 5/1/98 51.70% - 10.65% 45.00% - 5.61% 50.85% - 9.80%
Franklin Growth
Investments Fund 5/1/98 37.81% - 21.98% 31.11% - 16.94% 36.96% - 21.13%
</TABLE>
- ---------------------------
- --------------------------- STAMP
- ---------------------------
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
February __, 2000 for the Series A Annuity Contract issued by Cova.
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
issued by
COVA VARIABLE ANNUITY ACCOUNT FIVE
AND
COVA FINANCIAL LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED FEBRUARY ___, 2000 FOR THE
SERIES A INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS
DESCRIBED HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644,
(800) 831-5433.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED FEBRUARY __, 2000.
TABLE OF CONTENTS
Page
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTION
REDUCTION OR ELIMINATION OF SALES CHARGE
CALCULATION OF PERFORMANCE INFORMATION
Total Return
Historical Unit Values
Reporting Agencies
FEDERAL TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other than Natural Persons
Tax Treatment of Assignments
Death Benefits
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations
ANNUITY PROVISIONS
Variable Annuity
Fixed Annuity
Annuity Unit
Net Investment Factor
Mortality and Expense Guarantee
FINANCIAL STATEMENTS
COMPANY
Cova Financial Life Insurance Company (the "Company") was originally
incorporated on September 6, 1972 as Industrial Indemnity Life Insurance
Company, a California corporation and changed its name on January 1, 1986 to
Xerox Financial Life Insurance Company. The Company presently is licensed to do
business in the state of California. On June 1, 1995 a wholly-owned subsidiary
of General American Life Insurance Company ("General American Life") purchased
Xerox Financial Services Life Insurance Company ("Xerox Life"), an affiliate of
the Company, from Xerox Financial Services, Inc. The acquisition of Xerox Life
included related companies, including the Company. On June 1, 1995 the Company
changed its name to Cova Financial Life Insurance Company. 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.
Cova is licensed to do business in the State of California.
EXPERTS
The balance sheets of the Company as of December 31, 1998 and 1997, and the
related statements of income, shareholder's equity, and cash flows for each of
the years in the three-year period ended December 31, 1998, and the statement of
assets and liabilities of the Separate Account as of December 31, 1998, and the
related statement of operations for the year then ended and the statements of
changes in net assets for the two years then ended, have been included herein in
reliance upon the reports of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
DISTRIBUTION
Cova Life Sales Company ("Life Sales") acts as the distributor. Prior to June 1,
1995, Cova Life Sales Company was known as Xerox Life Sales Company. Life Sales
is an affiliate of the Company. The offering is on a continuous basis.
REDUCTION OR ELIMINATION OF THE SALES CHARGE
The amount of the Sales Charge on the Contracts may be reduced or eliminated
when sales of the Contracts are made to individuals or to a group of individuals
in a manner that results in savings of sales expenses. The entitlement to
reduction of the Sales Charge will be determined by the Company after
examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Contracts
with fewer sales contacts.
2. The total amount of purchase payments to be received will be considered.
Per Contract sales expenses are likely to be less on larger purchase payments
than on smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract with fewer
sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Sales Charge.
The Sales Charge may be eliminated when the Contracts are issued to an officer,
director or employee of the Company or any of its affiliates. In no event will
any reduction or elimination of the Sales Charge be permitted where the
reduction or elimination of the Sales Charge will be unfairly discriminatory to
any person.
CALCULATION OF PERFORMANCE INFORMATION
Total Return
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a .95% Mortality and Expense Risk Charge, the Sales Charge and the
expenses for the underlying investment portfolio being advertised and any
applicable Contract Maintenance Charge.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charge and any Sales Charge to arrive at the ending
hypothetical value. The average annual total return is then determined by
computing the fixed interest rate that a $1,000 purchase payment would have to
earn annually, compounded annually, to grow to the hypothetical value at the end
of the time periods described. The formula used in these calculations is:
n
P (1 + T) = ERV
<TABLE>
<CAPTION>
<S> <C> <C>
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods
used (or fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the time
periods used.
</TABLE>
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of the
Sales Charge. The deduction of any Sales Charge would reduce any percentage
increase or make greater any percentage decrease.
You should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what your total return may be in any future period.
Historical Unit Values
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
Reporting Agencies
The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
FEDERAL TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment or as annuity payments under the Annuity
Option selected. For a lump sum payment received as a total withdrawal (total
surrender), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
DEATH BENEFITS
Any death benefit paid under the Contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered herein are designed to be suitable for use under various
types of Qualified Plans. Taxation of participants in each Qualified Plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
Qualified Plans will utilize annuity tables which do not differentiate on the
basis of sex. Such annuity tables will also be available for use in connection
with certain non-qualified deferred compensation plans.
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations" below.) Employee loans are not allowable under the
Contracts. Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
c. Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit employers, including self-
employed individuals, to establish various types of retirement plans for
employees. These retirement plans may permit the purchase of the Contracts to
provide benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all Plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Pension or Profit
Sharing Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Pension and Profit-Sharing Plans),
403(b)(Tax-Sheltered Annuities) and 408 and 408A (Individual Retirement
Annuities). To the extent amounts are not includible in gross income because
they have been rolled over to an IRA or to another eligible Qualified Plan, no
tax penalty will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Owner or Annuitant (as applicable) reaches age 59 1/2; (b) distributions
following the death or disability of the Owner or Annuitant (as applicable)(for
this purpose disability is as defined in Section 72(m) (7) of the Code); (c)
after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the Owner or Annuitant (as applicable) or the joint lives
(or joint life expectancies) of such Owner or Annuitant (as applicable) and his
or her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (g) distributions from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8)of
the Code.) The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect transfers between Tax-Sheltered Annuity Plans. Owners should consult
their own tax counsel or other tax adviser regarding any distributions.
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account. At the
Annuity Date, the Contract Value in each investment portfolio will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. On the Annuity Date, a fixed number of Annuity Units
will be purchased as follows:
The first Annuity Payment is equal to A divided first by B then multiplied by C
where:
A. is the Variable Annuity Value.
B. is $1,000.
C. is the appropriate Annuity Payment amount for each $1,000 of Variable
Annuity Value for the Annuity Option elected.
Each Annuity Payment will be reduced by a pro rata portion of the annual
Contract Maintenance Charge. In each Subaccount, the fixed number of Annuity
Units is determined by dividing the amount of the initial Annuity Payment
determined for each Subaccount by the Annuity Unit value on the Annuity Date.
Thereafter, the number of Annuity Units in each Subaccount remains unchanged
unless you elect a transfer between Subaccounts. All calculations will
appropriately reflect the Annuity Payment frequency selected.
On the date of each subsequent Annuity Payment, the total Annuity Payment is the
sum of the Annuity Payments for each Subaccount reduced by the Contract
Maintenance Charge. The Annuity Payment in each Subaccount is determined by
multiplying the number of Annuity Units then allocated to such Subaccount by the
Annuity Unit value for that Subaccount.
The dollar amount of Variable Annuity Payments for each applicable Subaccount
after the first is determined as follows:
1) the dollar amount of the first Variable Annuity Payment is divided by the
Annuity Unit Value for each applicable Subaccount as of the Annuity Date.
2) the established number of Annuity Units per payment in each Subaccount is
multiplied by the Annuity Unit value for that Subaccount for the last business
day of the month preceding the month for which the payment is due. This result
is the dollar amount of the payment for each applicable Subaccount.
ANNUITY UNIT
The value of an Annuity Unit for each sub-account was arbitrarily set initially.
This was done when the first investment portfolio shares were purchased. The
Subaccount Annuity Unit value at the end of any subsequent business day is
determined by multiplying the Subaccount Annuity Unit value for the immediately
preceding business day by the net investment factor for the day for which the
Annuity Unit Value is being calculated; and dividing the result by the factor
equivalent to the Assumed Investment Rate for the period from the immediately
preceding business day to the current business day. The Assumed Investment Rate
is 3%.
NET INVESTMENT FACTOR
The net investment factor for any Subaccount of the Variable Account for any
business day is determined by dividing:
1) the Accumulation Unit Value as of the close of the current business day; by
2) the Accumulation Unit Value as of the close of the immediately preceding
business day.
The net investment factor may be greater or less than one, as the Annuity Unit
Value may increase or decrease.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. Each Annuity Payment will be reduced by a pro rata
portion of the annual contract maintenance charge. The first monthly Annuity
Payment will be based upon the Annuity Option elected and the appropriate
Annuity Option Table.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Assets:
Investments:
<S> <C> <C> <C>
Cova Series Trust (Cova)
Lord Abbett Growth and Income Portfolio 2,009,113 shares at a net asset value of $21.791180 per share $ 43,780,931
Bond Debenture Portfolio 928,126 shares at a net asset value of $12.007691 per share 11,144,654
Developing Growth Portfolio 113,518 shares at a net asset value of $12.276121 per share 1,393,564
Large Cap Research Portfolio 118,885 shares at a net asset value of $13.050142 per share 1,551,466
Mid-Cap Value Portfolio 114,140 shares at a net asset value of $10.901244 per share 1,244,272
Quality Bond Portfolio 726,064 shares at a net asset value of $10.670452 per share 7,747,425
Small Cap Stock Portfolio 675,875 shares at a net asset value of $12.783032 per share 8,639,737
Large Cap Stock Portfolio 1,660,641 shares at a net asset value of $18.449313 per share 30,637,681
Select Equity Portfolio 1,394,338 shares at a net asset value of $14.233562 per share 19,846,396
International Equity Portfolio 832,520 shares at a net asset value of $13.710082 per share 11,413,912
General American Capital Company (GACC):
Money Market Fund 88,790 shares at a net asset value of $19.971255 per share 1,773,252
Russell Insurance Funds (Russell):
Multi-Style Equity Fund 150,241 shares at a net asset value of $15.32 per share 2,301,685
Aggressive Equity Fund 29,785 shares at a net asset value of $11.80 per share 351,462
Non-US Fund 86,802 shares at a net asset value of $12.19 per share 1,058,121
Core Bond Fund 198,953 shares at a net asset value of $10.06 per share 2,001,463
Real Estate Securities Fund 2,698 shares at a net asset value of $8.96 per share 24,176
AIM Variable Insurance Funds, Inc. (AIM):
AIM V.I. Value Fund 50,029 shares at a net asset value of $28.96 per share 1,448,852
AIM V.I. Capital Appreciation Fund 15,106 shares at a net asset value of $26.84 per share 405,448
AIM V.I. International Equity Fund 11,116 shares at a net asset value of $21.44 per share 238,336
Alliance Variable Products Series Fund
Inc. (Alliance):
Premier Growth Portfolio 56,332 shares at a net asset value of $33.27 per share 1,874,174
Real Estate Investment Portfolio 23,027 shares at a net asset value of $8.95 per share 206,090
Liberty Variable Investment Trust (Liberty):
Newport Tiger Fund, Variable Series 15,542 shares at a net asset value of $1.96 per share 30,462
Goldman Sachs Variable Insurance
Trust (Goldman Sachs):
Growth and Income Fund 20,862 shares at a net asset value of $10.13 per share 211,331
International Equity Fund 24,223 shares at a net asset value of $12.90 per share 312,481
Global Income Fund 3,241 shares at a net asset value of $10.18 per share 32,995
Kemper Variable Series (Kemper):
Kemper Dreman High Return Equity Portfolio 104 shares at a net asset value of $0.933740 per share 97
Kemper Small Cap Growth Portfolio 49,905 shares at a net asset value of $2.026570 per share 101,136
Kemper Small Cap Value Portfolio 210,343 shares at a net asset value of $1.037000 per share 218,126
Kemper Government Securities Portfolio 271,363 shares at a net asset value of $1.158070 per share 314,257
MFS Variable Insurance Trust (MFS):
MFS Bond Series 9 shares at a net asset value of $10.97 per share 103
MFS Research Series 35,132 shares at a net asset value of $19.15 per share 672,775
MFS Growth with Income Series 63,787 shares at a net asset value of $19.28 per share 1,229,807
MFS Emerging Growth Series 37,040 shares at a net asset value of $24.47 per share 906,359
MFS Foreign & Colonial Emerging Markets
Equity Series 4,353 shares at a net asset value of $6.32 per share 27,513
MFS High Income Series 17,158 shares at a net asset value of $11.20 per share 192,171
MFS Global Governments Series 814 shares at a net asset value of $10.13 per share 8,245
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Assets, continued:
Investments, continued:
<S> <C> <C> <C>
Oppenheimer Variable Account Funds
(Oppenheimer):
Oppenheimer Capital Appreciation Fund 2,798 shares at a net asset value of $38.79 per share $ 108,538
Oppenheimer Main Street Growth & Income Fund 13,314 shares at a net asset value of $22.04 per share 293,450
Oppenheimer High Income Fund 15,235 shares at a net asset value of $10.55 per share 160,729
Oppenheimer Bond Fund 57,271 shares at a net asset value of $11.47 per share 656,898
Oppenheimer Strategic Bond Fund 15,329 shares at a net asset value of $4.85 per share 74,346
Putnam Variable Trust (Putnam)
Putnam VT Growth and Income Fund 52,120 shares at a net asset value of $26.22 per share 1,366,583
Putnam VT New Value Fund 2,434 shares at a net asset value of $11.67 per share 28,407
Putnam VT Vista Fund 11,971 shares at a net asset value of $15.93 per share 190,690
Putnam VT International Growth Fund 64,114 shares at a net asset value of $15.99 per share 1,025,181
Putnam VT International New Opportunities Fund 8,167 shares at a net asset value of $14.83 per share 121,111
Templeton Variable Products Series Fund
(Templeton):
Templeton Bond Fund 621 shares at a net asset value of $10.05 per share 6,238
Franklin Small Cap Investments Fund 14,267 shares at a net asset value of $11.29 per share 161,069
Templeton Stock Fund 3,977 shares at a net asset value of $20.78 per share 82,651
Templeton International Fund 16,324 shares at a net asset value of $19.59 per share 319,788
Templeton Developing Markets Fund 18,312 shares at a net asset value of $6.16 per share 112,799
Mutual Shares Investments Fund 8,184 shares at a net asset value of $10.04 per share 82,168
Franklin Growth Investments Fund 4,251 shares at a net asset value of $13.17 per share 55,986
Variable Insurance Products Fund, Fund II and
Fund III (Fidelity):
VIP Growth Portfolio 946 shares at a net asset value of $44.47 per share 42,052
VIP II Contrafund Portfolio 297 shares at a net asset value of $24.84 per share 7,365
VIP III Growth Opportunities Portfolio 275 shares at a net asset value of $21.75 per share 5,970
VIP III Growth & Income Portfolio 5,005 shares at a net asset value of $15.98 per share 79,972
VIP Equity-Income Portfolio 1,494 shares at a net asset value of $24.88 per share 37,174
----------------
Total assets $ 158,360,120
================
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Liabilities:
<S> <C>
GACC Money Market $ 68
Russell Multi-Style Equity 87
Russell Aggressive Equity 13
Russell Non-US 40
Russell Core Bond 77
Russell Real Estate Securities 1
AIM V.I. Value 55
AIM V.I. Capital Appreciation 16
AIM V.I. International Equity 9
Alliance Premier Growth 71
Alliance Real Estate Investment 8
Liberty Newport Tiger Fund, Variable 175
Goldman Sachs Growth and Income 8
Goldman Sachs International Equity 12
Goldman Sachs Global Income 1
Kemper Small Cap Growth 4
Kemper Small Cap Value 8
Kemper Government Securities 12
MFS Research 26
MFS Growth with Income 47
MFS Emerging Growth 35
MFS/Foreign & Colonial Emerging Markets Equity 1
MFS High Income 7
MFS Global Governments 1
Oppenheimer Capital Appreciation 4
Oppenheimer Main Street Growth & Income 11
Oppenheimer High Income 6
Oppenheimer Bond 25
Oppenheimer Strategic Bond 3
Putnam VT Growth and Income 52
Putnam VT New Value 1
Putnam VT Vista 7
Putnam VT International Growth 39
Putnam VT International New Opportunities 5
Templeton Bond 1
Franklin Small Cap Investments 6
Templeton Stock 3
Templeton International 12
Templeton Developing Markets 4
Templeton Mutual Shares Investments 3
Franklin Growth Investments 2
Fidelity VIP Growth 2
Fidelity VIP III Growth & Income 3
Fidelity VIP Equity-Income 1
========
Total liabilities $ 972
========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Net assets:
Accumulation units:
<S> <C> <C> <C>
Cova Lord Abbett Growth and Income 1,217,834 accumulation units at $35.846834 per unit $ 43,655,480
Cova Bond Debenture 837,590 accumulation units at $13.297003 per unit 11,137,440
Cova Developing Growth 116,502 accumulation units at $11.961763 per unit 1,393,564
Cova Large Cap Research 121,344 accumulation units at $12.785720 per unit 1,551,466
Cova Mid-Cap Value 116,798 accumulation units at $10.653220 per unit 1,244,272
Cova Quality Bond 667,347 accumulation units at $11.609294 per unit 7,747,425
Cova Small Cap Stock 648,561 accumulation units at $13.321396 per unit 8,639,737
Cova Large Cap Stock 1,516,790 accumulation units at $20.192781 per unit 30,628,204
Cova Select Equity 1,217,194 accumulation units at $16.298247 per unit 19,838,133
Cova International Equity 824,058 accumulation units at $13.850867 per unit 11,413,912
GACC Money Market 155,466 accumulation units at $11.405631 per unit 1,773,184
Russell Multi-Style Equity 176,484 accumulation units at $13.041389 per unit 2,301,598
Russell Aggressive Equity 38,075 accumulation units at $9.230506 per unit 351,449
Russell Non-US 85,959 accumulation units at $12.309179 per unit 1,058,081
Russell Core Bond 191,346 accumulation units at $10.459537 per unit 2,001,386
Russell Real Estate Securities 2,631 accumulation units at $9.190015 per unit 24,175
AIM V.I. Value 101,490 accumulation units at $14.275217 per unit 1,448,797
AIM V.I. Capital Appreciation 32,599 accumulation units at $12.436827 per unit 405,432
AIM V.I. International Equity 19,301 accumulation units at $12.347899 per unit 238,327
Alliance Premier Growth 119,026 accumulation units at $15.745289 per unit 1,874,103
Alliance Real Estate Investment 27,187 accumulation units at $7.580283 per unit 206,082
Liberty Newport Tiger Fund, Variable 2,640 accumulation units at $11.474808 per unit 30,287
Goldman Sachs Growth and Income 22,226 accumulation units at $9.507941 per unit 211,323
Goldman Sachs International Equity 25,535 accumulation units at $12.237176 per unit 312,469
Goldman Sachs Global Income 3,125 accumulation units at $10.557479 per unit 32,994
Kemper Dreman High Return Equity 10 accumulation units at $9.670000 per unit 97
Kemper Small Cap Growth 8,512 accumulation units at $11.881303 per unit 101,132
Kemper Small Cap Value 25,590 accumulation units at $8.523422 per unit 218,118
Kemper Government Securities 29,619 accumulation units at $10.609487 per unit 314,245
MFS Bond 10 accumulation units at $10.341000 per unit 103
MFS Research 54,844 accumulation units at $12.266571 per unit 672,749
MFS Growth with Income 106,616 accumulation units at $11.534481 per unit 1,229,760
MFS Emerging Growth 60,675 accumulation units at $14.937310 per unit 906,324
MFS/Foreign & Colonial Emerging Markets Equity 3,944 accumulation units at $6.976271 per unit 27,512
MFS High Income 18,975 accumulation units at $10.127249 per unit 192,164
MFS Global Governments 793 accumulation units at $10.391322 per unit 8,244
Oppenheimer Capital Appreciation 8,125 accumulation units at $13.358170 per unit 108,534
Oppenheimer Main Street Growth & Income 26,331 accumulation units at $11.144103 per unit 293,439
Oppenheimer High Income 15,972 accumulation units at $10.062994 per unit 160,723
Oppenheimer Bond 64,157 accumulation units at $10.238538 per unit 656,873
Oppenheimer Strategic Bond 7,366 accumulation units at $10.093478 per unit 74,343
Putnam VT Growth and Income 121,847 accumulation units at $11.215192 per unit 1,366,531
Putnam VT New Value 2,771 accumulation units at $10.249387 per unit 28,406
Putnam VT Vista 15,084 accumulation units at $12.641068 per unit 190,683
Putnam VT International Growth 74,675 accumulation units at $13.728132 per unit 1,025,142
Putnam VT International New Opportunities 8,299 accumulation units at $14.593575 per unit 121,106
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Net assets, continued:
Accumulation units, continued:
<S> <C> <C> <C>
Templeton Bond 637 accumulation units at $9.795096 per unit $ 6,237
Franklin Small Cap Investments 12,669 accumulation units at $12.713311 per unit 161,063
Templeton Stock 7,256 accumulation units at $11.390124 per unit 82,648
Templeton International 32,436 accumulation units at $9.858587 per unit 319,776
Templeton Developing Markets 12,351 accumulation units at $9.132548 per unit 112,795
Templeton Mutual Shares Investments 8,309 accumulation units at $9.888972 per unit 82,165
Franklin Growth Investments 4,816 accumulation units at $11.623799 per unit 55,984
Fidelity VIP Growth 2,911 accumulation units at $14.445422 per unit 42,050
Fidelity VIP II Contrafund 565 accumulation units at $13.028946 per unit 7,365
Fidelity VIP III Growth Opportunities 521 accumulation units at $11.449022 per unit 5,970
Fidelity VIP III Growth & Income 6,536 accumulation units at $12.234362 per unit 79,969
Fidelity VIP Equity-Income 3,419 accumulation units at $10.872928 per unit 37,173
----------------
158,208,743
Annuity units:
Cova Lord Abbett Growth and Income 4,541 annuity units at $27.628002 per unit 125,451
Cova Bond Debenture 571 annuity units at $12.627277 per unit 7,214
Cova Large Cap Stock 494 annuity units at $19.175732 per unit 9,477
Cova Select Equity 534 annuity units at $15.477346 per unit 8,263
================
Total net assets $ 158,359,148
================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Cova
------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money Stock and and Bond Developing
Income (1) Market (1) Index (1) Income (1) Income Debenture Growth
------------ ------------ ----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 27,755 223 13,623 13,703 - 213,945 -
------------ ------------ ----------- ------------ ------------- ----------- ------------
Expenses:
Mortality and expense risk 211 73 637 582 395,055 96,512 10,515
Administrative fee 25 9 76 70 47,407 11,582 1,262
------------ ------------ ----------- ------------ ------------- ----------- ------------
Total expenses 236 82 713 652 442,462 108,094 11,777
------------ ------------ ----------- ------------ ------------- ----------- ------------
Net investment income (loss) 27,519 141 12,910 13,051 (442,462) 105,851 (11,777)
------------ ------------ ----------- ------------ ------------- ----------- ------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares (16,882) - 308,127 112,186 42,645 17,898 1,444
Realized gain distributions - - 232,665 207,864 - 69,331 -
------------ ------------ ----------- ------------ ------------- ----------- ------------
Net realized gain (loss) (16,882) - 540,792 320,050 42,645 87,229 1,444
------------ ------------ ----------- ------------ ------------- ----------- ------------
Change in unrealized appreciation (19,209) - (491,713) (316,285) 232,226 (373,201) 77,537
------------ ------------ ----------- ------------ ------------- ----------- ------------
Net increase (decrease) in net
from operations $ (8,572) 141 61,989 16,816 (167,591) (180,121) 67,204
============ ============ =========== ============ ============= =========== ============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Cova
------------------------------------------------------------------------------------------
Large Small Large
Cap Mid-Cap Quality Cap Cap Select International
Research Value Bond Stock Stock Equity Equity
---------- --------- ----------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 2,277 1,536 81,794 24,018 42,000 53,137 55,097
---------- --------- ----------- ----------- ----------- ------------- --------------
Expenses:
Mortality and expense risk 10,030 10,494 68,645 77,231 272,207 189,168 100,860
Administrative fee 1,204 1,259 8,237 9,268 32,664 22,700 12,103
---------- --------- ----------- ----------- ----------- ------------- --------------
Total expenses 11,234 11,753 76,882 86,499 304,871 211,868 112,963
---------- --------- ----------- ----------- ----------- ------------- --------------
Net investment income (loss) (8,957) (10,217) 4,912 (62,481) (262,871) (158,731) (57,866)
---------- --------- ----------- ----------- ----------- ------------- --------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 4,134 7,230 15,901 (7,477) 237,047 166,219 77,197
Realized gain distributions - - 40,932 - 916,687 1,803,409 147,250
---------- --------- ----------- ----------- ----------- ------------- --------------
Net realized gain (loss) 4,134 7,230 56,833 (7,477) 1,153,734 1,969,628 224,447
---------- --------- ----------- ----------- ----------- ------------- --------------
Change in unrealized appreciation 61,631 25,586 (243,391) 540,363 (101,300) (2,722,128) 612,687
---------- --------- ----------- ----------- ----------- ------------- --------------
Net increase (decrease) in net
from operations $ 56,808 22,599 (181,646) 470,405 789,563 (911,231) 779,268
========== ========= =========== =========== =========== ============= ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
GACC Lord Abbett Russell
---------- -------------- ------------------------------------------------------------
Growth Multi- Real
Money and Style Aggressive Core Estate
Market Income (1) Equity Equity Non-US Bond Securities
---------- -------------- ---------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - - 6,430 421 3,982 47,052 -
---------- -------------- ---------- ------------ --------- ---------- ----------
Expenses:
Mortality and expense risk 15,518 10,298 15,304 2,276 6,165 13,701 22
Administrative fee 1,862 1,236 1,836 273 740 1,644 3
---------- -------------- ---------- ------------ --------- ---------- ----------
Total expenses 17,380 11,534 17,140 2,549 6,905 15,345 25
---------- -------------- ---------- ------------ --------- ---------- ----------
Net investment income (loss) (17,380) (11,534) (10,710) (2,128) (2,923) 31,707 (25)
---------- -------------- ---------- ------------ --------- ---------- ----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 27,338 4,505,534 2,606 (352) 5,448 (11,084) 9
Realized gain distributions - - 68,270 239 - 15,240 -
----------
---------- -------------- ---------- ------------ --------- ---------- ----------
Net realized gain (loss) 27,338 4,505,534 70,876 (113) 5,448 4,156 9
---------- -------------- ---------- ------------ --------- ---------- ----------
Change in unrealized appreciation 33,713 (2,782,796) (93,580) (9,979) 70,177 (54,298) (721)
---------- -------------- ---------- ------------ --------- ---------- ----------
Net increase (decrease) in net
from operations $ 43,671 1,711,204 (33,414) (12,220) 72,702 (18,435) (737)
========== ============== ========== ============ ========= ========== ==========
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
AIM Alliance Liberty Goldman Sachs
----------------------------------------- ---------------------- --------- --------------
Newport
V.I. Real Tiger Growth
V.I. Capital International Premier Estate Fund, and
V.I. Value Appreciation Equity Growth Investment Variable Income
----------- -------------- ------------- --------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - - - - 7,818 - -
----------- -------------- ------------- --------- ----------- --------- --------------
Expenses:
Mortality and expense risk 7,401 1,884 1,871 14,120 1,734 257 1,556
Administrative fee 888 226 224 1,694 208 31 187
----------- -------------- ------------- --------- ----------- --------- --------------
Total expenses 8,289 2,110 2,095 15,814 1,942 288 1,743
----------- -------------- ------------- --------- ----------- --------- --------------
Net investment income (loss) (8,289) (2,110) (2,095) (15,814) 5,876 (288) (1,743)
----------- -------------- ------------- --------- ----------- --------- --------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 4,460 1,546 (1,341) 26,783 (4,442) - 393
Realized gain distributions - - - 21,117 - - -
----------- -------------- ------------- --------- ----------- --------- --------------
Net realized gain (loss) 4,460 1,546 (1,341) 47,900 (4,442) - 393
----------- -------------- ------------- --------- ----------- --------- --------------
Change in unrealized appreciation 7,490 5,603 20,242 40,058 (12,089) 5,840 (10,798)
----------- -------------- ------------- --------- ----------- --------- --------------
Net increase (decrease) in net
from operations $ 3,661 5,039 16,806 72,144 (10,655) 5,552 (12,148)
=========== ============== ============= ========= =========== ========= ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Goldman Sachs Kemper MFS
------------------------- ------------------------------------------------ -------
Dreman
High Small Small
International Global Return Cap Cap Government
Equity Income Equity Growth Value Securities Bond
------------- --------- ---------- -------- --------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - - 1 - 1,730 3,820 2
------------- --------- ---------- -------- --------- ------------- -------
Expenses:
Mortality and expense risk 2,078 307 - 597 1,741 1,133 -
Administrative fee 249 37 - 72 209 136 -
------------- --------- ---------- -------- --------- ------------- -------
Total expenses 2,327 344 - 669 1,950 1,269 -
------------- --------- ---------- -------- --------- ------------- -------
Net investment income (loss) (2,327) (344) 1 (669) (220) 2,551 2
------------- --------- ---------- -------- --------- ------------- -------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 1,011 (4) - 233 (2,675) (3) -
Realized gain distributions - - 1 - - - -
------------- --------- ---------- -------- --------- ------------- -------
Net realized gain (loss) 1,011 (4) 1 233 (2,675) (3) -
------------- --------- ---------- -------- --------- ------------- -------
Change in unrealized appreciation 18,940 (444) (10) 3,574 (763) 507 (4)
------------- --------- ---------- -------- --------- ------------- -------
Net increase (decrease) in net
from operations $ 17,624 (792) (8) 3,138 (3,658) 3,055 (2)
============= ========= ========== ======== ========= ============= =======
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
MFS Oppenheimer
-------------------------------------------------------------------------- --------------
F&C
Growth Emerging
with Emerging Markets High Global Capital
Research Income Growth Equity Income Governments Appreciation
----------- ---------- ---------- ---------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 988 3,198 - - 8,526 322 262
----------- ---------- ---------- ---------- --------- ------------- --------------
Expenses:
Mortality and expense risk 4,852 9,675 7,466 227 1,481 59 863
Administrative fee 582 1,161 896 27 178 7 104
----------- ---------- ---------- ---------- --------- ------------- --------------
Total expenses 5,434 10,836 8,362 254 1,659 66 967
----------- ---------- ---------- ---------- --------- ------------- --------------
Net investment income (loss) (4,446) (7,638) (8,362) (254) 6,867 256 (705)
----------- ---------- ---------- ---------- --------- ------------- --------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 1,921 4,621 12,442 (1,777) 1,416 (53) 1,837
Realized gain distributions 5,219 3,839 - - - - 2,880
----------- ---------- ---------- ---------- --------- ------------- --------------
Net realized gain (loss) 7,140 8,460 12,442 (1,777) 1,416 (53) 4,717
----------- ---------- ---------- ---------- --------- ------------- --------------
Change in unrealized appreciation (7,656) (61,806) 90,376 5,271 (4,896) (324) 1,191
----------- ---------- ---------- ---------- --------- ------------- --------------
Net increase (decrease) in net
from operations $ (4,962) (60,984) 94,456 3,240 3,387 (121) 5,203
=========== ========== ========== ========== ========= ============= ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Oppenheimer Putnam
------------------------------------------------ -----------------------------------
Main Street
Growth VT Growth
and High Strategic and VT New
Income Income Bond Bond Income Value VT Vista
----------- --------- ----------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 815 8,100 22,575 1,644 15,328 3 -
----------- --------- ----------- ---------- ------------ --------- ---------
Expenses:
Mortality and expense risk 2,203 1,270 4,729 417 11,125 304 1,346
Administrative fee 264 152 567 51 1,335 36 162
----------- --------- ----------- ---------- ------------ --------- ---------
Total expenses 2,467 1,422 5,296 468 12,460 340 1,508
----------- --------- ----------- ---------- ------------ --------- ---------
Net investment income (loss) (1,652) 6,678 17,279 1,176 2,868 (337) (1,508)
----------- --------- ----------- ---------- ------------ --------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 6,005 (495) (1,810) (123) 3,839 1,284 3,500
Realized gain distributions 1,373 - 2,168 - 76,488 668 -
----------- --------- ----------- ---------- ------------ --------- ---------
Net realized gain (loss) 7,378 (495) 358 (123) 80,327 1,952 3,500
----------- --------- ----------- ---------- ------------ --------- ---------
Change in unrealized appreciation 10,309 (5,530) (30,735) (1,595) (124,407) (1,597) 8,151
----------- --------- ----------- ---------- ------------ --------- ---------
Net increase (decrease) in net
from operations $ 16,035 653 (13,098) (542) (41,212) 18 10,143
=========== ========= =========== ========== ============ ========= =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Putnam Templeton
----------------------------- ------------------------------------------------------------
VT
VT International Franklin
International New Small Cap Developing
Growth Opportunities Bond Investments Stock International Markets
------------- -------------- ------ ------------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ - 37 - - - 1,768 833
------------- -------------- ------ ------------- -------- ------------- ------------
Expenses:
Mortality and expense risk 7,794 890 15 349 322 1,486 798
Administrative fee 936 107 2 42 39 178 96
------------- -------------- ------ ------------- -------- ------------- ------------
Total expenses 8,730 997 17 391 361 1,664 894
------------- -------------- ------ ------------- -------- ------------- ------------
Net investment income (loss) (8,730) (960) (17) (391) (361) 104 (61)
------------- -------------- ------ ------------- -------- ------------- ------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 6,207 478 - 14 (208) 52 5,790
Realized gain distributions - - - - - 6,140 -
------------- -------------- ------ ------------- -------- ------------- ------------
Net realized gain (loss) 6,207 478 - 14 (208) 6,192 5,790
------------- -------------- ------ ------------- -------- ------------- ------------
Change in unrealized appreciation 133,639 23,769 28 10,635 (1,564) (621) 2,931
------------- -------------- ------ ------------- -------- ------------- ------------
Net increase (decrease) in net
from operations $ 131,116 23,287 11 10,258 (2,133) 5,675 8,660
============= ============== ====== ============= ======== ============= ============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Templeton Fidelity
---------------------------- ----------------------------------------------------------
Mutual Franklin VIP III VIP III VIP
Shares Growth VIP VIP II Growth Growth & Equity-
Investments Investments Growth Contrafund Opportunities Income Income
------------ -------------- -------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 35 - 11 5 14 153 124
------------ -------------- -------- ----------- ------------- ----------- ---------
Expenses:
Mortality and expense risk 331 154 205 32 48 446 231
Administrative fee 40 19 25 4 6 54 28
------------ -------------- -------- ----------- ------------- ----------- ---------
Total expenses 371 173 230 36 54 500 259
------------ -------------- -------- ----------- ------------- ----------- ---------
Net investment income (loss) (336) (173) (219) (31) (40) (347) (135)
------------ -------------- -------- ----------- ------------- ----------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 16 8 140 1 2 162 (2)
Realized gain distributions - - 688 35 25 306 274
------------ -------------- -------- ----------- ------------- ----------- ---------
Net realized gain (loss) 16 8 828 36 27 468 272
------------ -------------- -------- ----------- ------------- ----------- ---------
Change in unrealized appreciation (3,899) 1,026 9 (174) 36 (2,780) (2,867)
------------ -------------- -------- ----------- ------------- ----------- ---------
Net increase (decrease) in net
from operations $ (4,219) 861 618 (169) 23 (2,659) (2,730)
============ ============== ======== =========== ============= =========== =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Total
-------------
Income:
<S> <C>
Dividends $ 665,105
-------------
Expenses:
Mortality and expense risk 1,389,301
Administrative fee 166,719
-------------
Total expenses 1,556,020
-------------
Net investment income (loss) (890,915)
-------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 5,566,396
Realized gain distributions 3,623,108
-------------
Net realized gain (loss) 9,189,504
-------------
Change in unrealized appreciation (5,439,615)
-------------
Net increase (decrease) in net
from operations $ 2,858,974
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Cova
--------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money Stock and and Bond Developing
Income (1) Market (1) Index (1) Income (1) Income Debenture Growth
------------ ----------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 27,519 141 12,910 13,051 (442,462) 105,851 (11,777)
Net realized gain (loss) (16,882) - 540,792 320,050 42,645 87,229 1,444
Change in unrealized appreciation (19,209) - (491,713) (316,285) 232,226 (373,201) 77,537
------------ ----------- ------------ ------------- ------------- ------------ ------------
Net increase (decrease) from
operations (8,572) 141 61,989 16,816 (167,591) (180,121) 67,204
------------ ----------- ------------ ------------- ------------- ------------ ------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners - - - - 821,828 362,236 146,908
Transfers between sub-accounts
(including fixed account), net (762,919) (267,611) (2,368,402) (2,135,470) 45,639,074 2,609,728 397,947
Transfers for contract benefits and
terminations - - - - (2,512,380) (847,431) (3,492)
------------ ----------- ------------ ------------- ------------- ------------ ------------
Net increase (decrease) in net
assets from contract
transactions (762,919) (267,611) (2,368,402) (2,135,470) 43,948,522 2,124,533 541,363
------------ ----------- ------------ ------------- ------------- ------------ ------------
Net increase (decrease) in net
assets (771,491) (267,470) (2,306,413) (2,118,654) 43,780,931 1,944,412 608,567
Net assets at beginning of period 771,491 267,470 2,306,413 2,118,654 - 9,200,242 784,997
------------ ----------- ------------ ------------- ------------- ------------ ------------
Net assets as end of period $ - - - - 43,780,931 11,144,654 1,393,564
============ =========== ============ ============= ============= ============ ============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Cova
---------------------------------------------------------------------------------------------
Large Small Large
Cap Mid-Cap Quality Cap Cap Select International
Research Value Bond Stock Stock Equity Equity
------------ ------------ ---------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (8,957) (10,217) 4,912 (62,481) (262,871) (158,731) (57,866)
Net realized gain (loss) 4,134 7,230 56,833 (7,477) 1,153,734 1,969,628 224,447
Change in unrealized appreciation 61,631 25,586 (243,391) 540,363 (101,300) (2,722,128) 612,687
------------ ------------ ---------- ----------- ------------- ------------ --------------
Net increase (decrease) from
operations 56,808 22,599 (181,646) 470,405 789,563 (911,231) 779,268
------------ ------------ ---------- ----------- ------------- ------------ --------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 252,466 65,381 512,983 73,939 1,145,775 620,840 166,074
Transfers between sub-accounts
(including fixed account), net 675,981 278,231 1,950,092 156,630 7,777,978 3,289,399 817,211
Transfers for contract benefits and
terminations (23,811) (13,936) (503,709) (415,323) (1,076,280) (1,036,685) (394,253)
------------ ------------ ---------- ----------- ------------- ------------ --------------
Net increase (decrease) in net
assets from contract
transactions 904,636 329,676 1,959,366 (184,754) 7,847,473 2,873,554 589,032
------------ ------------ ---------- ----------- ------------- ------------ --------------
Net increase (decrease) in net
assets 961,444 352,275 1,777,720 285,651 8,637,036 1,962,323 1,368,300
Net assets at beginning of period 590,022 891,997 5,969,705 8,354,086 22,000,645 17,884,073 10,045,612
------------ ------------ ---------- ----------- ------------- ------------ --------------
Net assets as end of period $ 1,551,466 1,244,272 7,747,425 8,639,737 30,637,681 19,846,396 11,413,912
============ ============ ========== =========== ============= ============ ==============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
GACC Lord Abbett Russell
------------ ------------- -------------------------------------------------------------------
Growth Multi- Real
Money and Style Aggressive Core Estate
Market Income (1) Equity Equity Non-US Bond Securities
------------ ------------- ------------ ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (17,380) (11,534) (10,710) (2,128) (2,923) 31,707 (25)
Net realized gain (loss) 27,338 4,505,534 70,876 (113) 5,448 4,156 9
Change in unrealized appreciation 33,713 (2,782,796) (93,580) (9,979) 70,177 (54,298) (721)
------------ ------------- ------------ ----------- ------------- ------------ ------------
Net increase (decrease) from
operations 43,671 1,711,204 (33,414) (12,220) 72,702 (18,435) (737)
------------ ------------- ------------ ----------- ------------- ------------ ------------
Contract transactions:
Cova payments - - - - - - 100
Cova redemptions - - - - - - -
Payments received from contract
owners 314,083 60,200 946,072 154,100 385,471 470,730 2,486
Transfers between sub-accounts
(including fixed account), net 688,923 (38,834,206) 909,476 155,108 451,483 1,015,922 22,326
Transfers for contract benefits and
terminations (712,998) (34,966) (137,009) (32,064) (55,761) (120,629) -
------------ ------------- ------------ ----------- ------------- ------------ ------------
Net increase (decrease) in net
assets from contract
transactions 290,008 (38,808,972) 1,718,539 277,144 781,193 1,366,023 24,912
------------ ------------- ------------ ----------- ------------- ------------ ------------
Net increase (decrease) in net
assets 333,679 (37,097,768) 1,685,125 264,924 853,895 1,347,588 24,175
Net assets at beginning of period 1,439,505 37,097,768 616,473 86,525 204,186 653,798 -
------------ ------------- ------------ ----------- ------------- ------------ ------------
Net assets as end of period $ 1,773,184 - 2,301,598 351,449 1,058,081 2,001,386 24,175
============ ============= ============ =========== ============= ============ ============
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
AIM Alliance Liberty Goldman Sachs
------------------------------------------ ------------------------ ---------- -------------
Newport
V.I. Real Tiger Growth
V.I. Capital International Premier Estate Fund, and
V.I. Value Appreciation Equity Growth Investment Variable Income
------------- -------------- ------------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (8,289) (2,110) (2,095) (15,814) 5,876 (288) (1,743)
Net realized gain (loss) 4,460 1,546 (1,341) 47,900 (4,442) - 393
Change in unrealized appreciation 7,490 5,603 20,242 40,058 (12,089) 5,840 (10,798)
------------- -------------- ------------- ----------- ------------ ---------- -------------
Net increase (decrease) from
operations 3,661 5,039 16,806 72,144 (10,655) 5,552 (12,148)
------------- -------------- ------------- ----------- ------------ ---------- -------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions (135) (117) - - - - -
Payments received from contract
owners 494,339 154,996 51,173 373,284 11,497 2,493 12,612
Transfers between sub-accounts
(including fixed account), net 937,251 180,566 (1,953) 631,569 39,051 - 82,457
Transfers for contract benefits and
terminations (23,778) (784) (1,912) (122,070) (10,436) - (1,515)
------------- -------------- ------------- ----------- ------------ ---------- -------------
Net increase (decrease) in net
assets from contract
transactions 1,407,677 334,661 47,308 882,783 40,112 2,493 93,554
------------- -------------- ------------- ----------- ------------ ---------- -------------
Net increase (decrease) in net
assets 1,411,338 339,700 64,114 954,927 29,457 8,045 81,406
Net assets at beginning of period 37,459 65,732 174,213 919,176 176,625 22,242 129,917
------------- -------------- ------------- ----------- ------------ ---------- -------------
Net assets as end of period $ 1,448,797 405,432 238,327 1,874,103 206,082 30,287 211,323
============= ============== ============= =========== ============ ========== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Goldman Sachs Kemper MFS
------------------------- ------------------------------------------------- ------
Dreman
High Small Small
International Global Return Cap Cap Government
Equity Income Equity Growth Value Securities Bond
------------- --------- -------- ---------- ---------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (2,327) (344) 1 (669) (220) 2,551 2
Net realized gain (loss) 1,011 (4) 1 233 (2,675) (3) -
Change in unrealized appreciation 18,940 (444) (10) 3,574 (763) 507 (4)
------------- --------- -------- ---------- ---------- ------------ ------
Net increase (decrease) from
operations 17,624 (792) (8) 3,138 (3,658) 3,055 (2)
------------- --------- -------- ---------- ---------- ------------ ------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - (106) -
Payments received from contract
owners 24,245 - - 16,891 46,547 44,475 -
Transfers between sub-accounts
(including fixed account), net 91,025 1,350 - 39,235 41,197 254,047 -
Transfers for contract benefits and
terminations (1,478) (36) - (2,889) (11,911) (14,012) -
------------- --------- -------- ---------- ---------- ------------ ------
Net increase (decrease) in net
assets from contract
transactions 113,792 1,314 - 53,237 75,833 284,404 -
------------- --------- -------- ---------- ---------- ------------ ------
Net increase (decrease) in net
assets 131,416 522 (8) 56,375 72,175 287,459 (2)
Net assets at beginning of period 181,053 32,472 105 44,757 145,943 26,786 105
------------- --------- -------- ---------- ---------- ------------ ------
Net assets as end of period $ 312,469 32,994 97 101,132 218,118 314,245 103
============= ========= ======== ========== ========== ============ ======
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
MFS Oppenheimer
-------------------------------------------------------------------------- -------------
F&C
Growth Emerging
with Emerging Markets High Global Capital
Research Income Growth Equity Income Governments Appreciation
----------- ---------- ---------- ---------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (4,446) (7,638) (8,362) (254) 6,867 256 (705)
Net realized gain (loss) 7,140 8,460 12,442 (1,777) 1,416 (53) 4,717
Change in unrealized appreciation (7,656) (61,806) 90,376 5,271 (4,896) (324) 1,191
----------- ---------- ---------- ---------- --------- -------------- -------------
Net increase (decrease) from
operations (4,962) (60,984) 94,456 3,240 3,387 (121) 5,203
----------- ---------- ---------- ---------- --------- -------------- -------------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - (135)
Payments received from contract
owners 136,206 78,180 81,167 1,989 19,640 - 12,929
Transfers between sub-accounts
(including fixed account), net 257,264 467,376 153,722 (4,856) 40,531 6,190 29,491
Transfers for contract benefits and
terminations (32,343) (37,170) (54,904) (726) (408) (1,925) (624)
----------- ---------- ---------- ---------- --------- -------------- -------------
Net increase (decrease) in net
assets from contract
transactions 361,127 508,386 179,985 (3,593) 59,763 4,265 41,661
----------- ---------- ---------- ---------- --------- -------------- -------------
Net increase (decrease) in net
assets 356,165 447,402 274,441 (353) 63,150 4,144 46,864
Net assets at beginning of period 316,584 782,358 631,883 27,865 129,014 4,100 61,670
----------- ---------- ---------- ---------- --------- -------------- -------------
Net assets as end of period $ 672,749 1,229,760 906,324 27,512 192,164 8,244 108,534
=========== ========== ========== ========== ========= ============== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Oppenheimer Putnam
------------------------------------------------- ------------------------------------
Main Street
Growth VT Growth
and High Strategic and VT New
Income Income Bond Bond Income Value VT Vista
------------ ----------- ----------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (1,652) 6,678 17,279 1,176 2,868 (337) (1,508)
Net realized gain (loss) 7,378 (495) 358 (123) 80,327 1,952 3,500
Change in unrealized appreciation 10,309 (5,530) (30,735) (1,595) (124,407) (1,597) 8,151
------------ ----------- ----------- --------- ------------ ---------- ----------
Net increase (decrease) from
operations 16,035 653 (13,098) (542) (41,212) 18 10,143
------------ ----------- ----------- --------- ------------ ---------- ----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 43,832 20,906 29,273 14,538 119,800 10,335 16,834
Transfers between sub-accounts
(including fixed account), net 97,378 35,619 169,476 33,405 477,386 (4,701) 99,346
Transfers for contract benefits and
terminations (17,690) (819) (18,128) (337) (102,997) (365) (15,893)
------------ ----------- ----------- --------- ------------ ---------- ----------
Net increase (decrease) in net
assets from contract
transactions 123,520 55,706 180,621 47,606 494,189 5,269 100,287
------------ ----------- ----------- --------- ------------ ---------- ----------
Net increase (decrease) in net
assets 139,555 56,359 167,523 47,064 452,977 5,287 110,430
Net assets at beginning of period 153,884 104,364 489,350 27,279 913,554 23,119 80,253
------------ ----------- ----------- --------- ------------ ---------- ----------
Net assets as end of period $ 293,439 160,723 656,873 74,343 1,366,531 28,406 190,683
============ =========== =========== ========= ============ ========== ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Putnam Templeton
--------------------------- ---------------------------------------------------------------
VT
VT International Franklin
International New Small Cap Developing
Growth Opportunities Bond Investments Stock International Markets
------------ ------------- ------- ------------ ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (8,730) (960) (17) (391) (361) 104 (61)
Net realized gain (loss) 6,207 478 - 14 (208) 6,192 5,790
Change in unrealized appreciation 133,639 23,769 28 10,635 (1,564) (621) 2,931
------------ ------------- ------- ------------ ---------- -------------- -------------
Net increase (decrease) from
operations 131,116 23,287 11 10,258 (2,133) 5,675 8,660
------------ ------------- ------- ------------ ---------- -------------- -------------
Contract transactions:
Cova payments - - 100 100 100 - -
Cova redemptions - - - (122) (117) (114) -
Payments received from contract
owners 59,025 3,023 5,127 9,200 49,708 77,754 10,173
Transfers between sub-accounts
(including fixed account), net 199,486 40,189 999 141,627 34,958 176,540 43,940
Transfers for contract benefits and
terminations (27,971) (19) - - 132 (710) (3,127)
------------ ------------- ------- ------------ ---------- -------------- -------------
Net increase (decrease) in net
assets from contract
transactions 230,540 43,193 6,226 150,805 84,781 253,470 50,986
------------ ------------- ------- ------------ ---------- -------------- -------------
Net increase (decrease) in net
assets 361,656 66,480 6,237 161,063 82,648 259,145 59,646
Net assets at beginning of period 663,486 54,626 - - - 60,631 53,149
------------ ------------- ------- ------------ ---------- -------------- -------------
Net assets as end of period $ 1,025,142 121,106 6,237 161,063 82,648 319,776 112,795
============ ============= ======= ============ ========== ============== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Templeton Fidelity
--------------------------- ------------------------------------------------------------
Mutual Franklin VIP III VIP III VIP
Shares Growth VIP VIP II Growth Growth & Equity-
Investments Investments Growth Contrafund Opportunities Income Income
------------ ------------- -------- ------------ ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (336) (173) (219) (31) (40) (347) (135)
Net realized gain (loss) 16 8 828 36 27 468 272
Change in unrealized appreciation (3,899) 1,026 9 (174) 36 (2,780) (2,867)
------------ ------------- -------- ------------ ------------- ---------- ---------
Net increase (decrease) from
operations (4,219) 861 618 (169) 23 (2,659) (2,730)
------------ ------------- -------- ------------ ------------- ---------- ---------
Contract transactions:
Cova payments - 100 - - - - -
Cova redemptions (121) (120) - - - - -
Payments received from contract
owners - - 15,537 6,241 4,569 39,185 3,029
Transfers between sub-accounts
(including fixed account), net 77,400 55,154 19,225 318 35 17,861 28,637
Transfers for contract benefits and
terminations - (11) 47 - (2) 58 (2)
------------ ------------- -------- ------------ ------------- ---------- ---------
Net increase (decrease) in net
assets from contract
transactions 77,279 55,123 34,809 6,559 4,602 57,104 31,664
------------ ------------- -------- ------------ ------------- ---------- ---------
Net increase (decrease) in net
assets 73,060 55,984 35,427 6,390 4,625 54,445 28,934
Net assets at beginning of period 9,105 - 6,623 975 1,345 25,524 8,239
------------ ------------- -------- ------------ ------------- ---------- ---------
Net assets as end of period $ 82,165 55,984 42,050 7,365 5,970 79,969 37,173
============ ============= ======== ============ ============= ========== =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Nine Months ended September 30, 1999
Unaudited
<TABLE>
<CAPTION>
Total
---------------
Increase (decrease) in net assets from
operations:
<S> <C>
Net investment income (loss) $ (890,915)
Net realized gain (loss) 9,189,504
Change in unrealized appreciation (5,439,615)
---------------
Net increase (decrease) from
operations 2,858,974
---------------
Contract transactions:
Cova payments 500
Cova redemptions (1,087)
Payments received from contract
owners 8,602,324
Transfers between sub-accounts
(including fixed account), net 27,456,692
Transfers for contract benefits and
terminations (8,427,482)
---------------
Net increase (decrease) in net
assets from contract
transactions 27,630,947
---------------
Net increase (decrease) in net
assets 30,489,921
Net assets at beginning of period 127,869,227
---------------
Net assets as end of period $ 158,359,148
===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Cova
--------------------------------------------------------------------------------------------
VKAC
Growth Large
Quality Money Stock and Bond Developing Cap
Income Market Index Income Debenture Growth Research
---------- --------- ------------ ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 31,278 11,868 (17,610) (15,214) 92,644 (5,086) (2,082)
Net realized gain (loss) 1,603 - 391,001 237,648 87,212 (1,333) 25
Change in unrealized appreciation 4,531 - 98,370 64,902 110,064 57,229 52,098
---------- --------- ------------ ------------- ------------- ------------- -----------
Net increase (decrease) in
net assets from operations 37,412 11,868 471,761 287,336 289,920 50,810 50,041
---------- --------- ------------ ------------- ------------- ------------- -----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners - - - 1,000 1,051,661 334,325 237,270
Transfers between sub-accounts
(including fixed account), net 11,714 (111,191) 138,069 202,862 3,726,785 337,360 303,087
Transfers for contract benefits and
terminations (8,629) (3,863) (40,936) (52,497) (343,261) (1,070) (376)
---------- --------- ------------ ------------- ------------- ------------- -----------
Net increase (decrease) in net
assets from contract
transactions 3,085 (115,054) 97,133 151,365 4,435,185 670,615 539,981
---------- --------- ------------ ------------- ------------- ------------- -----------
Net increase (decrease) in net
assets 40,497 (103,186) 568,894 438,701 4,725,105 721,425 590,022
Net assets at beginning of period 730,994 370,656 1,737,519 1,679,953 4,475,137 63,572 -
---------- --------- ------------ ------------- ------------- ------------- -----------
Net assets at end of period $ 771,491 267,470 2,306,413 2,118,654 9,200,242 784,997 590,022
========== ========= ============ ============= ============= ============= ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Cova GACC
-------------------------------------------------------------------------- ----------
Small Large
Mid-Cap Quality Cap Cap Select International Money
Value Bond Stock Stock Equity Equity Market
---------- ---------- ---------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (5,560) 29,095 (95,891) (176,715) (152,047) 34,256 (6,981)
Net realized gain (loss) (4,501) 10,751 280,526 352,389 999,481 25,322 18,462
Change in unrealized appreciation 11,980 212,005 (768,604) 4,086,693 1,878,770 827,333 8,306
---------- ---------- ---------- ----------- ----------- ------------ ----------
Net increase (decrease) in
net assets from operations 1,919 251,851 (583,969) 4,262,367 2,726,204 886,911 19,787
---------- ---------- ---------- ----------- ----------- ------------ ----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 593,364 828,237 664,035 1,433,747 1,284,829 470,560 1,894,032
Transfers between sub-accounts
(including fixed account), net 210,332 2,485,711 2,154,230 6,772,257 4,674,806 2,712,309 (358,103)
Transfers for contract benefits and
terminations (2,706) (213,576) (458,393) (691,973) (646,951) (375,560) (266,514)
---------- ---------- ---------- ----------- ----------- ------------ ----------
Net increase (decrease) in net
assets from contract
transactions 800,990 3,100,372 2,359,872 7,514,031 5,312,684 2,807,309 1,269,415
---------- ---------- ---------- ----------- ----------- ------------ ----------
Net increase (decrease) in net
assets 802,909 3,352,223 1,775,903 11,776,398 8,038,888 3,694,220 1,289,202
Net assets at beginning of period 89,088 2,617,482 6,578,183 10,224,247 9,845,185 6,351,392 150,303
---------- ---------- ---------- ----------- ----------- ------------ ----------
Net assets at end of period $ 891,997 5,969,705 8,354,086 22,000,645 17,884,073 10,045,612 1,439,505
========== ========== ========== =========== =========== ============ ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Lord Abbett Russell AIM
------------- --------------------------------------------- --------------------------
Growth Multi-
and Style Aggressive Core V.I. Capital
Income (1) Equity Equity Non-US Bond V.I. Value Appreciation
------------- -------- ----------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 110,598 (2,142) (365) (884) 1,981 (29) (179)
Net realized gain (loss) 1,847,461 202 (45) (78) 2 (47) 1,256
Change in unrealized appreciation 1,268,706 37,385 (1,753) 1,844 3,543 1,376 5,386
------------- -------- ----------- --------- ----------- ----------- -------------
Net increase (decrease) in
net assets from operations 3,226,765 35,445 (2,163) 882 5,526 1,300 6,463
------------- -------- ----------- --------- ----------- ----------- -------------
Contract transactions:
Cova payments - 100 100 100 100 100 100
Cova redemptions - (127) (95) (93) (103) - -
Payments received from contract
owners 2,282,528 550,062 80,621 187,582 578,539 33,651 57,937
Transfers between sub-accounts
(including fixed account), net 8,659,268 31,554 8,298 15,688 70,898 2,043 1,227
Transfers for contract benefits and
terminations (1,472,455) (561) (236) 27 (1,162) 365 5
------------- -------- ----------- --------- ----------- ----------- -------------
Net increase (decrease) in net
assets from contract
transactions 9,469,341 581,028 88,688 203,304 648,272 36,159 59,269
------------- -------- ----------- --------- ----------- ----------- -------------
Net increase (decrease) in net
assets 12,696,106 616,473 86,525 204,186 653,798 37,459 65,732
Net assets at beginning of period 24,401,662 - - - - - -
------------- -------- ----------- --------- ----------- ----------- -------------
Net assets at end of period $ 37,097,768 616,473 86,525 204,186 653,798 37,459 65,732
============= ======== =========== ========= =========== =========== =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
AIM Alliance Liberty Goldman Sachs
-------------- ----------------------- --------- ------------------------------------
Newport
V.I. Real Tiger Growth
International Premier Estate Fund, and International Global
Equity Growth Investment Variable Income Equity Income
-------------- --------- ------------ --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 187 (4,379) (540) 355 125 (1,051) 1,029
Net realized gain (loss) (5,943) (6,634) (2,767) 4 (4,119) 1,202 330
Change in unrealized appreciation (6,224) 118,514 (17,191) 2,743 (11,213) 2,720 (187)
-------------- --------- ------------ --------- --------- ------------- ---------
Net increase (decrease) in
net assets from operations (11,980) 107,501 (20,498) 3,102 (15,207) 2,871 1,172
-------------- --------- ------------ --------- --------- ------------- ---------
Contract transactions:
Cova payments 100 100 100 100 100 100 100
Cova redemptions (100) (138) (81) - (97) (86) -
Payments received from contract
owners 184,408 794,977 178,563 19,040 128,899 154,193 31,200
Transfers between sub-accounts
(including fixed account), net 3,073 20,139 19,454 - 16,047 23,975 -
Transfers for contract benefits and
terminations (1,288) (3,403) (913) - 175 - -
-------------- --------- ------------ --------- --------- ------------- ---------
Net increase (decrease) in net
assets from contract
transactions 186,193 811,675 197,123 19,140 145,124 178,182 31,300
-------------- --------- ------------ --------- --------- ------------- ---------
Net increase (decrease) in net
assets 174,213 919,176 176,625 22,242 129,917 181,053 32,472
Net assets at beginning of period - - - - - - -
-------------- --------- ------------ --------- --------- ------------- ---------
Net assets at end of period $ 174,213 919,176 176,625 22,242 129,917 181,053 32,472
============== ========= ============ ========= ========= ============= =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Kemper MFS
------------------------------------------------- ---------------------------------
Dreman
High Small Small Growth
Return Cap Cap Government with
Equity Growth Value Securities Bond Research Income
--------- --------- ----------- ------------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ - (265) (889) (42) - (1,500) (4,815)
Net realized gain (loss) - 191 (6,422) - - 145 (4,972)
Change in unrealized appreciation 5 3,989 (13,980) 206 5 24,572 54,989
--------- --------- ----------- ------------- ------ ----------- -----------
Net increase (decrease) in
net assets from operations 5 3,915 (21,291) 164 5 23,217 45,202
--------- --------- ----------- ------------- ------ ----------- -----------
Contract transactions:
Cova payments 100 100 100 100 100 100 100
Cova redemptions - (108) (78) - - (123) (120)
Payments received from contract
owners - 35,374 184,026 23,032 - 252,002 692,249
Transfers between sub-accounts
(including fixed account), net - 5,487 (15,831) 3,490 - 42,134 48,220
Transfers for contract benefits and
terminations - (11) (983) - - (746) (3,293)
--------- --------- ----------- ------------- ------ ----------- -----------
Net increase (decrease) in net
assets from contract
transactions 100 40,842 167,234 26,622 100 293,367 737,156
--------- --------- ----------- ------------- ------ ----------- -----------
Net increase (decrease) in net
assets 105 44,757 145,943 26,786 105 316,584 782,358
Net assets at beginning of period - - - - - - -
--------- --------- ----------- ------------- ------ ----------- -----------
Net assets at end of period $ 105 44,757 145,943 26,786 105 316,584 782,358
========= ========= =========== ============= ====== =========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
MFS Oppenheimer
------------------------------------------------ ----------------------------------------
F&C Main Street
Emerging Growth
Emerging Markets High Global Capital and High
Growth Equity Income Governments Appreciation Income Income
--------- ---------- ---------- ------------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (3,541) 124 (541) (8) (286) (748) (559)
Net realized gain (loss) (2,706) (10,435) (1,086) 1 1,028 (157) (139)
Change in unrealized appreciation 87,574 (7,685) (2,625) 189 9,357 (771) (2,071)
--------- ---------- ---------- ------------- -------------- ------------ ---------
Net increase (decrease) in
net assets from operations 81,327 (17,996) (4,252) 182 10,099 (1,676) (2,769)
--------- ---------- ---------- ------------- -------------- ------------ ---------
Contract transactions:
Cova payments 100 100 100 100 100 100 100
Cova redemptions (126) (65) (93) - - (89) (93)
Payments received from contract
owners 527,982 71,508 125,820 3,193 42,486 144,121 93,367
Transfers between sub-accounts
(including fixed account), net 24,659 (25,211) 8,401 625 9,440 11,637 14,033
Transfers for contract benefits and
terminations (2,059) (471) (962) - (455) (209) (274)
--------- ---------- ---------- ------------- -------------- ------------ ---------
Net increase (decrease) in net
assets from contract
transactions 550,556 45,861 133,266 3,918 51,571 155,560 107,133
--------- ---------- ---------- ------------- -------------- ------------ ---------
Net increase (decrease) in net
assets 631,883 27,865 129,014 4,100 61,670 153,884 104,364
Net assets at beginning of period - - - - - - -
--------- ---------- ---------- ------------- -------------- ------------ ---------
Net assets at end of period $ 631,883 27,865 129,014 4,100 61,670 153,884 104,364
========= ========== ========== ============= ============== ============ =========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Oppenheimer Putnam
-------------------- --------------------------------------------------------------------
VT
VT Growth VT International
Strategic and VT New International New
Bond Bond Income Value VT Vista Growth Opportunities
--------- --------- ----------- -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (2,628) (166) (5,191) 101 (436) (1,984) (266)
Net realized gain (loss) 238 (4) (4,815) 79 (12) (8,326) (27)
Change in unrealized appreciation 12,503 (129) 44,649 860 7,815 (2,297) 299
--------- --------- ----------- -------- ---------- -------------- ---------------
Net increase (decrease) in
net assets from operations 10,113 (299) 34,643 1,040 7,367 (12,607) 6
--------- --------- ----------- -------- ---------- -------------- ---------------
Contract transactions:
Cova payments 100 100 100 100 100 100 100
Cova redemptions (105) - (113) - (109) (127) (109)
Payments received from contract
owners 407,896 22,655 787,874 4,669 46,531 674,756 50,740
Transfers between sub-accounts
(including fixed account), net 73,891 4,823 94,763 17,311 26,352 5,031 3,797
Transfers for contract benefits and
terminations (2,545) - (3,713) (1) 12 (3,667) 92
--------- --------- ----------- -------- ---------- -------------- ---------------
Net increase (decrease) in net
assets from contract
transactions 479,237 27,578 878,911 22,079 72,886 676,093 54,620
--------- --------- ----------- -------- ---------- -------------- ---------------
Net increase (decrease) in net
assets 489,350 27,279 913,554 23,119 80,253 663,486 54,626
Net assets at beginning of period - - - - - - -
--------- --------- ----------- -------- ---------- -------------- ---------------
Net assets at end of period $ 489,350 27,279 913,554 23,119 80,253 663,486 54,626
========= ========= =========== ======== ========== ============== ===============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Templeton Fidelity
---------------------------------------- -------------------------------------------------
Mutual VIP III VIP III
Developing Shares VIP VIP II Growth Growth &
International Markets Investments Growth Contrafund Opportunities Income
------------- ----------- ------------ --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (139) (93) (3) (17) (1) - (58)
Net realized gain (loss) 9 8 - - - - -
Change in unrealized appreciation 4,711 3,570 263 1,118 99 19 3,784
------------- ----------- ------------ --------- ----------- ------------- ----------
Net increase (decrease) in
net assets from operations 4,581 3,485 260 1,101 98 19 3,726
------------- ----------- ------------ --------- ----------- ------------- ----------
Contract transactions:
Cova payments 100 100 100 100 100 100 100
Cova redemptions - (133) - - - - -
Payments received from contract
owners 54,930 25,540 8,079 990 777 - 3,746
Transfers between sub-accounts
(including fixed account), net 1,153 24,157 666 4,427 - 1,226 17,428
Transfers for contract benefits and
terminations (133) - - 5 - - 524
------------- ----------- ------------ --------- ----------- ------------- ----------
Net increase (decrease) in net
assets from contract
transactions 56,050 49,664 8,845 5,522 877 1,326 21,798
------------- ----------- ------------ --------- ----------- ------------- ----------
Net increase (decrease) in net
assets 60,631 53,149 9,105 6,623 975 1,345 25,524
Net assets at beginning of period - - - - - - -
------------- ----------- ------------ --------- ----------- ------------- ----------
Net assets at end of period $ 60,631 53,149 9,105 6,623 975 1,345 25,524
============= =========== ============ ========= =========== ============= ==========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Fidelity
----------------
VIP
Equity-
Income Total
---------------- ------------------
<S> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (12) (197,302)
Net realized gain (loss) - 4,192,008
Change in unrealized appreciation 635 8,280,979
---------------- ------------------
Net increase (decrease) in
net assets from operations 623 12,275,685
---------------- ------------------
Contract transactions:
Cova payments 100 4,200
Cova redemptions - (2,511)
Payments received from contract
owners 2,968 18,342,571
Transfers between sub-accounts
(including fixed account), net 4,427 32,538,428
Transfers for contract benefits and
terminations 121 (4,604,519)
---------------- ------------------
Net increase (decrease) in net
assets from contract
transactions 7,616 46,278,169
---------------- ------------------
Net increase (decrease) in net
assets 8,239 58,553,854
Net assets at beginning of period - 69,315,373
---------------- ------------------
Net assets at end of period $ 8,239 127,869,227
================ ==================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(1) ORGANIZATION
Cova Variable Annuity Account Five (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by Cova Financial Life Insurance Company (Cova)
and exists in accordance with the regulations of the California
Department of Insurance. The Separate Account is a funding vehicle for
variable annuity contracts issued by Cova.
The Separate Account is divided into sub-accounts with the assets of each
sub-account invested in corresponding portfolios of the following
investment companies. Each investment company is a diversified, open-end,
management investment company registered under the Investment Company Act
of 1940 as amended. The sub-accounts available for investment may vary
between variable annuity contracts offered for sale by Cova.
<S> <C>
Cova Series Trust (Cova) 10 portfolios
General American Capital Company (GACC) 1 portfolio
Russell Insurance Funds (Russell) 5 portfolios
AIM Variable Insurance Funds, Inc. (AIM) 3 portfolios
Alliance Variable Products Series Fund, Inc. (Alliance) 2 portfolios
Liberty Variable Investment Trust (Liberty) 1 portfolio
Goldman Sachs Variable Insurance Trust (Goldman Sachs) 3 portfolios
Investors Fund Series (Kemper) 4 portfolios
MFS Variable Insurance Trust (MFS) 7 portfolios
Oppenheimer Variable Account Funds (Oppenheimer) 5 portfolios
Putnam Variable Trust (Putnam) 5 portfolios
Templeton Variable Products Series Fund (Templeton) 7 portfolios
Variable Insurance Products Fund, Fund II and Fund III (Fidelity) 5 portfolios
</TABLE>
The following sub-accounts commenced operations during the period:
Cova Lord Abbett Growth and Income January 8, 1999
Russell Real Estate Securities July 1, 1999
Templeton Bond March 1, 1999
Franklin Small Cap Investments March 1, 1999
Templeton Stock March 2, 1999
Franklin Growth Investments March 1, 1999
The following sub-accounts ceased operations during the period:
Cova Quality Income January 8, 1999
Cova Money Market January 8, 1999
Cova High Yield January 8, 1999
Cova Stock Index January 8, 1999
Cova VKAC Growth and Income January 8, 1999
Lord Abbett Growth and Income January 8, 1999
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the sale
of portfolio shares owned by the sub-accounts. Income from dividends
and gains from realized capital gain distributions are recorded on
the ex-distribution date.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in additional
shares of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment income
and realized capital gains are deemed to pass through to the
Separate Account. As a result, GACC does not distribute dividends
and realized capital gains. During December of each year, the
accumulated net investment income and realized capital gains of the
GACC Money Market Fund are allocated to the Separate Account by
increasing the cost basis and recognizing a gain in the Separate
Account.
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the federal
income tax return of Cova which is taxed as a Life Insurance Company
under the provisions of the Internal Revenue Code (IRC). Under
current IRC provisions, Cova believes it will be treated as the
owner of the Separate Account assets for federal income tax purposes
and does not expect to incur federal income taxes on the earnings of
the Separate Account to the extent the earnings are credited to the
variable annuity contracts. Based on this, no charge has been made
to the Separate Account for federal income taxes. A charge may be
made in future years for any federal income taxes that would be
attributable to the variable annuity contracts.
(D) ANNUITY RESERVES
Annuity reserves are computed for contracts in the payout stage
according to the 1983a Mortality Table. The assumed investment
return is 3%. The mortality risk is borne by Cova and may result in
additional transfers to the Separate Account. Conversely, if
reserves exceed amounts required, transfers may be made from the
Separate Account to Cova.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of each Separate Account
sub-account equivalent to an annual rate of 1.25% for the assumption of
mortality and expense risks and 0.15% for administrative expenses. The
mortality risks assumed by Cova arise from its contractual obligation to
make annuity payments after the annuity date for the life of the
annuitant and to waive the withdrawal fee in the event of the death of
the contract owner. The administrative fees cover the cost of
establishing and maintaining the variable annuity contracts and the
Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at the
time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee is imposed on withdrawals of contract values
attributable to purchase payments within five years after receipt and is
equal to 5% of the purchase payment withdrawn. After the first contract
anniversary, provided the contract value exceeds $5,000, the contract
owner may make one withdrawal each contract year of up to 10% of the
aggregate purchase payments (on deposit for more than one year) without
incurring a surrender fee. During the nine months ending September 30,
1999, surrender fees of $196 thousand were deducted.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the Separate Account sub-accounts
and the fixed rate account to which the contract value is allocated.
Subject to certain restrictions, the contract owner may transfer all or a
part of the accumulated value of the contract among the available
sub-accounts and the fixed rate account. If more than 12 transfers have
been made in the contract year, a transfer fee of $25 per transfer or, if
less, 2% of the amount transferred, may be deducted from the contract
value. Transfers made in a dollar cost averaging program are not subject
to the transfer fee.
During the nine months ending September 30, 1999, contract maintenance
and transfer fees of $26 thousand were deducted.
Currently, Cova advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes at the time annuity
payments begin. Cova reserves the right to deduct premium taxes when
incurred.
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(5) COST BASIS OF INVESTMENTS
The cost basis of each sub-account's investment follows:
<S> <C> <C>
Cova Lord Abbett Growth and Income $ 43,548,705 MFS Bond $ 102
Cova Bond Debenture 11,244,456 MFS Research 655,859
Cova Developing Growth 1,258,394 MFS Growth with Income 1,236,624
Cova Large Cap Research 1,437,737 MFS Emerging Growth 728,409
Cova Mid-Cap Value 1,204,170 MFS/F&C Emerging Markets Equity 29,927
Cova Quality Bond 7,736,695 MFS High Income 199,692
Cova Small Cap Stock 8,102,206 MFS Global Governments 8,380
Cova Large Cap Stock 26,021,420 Oppenheimer Capital Appreciation 97,990
Cova Select Equity 19,404,781 Oppenheimer Main Street Growth & Income 283,912
Cova International Equity 9,882,237 Oppenheimer High Income 168,330
GACC Money Market 1,730,793 Oppenheimer Bond 675,130
Russell Multi-Style Equity 2,357,880 Oppenheimer Strategic Bond 76,070
Russell Aggressive Equity 363,194 Putnam VT Growth and Income 1,446,341
Russell Non-US 986,100 Putnam VT New Value 29,144
Russell Core Bond 2,052,218 Putnam VT Vista 174,724
Russell Real Estate Securities 24,897 Putnam VT International Growth 893,839
AIM V.I. Value 1,439,986 Putnam VT International New Opportunities 97,043
AIM V.I. Capital Appreciation 394,459 Templeton Bond 6,210
AIM V.I. International Equity 224,318 Franklin Small Cap Investments 150,434
Alliance Premier Growth 1,715,602 Templeton Stock 84,215
Alliance Real Estate Investment 235,370 Templeton International 315,698
Liberty Newport Tiger Fund, Variable 21,879 Templeton Developing Markets 106,298
Goldman Sachs Growth and Income 233,342 Templeton Mutual Shares Investments 85,804
Goldman Sachs International Equity 290,821 Franklin Growth Investments 54,960
Goldman Sachs Global Income 33,626 Fidelity VIP Growth 40,925
Kemper Dreman High Return Equity 102 Fidelity VIP II Contrafund 7,440
Kemper Small Cap Growth 93,573 Fidelity VIP III Growth Opportunities 5,915
Kemper Small Cap Value 232,869 Fidelity VIP III Growth & Income 78,968
Kemper Government Securities 313,544 Fidelity VIP Equity-Income 39,406
------------------
$ 150,363,163
==================
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
Commenced Accumulation Unit Value
------------------------------------------------------------
Operations 9/30/99 12/31/98 12/31/97 12/31/96
------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 $ 35.846834 - - -
Cova Bond Debenture 5/20/96 13.297003 13.496510 12.881799 11.294929
Cova Developing Growth 11/7/97 11.961763 11.067868 10.527555 -
Cova Large Cap Research 2/17/98 12.785720 11.825638 - -
Cova Mid-Cap Value 11/7/97 10.653220 10.437956 10.467957 -
Cova Quality Bond 5/20/96 11.609294 11.914509 11.155144 10.368767
Cova Small Cap Stock 5/15/96 13.321396 12.582885 13.491493 11.308427
Cova Large Cap Stock 5/16/96 20.192781 19.428505 14.889464 11.334982
Cova Select Equity 5/15/96 16.298247 16.987203 14.053503 10.838053
Cova International Equity 5/14/96 13.850867 12.889314 11.462436 10.967004
GACC Money Market 12/4/97 11.405631 11.109949 10.667017 -
Russell Multi-Style Equity 12/31/97 13.041389 12.740123 10.000000 -
Russell Aggressive Equity 12/31/97 9.230506 10.001283 10.000000 -
Russell Non-US 12/31/97 12.309179 11.182808 10.000000 -
Russell Core Bond 12/31/97 10.459537 10.631124 10.000000 -
Russell Real Estate Securities 7/1/99 9.190015 - - -
AIM V.I. Value 12/31/97 14.275217 13.075597 10.000000 -
AIM V.I. Capital Appreciation 12/31/97 12.436827 11.800084 10.000000 -
AIM V.I. International Equity 12/31/97 12.347899 11.418467 10.000000 -
Alliance Premier Growth 12/31/97 15.745289 14.620511 10.000000 -
Alliance Real Estate Investment 12/31/97 7.580283 8.000583 10.000000 -
Liberty Newport Tiger Fund, Variable 12/31/97 11.474808 9.278784 10.000000 -
Goldman Sachs Growth and Income 3/31/98 9.507941 9.911702 - -
Goldman Sachs International Equity 3/31/98 12.237176 11.416783 - -
Goldman Sachs Global Income 3/31/98 10.557479 10.815310 - -
Kemper Dreman High Return Equity 5/15/98 9.670000 10.489000 - -
Kemper Small Cap Growth 12/31/97 11.881303 11.687795 10.000000 -
Kemper Small Cap Value 12/31/97 8.523422 8.770360 10.000000 -
Kemper Government Securities 12/31/97 10.609487 10.634608 10.000000 -
MFS Bond 5/15/98 10.341000 10.509000 - -
MFS Research 12/31/97 12.266571 12.179142 10.000000 -
MFS Growth with Income 12/31/97 11.534481 12.075079 10.000000 -
MFS Emerging Growth 12/31/97 14.937310 13.244101 10.000000 -
MFS/F&C Emerging Markets Equity 12/31/97 6.976271 6.581757 10.000000 -
MFS High Income 12/31/97 10.127249 9.863111 10.000000 -
MFS Global Governments 12/31/97 10.391322 10.663503 10.000000 -
Oppenheimer Capital Appreciation 12/31/97 13.358170 12.244057 10.000000 -
Oppenheimer Main Street Growth & Income 12/31/97 11.144103 10.340279 10.000000 -
Oppenheimer High Income 12/31/97 10.062994 9.907918 10.000000 -
Oppenheimer Bond 12/31/97 10.238538 10.551643 10.000000 -
Oppenheimer Strategic Bond 12/31/97 10.093478 10.164797 10.000000 -
Putnam VT Growth and Income 12/31/97 11.215192 11.403244 10.000000 -
Putnam VT New Value 12/31/97 10.249387 10.498075 10.000000 -
Putnam VT Vista 12/31/97 12.641068 11.804097 10.000000 -
Putnam VT International Growth 12/31/97 13.728132 11.729428 10.000000 -
Putnam VT International New Opportunities 12/31/97 14.593575 11.420772 10.000000 -
Templeton Bond 3/1/99 9.795096 - - -
Franklin Small Cap Investments 3/1/99 12.713311 - - -
Templeton Stock 3/2/99 11.390124 - - -
Templeton International 9/21/98 9.858587 9.149729 - -
Templeton Developing Markets 9/21/98 9.132548 7.557531 - -
Templeton Mutual Shares Investments 9/21/98 9.888972 9.646506 - -
Franklin Growth Investments 3/1/99 11.623799 - - -
Fidelity VIP Growth 2/17/98 14.445422 13.115493 - -
Fidelity VIP II Contrafund 2/17/98 13.028946 12.429344 - -
Fidelity VIP III Growth Opportunities 2/17/98 11.449022 11.814000 - -
Fidelity VIP III Growth & Income 2/17/98 12.234362 12.259160 - -
Fidelity VIP Equity-Income 2/17/98 10.872928 10.674283 - -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
Commenced Net Assets (in thousands)
------------------------------------------------------------
Operations 9/30/99 12/31/98 12/31/97 12/31/96
------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 $ 43,781 - - -
Cova Bond Debenture 5/20/96 11,145 9,200 4,475 447
Cova Developing Growth 11/7/97 1,394 785 64 -
Cova Large Cap Research 2/17/98 1,551 590 - -
Cova Mid-Cap Value 11/7/97 1,244 892 89 -
Cova Quality Bond 5/20/96 7,747 5,970 2,617 669
Cova Small Cap Stock 5/15/96 8,640 8,354 6,578 1,279
Cova Large Cap Stock 5/16/96 30,638 22,001 10,224 1,431
Cova Select Equity 5/15/96 19,846 17,884 9,845 2,011
Cova International Equity 5/14/96 11,414 10,046 6,351 1,360
GACC Money Market 12/4/97 1,773 1,440 150 -
Russell Multi-Style Equity 12/31/97 2,302 616 - -
Russell Aggressive Equity 12/31/97 351 87 - -
Russell Non-US 12/31/97 1,058 204 - -
Russell Core Bond 12/31/97 2,001 654 - -
Russell Real Estate Securities 7/1/99 24 - - -
AIM V.I. Value 12/31/97 1,449 37 - -
AIM V.I. Capital Appreciation 12/31/97 405 66 - -
AIM V.I. International Equity 12/31/97 238 174 - -
Alliance Premier Growth 12/31/97 1,874 919 - -
Alliance Real Estate Investment 12/31/97 206 177 - -
Liberty Newport Tiger Fund, Variable 12/31/97 30 22 - -
Goldman Sachs Growth and Income 3/31/98 211 130 - -
Goldman Sachs International Equity 3/31/98 312 181 - -
Goldman Sachs Global Income 3/31/98 33 32 - -
Kemper Dreman High Return Equity 5/15/98 - - - -
Kemper Small Cap Growth 12/31/97 101 45 - -
Kemper Small Cap Value 12/31/97 218 146 - -
Kemper Government Securities 12/31/97 314 27 - -
MFS Bond 5/15/98 - - - -
MFS Research 12/31/97 673 317 - -
MFS Growth with Income 12/31/97 1,230 782 - -
MFS Emerging Growth 12/31/97 906 632 - -
MFS/F&C Emerging Markets Equity 12/31/97 28 28 - -
MFS High Income 12/31/97 192 129 - -
MFS Global Governments 12/31/97 8 4 - -
Oppenheimer Capital Appreciation 12/31/97 109 62 - -
Oppenheimer Main Street Growth & Income 12/31/97 293 154 - -
Oppenheimer High Income 12/31/97 161 104 - -
Oppenheimer Bond 12/31/97 657 489 - -
Oppenheimer Strategic Bond 12/31/97 74 27 - -
Putnam VT Growth and Income 12/31/97 1,367 914 - -
Putnam VT New Value 12/31/97 28 23 - -
Putnam VT Vista 12/31/97 191 80 - -
Putnam VT International Growth 12/31/97 1,025 663 - -
Putnam VT International New Opportunities 12/31/97 121 55 - -
Templeton Bond 3/1/99 6 - - -
Franklin Small Cap Investments 3/1/99 161 - - -
Templeton Stock 3/2/99 83 - - -
Templeton International 9/21/98 320 61 - -
Templeton Developing Markets 9/21/98 113 53 - -
Templeton Mutual Shares Investments 9/21/98 82 9 - -
Franklin Growth Investments 3/1/99 56 - - -
Fidelity VIP Growth 2/17/98 42 7 - -
Fidelity VIP II Contrafund 2/17/98 7 1 - -
Fidelity VIP III Growth Opportunities 2/17/98 6 1 - -
Fidelity VIP III Growth & Income 2/17/98 80 26 - -
Fidelity VIP Equity-Income 2/17/98 37 8 - -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED:
Commenced Total Return*
------------------------------------------------------------
Operations 1999 1998 1997 1996
------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 -0.16% - - -
Cova Bond Debenture 5/20/96 -1.48% 4.77% 14.05% 11.32%
Cova Developing Growth 11/7/97 8.08% 5.13% -2.80% -
Cova Large Cap Research 2/17/98 8.12% 9.94% - -
Cova Mid-Cap Value 11/7/97 2.06% -0.29% 4.17% -
Cova Quality Bond 5/20/96 -2.56% 6.81% 7.58% 4.20%
Cova Small Cap Stock 5/15/96 5.87% -6.74% 19.31% 3.69%
Cova Large Cap Stock 5/16/96 3.93% 30.49% 31.36% 11.62%
Cova Select Equity 5/15/96 -4.06% 20.88% 29.67% 6.76%
Cova International Equity 5/14/96 7.46% 12.45% 4.52% 8.60%
GACC Money Market 12/4/97 2.66% 4.15% 0.34% -
Russell Multi-Style Equity 12/31/97 2.36% 27.40% - -
Russell Aggressive Equity 12/31/97 -7.71% 0.01% - -
Russell Non-US 12/31/97 10.07% 11.83% - -
Russell Core Bond 12/31/97 -1.61% 6.31% - -
Russell Real Estate Securities 7/1/99 -8.10% - - -
AIM V.I. Value 12/31/97 9.17% 30.76% - -
AIM V.I. Capital Appreciation 12/31/97 5.40% 18.00% - -
AIM V.I. International Equity 12/31/97 8.14% 14.19% - -
Alliance Premier Growth 12/31/97 7.69% 46.21% - -
Alliance Real Estate Investment 12/31/97 -5.25% -19.99% - -
Liberty Newport Tiger Fund, Variable 12/31/97 23.67% -7.21% - -
Goldman Sachs Growth and Income 3/31/98 -4.07% -11.60% - -
Goldman Sachs International Equity 3/31/98 7.19% 1.94% - -
Goldman Sachs Global Income 3/31/98 -2.38% 6.53% - -
Kemper Dreman High Return Equity 5/15/98 -7.81% 4.89% - -
Kemper Small Cap Growth 12/31/97 1.66% 16.88% - -
Kemper Small Cap Value 12/31/97 -2.82% -12.30% - -
Kemper Government Securities 12/31/97 -0.24% 6.35% - -
MFS Bond 5/15/98 -1.60% 5.09% - -
MFS Research 12/31/97 0.72% 21.79% - -
MFS Growth with Income 12/31/97 -4.48% 20.75% - -
MFS Emerging Growth 12/31/97 12.79% 32.44% - -
MFS/F&C Emerging Markets Equity 12/31/97 5.99% -34.18% - -
MFS High Income 12/31/97 2.68% -1.37% - -
MFS Global Governments 12/31/97 -2.55% 6.63% - -
Oppenheimer Capital Appreciation 12/31/97 9.10% 22.44% - -
Oppenheimer Main Street Growth & Income 12/31/97 7.77% 3.40% - -
Oppenheimer High Income 12/31/97 1.56% -0.92% - -
Oppenheimer Bond 12/31/97 -2.97% 5.52% - -
Oppenheimer Strategic Bond 12/31/97 -0.70% 1.65% - -
Putnam VT Growth and Income 12/31/97 -1.65% 14.03% - -
Putnam VT New Value 12/31/97 -2.37% 4.98% - -
Putnam VT Vista 12/31/97 7.09% 18.04% - -
Putnam VT International Growth 12/31/97 17.04% 17.29% - -
Putnam VT International New Opportunities 12/31/97 27.78% 14.21% - -
Templeton Bond 3/1/99 -2.05% - - -
Franklin Small Cap Investments 3/1/99 27.13% - - -
Templeton Stock 3/2/99 13.90% - - -
Templeton International 9/21/98 7.75% 15.92% - -
Templeton Developing Markets 9/21/98 20.84% 33.87% - -
Templeton Mutual Shares Investments 9/21/98 2.51% 11.61% - -
Franklin Growth Investments 3/1/99 16.24% - - -
Fidelity VIP Growth 2/17/98 10.14% 31.16% - -
Fidelity VIP II Contrafund 2/17/98 4.82% 24.29% - -
Fidelity VIP III Growth Opportunities 2/17/98 -3.09% 18.14% - -
Fidelity VIP III Growth & Income 2/17/98 -0.20% 22.59% - -
Fidelity VIP Equity-Income 2/17/98 1.86% 6.74% - -
* The total return for sub-accounts that commenced operations during the period is not annualized.
** The expense ratio for sub-accounts that commenced operations during the period is annualized.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE, CONTINUED:
Separate Account Expenses
Commenced As a % of Average Net Assets**
------------------------------------------------------------
Operations 1999 1998 1997 1996
------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 1.40% - - -
Cova Bond Debenture 5/20/96 1.40% 1.40% 1.40% 1.40%
Cova Developing Growth 11/7/97 1.40% 1.40% 1.40% -
Cova Large Cap Research 2/17/98 1.40% 1.40% - -
Cova Mid-Cap Value 11/7/97 1.40% 1.40% 1.40% -
Cova Quality Bond 5/20/96 1.40% 1.40% 1.40% 1.40%
Cova Small Cap Stock 5/15/96 1.40% 1.40% 1.40% 1.40%
Cova Large Cap Stock 5/16/96 1.40% 1.40% 1.40% 1.40%
Cova Select Equity 5/15/96 1.40% 1.40% 1.40% 1.40%
Cova International Equity 5/14/96 1.40% 1.40% 1.40% 1.40%
GACC Money Market 12/4/97 1.40% 1.40% 1.40% -
Russell Multi-Style Equity 12/31/97 1.40% 1.40% - -
Russell Aggressive Equity 12/31/97 1.40% 1.40% - -
Russell Non-US 12/31/97 1.40% 1.40% - -
Russell Core Bond 12/31/97 1.40% 1.40% - -
Russell Real Estate Securities 7/1/99 1.40% - - -
AIM V.I. Value 12/31/97 1.40% 1.40% - -
AIM V.I. Capital Appreciation 12/31/97 1.40% 1.40% - -
AIM V.I. International Equity 12/31/97 1.40% 1.40% - -
Alliance Premier Growth 12/31/97 1.40% 1.40% - -
Alliance Real Estate Investment 12/31/97 1.40% 1.40% - -
Liberty Newport Tiger Fund, Variable 12/31/97 1.40% 1.39% - -
Goldman Sachs Growth and Income 3/31/98 1.40% 1.40% - -
Goldman Sachs International Equity 3/31/98 1.40% 1.40% - -
Goldman Sachs Global Income 3/31/98 1.40% 1.40% - -
Kemper Dreman High Return Equity 5/15/98 1.40% 0.55% - -
Kemper Small Cap Growth 12/31/97 1.40% 1.40% - -
Kemper Small Cap Value 12/31/97 1.40% 1.40% - -
Kemper Government Securities 12/31/97 1.40% 1.38% - -
MFS Bond 5/15/98 1.40% 0.52% - -
MFS Research 12/31/97 1.40% 1.40% - -
MFS Growth with Income 12/31/97 1.40% 1.40% - -
MFS Emerging Growth 12/31/97 1.40% 1.40% - -
MFS/F&C Emerging Markets Equity 12/31/97 1.40% 1.40% - -
MFS High Income 12/31/97 1.40% 1.40% - -
MFS Global Governments 12/31/97 1.40% 1.37% - -
Oppenheimer Capital Appreciation 12/31/97 1.40% 1.40% - -
Oppenheimer Main Street Growth & Income 12/31/97 1.40% 1.40% - -
Oppenheimer High Income 12/31/97 1.40% 1.40% - -
Oppenheimer Bond 12/31/97 1.40% 1.40% - -
Oppenheimer Strategic Bond 12/31/97 1.40% 1.40% - -
Putnam VT Growth and Income 12/31/97 1.40% 1.40% - -
Putnam VT New Value 12/31/97 1.40% 1.40% - -
Putnam VT Vista 12/31/97 1.40% 1.40% - -
Putnam VT International Growth 12/31/97 1.40% 1.40% - -
Putnam VT International New Opportunities 12/31/97 1.40% 1.40% - -
Templeton Bond 3/1/99 1.40% - - -
Franklin Small Cap Investments 3/1/99 1.40% - - -
Templeton Stock 3/2/99 1.40% - -
Templeton International 9/21/98 1.40% 1.40% - -
Templeton Developing Markets 9/21/98 1.40% 1.40% - -
Templeton Mutual Shares Investments 9/21/98 1.40% 1.32% - -
Franklin Growth Investments 3/1/99 1.40% - - -
Fidelity VIP Growth 2/17/98 1.40% 1.35% - -
Fidelity VIP II Contrafund 2/17/98 1.40% 0.75% - -
Fidelity VIP III Growth Opportunities 2/17/98 1.40% 0.52% - -
Fidelity VIP III Growth & Income 2/17/98 1.40% 1.39% - -
Fidelity VIP Equity-Income 2/17/98 1.40% 1.34% - -
* The total return for sub-accounts that commenced operations during the period is not annualized.
** The expense ratio for sub-accounts that commenced operations during the period is annualized.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The realized gain (loss) on the sale of fund shares and the change in
unrealized appreciation for each sub-account during the nine months
ending September 30, 1999 and the year ending December 31, 1998 follows:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
----------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Cova Quality Income 1999 $ 763,185 $ 780,067 $ (16,882)
1998 68,255 66,652 1,603
Cova Money Market 1999 267,703 267,703 -
1998 127,698 127,698 -
Cova Stock Index 1999 2,369,204 2,061,077 308,127
1998 135,751 117,530 18,221
Cova VKAC Growth and Income 1999 2,136,203 2,024,017 112,186
1998 104,628 89,010 15,618
Cova Lord Abbett Growth and Income 1999 2,559,061 2,516,416 42,645
1998 - - -
Cova Bond Debenture 1999 691,020 673,122 17,898
1998 670,935 657,487 13,448
Cova Developing Growth 1999 17,355 15,911 1,444
1998 59,769 61,323 (1,554)
Cova Large Cap Research 1999 39,854 35,720 4,134
1998 1,318 1,293 25
Cova Mid-Cap Value 1999 128,217 120,987 7,230
1998 121,779 126,280 (4,501)
Cova Quality Bond 1999 1,181,032 1,165,131 15,901
1998 319,864 309,113 10,751
Cova Small Cap Stock 1999 1,004,121 1,011,598 (7,477)
1998 986,220 974,390 11,830
Cova Large Cap Stock 1999 1,145,669 908,622 237,047
1998 1,700,678 1,489,784 210,894
Cova Select Equity 1999 929,358 763,139 166,219
1998 1,190,393 1,040,041 150,352
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Cova International Equity 1999 $ 651,743 $ 574,546 $ 77,197
1998 652,667 629,290 23,377
GACC Money Market 1999 1,866,700 1,839,362 27,338
1998 2,053,922 2,035,460 18,462
Lord Abbett Growth and Income 1999 38,963,704 34,458,170 4,505,534
1998 1,839,293 1,749,075 90,218
Russell Multi-Style Equity 1999 184,401 181,795 2,606
1998 7,462 7,262 200
Russell Aggressive Equity 1999 40,617 40,969 (352)
1998 416 468 (52)
Russell Non-US 1999 80,172 74,724 5,448
1998 821 900 (79)
Russell Core Bond 1999 323,045 334,129 (11,084)
1998 1,162 1,160 2
Russell Real Estate Securities 1999 1,532 1,523 9
1998 - - -
AIM V.I. Value 1999 240,333 235,873 4,460
1998 26,188 27,774 (1,586)
AIM V.I. Capital Appreciation 1999 35,089 33,543 1,546
1998 236 258 (22)
AIM V.I. International Equity 1999 54,165 55,506 (1,341)
1998 40,160 46,103 (5,943)
Alliance Premier Growth 1999 226,986 200,203 26,783
1998 67,438 74,072 (6,634)
Alliance Real Estate Investment 1999 61,460 65,902 (4,442)
1998 14,746 17,733 (2,987)
Liberty Newport Tiger Fund, Variable 1999 - - -
1998 37 33 4
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
--------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
---------- ------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Goldman Sachs Growth and Income 1999 $ 24,027 $ 23,634 $ 393
1998 23,582 27,701 (4,119)
Goldman Sachs International Equity 1999 24,280 23,269 1,011
1998 999 1,123 (124)
Goldman Sachs Global Income 1999 371 375 (4)
1998 181 176 5
Kemper Dreman High Return Equity 1999 - - -
1998 - - -
Kemper Small Cap Growth 1999 3,424 3,191 233
1998 7,419 7,675 (256)
Kemper Small Cap Value 1999 36,973 39,648 (2,675)
1998 21,781 28,205 (6,424)
Kemper Government Securities 1999 44,898 44,901 (3)
1998 9 9 -
MFS Bond 1999 - - -
1998 - - -
MFS Research 1999 31,969 30,048 1,921
1998 1,823 1,914 (91)
MFS Growth with Income 1999 68,668 64,047 4,621
1998 40,854 45,826 (4,972)
MFS Emerging Growth 1999 66,536 54,094 12,442
1998 31,963 34,744 (2,781)
MFS/Foreign & Colonial Emerging Markets Equity 1999 35,664 37,441 (1,777)
1998 32,580 43,015 (10,435)
MFS High Income 1999 37,569 36,153 1,416
1998 18,006 19,172 (1,166)
MFS Global Governments 1999 1,979 2,032 (53)
1998 34 33 1
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
----------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Oppenheimer Capital Appreciation 1999 $ 18,510 $ 16,673 $ 1,837
1998 731 756 (25)
Oppenheimer Main Street Growth & Income 1999 64,556 58,551 6,005
1998 1,004 1,167 (163)
Oppenheimer High Income 1999 17,278 17,773 (495)
1998 2,657 2,855 (198)
Oppenheimer Bond 1999 132,308 134,118 (1,810)
1998 17,891 17,655 236
Oppenheimer Strategic Bond 1999 15,170 15,293 (123)
1998 160 165 (5)
Putnam VT Growth and Income 1999 116,095 112,256 3,839
1998 45,339 51,871 (6,532)
Putnam VT New Value 1999 12,757 11,473 1,284
1998 6,880 6,868 12
Putnam VT Vista 1999 31,449 27,949 3,500
1998 376 388 (12)
Putnam VT International Growth 1999 96,463 90,256 6,207
1998 64,381 72,707 (8,326)
Putnam VT International New Opportunities 1999 7,903 7,425 478
1998 378 405 (27)
Templeton Bond 1999 17 17 -
1998 - - -
Franklin Small Cap Investments 1999 464 450 14
1998 - - -
Templeton Stock 1999 25,708 25,916 (208)
1998 - - -
Templeton International 1999 1,506 1,454 52
1998 133 124 9
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS), CONTINUED:
Realized Gain (Loss)
----------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
------------ ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Templeton Developing Markets 1999 $ 33,375 $ 27,585 $ 5,790
1998 133 125 8
Templeton Mutual Shares Investments 1999 449 433 16
1998 - - -
Franklin Growth Investments 1999 146 138 8
1998 - - -
Fidelity VIP Growth 1999 1,129 989 140
1998 3 3 -
Fidelity VIP II Contrafund 1999 59 58 1
1998 - - -
Fidelity VIP III Growth Opportunities 1999 54 52 2
1998 - - -
Fidelity VIP III Growth & Income 1999 1,502 1,340 162
1998 - - -
Fidelity VIP Equity-Income 1999 409 411 (2)
1998 - - -
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) UNREALIZED APPRECIATION:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
------------ ------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Cova Quality Income 1999 $ - $ 19,209 $ (19,209)
1998 19,209 14,678 4,531
Cova Money Market 1999 - - -
1998 - - -
Cova Stock Index 1999 - 491,713 (491,713)
1998 491,713 393,343 98,370
Cova VKAC Growth and Income 1999 - 316,285 (316,285)
1998 316,285 251,383 64,902
Cova Lord Abbett Growth and Income 1999 232,226 - 232,226
1998 - - -
Cova Bond Debenture 1999 (99,802) 273,399 (373,201)
1998 273,399 163,335 110,064
Cova Developing Growth 1999 135,170 57,633 77,537
1998 57,633 404 57,229
Cova Large Cap Research 1999 113,729 52,098 61,631
1998 52,098 - 52,098
Cova Mid-Cap Value 1999 40,102 14,516 25,586
1998 14,516 2,536 11,980
Cova Quality Bond 1999 10,730 254,121 (243,391)
1998 254,121 42,116 212,005
Cova Small Cap Stock 1999 537,531 (2,832) 540,363
1998 (2,832) 765,772 (768,604)
Cova Large Cap Stock 1999 4,616,261 4,717,561 (101,300)
1998 4,717,561 630,868 4,086,693
Cova Select Equity 1999 441,615 3,163,743 (2,722,128)
1998 3,163,743 1,284,973 1,878,770
Cova International Equity 1999 1,531,675 918,988 612,687
1998 918,988 91,655 827,333
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
----------- ------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
GACC Money Market 1999 $ 42,459 $ 8,746 $ 33,713
1998 8,746 440 8,306
Lord Abbett Growth and Income 1999 - 2,782,796 (2,782,796)
1998 2,782,796 1,514,090 1,268,706
Russell Multi-Style Equity 1999 (56,195) 37,385 (93,580)
1998 37,385 - 37,385
Russell Aggressive Equity 1999 (11,732) (1,753) (9,979)
1998 (1,753) - (1,753)
Russell Non-US 1999 72,021 1,844 70,177
1998 1,844 - 1,844
Russell Core Bond 1999 (50,755) 3,543 (54,298)
1998 3,543 - 3,543
Russell Real Estate Securities 1999 (721) - (721)
1998 - - -
AIM V.I. Value 1999 8,866 1,376 7,490
1998 1,376 - 1,376
AIM V.I. Capital Appreciation 1999 10,989 5,386 5,603
1998 5,386 - 5,386
AIM V.I. International Equity 1999 14,018 (6,224) 20,242
1998 (6,224) - (6,224)
Alliance Premier Growth 1999 158,572 118,514 40,058
1998 118,514 - 118,514
Alliance Real Estate Investment 1999 (29,280) (17,191) (12,089)
1998 (17,191) - (17,191)
Liberty Newport Tiger Fund, Variable 1999 8,583 2,743 5,840
1998 2,743 - 2,743
Goldman Sachs Growth and Income 1999 (22,011) (11,213) (10,798)
1998 (11,213) - (11,213)
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
----------- ------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Goldman Sachs International Equity 1999 $ 21,660 $ 2,720 $ 18,940
1998 2,720 - 2,720
Goldman Sachs Global Income 1999 (631) (187) (444)
1998 (187) - (187)
Kemper Dreman High Return Equity 1999 (5) 5 (10)
1998 5 - 5
Kemper Small Cap Growth 1999 7,563 3,989 3,574
1998 3,989 - 3,989
Kemper Small Cap Value 1999 (14,743) (13,980) (763)
1998 (13,980) - (13,980)
Kemper Government Securities 1999 713 206 507
1998 206 - 206
MFS Bond 1999 1 5 (4)
1998 5 - 5
MFS Research 1999 16,916 24,572 (7,656)
1998 24,572 - 24,572
MFS Growth with Income 1999 (6,817) 54,989 (61,806)
1998 54,989 - 54,989
MFS Emerging Growth 1999 177,950 87,574 90,376
1998 87,574 - 87,574
MFS/Foreign & Colonial Emerging Markets Equity 1999 (2,414) (7,685) 5,271
1998 (7,685) - (7,685)
MFS High Income 1999 (7,521) (2,625) (4,896)
1998 (2,625) - (2,625)
MFS Global Governments 1999 (135) 189 (324)
1998 189 - 189
Oppenheimer Capital Appreciation 1999 10,548 9,357 1,191
1998 9,357 - 9,357
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
----------- ------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Oppenheimer Main Street Growth & Income 1999 $ 9,538 $ (771) $ 10,309
1998 (771) - (771)
Oppenheimer High Income 1999 (7,601) (2,071) (5,530)
1998 (2,071) - (2,071)
Oppenheimer Bond 1999 (18,232) 12,503 (30,735)
1998 12,503 - 12,503
Oppenheimer Strategic Bond 1999 (1,724) (129) (1,595)
1998 (129) - (129)
Putnam VT Growth and Income 1999 (79,758) 44,649 (124,407)
1998 44,649 - 44,649
Putnam VT New Value 1999 (737) 860 (1,597)
1998 860 - 860
Putnam VT Vista 1999 15,966 7,815 8,151
1998 7,815 - 7,815
Putnam VT International Growth 1999 131,342 (2,297) 133,639
1998 (2,297) - (2,297)
Putnam VT International New Opportunities 1999 24,068 299 23,769
1998 299 - 299
Templeton Bond 1999 28 - 28
1998 - - -
Franklin Small Cap Investments 1999 10,635 - 10,635
1998 - - -
Templeton Stock 1999 (1,564) - (1,564)
1998 - - -
Templeton International 1999 4,090 4,711 (621)
1998 4,711 - 4,711
Templeton Developing Markets 1999 6,501 3,570 2,931
1998 3,570 - 3,570
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(7) UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
----------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
------------ ------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Templeton Mutual Shares Investments 1999 $ (3,636) $ 263 $ (3,899)
1998 263 - 263
Franklin Growth Investments 1999 1,026 - 1,026
1998 - - -
Fidelity VIP Growth 1999 1,127 1,118 9
1998 1,118 - 1,118
Fidelity VIP II Contrafund 1999 (75) 99 (174)
1998 99 - 99
Fidelity VIP III Growth Opportunities 1999 55 19 36
1998 19 - 19
Fidelity VIP III Growth & Income 1999 1,004 3,784 (2,780)
1998 3,784 - 3,784
Fidelity VIP Equity-Income 1999 (2,232) 635 (2,867)
1998 635 - 635
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS
The change in the number of units for each sub-account follows:
Cova
----------------------------------------------------------------------------------------------
VKAC Lord Abbett
Growth Growth
Quality Money Stock and and Bond Developing
Income (1) Market (1) Index (1) Income (1) Income Debenture Growth
------------ ------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 43,729 29,951 69,602 80,080 - 347,400 6,039
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased - - - 48 - 83,877 31,649
Contract units transferred, net 763 (8,882) 5,039 9,020 - 280,852 33,339
Contract units redeemed (507) (306) (1,474) (2,306) - (30,453) (101)
------------ ------------ ----------- ------------ ------------ ----------- ------------
Unit balance at 12/31/98 43,985 20,763 73,167 86,842 - 681,676 70,926
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased - - - - 18,549 26,239 12,290
Contract units transferred, net (43,985) (20,763) (73,167) (86,842) 1,267,182 192,437 33,592
Contract units redeemed - - - - (67,897) (62,762) (306)
------------ ------------ ----------- ------------ ------------ ----------- ------------
Unit balance at 9/30/99 - - - - 1,217,834 837,590 116,502
============ ============ =========== ============ ============ =========== ============
Annuity units:
Unit balance at 12/31/97 - -
Contract units purchased - -
Contract units redeemed - -
------------ -----------
Unit balance at 12/31/98 - -
Contract units purchased 4,597 574
Contract units redeemed (56) (3)
------------ -----------
Unit balance at 9/30/99 4,541 571
============ ===========
(1) Sub-account ceased operations on January 8, 1999.
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Cova
---------------------------------------------------------------------------------------------
Large Small Large
Cap Mid-Cap Quality Cap Cap Select International
Research Value Bond Stock Stock Equity Equity
----------- ----------- ---------- ---------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - 8,510 234,643 487,580 686,677 700,550 554,105
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 21,971 56,591 71,796 55,831 86,312 93,645 39,068
Contract units transferred, net 27,982 20,523 212,881 162,174 401,442 309,696 218,017
Contract units redeemed (59) (167) (18,275) (41,660) (42,041) (51,094) (31,815)
----------- ----------- ---------- ---------- ------------- ------------ --------------
Unit balance at 12/31/98 49,894 85,457 501,045 663,925 1,132,390 1,052,797 779,375
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 19,713 6,097 43,572 5,967 55,225 34,885 12,777
Contract units transferred, net 53,624 26,508 166,110 11,358 381,193 188,112 61,052
Contract units redeemed (1,887) (1,264) (43,380) (32,689) (52,018) (58,600) (29,146)
----------- ----------- ---------- ---------- ------------- ------------ --------------
Unit balance at 9/30/99 121,344 116,798 667,347 648,561 1,516,790 1,217,194 824,058
=========== =========== ========== ========== ============= ============ ==============
Annuity units:
Unit balance at 12/31/97 - -
Contract units purchased - -
Contract units redeemed - -
------------- ------------
Unit balance at 12/31/98 - -
Contract units purchased 496 536
Contract units redeemed (2) (2)
------------- ------------
Unit balance at 9/30/99 494 534
============= ============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
GACC Lord Abbett Russell
----------- ------------- ---------------------------------------------------------------
Growth Multi- Real
Money and Style Aggressive Core Estate
Market Income Equity Equity Non-US Bond Securities
----------- ------------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 14,091 791,310 - - - - -
Cova units purchased - - 10 10 10 10 -
Cova units redeemed - - (10) (10) (10) (10) -
Contract units purchased 175,697 70,041 45,702 7,795 16,824 54,877 -
Contract units transferred, net (33,948) 266,026 2,780 887 1,475 6,720 -
Contract units redeemed (26,271) (46,611) (94) (31) (40) (99) -
----------- ------------- ---------- ------------ ----------- ----------- -----------
Unit balance at 12/31/98 129,569 1,080,766 48,388 8,651 18,259 61,498 -
Cova units purchased - - - - - - 10
Cova units redeemed - - - - - - -
Contract units purchased 28,082 1,724 72,472 16,870 34,726 44,528 421
Contract units transferred, net 61,023 (1,081,503) 67,103 16,184 38,168 96,956 2,358
Contract units redeemed (63,208) (987) (11,479) (3,630) (5,194) (11,636) (158)
----------- ------------- ---------- ------------ ----------- ----------- -----------
Unit balance at 9/30/99 155,466 - 176,484 38,075 85,959 191,346 2,631
=========== ============= ========== ============ =========== =========== ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
AIM Alliance Liberty Goldman Sachs
---------------------------------------- ---------------------- ---------- ----------------
Newport
V.I. Real Tiger Growth
V.I. Capital International Premier Estate Fund, and
V.I. Value Appreciation Equity Growth Investment Variable Income
---------- ------------- -------------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 10 10 10 10 9
Cova units redeemed - - (10) (10) (10) - (9)
Contract units purchased 2,811 5,456 15,482 61,989 20,016 2,387 11,978
Contract units transferred, net 44 104 (97) 1,056 2,144 - 1,129
Contract units redeemed - - (128) (176) (83) - -
---------- ------------- -------------- --------- ----------- ---------- ----------------
Unit balance at 12/31/98 2,865 5,570 15,257 62,869 22,077 2,397 13,107
Cova units purchased - - - - - - -
Cova units redeemed (10) (10) - - - - -
Contract units purchased 34,362 12,532 4,361 23,815 1,477 243 1,236
Contract units transferred, net 65,875 14,572 (149) 39,942 4,868 - 8,096
Contract units redeemed (1,602) (65) (168) (7,600) (1,235) - (213)
---------- ------------- -------------- --------- ----------- ---------- ----------------
Unit balance at 9/30/99 101,490 32,599 19,301 119,026 27,187 2,640 22,226
========== ============= ============== ========= =========== ========== ================
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Goldman Sachs Kemper MFS
-------------------------- ------------------------------------------------- -------
Dreman
High Small Small
International Global Return Cap Cap Government
Equity Income Equity Growth Value Securities Bond
--------------- --------- ---------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 9 10 10 10 10 10 10
Cova units redeemed (9) - - (10) (10) - -
Contract units purchased 13,558 2,992 - 3,287 18,879 2,180 -
Contract units transferred, net 2,301 - - 542 (2,152) 329 -
Contract units redeemed - - - - (86) - -
--------------- --------- ---------- ---------- --------- -------------- -------
Unit balance at 12/31/98 15,859 3,002 10 3,829 16,641 2,519 10
Cova units purchased - - - - - - -
Cova units redeemed - - - - - (10) -
Contract units purchased 2,090 - - 1,511 5,762 4,211 -
Contract units transferred, net 7,708 126 - 3,419 4,500 24,237 -
Contract units redeemed (122) (3) - (247) (1,313) (1,338) -
--------------- --------- ---------- ---------- --------- -------------- -------
Unit balance at 9/30/99 25,535 3,125 10 8,512 25,590 29,619 10
=============== ========= ========== ========== ========= ============== =======
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
MFS Oppenheimer
------------------------------------------------------------------------- ---------------
F&C
Growth Emerging
with Emerging Markets High Global Capital
Research Income Growth Equity Income Governments Appreciation
---------- -------- --------- ---------- --------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) (10) (10) - -
Contract units purchased 22,166 60,871 45,740 8,277 12,308 316 4,131
Contract units transferred, net 3,870 4,170 2,112 (3,990) 826 59 938
Contract units redeemed (42) (250) (142) (53) (54) - (42)
---------- -------- --------- ---------- --------- -------------- ---------------
Unit balance at 12/31/98 25,994 64,791 47,710 4,234 13,080 385 5,037
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - (10)
Contract units purchased 11,000 6,463 5,899 280 1,924 - 971
Contract units transferred, net 20,369 38,374 10,834 (469) 4,011 595 2,174
Contract units redeemed (2,519) (3,012) (3,768) (101) (40) (187) (47)
---------- -------- --------- ---------- --------- -------------- ---------------
Unit balance at 9/30/99 54,844 106,616 60,675 3,944 18,975 793 8,125
========== ======== ========= ========== ========= ============== ===============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Oppenheimer Putnam
------------------------------------------------- --------------------------------------
Main Street
Growth VT Growth
and High Strategic and VT New
Income Income Bond Bond Income Value VT Vista
------------- --------- ---------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 10 10 10 10 10
Cova units redeemed (10) (10) (10) - (10) - (10)
Contract units purchased 13,701 9,108 39,444 2,196 72,178 487 4,298
Contract units transferred, net 1,202 1,436 7,160 478 8,219 1,705 2,501
Contract units redeemed (21) (11) (227) - (283) - -
------------- --------- ---------- ----------- ------------ --------- -----------
Unit balance at 12/31/98 14,882 10,533 46,377 2,684 80,114 2,202 6,799
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 4,070 2,063 2,822 1,431 10,166 960 1,392
Contract units transferred, net 8,901 3,456 16,694 3,284 39,932 (359) 8,110
Contract units redeemed (1,522) (80) (1,736) (33) (8,365) (32) (1,217)
------------- --------- ---------- ----------- ------------ --------- -----------
Unit balance at 9/30/99 26,331 15,972 64,157 7,366 121,847 2,771 15,084
============= ========= ========== =========== ============ ========= ===========
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Putnam Templeton
------------------------------ --------------------------------------------------------------
VT
VT International Franklin
International New Small Cap Developing
Growth Opportunities Bond Investments Stock International Markets
-------------- -------------- ------- ------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 10 10 - - - 13 18
Cova units redeemed (10) (10) - - - - (18)
Contract units purchased 56,707 4,416 - - - 6,502 3,871
Contract units transferred, net 107 367 - - - 126 3,162
Contract units redeemed (248) - - - - (15) -
-------------- -------------- ------- ------------- -------- ------------- -------------
Unit balance at 12/31/98 56,566 4,783 - - - 6,626 7,033
Cova units purchased - - 10 10 10 - -
Cova units redeemed - - - (10) (10) (13) -
Contract units purchased 4,697 227 525 806 4,297 8,021 1,209
Contract units transferred, net 15,589 3,290 102 11,863 2,960 17,875 4,437
Contract units redeemed (2,177) (1) - - (1) (73) (328)
-------------- -------------- ------- ------------- -------- ------------- -------------
Unit balance at 9/30/99 74,675 8,299 637 12,669 7,256 32,436 12,351
============== ============== ======= ============= ======== ============= =============
</TABLE>
<PAGE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
September 30, 1999
Unaudited
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Templeton Fidelity
---------------------------- ---------------------------------------------------------------
Mutual Franklin VIP III VIP III VIP
Shares Growth VIP VIP II Growth Growth & Equity-
Investments Investments Growth Contrafund Opportunities Income Income
------------- ------------- ---------- ------------ -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - - - - - - -
Cova units purchased 12 - 10 10 10 10 10
Cova units redeemed - - - - - - -
Contract units purchased 863 - 89 68 - 325 296
Contract units transferred, net 69 - 406 - 104 1,747 466
Contract units redeemed - - - - - - -
------------- ------------- ---------- ------------ ------------- ----------- ---------
Unit balance at 12/31/98 944 - 505 78 114 2,082 772
Cova units purchased - 10 - - - - -
Cova units redeemed (12) (10) - - - - -
Contract units purchased - - 1,085 463 405 3,059 256
Contract units transferred, net 7,377 4,817 1,322 24 2 1,395 2,391
Contract units redeemed - (1) (1) - - - -
------------- ------------- ---------- ------------ ------------- ----------- ---------
Unit balance at 9/30/99 8,309 4,816 2,911 565 521 6,536 3,419
============= ============= ========== ============ ============= =========== =========
</TABLE>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Contract Owners of Cova Variable Annuity Account Five, Board of
Directors and Shareholder of Cova Financial Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Quality Income, Money Market, Stock Index, Growth and Income, Bond
Debenture, Developing Growth, Large Cap Research, Mid-Cap Value, Quality
Bond, Small Cap Stock, Large Cap Stock, Select Equity, and International
Equity sub-accounts (investment options within the Cova Series Trust); the
Growth and Income sub-account (investment option within the Lord Abbett
Series Fund, Inc.); the Money Market sub-account (investment option within
the General American Capital Company); the Multi-Style Equity, Aggressive
Equity, Non-US, and Core Bond sub-accounts (investment options within the
Russell Insurance Funds); the AIM V.I. Value, AIM V.I. Capital
Appreciation, and AIM V.I. International Equity sub-accounts (investment
options within the AIM Variable Insurance Funds, Inc.); the Premier Growth
and Real Estate Investment sub-accounts (investment options within the
Alliance Variable Products Series Fund, Inc.); the Newport Tiger
sub-account (investment option within the Liberty Variable Investment
Trust); the Growth and Income, International Equity, and Global Income
sub-accounts (investment options within the Goldman Sachs Variable
Insurance Trust); the Kemper-Dreman High Return Equity, Kemper Small Cap
Growth, Kemper Small Cap Value, and Kemper Government Securities
sub-accounts (investment options within the Investors Fund Series); the MFS
Bond, MFS Research, MFS Growth with Income, MFS Emerging Growth,
MFS/Foreign & Colonial Emerging Markets Equity, MFS High Income, and MFS
World Governments sub-accounts (investment options within the MFS Variable
Insurance Trust); the Oppenheimer Growth, Oppenheimer Growth & Income,
Oppenheimer High Income, Oppenheimer Bond, and Oppenheimer Strategic Bond
sub-accounts (investment options within the Oppenheimer Variable Account
Funds); the Putnam Growth and Income, Putnam New Value, Putnam Vista,
Putnam International Growth, and Putnam International New Opportunities
(investment options within the Putnam Variable Trust); the Templeton
International, Templeton Developing Markets, and Mutual Shares Investments
(investment options within the Templeton Variable Products Series Fund) and
Growth, Contrafund, Growth Opportunities, Growth & Income, and
Equity-Income sub-accounts (investment options within the Variable
Insurance Products Fund, Fund II, and Fund III) of Cova Variable Annuity
Account Five of Cova Financial Life Insurance Company (the Separate
Account) as of December 31, 1998, and the related statement of operations
for the year then ended and the statements of changes in net assets for the
two years then ended. These financial statements are the responsibility of
the Separate Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with transfer agents. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the sub-accounts of
Cova Variable Annuity Account Five of Cova Financial Life Insurance Company
as of December 31, 1998, and the results of their operations and the
changes in their net assets for each of the years presented, in conformity
with generally accepted accounting principles.
Chicago, Illinois
March 1, 1999
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Assets:
Investments:
Cova Series Trust (Trust):
Quality Income Portfolio - 70,231 shares at a net asset value of $10.99 per share (cost: $ 771,521
$752,312)
Money Market Portfolio - 267,480 shares at a net asset value of $1.00 per share (cost: 267,480
$267,480)
Stock Index Portfolio - 103,701 shares at a net asset value of $22.24 per share (cost: 2,306,502
$1,814,789)
VKAC Growth and Income Portfolio - 118,981 shares at a net asset value of $17.81 per share 2,118,735
(cost: $1,802,450)
Bond Debenture Portfolio - 743,132 shares at a net asset value of $12.38 per share (cost: 9,200,594
$8,927,195)
Developing Growth Portfolio - 69,838 shares at a net asset value of $11.24 per share (cost: 785,026
$727,393)
Large Cap Research Portfolio - 49,317 shares at a net asset value of $11.96 per share 590,045
(cost: $537,947)
Mid-Cap Value Portfolio - 84,292 shares at a net asset value of $10.58 per share (cost: 892,031
$877,515)
Quality Bond Portfolio - 541,754 shares at a net asset value of $11.02 per share (cost: 5,969,934
$5,715,813)
Small Cap Stock Portfolio - 697,228 shares at a net asset value of $11.98 per share (cost: 8,354,398
$8,357,230)
Large Cap Stock Portfolio - 1,214,540 shares at a net asset value of $18.12 per share 22,001,488
(cost: $17,283,927)
Select Equity Portfolio - 1,112,492 shares at a net asset value of $16.08 per share (cost: 17,884,756
$14,721,013)
International Equity Portfolio - 781,347 shares at a net asset value of $12.86 per share 10,045,997
(cost: $9,127,009)
Lord Abbett Series Fund, Inc. (Lord
Abbett):
Growth and Income Portfolio - 1,796,658 shares at a net asset value of $20.65 per share 37,099,191
(cost: $34,316,395)
General American Capital Company
(GACC):
Money Market Portfolio - 74,779 shares at a net asset value of $19.25 per share (cost: 1,439,559
$1,430,813)
Russell Insurance Funds
(Russell):
Multi-Style Equity Fund - 38,483 shares at a net asset value of $16.02 per share (cost: 616,495
$579,110)
Aggressive Equity Fund - 6,813 shares at a net asset value of $12.70 per share (cost: 86,528
$88,281)
Non-US Fund - 18,412 shares at a net asset value of $11.09 per share 204,193
(cost: $202,349)
Core Bond Fund - 61,219 shares at a net asset value of $10.68 per share 653,821
(cost: $650,278)
AIM Variable Insurance Funds, Inc.
(AIM):
AIM V.I. Value Fund - 1,427 shares at a net asset value of $26.25 per share (cost: $36,084) 37,460
AIM V.I. Capital Appreciation Fund - 2,608 shares at a net asset value of $25.20 per share 65,734
(cost: $60,348)
AIM V.I. International Equity Fund - 8,880 shares at a net asset value of $19.62 per share 174,220
(cost: $180,444)
Alliance Variable Products Series Fund, Inc.
(Alliance):
Premier Growth Portfolio - 29,623 shares at a net asset value of $31.03 per share (cost: 919,211
$800,697)
Real Estate Investment Portfolio - 18,061 shares at a net asset value of $9.78 per share 176,632
(cost: $193,823)
Liberty Variable Investment Trust
(Liberty):
Newport Tiger Fund, Variable Series - 14,183 shares at a net asset value of $1.57 per share 22,267
(cost: $19,524)
Goldman Sachs Variable Insurance Trust
(Goldman Sachs):
Growth and Income Fund - 12,433 shares at a net asset value of $10.45 per share (cost: 129,922
$141,135)
International Equity Fund - 15,202 shares at a net asset value of $11.91 per share (cost: 181,060
$178,340)
Global Income Fund - 3,147 shares at a net asset value of $10.32 per 32,473
share (cost: $32,660)
Investors Fund Series
(Kemper):
Kemper Dreman High Return Equity Portfolio - 102 shares at a net asset value of $1.03 per 105
share (cost: $100)
Kemper Small Cap Growth Portfolio - 22,750 shares at a net asset value of $1.97 per share 44,868
(cost: $40,879)
Kemper Small Cap Value Portfolio - 137,341 shares at a net asset value of $1.07 per share 146,329
(cost: $160,309)
Kemper Government Securities Portfolio - 22,204 shares at a net asset value of $1.21 per 26,826
share (cost: $26,620)
MFS Variable Insurance Trust (MFS):
MFS Bond Series - 9 shares at a net asset value of $11.38 per share 105
(cost: $100)
MFS Research Series - 16,619 shares at a net asset value of $19.05 per share (cost: 316,596
$292,024)
MFS Growth with Income Series - 38,905 shares at a net asset value of $20.11 per share 782,388
(cost: $727,399)
MFS Emerging Growth Series - 29,432 shares at a net asset value of $21.47 per share (cost: 631,907
$544,333)
MFS / Foreign & Colonial Emerging
Markets Equity Series - 4,723 shares at a net asset value of $5.90 per share (cost: 27,866
$35,551)
MFS High Income Series - 11,190 shares at a net asset value of $11.53 per share (cost: 129,019
$131,644)
MFS World Governments Series - 377 shares at a net asset value of $10.88 per share (cost: 4,100
$3,911)
Oppenheimer Variable Account Funds
(Oppenheimer):
Oppenheimer Growth Fund - 1,682 shares at a net asset value of $36.67 per share (cost: 61,672
$52,315)
Oppenheimer Growth & Income Fund - 7,514 shares at a net asset value of $20.48 per share 153,890
(cost: $154,661)
Oppenheimer High Income Fund - 9,471 shares at a net asset value of $11.02 per share (cost: 104,368
$106,439)
Oppenheimer Bond Fund - 39,722 shares at a net asset value of $12.32 per share (cost: 489,369
$476,866)
Oppenheimer Strategic Bond Fund - 5,328 shares at a net asset value of $5.12 per share 27,280
(cost: $27,409)
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Assets, continued:
Investments,
continued:
Putnam Variable Trust
(Putnam):
Putnam Growth and Income Fund - 31,755 shares at a net asset value of $28.77 per share $ 913,589
(cost: $868,940)
Putnam New Value Fund - 1,922 shares at a net asset value of $12.03 per share (cost: 23,120
$22,260)
Putnam Vista Fund - 5,452 shares at a net asset value of $14.72 per 80,256
share (cost: $72,441)
Putnam International Growth Fund - 49,076 shares at a net asset value of $13.52 per share 663,511
(cost: $665,808)
Putnam International New
Opportunities
Fund - 4,754 shares at a net asset value of $11.49 per share 54,628
(cost: $54,329)
Templeton Variable Products Series Fund
(Templeton):
Templeton International Fund - 2,937 shares at a net asset value of $20.69 per share (cost: 60,769
$56,058)
Templeton Developing Markets Fund - 10,379 shares at a net asset value of $5.13 per share 53,242
(cost: $49,672)
Mutual Shares Investments Fund - 937 shares at a net asset value of $9.72 per share (cost: 9,108
$8,845)
Variable Insurance Products Fund, Fund II, and Fund
III (Fidelity):
Growth Portfolio - 148 shares at a net asset value of $44.87 per share 6,637
(cost: $5,519)
Contrafund Portfolio - 40 shares at a net asset value of $24.44 per 976
share (cost: $877)
Growth Opportunities Portfolio - 59 shares at a net asset value of $22.88 per share (cost: 1,345
$1,326)
Growth & Income Portfolio - 1,584 shares at a net asset value of $16.15 per share (cost: 25,582
$21,798)
Equity-Income Portfolio - 325 shares at a net asset value of $25.42 per 8,251
share (cost: $7,616)
----------
Total $ 127,874,975
assets
==========
Liabilities:
Trust Quality Income $ 30
Trust Money Market 10
Trust Stock 89
Index
Trust VKAC Growth and Income 81
Trust Bond Debenture 352
Trust Developing 29
Growth
Trust Large Cap 23
Research
Trust Mid-Cap Value 34
Trust Quality 229
Bond
Trust Small Cap Stock 312
Trust Large Cap Stock 843
Trust Select 683
Equity
Trust International 385
Equity
Lord Abbett Growth and Income 1,423
GACC Money Market 54
Russell Multi-Style 22
Equity
Russell Aggressive 3
Equity
Russell Non-US 7
Russell Core 23
Bond
AIM Value 1
AIM Capital 2
Appreciation
AIM International 7
Equity
Alliance Premier 35
Growth
Alliance Real Estate 7
Investment
Liberty Newport Tiger 25
Goldman Sachs Growth and 5
Income
Goldman Sachs International 7
Equity
Goldman Sachs Global Income 1
Kemper Small Cap 111
Growth
Kemper Small Cap 386
Value
Kemper Government Securities 40
MFS Research 12
MFS Growth with 30
Income
MFS Emerging Growth 24
MFS / F&C Emerging Markets Equity 1
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Liabilities,
continued:
MFS High Income $ 5
Oppenheimer Growth 2
Oppenheimer Growth & Income 6
Oppenheimer High 4
Income
Oppenheimer 19
Bond
Oppenheimer Strategic Bond 1
Putnam Growth and Income 35
Putnam New 1
Value
Putnam Vista 3
Putnam International Growth 25
Putnam International New Opportunities 2
Templeton 138
International
Templeton Developing Markets 93
Templeton Mutual Shares Investments 3
Fidelity VIP 14
Growth
Fidelity VIP II 1
Contrafund
Fidelity VIP III Growth & 58
Income
Fidelity VIP 12
Equity-Income
----------
Total $ 5,748
liabilities
==========
Net
assets:
Trust Quality Income - 43,985 accumulation units at $17.539867 $ 771,491
per unit
Trust Money Market - 20,763 accumulation units at $12.882157 per 267,470
unit
Trust Stock Index - 73,167 accumulation units at 2,306,413
$31.522519 per unit
Trust VKAC Growth and Income - 86,842 accumulation units at 2,118,654
$24.396679 per unit
Trust Bond Debenture - 681,676 accumulation units at $13.496510 9,200,242
per unit
Trust Developing Growth - 70,926 accumulation units at $11.067868 784,997
per unit
Trust Large Cap Research - 49,894 accumulation units at 590,022
$11.825638 per unit
Trust Mid-Cap Value - 85,457 accumulation units at $10.437956 per 891,997
unit
Trust Quality Bond - 501,045 accumulation units at 5,969,705
$11.914509 per unit
Trust Small Cap Stock - 663,925 accumulation units at $12.582885 8,354,086
per unit
Trust Large Cap Stock - 1,132,390 accumulation units at 22,000,645
$19.428505 per unit
Trust Select Equity - 1,052,797 accumulation units at $16.987203 17,884,073
per unit
Trust International Equity - 779,375 accumulation units at 10,045,612
$12.889314 per unit
Lord Abbett Growth and Income - 1,080,766 accumulation units at $34.325431 37,097,768
per unit
GACC Money Market - 129,569 accumulation units at $11.109949 per 1,439,505
unit
Russell Multi-Style Equity - 48,388 accumulation units at 616,473
$12.740123 per unit
Russell Aggressive Equity - 8,651 accumulation units at 86,525
$10.001283 per unit
Russell Non-US - 18,259 accumulation units at 204,186
$11.182808 per unit
Russell Core Bond - 61,498 accumulation units at 653,798
$10.631124 per unit
AIM Value - 2,865 accumulation units at 37,459
$13.075597 per unit
AIM Capital Appreciation - 5,570 accumulation units at $11.800084 65,732
per unit
AIM International Equity - 15,257 accumulation units at 174,213
$11.418467 per unit
Alliance Premier Growth - 62,869 accumulation units at $14.620511 919,176
per unit
Alliance Real Estate Investment - 22,077 accumulation units at 176,625
$8.000583 per unit
Liberty Newport Tiger - 2,397 accumulation units at 22,242
$9.278784 per unit
Goldman Sachs Growth and Income - 13,107 accumulation units at $9.911702 129,917
per unit
Goldman Sachs International Equity - 15,859 accumulation units at 181,053
$11.416783 per unit
Goldman Sachs Global Income - 3,002 accumulation units at 32,472
$10.815310 per unit
Kemper Dreman High Return Equity - 10 accumulation units at 105
$10.489000 per unit
Kemper Small Cap Growth - 3,829 accumulation units at $11.687795 44,757
per unit
Kemper Small Cap Value - 16,641 accumulation units at $8.770360 145,943
per unit
Kemper Government Securities - 2,519 accumulation units at 26,786
$10.634608 per unit
MFS Bond - 10 accumulation units at $10.509000 105
per unit
MFS Research - 25,994 accumulation units at $12.179142 316,584
per unit
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Net assets,
continued:
MFS Growth with Income - 64,791 accumulation units at $12.075079 $ 782,358
per unit
MFS Emerging Growth - 47,710 accumulation units at $13.244101 per 631,883
unit
MFS / F&C Emerging Markets Equity - 4,234 accumulation units at $6.581757 27,865
per unit
MFS High Income - 13,080 accumulation units at 129,014
$9.863111 per unit
MFS World Governments - 385 accumulation units at $10.663503 per 4,100
unit
Oppenheimer Growth - 5,037 accumulation units at $12.244057 per 61,670
unit
Oppenheimer Growth & Income - 14,882 accumulation units at 153,884
$10.340279 per unit
Oppenheimer High Income - 10,533 accumulation units at $9.907918 104,364
per unit
Oppenheimer Bond - 46,377 accumulation units at 489,350
$10.551643 per unit
Oppenheimer Strategic Bond - 2,684 accumulation units at 27,279
$10.164797 per unit
Putnam Growth and Income - 80,114 accumulation units at 913,554
$11.403244 per unit
Putnam New Value - 2,202 accumulation units at 23,119
$10.498075 per unit
Putnam Vista - 6,799 accumulation units at $11.804097 80,253
per unit
Putnam International Growth - 56,566 accumulation units at 663,486
$11.729428 per unit
Putnam International New Opportunities - 4,783 accumulation units at 54,626
$11.420772 per unit
Templeton International - 6,626 accumulation units at $9.149729 60,631
per unit
Templeton Developing Markets - 7,033 accumulation units at 53,149
$7.557531 per unit
Templeton Mutual Shares Investments - 944 accumulation units at $9.646506 9,105
per unit
Fidelity VIP Growth - 505 accumulation units at 6,623
$13.115493 per unit
Fidelity VIP II Contrafund - 78 accumulation units at $12.429344 975
per unit
Fidelity VIP III Growth Opportunities - 114 accumulation units at 1,345
$11.814000 per unit
Fidelity VIP III Growth & Income - 2,082 accumulation units at 25,524
$12.259160 per unit
Fidelity VIP Equity-Income - 772 accumulation units at $10.674283 8,239
per unit
----------
Total net $ 127,869,227
assets
==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
TRUST
-------------------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND DEVELOPING LARGE CAP
INCOME MARKET INDEX INCOME DEBENTURE GROWTH RESEARCH
-------- -------- --------- ------------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 42,140 15,998 11,040 11,939 189,684 -- 384
-------- -------- --------- ------------ ----------- ------------ --------
Expenses:
Mortality and expense risk fee 9,698 3,687 25,580 24,244 86,643 4,541 2,202
Administrative fee 1,164 443 3,070 2,909 10,397 545 264
-------- -------- --------- ------------ ----------- ------------ --------
Total expenses 10,862 4,130 28,650 27,153 97,040 5,086 2,466
-------- -------- --------- ------------ ----------- ------------ --------
Net investment income (loss) 31,278 11,868 (17,610) (15,214) 92,644 (5,086) (2,082)
-------- -------- --------- ------------ ----------- ------------ --------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares 1,603 -- 18,221 15,618 13,448 (1,554) 25
Realized gain distributions -- -- 372,780 222,030 73,764 221 --
-------- -------- --------- ------------ ----------- ------------ --------
Net realized gain (loss) 1,603 -- 391,001 237,648 87,212 (1,333) 25
-------- -------- --------- ---------- --------- ------------ --------
Change in unrealized appreciation
during the year 4,531 -- 98,370 64,902 110,064 57,229 52,098
-------- -------- --------- ------------ ----------- ------------ --------
Net increase (decrease)
in net assets from operations $ 37,412 11,868 471,761 287,336 289,920 50,810 50,041
======== ======== ========= =========== =========== ============ ========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
TRUST LORD ABBETT GACC
------------------------------------------------------------- ------------- ----------
GROWTH
MID-CAP QUALITY SMALL CAP LARGE CAP SELECT INTERNATIONAL AND MONEY
VALUE BOND STOCK STOCK EQUITY EQUITY INCOME MARKET
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 591 84,774 10,505 42,974 42,555 153,341 546,511 --
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Expenses:
Mortality and expense risk fee 5,492 49,714 94,997 196,151 173,752 106,326 389,208 6,233
Administrative fee 659 5,965 11,399 23,538 20,850 12,759 46,705 748
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Total expenses 6,151 55,679 106,396 219,689 194,602 119,085 435,913 6,981
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Net investment income (loss) (5,560) 29,095 (95,891) (176,715) (152,047) 34,256 110,598 (6,981)
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (4,501) 10,751 11,830 210,894 150,352 23,377 90,218 18,462
Realized gain distributions -- -- 268,696 141,495 849,129 1,945 1,757,243 --
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Net realized gain (loss) (4,501) 10,751 280,526 352,389 999,481 25,322 1,847,461 18,462
-------- --------- --------- ---------- ---------- ----------- ----------- ----------
Change in unrealized appreciation
during the year 11,980 212,005 (768,604) 4,086,693 1,878,770 827,333 1,268,706 8,306
-------- --------- --------- ---------- ---------- ----------- ------------- ----------
Net increase (decrease)
in net assets from operations $ 1,919 251,851 (583,969) 4,262,367 2,726,204 886,911 3,226,765 19,787
======== ========= ========= ========== ========== =========== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
RUSSELL AIM
-------------------------------------------- -----------------------------------
MULTI-STYLE AGGRESSIVE CORE CAPITAL INTERNATIONAL
EQUITY EQUITY NON-US BOND VALUE APPRECIATION EQUITY
------------ ----------- -------- ------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 714 22 2 3,287 174 72 1,368
------------ ----------- -------- ------- ------- ------------- -----------
Expenses:
Mortality and expense risk fee 2,550 346 791 1,166 181 224 1,054
Administrative fee 306 41 95 140 22 27 127
------------ ----------- -------- ------- ------- ------------- -----------
Total expenses 2,856 387 886 1,306 203 251 1,181
------------ ----------- -------- ------- ------- ------------- -----------
Net investment income (loss) (2,142) (365) (884) 1,981 (29) (179) 187
------------ ----------- -------- ------- ------- ------------- -----------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares 200 (52) (79) 2 (1,586) (22) (5,943)
Realized gain distributions 2 7 1 -- 1,539 1,278 --
------------ ----------- -------- ------- ------- ------------- -----------
Net realized gain (loss) 202 (45) (78) 2 (47) 1,256 (5,943)
------------ ----------- -------- ------- ------- ------------- ---------
Change in unrealized appreciation
during the year 37,385 (1,753) 1,844 3,543 1,376 5,386 (6,224)
------------ ----------- -------- ------- ------- ------------- -----------
Net increase (decrease)
in net assets from operations $ 35,445 (2,163) 882 5,526 1,300 6,463 (11,980)
============ =========== ======== ======= ======= ============= ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
ALLIANCE LIBERTY GOLDMAN SACHS KEMPER
-------------------- -------- ------------------------------- -----------------------
GROWTH
PREMIER REAL ESTATE NEWPORT AND INTERNATIONAL GLOBAL DREMAN HIGH SMALL CAP
GROWTH INVESTMENT TIGER INCOME EQUITY INCOME RETURN EQUITY GROWTH
--------- ---------- -------- --------- ------------ ------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 149 505 418 1,162 -- 1,211 -- --
--------- ---------- -------- --------- ------------ ------- --------- ------
Expenses:
Mortality and expense risk fee 4,043 933 56 926 938 163 -- 236
Administrative fee 485 112 7 111 113 19 -- 29
--------- ---------- -------- --------- ------------ ------- --------- --------
Total expenses 4,528 1,045 63 1,037 1,051 182 -- 265
--------- ---------- -------- --------- ------------ ------- --------- --------
Net investment income (loss) (4,379) (540) 355 125 (1,051) 1,029 -- (265)
--------- ---------- -------- --------- ------------ ------- --------- --------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (6,634) (2,987) 4 (4,119) (124) 5 -- (256)
Realized gain distributions -- 220 -- -- 1,326 325 -- 447
--------- ---------- -------- --------- ------------ ------- --------- --------
Net realized gain (loss) (6,634) (2,767) 4 (4,119) 1,202 330 -- 191
--------- ---------- -------- --------- ------------ ------- --------- --------
Change in unrealized appreciation
during the year 118,514 (17,191) 2,743 (11,213) 2,720 (187) 5 3,989
--------- ---------- -------- --------- ------------ ------- --------- ---------
Net increase (decrease)
in net assets from operations $ 107,501 (20,498) 3,102 (15,207) 2,871 1,172 5 3,915
========= ========== ======== ========= ============ ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
KEMPER MFS
----------------------- -------------------------------------------------------
GROWTH F&C EMERGING
SMALL CAP GOVERNMENT WITH EMERGING MARKETS
VALUE SECURITIES BOND RESEARCH INCOME GROWTH EQUITY
-------- ------------ ----- ----------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ -- 7 -- 18 -- -- 449
-------- ------------ ----- ----------- -------- ----------- ---------------
Expenses:
Mortality and expense risk fee 794 44 -- 1,355 4,299 3,162 290
Administrative fee 95 5 -- 163 516 379 35
-------- ------------ ----- ----------- -------- ----------- ---------------
Total expenses 889 49 -- 1,518 4,815 3,541 325
-------- ------------ ----- ----------- -------- ----------- ---------------
Net investment income (loss) (889) (42) -- (1,500) (4,815) (3,541) 124
-------- ------------ ----- ----------- -------- ----------- ---------------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (6,424) -- -- (91) (4,972) (2,781) (10,435)
Realized gain distributions 2 -- -- 236 -- 75 --
-------- ------------ ----- ----------- -------- ----------- ---------------
Net realized gain (loss) (6,422) -- -- 145 (4,972) (2,706) (10,435)
-------- ------------ ----- ----------- -------- ----------- ---------------
Change in unrealized appreciation
during the year (13,980) 206 5 24,572 54,989 87,574 (7,685)
-------- ------------ ----- ----------- -------- ----------- ---------------
Net increase (decrease)
in net assets from operations $ (21,291) 164 5 23,217 45,202 81,327 (17,996)
======== ============ ===== =========== ======== =========== ===============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
MFS OPPENHEIMER PUTNAM
------------------- -------------------------------------------- -----------------
GROWTH GROWTH
HIGH WORLD AND HIGH STRATEGIC AND NEW
INCOME GOVERNMENTS GROWTH INCOME INCOME BOND BOND INCOME VALUE
------- ----------- -------- -------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ 234 26 87 -- 49 2 2 263 248
------- ---------- -------- -------- ------- ------- -------- -------- -------
Expenses:
Mortality and expense risk fee 692 31 333 668 543 2,348 150 4,870 131
Administrative fee 83 3 40 80 65 282 18 584 16
------- ----------- -------- -------- ------- ------- -------- -------- -------
Total expenses 775 34 373 748 608 2,630 168 5,454 147
------- ----------- -------- -------- ------- ------- -------- -------- -------
Net investment income (loss) (541) (8) (286) (748) (559) (2,628) (166) (5,191) 101
------- ---------- -------- -------- ------- ------- -------- -------- -------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (1,166) 1 (25) (163) (198) 236 (5) (6,532) 12
Realized gain distributions 80 -- 1,053 6 59 2 1 1,717 67
------- ---------- -------- -------- ------- ------- -------- -------- -------
Net realized gain (loss) (1,086) 1 1,028 (157) (139) 238 (4) (4,815) 79
------- ---------- -------- -------- ------- ------- -------- -------- -------
Change in unrealized appreciation
during the year (2,625) 189 9,357 (771) (2,071) 12,503 (129) 44,649 860
------- ---------- -------- -------- ------- ------- -------- -------- -------
Net increase (decrease)
in net assets from operations $ (4,252) 182 10,099 (1,676) (2,769) 10,113 (299) 34,643 1,040
======= ========== ======== ======== ======= ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
PUTNAM TEMPLETON
--------------------------------------------------------------- ---------------
INTERNATIONAL
INTERNATIONAL NEW DEVELOPING
VISTA GROWTH OPPORTUNITIES INTERNATIONAL MARKETS
--------- ---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ -- 2,161 5 -- --
--------- ---------------- ---------------- ---------------- --------------
Expenses:
Mortality and expense risk fee 389 3,701 242 124 83
Administrative fee 47 444 29 15 10
--------- ---------------- ---------------- ---------------- --------------
Total expenses 436 4,145 271 139 93
--------- ---------------- ---------------- ---------------- --------------
Net investment income (loss) (436) (1,984) (266) (139) (93)
--------- ---------------- ---------------- ---------------- --------------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (12) (8,326) (27) 9 8
Realized gain distributions -- -- -- -- --
--------- ---------------- ---------------- ---------------- --------------
Net realized gain (loss) (12) (8,326) (27) 9 8
--------- ---------------- ---------------- ---------------- --------------
Change in unrealized appreciation
during the year 7,815 (2,297) 299 4,711 3,570
--------- ---------------- ---------------- ---------------- --------------
Net increase (decrease)
in net assets from operations $ 7,367 (12,607) 6 4,581 3,485
========= ================ ================ ================ ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Operations
Year ended December 31, 1998
TEMPLETON FIDELITY
---------- -------------------------------------------------------------
MUTUAL
SHARES GROWTH GROWTH & EQUITY-
INVESTMENTS GROWTH CONTRAFUND OPPORTUNITIES INCOME INCOME TOTAL
---------- --------- ----------- ------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income -
dividends $ -- -- -- -- -- -- 1,165,071
---------- --------- ----------- ------------- ------------ ---------- -------------
Expenses:
Mortality and expense risk fee 3 15 1 -- 52 11 1,216,406
Administrative fee -- 2 -- -- 6 1 145,967
---------- --------- ----------- ------------- ------------ ---------- -------------
Total expenses 3 17 1 -- 58 12 1,362,373
---------- --------- ----------- ------------- ------------ ---------- -------------
Net investment income (loss) (3) (17) (1) -- (58) (12) (197,302)
---------- --------- ----------- ------------- ------------ ---------- -------------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares -- -- -- -- -- -- 496,262
Realized gain distributions -- -- -- -- -- -- 3,695,746
---------- --------- ----------- ------------- ------------ ---------- -------------
Net realized gain (loss) -- -- -- -- -- -- 4,192,008
---------- --------- ----------- ------------- ------------ ---------- -------------
Change in unrealized appreciation
during the year 263 1,118 99 19 3,784 635 8,280,979
---------- --------- ----------- ------------- ------------ ---------- -------------
Net increase (decrease)
in net assets from operations $ 260 1,101 98 19 3,726 623 12,275,685
========== ========= =========== ============= ============ ========== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
TRUST
-------------------------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND DEVELOPING LARGE CAP
INCOME MARKET INDEX INCOME DEBENTURE GROWTH RESEARCH
--------- --------- ---------- ------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 31,278 11,868 (17,610) (15,214) 92,644 (5,086) (2,082)
Net realized gain (loss) 1,603 -- 391,001 237,648 87,212 (1,333) 25
Change in unrealized appreciation
during the year 4,531 -- 98,370 64,902 110,064 57,229 52,098
--------- --------- ---------- ------------- ----------- ------------ ----------
Net increase (decrease) in
net assets from operations 37,412 11,868 471,761 287,336 289,920 50,810 50,041
--------- --------- ---------- ------------- ----------- ------------ ----------
Contract transactions:
Cova payments -- -- -- -- -- -- --
Cova transfers -- -- -- -- -- -- --
Payments received from contract
owners -- -- -- 1,000 1,051,661 334,325 237,270
Transfers between sub-accounts
(including fixed account), net 11,714 (111,191) 138,069 202,862 3,726,785 337,360 303,087
Transfers for contract benefits
and terminations (8,629) (3,863) (40,936) (52,497) (343,261) (1,070) (376)
--------- --------- ---------- ------------- ----------- ------------ ----------
Net increase (decrease) in
net assets from contract
transactions 3,085 (115,054) 97,133 151,365 4,435,185 670,615 539,981
--------- --------- ---------- ------------- ----------- ------------ ----------
Net increase (decrease)
in net assets 40,497 (103,186) 568,894 438,701 4,725,105 721,425 590,022
Net assets at beginning of period 730,994 370,656 1,737,519 1,679,953 4,475,137 63,572 --
--------- --------- ---------- ------------- ----------- ------------ ----------
Net assets at end of period $ 771,491 267,470 2,306,413 2,118,654 9,200,242 784,997 590,022
========= ========= ========== ============= =========== ============ ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
TRUST
----------------------------------------------------------
MID-CAP QUALITY SMALL CAP LARGE CAP
VALUE BOND STOCK STOCK
----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (5,560) 29,095 (95,891) (176,715)
Net realized gain (loss) (4,501) 10,751 280,526 352,389
Change in unrealized appreciation
during the year 11,980 212,005 (768,604) 4,086,693
----------- ------------- ------------ --------------
Net increase (decrease) in
net assets from operations 1,919 251,851 (583,969) 4,262,367
----------- ------------- ------------ --------------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- --
Payments received from contract
owners 593,364 828,237 664,035 1,433,747
Transfers between sub-accounts
(including fixed account), net 210,332 2,485,711 2,154,230 6,772,257
Transfers for contract benefits
and terminations (2,706) (213,576) (458,393) (691,973)
----------- ------------- ------------ --------------
Net increase (decrease) in
net assets from contract
transactions 800,990 3,100,372 2,359,872 7,514,031
----------- ------------- ------------ --------------
Net increase (decrease)
in net assets 802,909 3,352,223 1,775,903 11,776,398
Net assets at beginning of period 89,088 2,617,482 6,578,183 10,224,247
----------- ------------- ------------ --------------
Net assets at end of period $ 891,997 5,969,705 8,354,086 22,000,645
=========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
TRUST LORD ABBETT GACC
--------------------------------- --------------- -------------
GROWTH
SELECT INTERNATIONAL AND MONEY
EQUITY EQUITY INCOME MARKET
-------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (152,047) 34,256 110,598 (6,981)
Net realized gain (loss) 999,481 25,322 1,847,461 18,462
Change in unrealized appreciation
during the year 1,878,770 827,333 1,268,706 8,306
-------------- ---------------- --------------- -------------
Net increase (decrease) in
net assets from operations 2,726,204 886,911 3,226,765 19,787
-------------- ---------------- --------------- -------------
Contract transactions:
Cova payments -- -- -- --
Cova transfers -- -- -- --
Payments received from contract
owners 1,284,829 470,560 2,282,528 1,894,032
Transfers between sub-accounts
(including fixed account), net 4,674,806 2,712,309 8,659,268 (358,103)
Transfers for contract benefits
and terminations (646,951) (375,560) (1,472,455) (266,514)
-------------- ---------------- --------------- -------------
Net increase (decrease) in
net assets from contract
transactions 5,312,684 2,807,309 9,469,341 1,269,415
-------------- ---------------- --------------- -------------
Net increase (decrease)
in net assets 8,038,888 3,694,220 12,696,106 1,289,202
Net assets at beginning of period 9,845,185 6,351,392 24,401,662 150,303
-------------- ---------------- --------------- -------------
Net assets at end of period $ 17,884,073 10,045,612 37,097,768 1,439,505
============== ================ =============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
RUSSELL AIM
------------------------------------------------ -------------------------
MULTI-STYLE AGGRESSIVE CORE CAPITAL
EQUITY EQUITY NON-US BOND VALUE APPRECIATION
------------ ------------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (2,142) (365) (884) 1,981 (29) (179)
Net realized gain (loss) 202 (45) (78) 2 (47) 1,256
Change in unrealized appreciation
during the year 37,385 (1,753) 1,844 3,543 1,376 5,386
------------ ------------- --------- --------- -------- ---------------
Net increase (decrease) in
net assets from operations 35,445 (2,163) 882 5,526 1,300 6,463
------------ ------------- --------- --------- -------- ---------------
Contract transactions:
Cova payments 100 100 100 100 100 100
Cova transfers (127) (95) (93) (103) -- --
Payments received from contract
owners 550,062 80,621 187,582 578,539 33,651 57,937
Transfers between sub-accounts
(including fixed account), net 31,554 8,298 15,688 70,898 2,043 1,227
Transfers for contract benefits
and terminations (561) (236) 27 (1,162) 365 5
------------ ------------- --------- --------- -------- ---------------
Net increase (decrease) in
net assets from contract
transactions 581,028 88,688 203,304 648,272 36,159 59,269
------------ ------------- --------- --------- -------- ---------------
Net increase (decrease)
in net assets 616,473 86,525 204,186 653,798 37,459 65,732
Net assets at beginning of period -- -- -- -- -- --
------------ ----------- --------- --------- -------- ---------------
Net assets at end of period $ 616,473 86,525 204,186 653,798 37,459 65,732
============ ============= ========= ========= ======== ===============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
AIM ALLIANCE LIBERTY
----------------- ----------------------------- -----------
INTERNATIONAL PREMIER REAL ESTATE NEWPORT
EQUITY GROWTH INVESTMENT TIGER
----------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 187 (4,379) (540) 355
Net realized gain (loss) (5,943) (6,634) (2,767) 4
Change in unrealized appreciation
during the year (6,224) 118,514 (17,191) 2,743
----------------- ----------- --------------- -----------
Net increase (decrease) in
net assets from operations (11,980) 107,501 (20,498) 3,102
----------------- ----------- --------------- -----------
Contract transactions:
Cova payments 100 100 100 100
Cova transfers (100) (138) (81) --
Payments received from contract
owners 184,408 794,977 178,563 19,040
Transfers between sub-accounts
(including fixed account), net 3,073 20,139 19,454 --
Transfers for contract benefits
and terminations (1,288) (3,403) (913) --
----------------- ----------- --------------- -----------
Net increase (decrease) in
net assets from contract
transactions 186,193 811,675 197,123 19,140
----------------- ----------- --------------- -----------
Net increase (decrease)
in net assets 174,213 919,176 176,625 22,242
Net assets at beginning of period -- -- -- --
----------------- ----------- --------------- -----------
Net assets at end of period $ 174,213 919,176 176,625 22,242
================= =========== =============== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
GOLDMAN SACHS KEMPER
------------------------------------------ ----------------------------
GROWTH
AND INTERNATIONAL GLOBAL DREMAN HIGH SMALL CAP
INCOME EQUITY INCOME RETURN EQUITY GROWTH
------------ -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 125 (1,051) 1,029 -- (265)
Net realized gain (loss) (4,119) 1,202 330 -- 191
Change in unrealized appreciation
during the year (11,213) 2,720 (187) 5 3,989
------------ -------------- ---------- ------------- ------------
Net increase (decrease) in
net assets from operations (15,207) 2,871 1,172 5 3,915
------------ -------------- ---------- ------------- ------------
Contract transactions:
Cova payments 100 100 100 100 100
Cova transfers (97) (86) -- -- (108)
Payments received from contract
owners 128,899 154,193 31,200 -- 35,374
Transfers between sub-accounts
(including fixed account), net 16,047 23,975 -- -- 5,487
Transfers for contract benefits
and terminations 175 -- -- -- (11)
------------ -------------- ---------- ------------- ------------
Net increase (decrease) in
net assets from contract
transactions 145,124 178,182 31,300 100 40,842
------------ -------------- ---------- ------------- ------------
Net increase (decrease)
in net assets 129,917 181,053 32,472 105 44,757
Net assets at beginning of period -- -- -- -- --
------------ -------------- ---------- ------------- ------------
Net assets at end of period $ 129,917 181,053 32,472 105 44,757
============ ============== ========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
KEMPER MFS
------------------------- ----------------------------------------
GROWTH
SMALL CAP GOVERNMENT WITH EMERGING
VALUE SECURITIES BOND RESEARCH INCOME GROWTH
--------- ------------- ------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (889) (42) -- (1,500) (4,815) (3,541)
Net realized gain (loss) (6,422) -- -- 145 (4,972) (2,706)
Change in unrealized appreciation
during the year (13,980) 206 5 24,572 54,989 87,574
--------- ------------- ------ --------- --------- ----------
Net increase (decrease) in
net assets from operations (21,291) 164 5 23,217 45,202 81,327
--------- ------------- ------ --------- --------- ----------
Contract transactions:
Cova payments 100 100 100 100 100 100
Cova transfers (78) -- -- (123) (120) (126)
Payments received from contract
owners 184,026 23,032 -- 252,002 692,249 527,982
Transfers between sub-accounts
(including fixed account), net (15,831) 3,490 -- 42,134 48,220 24,659
Transfers for contract benefits
and terminations (983) -- -- (746) (3,293) (2,059)
--------- ------------- ------ --------- --------- ----------
Net increase (decrease) in
net assets from contract
transactions 167,234 26,622 100 293,367 737,156 550,556
--------- ------------- ------ --------- --------- ----------
Net increase (decrease)
in net assets 145,943 26,786 105 316,584 782,358 631,883
Net assets at beginning of period -- -- -- -- -- --
--------- ------------- ------ --------- --------- ----------
Net assets at end of period $ 145,943 26,786 105 316,584 782,358 631,883
========= ============= ====== ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
MFS OPPENHEIMER
------------------------------------------- ---------------------
F&C EMERGING GROWTH
MARKETS HIGH WORLD AND
EQUITY INCOME GOVERNMENTS GROWTH INCOME
---------------- ---------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 124 (541) (8) (286) (748)
Net realized gain (loss) (10,435) (1,086) 1 1,028 (157)
Change in unrealized appreciation
during the year (7,685) (2,625) 189 9,357 (771)
---------------- ---------- --------------- --------- ---------
Net increase (decrease) in
net assets from operations (17,996) (4,252) 182 10,099 (1,676)
---------------- ---------- --------------- --------- ---------
Contract transactions:
Cova payments 100 100 100 100 100
Cova transfers (65) (93) -- -- (89)
Payments received from contract
owners 71,508 125,820 3,193 42,486 144,121
Transfers between sub-accounts
(including fixed account), net (25,211) 8,401 625 9,440 11,637
Transfers for contract benefits
and terminations (471) (962) -- (455) (209)
---------------- ---------- --------------- --------- ---------
Net increase (decrease) in
net assets from contract
transactions 45,861 133,266 3,918 51,571 155,560
---------------- ---------- --------------- --------- ---------
Net increase (decrease)
in net assets 27,865 129,014 4,100 61,670 153,884
Net assets at beginning of period -- -- -- -- --
---------------- ---------- --------------- --------- ---------
Net assets at end of period $ 27,865 129,014 4,100 61,670 153,884
================ ========== =============== ========= =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
OPPENHEIMER PUTNAM
----------------------------------------- ----------------------
GROWTH
HIGH STRATEGIC AND NEW
INCOME BOND BOND INCOME VALUE
----------- ------------ -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (559) (2,628) (166) (5,191) 101
Net realized gain (loss) (139) 238 (4) (4,815) 79
Change in unrealized appreciation
during the year (2,071) 12,503 (129) 44,649 860
----------- ------------ -------------- ----------- ---------
Net increase (decrease) in
net assets from operations (2,769) 10,113 (299) 34,643 1,040
----------- ------------ -------------- ----------- ---------
Contract transactions:
Cova payments 100 100 100 100 100
Cova transfers (93) (105) -- (113) --
Payments received from contract
owners 93,367 407,896 22,655 787,874 4,669
Transfers between sub-accounts
(including fixed account), net 14,033 73,891 4,823 94,763 17,311
Transfers for contract benefits
and terminations (274) (2,545) -- (3,713) (1)
----------- ------------ -------------- ----------- ---------
Net increase (decrease) in
net assets from contract
transactions 107,133 479,237 27,578 878,911 22,079
----------- ------------ -------------- ----------- ---------
Net increase (decrease)
in net assets 104,364 489,350 27,279 913,554 23,119
Net assets at beginning of period -- -- -- -- --
----------- ------------ ---------- ----------- ---------
Net assets at end of period $ 104,364 489,350 27,279 913,554 23,119
=========== ============ ============== =========== =========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
PUTNAM TEMPLETON
---------------------------------------- ----------------------------------------
INTERNATIONAL MUTUAL
INTERNATIONAL NEW DEVELOPING SHARES
VISTA GROWTH OPPORTUNITIES INTERNATIONAL MARKETS INVESTMENTS
--------- ------------ -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (436) (1,984) (266) (139) (93) (3)
Net realized gain (loss) (12) (8,326) (27) 9 8 --
Change in unrealized appreciation
during the year 7,815 (2,297) 299 4,711 3,570 263
--------- ------------ -------------- ------------- ------------ ----------
Net increase (decrease) in
net assets from operations 7,367 (12,607) 6 4,581 3,485 260
--------- ------------ -------------- ------------- ------------ ----------
Contract transactions:
Cova payments 100 100 100 100 100 100
Cova transfers (109) (127) (109) -- (133) --
Payments received from contract
owners 46,531 674,756 50,740 54,930 25,540 8,079
Transfers between sub-accounts
(including fixed account), net 26,352 5,031 3,797 1,153 24,157 666
Transfers for contract benefits
and terminations 12 (3,667) 92 (133) -- --
--------- ------------ -------------- ------------- ------------ ----------
Net increase (decrease) in
net assets from contract
transactions 72,886 676,093 54,620 56,050 49,664 8,845
--------- ------------ -------------- ------------- ------------ ----------
Net increase (decrease)
in net assets 80,253 663,486 54,626 60,631 53,149 9,105
Net assets at beginning of period -- -- -- -- -- --
--------- ------------ -------------- ------------- ------------ ----------
Net assets at end of period $ 80,253 663,486 54,626 60,631 53,149 9,105
========= ============ ============== ============= ============ ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1998
Fidelity
----------------------------------------------------------
Growth Growth & Equity-
Growth Contrafund Opportunities Income Income Total
------- ------------- --------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ (17) (1) - (58) (12) (197,302)
Net realized gain (loss) - - - - - 4,192,008
Change in unrealized appreciation
during the year 1,118 99 19 3,784 635 8,280,979
------- ----------- -------------- --------- -------- -------------
Net increase (decrease) in
net assets from operations 1,101 98 19 3,726 623 12,275,685
------- ----------- -------------- --------- -------- -------------
Contract transactions:
Cova payments 100 100 100 100 100 4,200
Cova transfers - - - - - (2,511)
Payments received from contract
owners 990 777 - 3,746 2,968 18,342,571
Transfers between sub-accounts
(including fixed account), net 4,427 - 1,226 17,428 4,427 32,538,428
Transfers for contract benefits
and terminations 5 - - 524 121 (4,604,519)
------- ----------- -------------- --------- -------- -------------
Net increase (decrease) in
net assets from contract
transactions 5,522 877 1,326 21,798 7,616 46,278,169
------- ----------- -------------- --------- -------- -------------
Net increase (decrease)
in net assets 6,623 975 1,345 25,524 8,239 58,553,854
Net assets at beginning of period - - - - - 69,315,373
------- ----------- -------------- --------- -------- -------------
Net assets at end of period $ 6,623 975 1,345 25,524 8,239 127,869,227
======= =========== ============== ========= ======== =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1997
TRUST
---------------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND DEVELOPING
INCOME MARKET INDEX INCOME DEBENTURE GROWTH
--------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ 21,228 33,229 1,305 917 120,111 (65)
Net realized gain (loss) (265) -- 24,202 17,990 6,426 (15)
Change in unrealized appreciation
during the year 14,231 -- 311,158 213,640 154,943 404
--------- ----------- ----------- ----------- ----------- ------------
Net increase in net
assets from operations 35,194 33,229 336,665 232,547 281,480 324
--------- ----------- ----------- ----------- ----------- ------------
Contract transactions:
Payments received from contract
owners 5,588 5,425,271 21,617 145,535 986,444 15,000
Transfers between sub-accounts
(including fixed account), net 437,402 (5,336,710) 444,691 627,885 2,836,964 48,082
Transfers for contract benefits
and terminations (46,134) (73,008) (25,416) (12,290) (76,410) 166
--------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets
from contract transactions 396,856 15,553 440,892 761,130 3,746,998 63,248
--------- ----------- ----------- ----------- ----------- ------------
Net increase in net assets 432,050 48,782 777,557 993,677 4,028,478 63,572
Net assets at beginning of period 298,944 321,874 959,962 686,276 446,659 --
--------- ----------- ----------- ----------- ----------- ------------
Net assets at end of period $ 730,994 370,656 1,737,519 1,679,953 4,475,137 63,572
========= =========== =========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1997
-----------------------------------------------------------------------------
MID-CAP QUALITY SMALL CAP LARGE CAP SELECT
VALUE BOND STOCK STOCK EQUITY
----------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ (17) 76,826 (29,973) (14,663) (32,802)
Net realized gain (loss) 50 12,743 19,329 566,223 50,103
Change in unrealized appreciation
during the year 2,536 39,803 731,752 574,012 1,183,581
----------- ------------- ------------- -------------- -------------
Net increase in net
assets from operations 2,569 129,372 721,108 1,125,572 1,200,882
----------- ------------- ------------- -------------- -------------
Contract transactions:
Payments received from contract
owners 32,249 283,752 965,134 1,764,924 1,672,740
Transfers between sub-accounts
(including fixed account), net 54,202 1,563,687 3,732,024 6,016,134 5,100,198
Transfers for contract benefits
and terminations 68 (28,465) (119,268) (113,206) (139,188)
----------- ------------- ------------- -------------- -------------
Net increase in net assets
from contract transactions 86,519 1,818,974 4,577,890 7,667,852 6,633,750
----------- ------------- ------------- -------------- -------------
Net increase in net assets 89,088 1,948,346 5,298,998 8,793,424 7,834,632
Net assets at beginning of period -- 669,136 1,279,185 1,430,823 2,010,553
----------- ------------- ------------- -------------- -------------
Net assets at end of period $ 89,088 2,617,482 6,578,183 10,224,247 9,845,185
=========== ============= ============= ============== =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Statement of Changes in Net Assets
Year ended December 31, 1997
TRUST LORD ABBETT GACC
---------------- ---------------- -----------
GROWTH
INTERNATIONAL AND MONEY
EQUITY INCOME MARKET TOTAL
---------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ (1,201) 165,930 (119) 340,706
Net realized gain (loss) 6,340 1,595,470 74 2,298,670
Change in unrealized appreciation
during the year 24,972 1,139,321 440 4,390,793
---------------- ---------------- ----------- ---------------
Net increase in net
assets from operations 30,111 2,900,721 395 7,030,169
---------------- ---------------- ----------- ---------------
Contract transactions:
Payments received from contract
owners 1,161,490 1,887,670 178,947 14,546,361
Transfers between sub-accounts
(including fixed account), net 3,891,923 10,712,632 (29,039) 30,100,075
Transfers for contract benefits
and terminations (92,391) (515,567) -- (1,241,109)
---------------- ---------------- ----------- ---------------
Net increase in net assets
from contract transactions 4,961,022 12,084,735 149,908 43,405,327
---------------- ---------------- ----------- ---------------
Net increase in net assets 4,991,133 14,985,456 150,303 50,435,496
Net assets at beginning of period 1,360,259 9,416,206 -- 18,879,877
---------------- ---------------- ----------- ---------------
Net assets at end of period $ 6,351,392 24,401,662 150,303 69,315,373
================ ================ =========== ===============
</TABLE>
See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(1) ORGANIZATION
Cova Variable Annuity Account Five (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by Cova Financial Life Insurance Company (Cova)
and exists in accordance with the regulations of the California
Department of Insurance. The Separate Account is a funding vehicle for
variable annuity contracts issued by Cova.
<TABLE>
<CAPTION>
The Separate Account is divided into sub-accounts with the assets of
each sub-account invested in the corresponding portfolios of the
following investment companies:
<S> <C>
Cova Series Trust (Trust) 13 portfolios
Lord Abbett Series Fund, Inc. (Lord Abbett) 1 portfolio
General American Capital Company (GACC) 1 portfolio
Russell Insurance Funds (Russell) 4 portfolios
AIM Variable Insurance Funds, Inc. (AIM) 3 portfolios
Alliance Variable Products Series Funds, Inc. (Alliance) 2 portfolios
Liberty Variable Investment Trust (Liberty) 1 portfolio
Goldman Sachs Variable Insurance Trust (Goldman Sachs) 3 portfolios
Investors Fund Series (Kemper) 4 portfolios
MFS Variable Insurance Trust (MFS) 7 portfolios
Oppenheimer Variable Account Funds (Oppenheimer) 5 portfolios
Putnam Variable Trust (Putnam) 5 portfolios
Templeton Variable Products Series Fund (Templeton) 3 portfolios
Variable Insurance Products Fund, Fund II, and Fund III (Fidelity) 5 portfolios
</TABLE>
Each investment company is a diversified, open-end, management
investment company registered under the Investment Company Act of 1940
as amended. Not all sub-accounts are available for investment depending
upon the terms of the variable annuity contracts offered for sale by
Cova.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the
sale of portfolio shares owned by the sub-accounts. Income from
dividends and gains from realized gain distributions are recorded
on the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in
additional shares of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment
income and realized capital gains are deemed to pass through to
the Separate Account. As a result, GACC does not distribute
dividends and realized gains. During December of each year, the
accumulated net investment income and realized capital gains of
the GACC Money Market Fund are allocated to the Separate Account
by increasing the cost basis and recognizing a capital gain in the
Separate Account.
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the Federal
income tax return of Cova, which is taxed as a Life Insurance
Company under the provisions of the Internal Revenue Code (IRC).
Under current IRC provisions, Cova believes it will be treated as
the owner of the Separate Account assets for Federal income tax
purposes and does not expect to incur Federal income taxes on the
earnings of the Separate Account to the extent the earnings are
credited to the variable annuity contracts. Based on this, no
charge is being made currently to the Separate Account for Federal
income taxes. A charge may be made in future years for any Federal
income taxes that would be attributable to the contracts.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of the Separate Account
equivalent to an annual rate of 1.25% for the assumption of mortality
and expense risks and 0.15% for administrative expenses. The mortality
risks assumed by Cova arise from its contractual obligation to make
annuity payments after the annuity date for the life of the annuitant
and to waive the withdrawal fee in the event of the death of the
contract owner. The administrative fees cover the cost of establishing
and maintaining the variable annuity contracts and the Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at
the time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee is imposed on withdrawals of contract values
attributable to purchase payments within five years after receipt and is
equal to 5% of the purchase payment withdrawn. After the first contract
anniversary, provided the contract value exceeds $5,000, the contract
owner may make one withdrawal each contract year of up to 10% of the
aggregate purchase payments (on deposit for more than one year) without
incurring a surrender fee. In 1998, surrender fees of $60,272 were
deducted from the contract values in the Separate Account.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their policy
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the sub-accounts and the fixed
rate account to which the contract value is allocated.
Subject to certain restrictions, the contract owner may transfer all or
a part of the accumulated value of the contract among the available
sub-accounts of the Separate Account and the fixed rate account offered
by Cova. If more than 12 transfers have been made in the contract year,
a transfer fee of $25 per transfer or, if less, 2% of amount
transferred, will be deducted from the contract account value. Transfers
made in the Dollar Cost Averaging program are not subject to the
transfer fee.
In 1998, contract maintenance and transfer fees of $27,322 were deducted
from the contract values in the Separate Account.
Cova currently advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes from the contract value
at the time annuity payments begin. Cova reserves the right to deduct
premium taxes when incurred.
(5) SUBSEQUENT EVENT
On January 8, 1999, the four sub-accounts investing in the Trust
portfolios managed by Van Kampen American Capital Advisory Corp. (VKAC)
- Quality Income, Money Market, Stock Index, and VKAC Growth and Income
portfolios ceased operations and their assets were transferred to one
new and three existing sub-accounts in accordance with the substitution
order issued by the Securities and Exchange Commission.
On January 8, 1999, the Lord Abbett Growth and Income sub-account ceased
operations and its assets were transferred to the Trust Lord Abbett
Growth and Income sub-account which commenced operations on January 8,
1999. The Trust Lord Abbett Growth and Income sub-account invests in the
Trust Lord Abbett Growth and Income Portfolio which commenced operations
on January 8, 1999. The Trust Lord Abbett Growth and Income Portfolio is
managed by Lord Abbett who also manages the Lord Abbett Growth and
Income Portfolio.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
COMMENCED ACCUMULATION UNIT VALUE
---------------------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 $ 17.539867 16.716340 15.540286 15.331980
Trust Money Market* 06/19/95 12.882157 12.375227 11.879722 11.425132
Trust Stock Index* 07/20/95 31.522519 24.963612 19.036955 15.773909
Trust VKAC Growth and Income* 07/19/95 24.396679 20.978338 17.008156 14.608910
Trust Bond Debenture 05/20/96 13.496510 12.881799 11.294929 --
Trust Developing Growth 11/07/97 11.067868 10.527555 -- --
Trust Large Cap Research 02/17/98 11.825638 -- -- --
Trust Mid-Cap Value 11/07/97 10.437956 10.467957 -- --
Trust Quality Bond 05/20/96 11.914509 11.155144 10.368767 --
Trust Small Cap Stock 05/15/96 12.582885 13.491493 11.308427 --
Trust Large Cap Stock 05/16/96 19.428505 14.889464 11.334982 --
Trust Select Equity 05/15/96 16.987203 14.053503 10.838053 --
Trust International Equity 05/14/96 12.889314 11.462436 10.967004 --
Lord Abbett Growth and Income* 07/20/95 34.325431 30.837057 25.089540 21.306278
GACC Money Market 12/04/97 11.109949 10.667017 -- --
Russell Multi-Style Equity 12/31/97 12.740123 10.000000 -- --
Russell Aggressive Equity 12/31/97 10.001283 10.000000 -- --
Russell Non-US 12/31/97 11.182808 10.000000 -- --
Russell Core Bond 12/31/97 10.631124 10.000000 -- --
AIM Value 12/31/97 13.075597 10.000000 -- --
AIM Capital Appreciation 12/31/97 11.800084 10.000000 -- --
AIM International Equity 12/31/97 11.418467 10.000000 -- --
Alliance Premier Growth 12/31/97 14.620511 10.000000 -- --
Alliance Real Estate Investment 12/31/97 8.000583 10.000000 -- --
Liberty Newport Tiger 12/31/97 9.278784 10.000000 -- --
Goldman Sachs Growth and Income 03/31/98 9.911702 -- -- --
Goldman Sachs International Equity 03/31/98 11.416783 -- -- --
Goldman Sachs Global Income 03/31/98 10.815310 -- -- --
Kemper Dreman High Return Equity 05/15/98 10.489000 -- -- --
Kemper Small Cap Growth 12/31/97 11.687795 10.000000 -- --
Kemper Small Cap Value 12/31/97 8.770360 10.000000 -- --
Kemper Government Securities 12/31/97 10.634608 10.000000 -- --
MFS Bond 05/15/98 10.509000 -- -- --
MFS Research 12/31/97 12.179142 10.000000 -- --
MFS Growth with Income 12/31/97 12.075079 10.000000 -- --
MFS Emerging Growth 12/31/97 13.244101 10.000000 -- --
MFS / F&C Emerging Markets Equity 12/31/97 6.581757 10.000000 -- --
MFS High Income 12/31/97 9.863111 10.000000 -- --
MFS World Governments 12/31/97 10.663503 10.000000 -- --
Oppenheimer Growth 12/31/97 12.244057 10.000000 -- --
Oppenheimer Growth & Income 12/31/97 10.340279 10.000000 -- --
Oppenheimer High Income 12/31/97 9.907918 10.000000 -- --
Oppenheimer Bond 12/31/97 10.551643 10.000000 -- --
Oppenheimer Strategic Bond 12/31/97 10.164797 10.000000 -- --
Putnam Growth and Income 12/31/97 11.403244 10.000000 -- --
Putnam New Value 12/31/97 10.498075 10.000000 -- --
Putnam Vista 12/31/97 11.804097 10.000000 -- --
Putnam International Growth 12/31/97 11.729428 10.000000 -- --
Putnam International New Opportunities 12/31/97 11.420772 10.000000 -- --
Templeton International 09/21/98 9.149729 -- -- --
Templeton Developing Markets 09/21/98 7.557531 -- -- --
Templeton Mutual Shares Investments 09/21/98 9.646506 -- -- --
Fidelity VIP Growth 02/17/98 13.115493 -- -- --
Fidelity VIP II Contrafund 02/17/98 12.429344 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 11.814000 -- -- --
Fidelity VIP III Growth & Income 02/17/98 12.259160 -- -- --
Fidelity VIP Equity-Income 02/17/98 10.674283 -- -- --
=========== =========== ============ ============
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
COMMENCED NET ASSETS (IN 000'S)
------------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 $ 771 731 299 133
Trust Money Market* 06/19/95 267 371 322 326
Trust Stock Index* 07/20/95 2,306 1,738 960 211
Trust VKAC Growth and Income* 07/19/95 2,119 1,680 686 105
Trust Bond Debenture 05/20/96 9,200 4,475 447 --
Trust Developing Growth 11/07/97 785 64 -- --
Trust Large Cap Research 02/17/98 590 -- -- --
Trust Mid-Cap Value 11/07/97 892 89 -- --
Trust Quality Bond 05/20/96 5,970 2,617 669 --
Trust Small Cap Stock 05/15/96 8,354 6,578 1,279 --
Trust Large Cap Stock 05/16/96 22,001 10,224 1,431 --
Trust Select Equity 05/15/96 17,884 9,845 2,011 --
Trust International Equity 05/14/96 10,046 6,351 1,360 --
Lord Abbett Growth and Income* 07/20/95 37,098 24,402 9,416 2,675
GACC Money Market 12/04/97 1,440 150 -- --
Russell Multi-Style Equity 12/31/97 616 -- -- --
Russell Aggressive Equity 12/31/97 87 -- -- --
Russell Non-US 12/31/97 204 -- -- --
Russell Core Bond 12/31/97 654 -- -- --
AIM Value 12/31/97 37 -- -- --
AIM Capital Appreciation 12/31/97 66 -- -- --
AIM International Equity 12/31/97 174 -- -- --
Alliance Premier Growth 12/31/97 919 -- -- --
Alliance Real Estate Investment 12/31/97 177 -- -- --
Liberty Newport Tiger 12/31/97 22 -- -- --
Goldman Sachs Growth and Income 03/31/98 130 -- -- --
Goldman Sachs International Equity 03/31/98 181 -- -- --
Goldman Sachs Global Income 03/31/98 32 -- -- --
Kemper Dreman High Return Equity 05/15/98 -- -- -- --
Kemper Small Cap Growth 12/31/97 45 -- -- --
Kemper Small Cap Value 12/31/97 146 -- -- --
Kemper Government Securities 12/31/97 27 -- -- --
MFS Bond 05/15/98 -- -- -- --
MFS Research 12/31/97 317 -- -- --
MFS Growth with Income 12/31/97 782 -- -- --
MFS Emerging Growth 12/31/97 632 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 28 -- -- --
MFS High Income 12/31/97 129 -- -- --
MFS World Governments 12/31/97 4 -- -- --
Oppenheimer Growth 12/31/97 62 -- -- --
Oppenheimer Growth & Income 12/31/97 154 -- -- --
Oppenheimer High Income 12/31/97 104 -- -- --
Oppenheimer Bond 12/31/97 489 -- -- --
Oppenheimer Strategic Bond 12/31/97 27 -- -- --
Putnam Growth and Income 12/31/97 914 -- -- --
Putnam New Value 12/31/97 23 -- -- --
Putnam Vista 12/31/97 80 -- -- --
Putnam International Growth 12/31/97 663 -- -- --
Putnam International New Opportunities 12/31/97 55 -- -- --
Templeton International 09/21/98 61 -- -- --
Templeton Developing Markets 09/21/98 53 -- -- --
Templeton Mutual Shares Investments 09/21/98 9 -- -- --
Fidelity VIP Growth 02/17/98 7 -- -- --
Fidelity VIP II Contrafund 02/17/98 1 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 1 -- -- --
Fidelity VIP III Growth & Income 02/17/98 26 -- -- --
Fidelity VIP Equity-Income 02/17/98 8 -- -- --
======== ======== ======= =======
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
COMMENCED TOTAL RETURN**
---------------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 4.93 % 7.57 1.36 6.30
Trust Money Market* 06/19/95 4.10 4.17 3.98 2.61
Trust Stock Index* 07/20/95 26.27 31.13 20.69 11.65
Trust VKAC Growth and Income* 07/19/95 16.30 23.34 16.42 11.93
Trust Bond Debenture 05/20/96 4.77 14.05 11.32 --
Trust Developing Growth 11/07/97 5.13 (2.80) -- --
Trust Large Cap Research 02/17/98 9.94 -- -- --
Trust Mid-Cap Value 11/07/97 (.29) 4.17 -- --
Trust Quality Bond 05/20/96 6.81 7.58 4.20 --
Trust Small Cap Stock 05/15/96 (6.74) 19.31 3.69 --
Trust Large Cap Stock 05/16/96 30.49 31.36 11.62 --
Trust Select Equity 05/15/96 20.88 29.67 6.76 --
Trust International Equity 05/14/96 12.45 4.52 8.60 --
Lord Abbett Growth and Income* 07/20/95 11.31 22.91 17.76 9.05
GACC Money Market 12/04/97 4.15 .34 -- --
Russell Multi-Style Equity 12/31/97 27.40 -- -- --
Russell Aggressive Equity 12/31/97 .01 -- -- --
Russell Non-US 12/31/97 11.83 -- -- --
Russell Core Bond 12/31/97 6.31 -- -- --
AIM Value 12/31/97 30.76 -- -- --
AIM Capital Appreciation 12/31/97 18.00 -- -- --
AIM International Equity 12/31/97 14.19 -- -- --
Alliance Premier Growth 12/31/97 46.21 -- -- --
Alliance Real Estate Investment 12/31/97 (19.99) -- -- --
Liberty Newport Tiger 12/31/97 (7.21) -- -- --
Goldman Sachs Growth and Income 03/31/98 (11.60) -- -- --
Goldman Sachs International Equity 03/31/98 1.94 -- -- --
Goldman Sachs Global Income 03/31/98 6.53 -- -- --
Kemper Dreman High Return Equity 05/15/98 4.89 -- -- --
Kemper Small Cap Growth 12/31/97 16.88 -- -- --
Kemper Small Cap Value 12/31/97 (12.30) -- -- --
Kemper Government Securities 12/31/97 6.35 -- -- --
MFS Bond 05/15/98 5.09 -- -- --
MFS Research 12/31/97 21.79 -- -- --
MFS Growth with Income 12/31/97 20.75 -- -- --
MFS Emerging Growth 12/31/97 32.44 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 (34.18) -- -- --
MFS High Income 12/31/97 (1.37) -- -- --
MFS World Governments 12/31/97 6.63 -- -- --
Oppenheimer Growth 12/31/97 22.44 -- -- --
Oppenheimer Growth & Income 12/31/97 3.40 -- -- --
Oppenheimer High Income 12/31/97 (0.92) -- -- --
Oppenheimer Bond 12/31/97 5.52 -- -- --
Oppenheimer Strategic Bond 12/31/97 1.65 -- -- --
Putnam Growth and Income 12/31/97 14.03 -- -- --
Putnam New Value 12/31/97 4.98 -- -- --
Putnam Vista 12/31/97 18.04 -- -- --
Putnam International Growth 12/31/97 17.29 -- -- --
Putnam International New Opportunities 12/31/97 14.21 -- -- --
Templeton International 09/21/98 15.92 -- -- --
Templeton Developing Markets 09/21/98 33.87 -- -- --
Templeton Mutual Shares Investments 09/21/98 11.61 -- -- --
Fidelity VIP Growth 02/17/98 31.16 -- -- --
Fidelity VIP II Contrafund 02/17/98 24.29 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 18.14 -- -- --
Fidelity VIP III Growth & Income 02/17/98 22.59 -- -- --
Fidelity VIP Equity-Income 02/17/98 6.74 -- -- --
======= ======= ======= =======
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
A summary of accumulation unit values, net assets, total return, and
expense ratios for each sub-account follows:
SEPARATE ACCOUNT EXPENSES
COMMENCED TO AVERAGE NET ASSETS**
-----------------------------------------
OPERATIONS 1998 1997 1996 1995
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Trust Quality Income* 08/16/95 1.40 1.40 1.40 1.40
Trust Money Market* 06/19/95 1.40 1.40 1.40 1.40
Trust Stock Index* 07/20/95 1.40 1.40 1.40 1.40
Trust VKAC Growth and Income* 07/19/95 1.40 1.40 1.40 1.40
Trust Bond Debenture 05/20/96 1.40 1.40 1.40 --
Trust Developing Growth 11/07/97 1.40 1.40 -- --
Trust Large Cap Research 02/17/98 1.40 -- -- --
Trust Mid-Cap Value 11/07/97 1.40 1.40 -- --
Trust Quality Bond 05/20/96 1.40 1.40 1.40 --
Trust Small Cap Stock 05/15/96 1.40 1.40 1.40 --
Trust Large Cap Stock 05/16/96 1.40 1.40 1.40 --
Trust Select Equity 05/15/96 1.40 1.40 1.40 --
Trust International Equity 05/14/96 1.40 1.40 1.40 --
Lord Abbett Growth and Income* 07/20/95 1.40 1.40 1.40 1.40
GACC Money Market 12/04/97 1.40 1.40 -- --
Russell Multi-Style Equity 12/31/97 1.40 -- -- --
Russell Aggressive Equity 12/31/97 1.40 -- -- --
Russell Non-US 12/31/97 1.40 -- -- --
Russell Core Bond 12/31/97 1.40 -- -- --
AIM Value 12/31/97 1.40 -- -- --
AIM Capital Appreciation 12/31/97 1.40 -- -- --
AIM International Equity 12/31/97 1.40 -- -- --
Alliance Premier Growth 12/31/97 1.40 -- -- --
Alliance Real Estate Investment 12/31/97 1.40 -- -- --
Liberty Newport Tiger 12/31/97 1.39 -- -- --
Goldman Sachs Growth and Income 03/31/98 1.40 -- -- --
Goldman Sachs International Equity 03/31/98 1.40 -- -- --
Goldman Sachs Global Income 03/31/98 1.40 -- -- --
Kemper Dreman High Return Equity 05/15/98 .55 -- -- --
Kemper Small Cap Growth 12/31/97 1.40 -- -- --
Kemper Small Cap Value 12/31/97 1.40 -- -- --
Kemper Government Securities 12/31/97 1.38 -- -- --
MFS Bond 05/15/98 .52 -- -- --
MFS Research 12/31/97 1.40 -- -- --
MFS Growth with Income 12/31/97 1.40 -- -- --
MFS Emerging Growth 12/31/97 1.40 -- -- --
MFS / F&C Emerging Markets Equity 12/31/97 1.40 -- -- --
MFS High Income 12/31/97 1.40 -- -- --
MFS World Governments 12/31/97 1.37 -- -- --
Oppenheimer Growth 12/31/97 1.40 -- -- --
Oppenheimer Growth & Income 12/31/97 1.40 -- -- --
Oppenheimer High Income 12/31/97 1.40 -- -- --
Oppenheimer Bond 12/31/97 1.40 -- -- --
Oppenheimer Strategic Bond 12/31/97 1.40 -- -- --
Putnam Growth and Income 12/31/97 1.40 -- -- --
Putnam New Value 12/31/97 1.40 -- -- --
Putnam Vista 12/31/97 1.40 -- -- --
Putnam International Growth 12/31/97 1.40 -- -- --
Putnam International New Opportunities 12/31/97 1.40 -- -- --
Templeton International 09/21/98 1.40 -- -- --
Templeton Developing Markets 09/21/98 1.40 -- -- --
Templeton Mutual Shares Investments 09/21/98 1.32 -- -- --
Fidelity VIP Growth 02/17/98 1.35 -- -- --
Fidelity VIP II Contrafund 02/17/98 .75 -- -- --
Fidelity VIP III Growth Opportunities 02/17/98 .52 -- -- --
Fidelity VIP III Growth & Income 02/17/98 1.39 -- -- --
Fidelity VIP Equity-Income 02/17/98 1.34 -- -- --
======= ======= ======= =======
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The table below summarizes the realized gain (loss) on the sale of fund
shares and the change in unrealized appreciation for each sub-account
during the year.
1998 1997
------------- -------------
<S> <C> <C>
Realized gain (loss) on sale of fund shares:
Trust Quality Income:
Aggregate proceeds from sales of fund shares $ 68,255 78,042
Aggregate cost of fund shares redeemed 66,652 78,307
------------- -------------
Realized gain (loss) $ 1,603 (265)
============= =============
Trust Money Market:
Aggregate proceeds from sales of fund shares $ 127,698 5,031,278
Aggregate cost of fund shares redeemed 127,698 5,031,278
------------- -------------
Realized gain (loss) $ -- --
============= =============
Trust Stock Index:
Aggregate proceeds from sales of fund shares $ 135,751 100,563
Aggregate cost of fund shares redeemed 117,530 81,687
------------- -------------
Realized gain (loss) $ 18,221 18,876
============= =============
Trust VKAC Growth and Income:
Aggregate proceeds from sales of fund shares $ 104,628 21,278
Aggregate cost of fund shares redeemed 89,010 18,280
------------- -------------
Realized gain (loss) $ 15,618 2,998
============= =============
Trust Bond Debenture:
Aggregate proceeds from sales of fund shares $ 670,935 109,027
Aggregate cost of fund shares redeemed 657,487 103,526
------------- -------------
Realized gain (loss) $ 13,448 5,501
============= =============
Trust Developing Growth:
Aggregate proceeds from sales of fund shares $ 59,769 15,035
Aggregate cost of fund shares redeemed 61,323 15,050
------------- -------------
Realized gain (loss) $ (1,554) (15)
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Trust Large Cap Research:
Aggregate proceeds from sales of fund shares $ 1,318 --
Aggregate cost of fund shares redeemed 1,293 --
------------- -------------
Realized gain (loss) $ 25 --
============= =============
Trust Mid-Cap Value:
Aggregate proceeds from sales of fund shares $ 121,779 5,141
Aggregate cost of fund shares redeemed 126,280 5,091
------------- -------------
Realized gain (loss) $ (4,501) 50
============= =============
Trust Quality Bond:
Aggregate proceeds from sales of fund shares $ 319,864 149,426
Aggregate cost of fund shares redeemed 309,113 147,472
------------- -------------
Realized gain (loss) $ 10,751 1,954
============= =============
Trust Small Cap Stock:
Aggregate proceeds from sales of fund shares $ 986,220 91,131
Aggregate cost of fund shares redeemed 974,390 81,824
------------- -------------
Realized gain (loss) $ 11,830 9,307
============= =============
Trust Large Cap Stock:
Aggregate proceeds from sales of fund shares $ 1,700,678 121,132
Aggregate cost of fund shares redeemed 1,489,784 106,386
------------- -------------
Realized gain (loss) $ 210,894 14,746
============= =============
Trust Select Equity:
Aggregate proceeds from sales of fund shares $ 1,190,393 150,731
Aggregate cost of fund shares redeemed 1,040,041 130,262
------------- -------------
Realized gain (loss) $ 150,352 20,469
============= =============
Trust International Equity:
Aggregate proceeds from sales of fund shares $ 652,667 185,858
Aggregate cost of fund shares redeemed 629,290 182,972
------------- -------------
Realized gain (loss) $ 23,377 2,886
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Lord Abbett Growth and Income:
Aggregate proceeds from sales of fund shares $ 1,839,293 585,935
Aggregate cost of fund shares redeemed 1,749,075 507,692
------------- -------------
Realized gain (loss) $ 90,218 78,243
============= =============
GACC Money Market:
Aggregate proceeds from sales of fund shares $ 2,053,922 29,146
Aggregate cost of fund shares redeemed 2,035,460 29,072
------------- -------------
Realized gain (loss) $ 18,462 74
============= =============
Russell Multi-Style Equity:
Aggregate proceeds from sales of fund shares $ 7,462 --
Aggregate cost of fund shares redeemed 7,262 --
------------- -------------
Realized gain (loss) $ 200 --
============= =============
Russell Aggressive Equity:
Aggregate proceeds from sales of fund shares $ 416 --
Aggregate cost of fund shares redeemed 468 --
------------- -------------
Realized gain (loss) $ (52) --
============= =============
Russell Non-US:
Aggregate proceeds from sales of fund shares $ 821 --
Aggregate cost of fund shares redeemed 900 --
------------- -------------
Realized gain (loss) $ (79) --
============= =============
Russell Core Bond:
Aggregate proceeds from sales of fund shares $ 1,162 --
Aggregate cost of fund shares redeemed 1,160 --
------------- -------------
Realized gain (loss) $ 2 --
============= =============
AIM Value:
Aggregate proceeds from sales of fund shares $ 26,188 --
Aggregate cost of fund shares redeemed 27,774 --
------------- -------------
Realized gain (loss) $ (1,586) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
AIM Capital Appreciation:
Aggregate proceeds from sales of fund shares $ 236 --
Aggregate cost of fund shares redeemed 258 --
------------- -------------
Realized gain (loss) $ (22) --
============= =============
AIM International Equity:
Aggregate proceeds from sales of fund shares $ 40,160 --
Aggregate cost of fund shares redeemed 46,103 --
------------- -------------
Realized gain (loss) $ (5,943) --
============= =============
Alliance Premier Growth:
Aggregate proceeds from sales of fund shares $ 67,438 --
Aggregate cost of fund shares redeemed 74,072 --
------------- -------------
Realized gain (loss) $ (6,634) --
============= =============
Alliance Real Estate:
Aggregate proceeds from sales of fund shares $ 14,746 --
Aggregate cost of fund shares redeemed 17,733 --
------------- -------------
Realized gain (loss) $ (2,987) --
============= =============
Liberty Newport Tiger:
Aggregate proceeds from sales of fund shares $ 37 --
Aggregate cost of fund shares redeemed 33 --
------------- -------------
Realized gain (loss) $ 4 --
============= =============
Goldman Sachs Growth and Income:
Aggregate proceeds from sales of fund shares $ 23,582 --
Aggregate cost of fund shares redeemed 27,701 --
------------- -------------
Realized gain (loss) $ (4,119) --
============= =============
Goldman Sachs International Equity:
Aggregate proceeds from sales of fund shares $ 999 --
Aggregate cost of fund shares redeemed 1,123 --
------------- -------------
Realized gain (loss) $ (124) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Goldman Sachs Global Income:
Aggregate proceeds from sales of fund shares $ 181 --
Aggregate cost of fund shares redeemed 176 --
------------- -------------
Realized gain (loss) $ 5 --
============= =============
Kemper-Dreman High Return Equity:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Kemper Small Cap Growth:
Aggregate proceeds from sales of fund shares $ 7,419 --
Aggregate cost of fund shares redeemed 7,675 --
------------- -------------
Realized gain (loss) $ (256) --
============= =============
Kemper Small Cap Value:
Aggregate proceeds from sales of fund shares $ 21,781 --
Aggregate cost of fund shares redeemed 28,205 --
------------- -------------
Realized gain (loss) $ (6,424) --
============= =============
Kemper Government Securities:
Aggregate proceeds from sales of fund shares $ 9 --
Aggregate cost of fund shares redeemed 9 --
------------- -------------
Realized gain (loss) $ -- --
============= =============
MFS Bond:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
MFS Research:
Aggregate proceeds from sales of fund shares $ 1,823 --
Aggregate cost of fund shares redeemed 1,914 --
------------- -------------
Realized gain (loss) $ (91) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
MFS Growth with Income:
Aggregate proceeds from sales of fund shares $ 40,854 --
Aggregate cost of fund shares redeemed 45,826 --
------------- -------------
Realized gain (loss) $ (4,972) --
============= =============
MFS Emerging Growth:
Aggregate proceeds from sales of fund shares $ 31,963 --
Aggregate cost of fund shares redeemed 34,744 --
------------- -------------
Realized gain (loss) $ (2,781) --
============= =============
MFS / F&C Emerging Markets Equity:
Aggregate proceeds from sales of fund shares $ 32,580 --
Aggregate cost of fund shares redeemed 43,015 --
------------- -------------
Realized gain (loss) $ (10,435) --
============= =============
MFS High Income:
Aggregate proceeds from sales of fund shares $ 18,006 --
Aggregate cost of fund shares redeemed 19,172 --
------------- -------------
Realized gain (loss) $ (1,166) --
============= =============
MFS World Governments:
Aggregate proceeds from sales of fund shares $ 34 --
Aggregate cost of fund shares redeemed 33 --
------------- -------------
Realized gain (loss) $ 1 --
============= =============
Oppenheimer Growth:
Aggregate proceeds from sales of fund shares $ 731 --
Aggregate cost of fund shares redeemed 756 --
------------- -------------
Realized gain (loss) $ (25) --
============= =============
Oppenheimer Growth & Income:
Aggregate proceeds from sales of fund shares $ 1,004 --
Aggregate cost of fund shares redeemed 1,167 --
------------- -------------
Realized gain (loss) $ (163) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Oppenheimer High Income:
Aggregate proceeds from sales of fund shares $ 2,657 --
Aggregate cost of fund shares redeemed 2,855 --
------------- -------------
Realized gain (loss) $ (198) --
============= =============
Oppenheimer Bond:
Aggregate proceeds from sales of fund shares $ 17,891 --
Aggregate cost of fund shares redeemed 17,655 --
------------- -------------
Realized gain (loss) $ 236 --
============= =============
Oppenheimer Strategic Bond:
Aggregate proceeds from sales of fund shares $ 160 --
Aggregate cost of fund shares redeemed 165 --
------------- -------------
Realized gain (loss) $ (5) --
============= =============
Putnam Growth and Income:
Aggregate proceeds from sales of fund shares $ 45,339 --
Aggregate cost of fund shares redeemed 51,871 --
------------- -------------
Realized gain (loss) $ (6,532) --
============= =============
Putnam New Value:
Aggregate proceeds from sales of fund shares $ 6,880 --
Aggregate cost of fund shares redeemed 6,868 --
------------- -------------
Realized gain (loss) $ 12 --
============= =============
Putnam Vista:
Aggregate proceeds from sales of fund shares $ 376 --
Aggregate cost of fund shares redeemed 388 --
------------- -------------
Realized gain (loss) $ (12) --
============= =============
Putnam International Growth:
Aggregate proceeds from sales of fund shares $ 64,381 --
Aggregate cost of fund shares redeemed 72,707 --
------------- -------------
Realized gain (loss) $ (8,326) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Putnam International New Opportunities:
Aggregate proceeds from sales of fund shares $ 378 --
Aggregate cost of fund shares redeemed 405 --
------------- -------------
Realized gain (loss) $ (27) --
============= =============
Templeton International:
Aggregate proceeds from sales of fund shares $ 133 --
Aggregate cost of fund shares redeemed 124 --
------------- -------------
Realized gain (loss) $ 9 --
============= =============
Templeton Developing Markets:
Aggregate proceeds from sales of fund shares $ 133 --
Aggregate cost of fund shares redeemed 125 --
------------- -------------
Realized gain (loss) $ 8 --
============= =============
Templeton Mutual Shares Investments:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Growth:
Aggregate proceeds from sales of fund shares $ 3 --
Aggregate cost of fund shares redeemed 3 --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Contrafund:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Growth Opportunities:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Realized gain (loss) on sale of fund shares, continued:
Fidelity Growth & Income:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Fidelity Equity-Income:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
------------- -------------
Realized gain (loss) $ -- --
============= =============
Unrealized appreciation (depreciation):
Trust Quality Income:
Appreciation (Depreciation), end of period $ 19,209 14,678
Appreciation (Depreciation), beginning of period 14,678 447
------------- -------------
Unrealized appreciation (depreciation) $ 4,531 14,231
============= =============
Trust Money Market:
Appreciation (Depreciation), end of period $ -- --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ -- --
============= =============
Trust Stock Index:
Appreciation (Depreciation), end of period $ 491,713 393,343
Appreciation (Depreciation), beginning of period 393,343 82,185
------------- -------------
Unrealized appreciation (depreciation) $ 98,370 311,158
============= =============
Trust VKAC Growth & Income:
Appreciation (Depreciation), end of period $ 316,285 251,383
Appreciation (Depreciation), beginning of period 251,383 37,743
------------- -------------
Unrealized appreciation (depreciation) $ 64,902 213,640
============= =============
Trust Bond Debenture:
Appreciation (Depreciation), end of period $ 273,399 163,335
Appreciation (Depreciation), beginning of period 163,335 8,392
------------- -------------
Unrealized appreciation (depreciation) $ 110,064 154,943
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Trust Developing Growth:
Appreciation (Depreciation), end of period $ 57,633 404
Appreciation (Depreciation), beginning of period 404 --
------------- -------------
Unrealized appreciation (depreciation) $ 57,229 404
============= =============
Trust Large Cap Research:
Appreciation (Depreciation), end of period $ 52,098 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 52,098 --
============= =============
Trust Mid-Cap Value:
Appreciation (Depreciation), end of period $ 14,516 2,536
Appreciation (Depreciation), beginning of period 2,536 --
------------- -------------
Unrealized appreciation (depreciation) $ 11,980 2,536
============= =============
Trust Quality Bond:
Appreciation (Depreciation), end of period $ 254,121 42,116
Appreciation (Depreciation), beginning of period 42,116 2,313
------------- -------------
Unrealized appreciation (depreciation) $ 212,005 39,803
============= =============
Trust Small Cap Stock:
Appreciation (Depreciation), end of period $ (2,832) 765,772
Appreciation (Depreciation), beginning of period 765,772 34,020
------------- -------------
Unrealized appreciation (depreciation) $ (768,604) 731,752
============= =============
Trust Large Cap Stock:
Appreciation (Depreciation), end of period $ 4,717,561 630,868
Appreciation (Depreciation), beginning of period 630,868 56,856
------------- -------------
Unrealized appreciation (depreciation) $ 4,086,693 574,012
============= =============
Trust Select Equity:
Appreciation (Depreciation), end of period $ 3,163,743 1,284,973
Appreciation (Depreciation), beginning of period 1,284,973 101,392
------------- -------------
Unrealized appreciation (depreciation) $ 1,878,770 1,183,581
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Trust International Equity:
Appreciation (Depreciation), end of period $ 918,988 91,655
Appreciation (Depreciation), beginning of period 91,655 66,683
------------- -------------
Unrealized appreciation (depreciation) $ 827,333 24,972
============= =============
Lord Abbett Growth and Income:
Appreciation (Depreciation), end of period $ 2,782,796 1,514,090
Appreciation (Depreciation), beginning of period 1,514,090 374,769
------------- -------------
Unrealized appreciation (depreciation) $ 1,268,706 1,139,321
============= =============
GACC Money Market:
Appreciation (Depreciation), end of period $ 8,746 440
Appreciation (Depreciation), beginning of period 440 --
------------- -------------
Unrealized appreciation (depreciation) $ 8,306 440
============= =============
Russell Multi-Style Equity:
Appreciation (Depreciation), end of period $ 37,385 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 37,385 --
============= =============
Russell Aggressive Equity:
Appreciation (Depreciation), end of period $ (1,753) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (1,753) --
============= =============
Russell Non-US:
Appreciation (Depreciation), end of period $ 1,844 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 1,844 --
============= =============
Russell Core Bond:
Appreciation (Depreciation), end of period $ 3,543 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,543 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
AIM Value:
Appreciation (Depreciation), end of period $ 1,376 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 1,376 --
============= =============
AIM Capital Appreciation:
Appreciation (Depreciation), end of period $ 5,386 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 5,386 --
============= =============
AIM International Equity:
Appreciation (Depreciation), end of period $ (6,224) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (6,224) --
============= =============
Alliance Premier Growth:
Appreciation (Depreciation), end of period $ 118,514 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 118,514 --
============= =============
Alliance Real Estate Investment:
Appreciation (Depreciation), end of period $ (17,191) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (17,191) --
============= =============
Liberty Newport Tiger:
Appreciation (Depreciation), end of period $ 2,743 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 2,743 --
============= =============
Goldman Sachs Growth and Income:
Appreciation (Depreciation), end of period $ (11,213) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (11,213) --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Goldman Sachs International Equity:
Appreciation (Depreciation), end of period $ 2,720 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 2,720 --
============= =============
Goldman Sachs Global Income:
Appreciation (Depreciation), end of period $ (187) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (187) --
============= =============
Kemper-Dreman High Return Equity:
Appreciation (Depreciation), end of period $ 5 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 5 --
============= =============
Kemper Small Cap Growth:
Appreciation (Depreciation), end of period $ 3,989 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,989 --
============= =============
Kemper Small Cap Value:
Appreciation (Depreciation), end of period $ (13,980) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (13,980) --
============= =============
Kemper Government Securities:
Appreciation (Depreciation), end of period $ 206 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 206 --
============= =============
MFS Bond:
Appreciation (Depreciation), end of period $ 5 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 5 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
MFS Research:
Appreciation (Depreciation), end of period $ 24,572 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 24,572 --
============= =============
MFS Growth with Income:
Appreciation (Depreciation), end of period $ 54,989 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 54,989 --
============= =============
MFS Emerging Growth:
Appreciation (Depreciation), end of period $ 87,574 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 87,574 --
============= =============
MFS / F&C Emerging Markets Equity:
Appreciation (Depreciation), end of period $ (7,685) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (7,685) --
============= =============
MFS High Income:
Appreciation (Depreciation), end of period $ (2,625) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (2,625) --
============= =============
MFS World Governments:
Appreciation (Depreciation), end of period $ 189 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 189 --
============= =============
Oppenheimer Growth:
Appreciation (Depreciation), end of period $ 9,357 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 9,357 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Oppenheimer Growth & Income:
Appreciation (Depreciation), end of period $ (771) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (771) --
============= =============
Oppenheimer High Income:
Appreciation (Depreciation), end of period $ (2,071) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (2,071) --
============= =============
Oppenheimer Bond:
Appreciation (Depreciation), end of period $ 12,503 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 12,503 --
============= =============
Oppenheimer Strategic Bond:
Appreciation (Depreciation), end of period $ (129) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (129) --
============= =============
Putnam Growth and Income:
Appreciation (Depreciation), end of period $ 44,649 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 44,649 --
============= =============
Putnam New Value:
Appreciation (Depreciation), end of period $ 860 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 860 --
============= =============
Putnam Vista:
Appreciation (Depreciation), end of period $ 7,815 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 7,815 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Putnam International Growth:
Appreciation (Depreciation), end of period $ (2,297) --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ (2,297) --
============= =============
Putnam International New Opportunities:
Appreciation (Depreciation), end of period $ 299 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 299 --
============= =============
Templeton International:
Appreciation (Depreciation), end of period $ 4,711 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 4,711 --
============= =============
Templeton Developing Markets:
Appreciation (Depreciation), end of period $ 3,570 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,570 --
============= =============
Templeton Mutual Shares Investments:
Appreciation (Depreciation), end of period $ 263 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 263 --
============= =============
Fidelity Growth:
Appreciation (Depreciation), end of period $ 1,118 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 1,118 --
============= =============
Fidelity Contrafund:
Appreciation (Depreciation), end of period $ 99 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 99 --
============= =============
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
------------- -------------
Unrealized appreciation (depreciation), continued:
Fidelity Growth Opportunities:
Appreciation (Depreciation), end of period $ 19 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 19 --
============= =============
Fidelity Growth & Income:
Appreciation (Depreciation), end of period $ 3,784 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 3,784 --
============= =============
Fidelity Equity-Income:
Appreciation (Depreciation), end of period $ 635 --
Appreciation (Depreciation), beginning of period -- --
------------- -------------
Unrealized appreciation (depreciation) $ 635 --
============= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
TRUST
----------------------------------------------------------------------
VKAC
QUALITY MONEY STOCK GROWTH AND BOND
INCOME MARKET INDEX INCOME DEBENTURE
----------- ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 19,237 27,094 50,426 40,350 39,545
Contract units purchased 339 449,124 927 8,266 82,546
Contract units transferred, net 27,138 (440,275) 19,361 32,087 231,381
Contract units redeemed (2,985) (5,992) (1,112) (623) (6,072)
----------- ------------ ---------- --------------- -------------
Unit balance at December 31, 1997 43,729 29,951 69,602 80,080 347,400
Contract units purchased -- -- -- 48 83,877
Contract units transferred, net 763 (8,882) 5,039 9,020 280,852
Contract units redeemed (507) (306) (1,474) (2,306) (30,453)
----------- ------------ ---------- --------------- -------------
Unit balance at December 31, 1998 43,985 20,763 73,167 86,842 681,676
=========== ============ ========== =============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
TRUST
-----------------------------------------------------------------------------
DEVELOPING LARGE CAP MID-CAP QUALITY SMALL CAP
GROWTH RESEARCH VALUE BOND STOCK
----------------------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- 64,534 113,118
Contract units purchased 1,385 -- 3,163 26,745 81,088
Contract units transferred, net 4,654 -- 5,347 146,007 302,653
Contract units redeemed -- -- -- (2,643) (9,279)
----------------------------- ----------- ------------- -------------
Unit balance at December 31, 1997 6,039 -- 8,510 234,643 487,580
Contract units purchased 31,649 21,971 56,591 71,796 55,831
Contract units transferred, net 33,339 27,982 20,523 212,881 162,174
Contract units redeemed (101) (59) (167) (18,275) (41,660)
----------------------------- ----------- ------------- -------------
Unit balance at December 31, 1998 70,926 49,894 85,457 501,045 663,925
============================= =========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
LORD ABBETT GACC
--------------------------------------------------- --------------- -------------
GROWTH
LARGE CAP SELECT INTERNATIONAL AND MONEY
STOCK EQUITY EQUITY INCOME MARKET
----------------- -------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 126,231 185,509 124,032 375,304 --
Contract units purchased 131,724 133,310 100,609 66,936 16,814
Contract units transferred, net 436,729 392,067 337,714 366,957 (2,723)
Contract units redeemed (8,007) (10,336) (8,250) (17,887) --
----------------- -------------- ---------------- --------------- -------------
Unit balance at December 31, 1997 686,677 700,550 554,105 791,310 14,091
Contract units purchased 86,312 93,645 39,068 70,041 175,697
Contract units transferred, net 401,442 309,696 218,017 266,026 (33,948)
Contract units redeemed (42,041) (51,094) (31,815) (46,611) (26,271)
----------------- -------------- ---------------- --------------- -------------
Unit balance at December 31, 1998 1,132,390 1,052,797 779,375 1,080,766 129,569
================= ============== ================ =============== =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
RUSSELL AIM
----------------------------------------------- -------------------------------------
MULTI-STYLE AGGRESSIVE CORE CAPITAL INTERNATIONAL
EQUITY EQUITY NON-US BOND VALUE APPRECIATION EQUITY
------------ ------------ --------- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- -- --
Contract units purchased -- -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- -- --
------------ ------------ --------- --------- -------- --------------- ------------
Unit balance at December 31, 1997 -- -- -- -- -- -- --
Contract units purchased 45,702 7,795 16,824 54,877 2,811 5,456 15,482
Contract units transferred, net 2,780 887 1,475 6,720 44 104 (97)
Contract units redeemed (94) (31) (40) (99) -- -- (128)
------------ ------------ --------- --------- -------- --------------- ------------
Unit balance at December 31, 1998 48,388 8,651 18,259 61,498 2,855 5,560 15,257
============ ============ ========= ========= ======== =============== ============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
ALLIANCE LIBERTY GOLDMAN SACHS
----------------------------- --------- -------------------------------------------
GROWTH
PREMIER REAL ESTATE NEWPORT AND INTERNATIONAL GLOBAL
GROWTH INVESTMENT TIGER INCOME EQUITY INCOME
------------ -------------- --------- ----------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
------------ -------------- --------- ----------- ---------------- ----------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 61,989 20,016 2,387 11,978 13,558 2,992
Contract units transferred, net 1,056 2,144 -- 1,129 2,301 --
Contract units redeemed (176) (83) -- -- -- --
------------ -------------- --------- ----------- ---------------- ----------
Unit balance at December 31, 1998 62,869 22,077 2,387 13,107 15,859 2,992
============ ============== ========= =========== ================ ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
KEMPER
---------------------------------
DREMAN HIGH SMALL CAP
RETURN EQUITY GROWTH
----------------- -------------
<S> <C> <C>
Unit balance at December 31, 1996 -- --
Contract units purchased -- --
Contract units transferred, net -- --
Contract units redeemed -- --
----------------- -------------
Unit balance at December 31, 1997 -- --
Contract units purchased -- 3,287
Contract units transferred, net -- 542
Contract units redeemed -- --
----------------- -------------
Unit balance at December 31, 1998 -- 3,829
================= =============
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
KEMPER MFS
---------------------------- ----------------------------------------------------
GROWTH
SMALL CAP GOVERNMENT WITH EMERGING
VALUE SECURITIES BOND RESEARCH INCOME GROWTH
---------- --------------- ------ ----------- ------------------------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
---------- --------------- ------ ----------- ------------------------------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 18,879 2,180 -- 22,166 60,871 45,740
Contract units transferred, net (2,152) 329 -- 3,870 4,170 2,112
Contract units redeemed (86) -- -- (42) (250) (142)
---------- --------------- ------ ----------- ------------------------------
Unit balance at December 31, 1998 16,641 2,509 -- 25,994 64,791 47,710
========== =============== ====== =========== ==============================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
MFS OPPENHEIMER
----------------------------------------------------- ------------------------------------
F&C EMERGING GROWTH
MARKETS HIGH WORLD AND HIGH
EQUITY INCOME GOVERNMENTS GROWTH INCOME INCOME
-------------------- ----------- ------------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
-------------------- ----------- ------------------ ---------- ----------- -----------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 8,277 12,308 316 4,131 13,701 9,108
Contract units transferred, net (3,990) 826 59 938 1,202 1,436
Contract units redeemed (53) (54) -- (42) (21) (11)
-------------------- ----------- ------------------------------ ----------- -----------
Unit balance at December 31, 1998 4,234 13,080 375 5,027 14,882 10,533
==================== =========== ================== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
OPPENHEIMER PUTNAM
------------------------ -----------------------
GROWTH
STRATEGIC AND NEW
BOND BOND INCOME VALUE
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- --
Contract units purchased -- -- -- --
Contract units transferred, net -- -- -- --
Contract units redeemed -- -- -- --
----------- ----------- ----------- ----------
Unit balance at December 31, 1997 -- -- -- --
Contract units purchased 39,444 2,196 72,178 487
Contract units transferred, net 7,160 478 8,219 1,705
Contract units redeemed (227) -- (283) --
----------- ----------- ----------- ----------
Unit balance at December 31, 1998 46,377 2,674 80,114 2,192
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
PUTNAM TEMPLETON
----------------------------- ---------------------------------------------------------
INTERNATIONAL
INTERNATIONAL NEW DEVELOPING
VISTA GROWTH OPPORTUNITIES INTERNATIONAL MARKETS
---------- ---------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- --
Contract units purchased -- -- -- -- --
Contract units transferred, net -- -- -- -- --
Contract units redeemed -- -- -- -- --
---------- ---------------- ----------------------------------- ----------------
Unit balance at December 31, 1997 -- -- -- -- --
Contract units purchased 4,298 56,707 4,416 6,502 3,871
Contract units transferred, net 2,501 107 367 126 3,162
Contract units redeemed -- (248) -- (15) --
---------- ---------------- ----------------------------------- ----------------
Unit balance at December 31, 1998 6,799 56,566 4,783 6,613 7,033
========== ================ =================================== ================
</TABLE>
<TABLE>
<CAPTION>
COVA VARIABLE ANNUITY ACCOUNT FIVE
Notes to Financial Statements
December 31, 1998 and 1997
TEMPLETON FIDELITY
-------------- --------------------------------------------------------------------
MUTUAL
SHARES GROWTH GROWTH & EQUITY-
INVESTMENTS GROWTH CONTRAFUND OPPORTUNITIES INCOME INCOME
-------------- -------- ----------- ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Unit balance at December 31, 1996 -- -- -- -- -- --
Contract units purchased -- -- -- -- -- --
Contract units transferred, net -- -- -- -- -- --
Contract units redeemed -- -- -- -- -- --
-------------- -------- ----------- ----------------- --------- ----------
Unit balance at December 31, 1997 -- -- -- -- -- --
Contract units purchased 863 89 68 -- 325 296
Contract units transferred, net 69 406 -- 104 1,747 466
Contract units redeemed -- -- -- -- -- --
-------------- -------- ----------- ----------------- --------- ----------
Unit balance at December 31, 1998 932 495 68 104 2,072 762
============== ======== =========== ================= ========= ==========
</TABLE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
<TABLE>
<CAPTION>
Balance Sheets
(In thousands)
SEPTEMBER 30,
1999 DECEMBER 31,
ASSETS (UNAUDITED) 1998
-----------------------------------
<S> <C> <C>
Investments:
Debt securities available for sale at fair value
(cost of $102,616 in 1999 and $99,228 in 1998) $98,944 $100,658
Mortgage loans, net of allowance for potential loan loss 5,472 5,245
Policy loans 1,078 1,223
----- -----
Total investments 105,494 107,126
------- -------
Cash and cash equivalents - interest bearing 2,483 5,789
Cash - non-interest bearing 1,322 1,200
Accrued investment income 1,686 1,641
Deferred policy acquisition costs 13,829 9,142
Present value of future profits 1,022 854
Goodwill 1,730 1,813
Deferred tax benefits, net 1,072 585
Receivable from OakRe 22,652 35,312
Other assets 218 516
Separate account assets 159,780 127,873
------- -------
Total assets $311,288 $291,851
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
(Continued)
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
<TABLE>
<CAPTION>
Balance Sheets, Continued
(In thousands)
SEPTEMBER 30,
1999 DECEMBER 31,
LIABILITIES AND SHAREHOLDER'S EQUITY (UNAUDITED) 1998
----------------------------------------
<S> <C> <C>
Policyholder deposits $121,112 $135,106
Future policy benefits 6,766 6,191
Payable on purchase of securities 1,107 27
Accounts payable and other liabilities 1,795 1,653
Federal and state income taxes payable - 172
Future purchase price payable to OakRe 275 342
Guaranty fund assessments 1,000 1,000
Separate account liabilities 159,777 127,871
------- -------
Total liabilities 291,832 272,362
------- -------
Shareholder's equity:
Common stock 2,800 2,800
Additional paid-in capital 15,523 14,523
Retained earnings 1,987 1,833
Accumulated other comprehensive income (loss), net of tax (854) 333
----- ---
Total shareholder's equity 19,456 19,489
------ ------
Total liabilities and shareholder's equity $311,288 $291,851
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
<TABLE>
<CAPTION>
Statements of Income (Unaudited)
(In thousands)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
-------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues:
Premiums $861 $937 $ (587) $345
Net investment income 5,809 5,612 1,954 1,875
Net realized investment gains (losses) (252) 90 (248) 119
Separate account fees 1,584 983 580 371
Other income 315 38 155 9
--- -- --- -
Total revenues 8,317 7,660 1,854 2,719
----- ----- ----- -----
Benefits and expenses:
Interest on policyholder deposits 4,642 3,990 1,689 1,293
Current and future policy benefits 1,216 1,182 (478) 436
Operating and other expenses 1,616 1,233 852 356
Amortization of purchased intangible assets 138 132 47 44
Amortization of deferred acquisition costs 605 398 209 144
--- --- --- ---
Total benefits and expenses 8,217 6,935 2,319 2,273
----- ----- ----- -----
Income before income taxes 100 725 (465) 446
--- --- ----- ---
Income tax expense(benefit):
Current (206) 391 (411) 401
Deferred 152 (263) 177 (393)
--- ----- --- -----
Total income tax expense (benefit) (54) 128 (234) 8
---- --- ----- -
Net income (loss) $154 $597 $ (231) $438
==== ==== ====== ====
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
<TABLE>
<CAPTION>
Statements of Shareholder's Equity (Unaudited)
(In thousands)
FOR THE PERIODS ENDED
9/30/99 12/31/98
---------------------------
<S> <C> <C>
Common stock, at beginning and end of period $2,800 $2,800
------ ------
Additional paid-in capital:
Balance at beginning of period 14,523 13,523
Capital contribution 1,000 1,000
----- -----
Balance at end of period 15,523 14,523
------ ------
Retained earnings:
Balance at beginning of period 1,833 1,023
Net income 154 810
--- ---
Balance at end of period 1,987 1,833
----- -----
Accumulated other comprehensive income:
Balance at beginning of period 333 145
Change in unrealized appreciation (depreciation) of
debt securities (5,102) 794
Change in deferred acquisition costs attributable to
unrealized appreciation(depreciation) 3,068 (513)
Change in present value of future profits attributable to
unrealized depreciation 208 8
Change in deferred federal income taxes impact 639 (101)
--- -----
Balance at end of period (854) 333
----- ---
Total shareholder's equity $19,456 $19,489
======= =======
Total comprehensive income:
Net income $154 $810
Other comprehensive income (change in unrealized
appreciation (depreciation) on debt securities) (1,187) 188
------- ---
Total comprehensive income(loss) $(1,033) $998
======== ====
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
<TABLE>
<CAPTION>
Statements of Cash Flows (Unaudited)
Nine months ended September 30, 1999 and 1998
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
-----------------------------
<S> <C> <C>
Reconciliation of net income to net cash provided by
operating activities:
Net income $154 $597
Adjustments to reconcile to net cash provided by
operating activities:
Increase in future policy benefits 575 589
Increase (decrease) in payables and accrued
liabilities 142 (156)
Decrease(increase) in accrued investment income (45) 346
Amortization of intangible assets 743 743
Recapture commission paid to OakRe (67) (195)
Net realized investment losses 252 (90)
Interest accumulated on policyholder deposits 4,642 3,990
Increase (decrease) in current and deferred
income taxes (659) 414
Commissions and expenses deferred (2,224) (2,375)
Other 1,418 (88)
----- ----
Net cash provided by operating activities 4,931 3,775
----- -----
Cash flows from investing activities:
Cash used in the purchase of investment securities (28,351) (31,999)
Proceeds from investment securities sold and
matured 25,949 35,253
Other (96) (90)
---- ----
Net cash provided by (used in) investing activities (2,498) 3,164
------- -----
</TABLE>
See accompanying notes to unaudited financial statements.
(Continued)
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
<TABLE>
<CAPTION>
Statements of Cash Flows, (Unaudited) (Continued)
Nine months ended September 30, 1999 and 1998
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
-----------------------------------
Cash flows from financing activities:
<S> <C> <C>
Policyholder deposits $45,315 $50,547
Transfers from OakRe 14,919 27,900
Transfer to separate accounts (31,204) (48,586)
Return of policyholder deposits (35,647) (27,138)
Capital contribution received 1,000 -
----- ------
Net cash provided (used) by financing activities (5,617) 2,723
------- -----
Increase (Decrease) in cash and cash equivalents (3,184) 9,662
------- -----
Cash and cash equivalents - beginning of period 6,989 2,148
----- -----
Cash and cash equivalents - end of period $3,805 $11,810
====== =======
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
Notes to Interim Financial Statements - (Unaudited)
September 30, 1999 and 1998
(1) BASIS OF PRESENTATION
The interim consolidated financial statements for Cova Financial Life Insurance
Company (the Company) have been prepared on the basis of generally accepted
accounting principles and, in the opinion of management, reflect all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation or
results for such periods. The results of operations and cash flows for any
interim period are not necessarily indicative of results for the full year.
These financial statements should be read in conjunction with the financial
statements as of December 31, 1998 and December 31, 1997, and for each of the
years in the three-year period ended December 31, 1998 and related notes
thereto, presented elsewhere herein. Interim financial data presented herein are
unaudited.
<TABLE>
<CAPTION>
(2) INVESTMENTS
The Company's investments in debt securities are considered available for sale
and carried at estimated fair value, with the aggregate unrealized appreciation
or depreciation being recorded as other comprehensive income. The carrying value
and amortized cost of investments at September 30, 1999 were as follows:
SEPTEMBER 30, 1999
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
-------------------------------------------------------------------
(in thousands )
<S> <C> <C> <C> <C> <C>
Debt Securities:
Government agency obligations $1,901 $41 $ - $1,942 $1,942
Corporate securities 77,186 116 (3,253) 74,049 74,049
Mortgage-backed securities 8,832 17 (116) 8,733 8,733
Asset-backed securities 14,697 43 (520) 14,220 14,220
------ -- ----- ------ ------
Total debt securities 102,616 217 (3,889) 98,944 98,944
Mortgage loans(net) 5,472 93 - 5,565 5,472
Policy loans 1,078 - - 1,078 1,078
----- ----- --- ----- -----
Total investments $109,166 $310 ($3,889) $105,587 $105,494
======== ==== ======== ======== ========
Company's beneficial interest
in separate accounts $3 -- -- $3 $3
== == == == ==
</TABLE>
As of September 30, 1999, the Company had one nonincome producing debt security
totaling $307,731. The Company's valuation allowance for potential losses on
mortgage loans is $30,000 at September 30, 1999
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
Notes to Interim Financial Statements - (Unaudited)
The amortized cost and estimated fair value of debt securities at September
30, 1999, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties. Maturities
of mortgage-backed securities will be substantially shorter than their
contractual maturity because they require monthly principal installments and
mortgagees may prepay principal.
<TABLE>
<CAPTION>
September 30, 1999
------------------------------------
Estimated
Amortized Fair
Cost Value
------------------------------------
(in thousands )
<S> <C> <C>
Less than one year $2,644 $2,650
Due after one years through five years 33,799 33,123
Due after five years through ten years 39,372 37,195
Due after ten years 17,969 17,243
Mortgage-backed securities 8,832 8,733
----- -----
Total $102,616 $98,944
======== =======
</TABLE>
At September 30, 1999, approximately 96.2% of the Company's debt securities are
investment grade or are non-rated but considered to be of investment grade. Of
the 3.8% non-investment grade debt securities, 3.5% are rated as BB, and 0.3%
are rated as C.and treated as impaired.
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
Notes to Interim Financial Statements - (Unaudited)
<TABLE>
<CAPTION>
The components of net investment income, net realized capital gains (losses) and
unrealized appreciation (depreciation) were as follows:
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------------------- --------------------------
(in thousands )
<S> <C> <C> <C> <C>
Income on debt securities $5,376 $5,232 $1,811 $1,717
Income on short-term investments 161 185 65 75
87
Income on mortgage loans 303 213 89
Income on policy loans 63 67 21 24
Miscellaneous interest 1 3 - 1
---- ---- ---- ----
Total investment income 5,904 5,700 1,984 1,906
Investment expenses (95) (88) (30) (31)
---- ---- ---- ----
Net investment income $5,809 $5,612 $1,954 $1,875
====== ====== ====== ======
Net realized capital gains (losses)
debt securities - $ (252) $90 $ (248) $119
====== === ====== ====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
----------------------------------
(in thousands)
Unrealized appreciation (depreciation) are as follows:
<S> <C> <C>
Debt securities $ (5,102) $274
Effects on deferred acquisition costs
amortization 3,068 (59)
Effects on present value of future
profits amortization 208 (119)
--- -----
Unrealized appreciation (depreciation)
before income taxes (1,826) 96
Unrealized income tax benefit/(expense) 639 (35)
--- ----
Net change in comprehensive income (loss) $ (1,187) $61
======== ===
</TABLE>
<PAGE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services Life Insurance Company)
Notes to Interim Financial Statements - (Unaudited)
(3) SECURITIES GREATER THAN 10% OF SHAREHOLDER'S EQUITY
As of September 30, 1999, the Company had one individual security which exceeded
10% of shareholder's equity:
Colonial Realty 7.5%, 07/15/2001 $1,998,038
(4) STATUTORY SURPLUS
As of September 30, 1999, the Company's statutory capital and surplus was
$10,279,197. The Company's statutory net losses for the periods ended September
30, 1999 and 1998 were $916,503 and $1,096,969, respectively.
(5) RELATED-PARTY TRANSACTIONS
The Company has entered into management, operations, and servicing agreements
with its affiliated companies. The affiliated companies are Cova Life Management
Company, which provides management services and the employees necessary to
conduct the activities of the Company; and Conning Asset Management, which
provides investment advice. Additionally, a portion of overhead and other
corporate expenses are allocated by the Company's ultimate parent, General
American Life Insurance Company Cova Life Administrative Service Company, which
provides various services for the Company including underwriting, claims, and
administrative functions. Expenses and fees paid to affiliated companies as of
September 30, 1999 and 1998 were $1,312,500 and $1,279,626, respectively.
(6) REINSURANCE
Effective in July 1999, the Company entered into a modified coinsurance
agreement with Metropolitan Life Insurance Company (MetLife). Under the
agreement, the company will cede the general account's new business and
recapture business from OakRe to MetLife. There was no transfer of assets
between the Company and MetLife from this agreement. In substance, the agreement
represents a guarantee by MetLife of new business and recapture business by the
Company during the period.
(7) SUBSEQUENT EVENT
On August 26, 1999, the Company's ultimate parent, General American Life
Insurance Company (GALIC), entered into a definitive agreement, whereby MetLife
will acquire GALIC's parent company GenAmerica Corporation for $1.2 billion in
cash. The purchase was approved by the Missouri Director of Insurance on
November 10, 1999. The purchase was completed on January 6, 2000.
On November 18, 1999, CLMC purchased the remaining 51% interest in CLASC from
another affiliate, Navisys Incorporated, for $1,184,414.
(8) OTHER
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Financial Statements
December 31, 1998, 1997, and 1996
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
Cova Financial Life Insurance Company:
We have audited the accompanying balance sheets of Cova Financial Life
Insurance Company (a wholly owned subsidiary of Cova Financial Services
Life Insurance Company) (the Company) as of December 31, 1998 and 1997, and
the related statements of income, shareholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cova Financial Life
Insurance Company as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
March 4, 1999
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Balance Sheets
December 31, 1998 and 1997
ASSETS 1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Investments:
Debt securities available-for-sale, at fair value
(cost of $99,228 in 1998 and $96,884 in 1997) $ 100,658 97,520
Mortgage loans, net of allowance for potential loan
loss of $10 in 1998 and $-0- in 1997 5,245 1,786
Policy loans 1,223 1,083
----------- -----------
Total investments 107,126 100,389
Cash and cash equivalents - interest-bearing 5,789 756
Cash - noninterest-bearing 1,200 1,392
Accrued investment income 1,641 1,826
Deferred policy acquisition costs 9,142 6,774
Present value of future profits 854 900
Goodwill 1,813 1,923
Deferred tax asset, net 585 1,042
Receivable from OakRe 35,312 68,533
Reinsurance receivables 118 114
Other assets 398 14
Separate account assets 127,873 69,318
----------- -----------
Total assets $ 291,851 252,981
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Balance Sheets, Continued
December 31, 1998 and 1997
LIABILITIES AND SHAREHOLDER'S EQUITY 1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Policyholder deposits $ 135,106 157,566
Future policy benefits 6,191 5,381
Payable on purchase of securities 27 92
Accounts payable and other liabilities 1,653 1,462
Federal and state income taxes payable 172 106
Future purchase price payable to OakRe 342 565
Guaranty fund assessments 1,000 1,000
Separate account liabilities 127,871 69,318
----------- -----------
Total liabilities 272,362 235,490
----------- -----------
Shareholder's equity:
Common stock, $233.34 par value. (Authorized
30,000 shares; issued and outstanding
12,000 shares in 1998 and 1997) 2,800 2,800
Additional paid-in capital 14,523 13,523
Retained earnings 1,833 1,023
Accumulated other comprehensive income,
net of tax 333 145
----------- -----------
Total shareholder's equity 19,489 17,491
----------- -----------
Total liabilities and shareholder's equity $ 291,851 252,981
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Income
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenues:
Premiums $ 1,308 1,191 488
Net investment income 7,516 6,761 4,176
Net realized gains (losses) on sales of
investments 178 158 (28)
Separate account fees 1,392 599 134
Other income 66 45 35
---------- ---------- ----------
Total revenues 10,460 8,754 4,805
---------- ---------- ----------
Benefits and expenses:
Interest on policyholder deposits 5,486 4,837 2,563
Current and future policy benefits 1,549 1,481 722
Operating and other expenses 1,614 1,203 570
Amortization of purchased intangible
assets 194 165 66
Amortization of deferred policy
acquisition costs 530 320 187
---------- ---------- ----------
Total benefits and expenses 9,373 8,006 4,108
---------- ---------- ----------
Income before income taxes 1,087 748 697
---------- ---------- ----------
Income tax expense (benefit):
Current (80) 310 351
Deferred 357 (5) (66)
---------- ---------- ----------
Total income tax expense 277 305 285
---------- ---------- ----------
Net income $ 810 443 412
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Common stock, at beginning
and end of period $ 2,800 2,800 2,800
---------- ---------- ----------
Additional paid-in capital:
Balance at beginning of period 13,523 13,523 13,523
Capital contribution 1,000 -- --
---------- ---------- ----------
Balance at end of period 14,523 13,523 13,523
---------- ---------- ----------
Retained earnings:
Balance at beginning of period 1,023 580 168
Net income 810 443 412
---------- ---------- ----------
Balance at end of period 1,833 1,023 580
---------- ---------- ----------
Accumulated other comprehensive income:
Balance at beginning of period 145 1 192
Change in unrealized appreciation (depreciation)
of debt and equity securities 794 630 (840)
Deferred federal income tax impact (101) (77) 103
Change in deferred policy acquisition costs
attributable to unrealized appreciation (513) (144) (69)
Change in present value of future profits
attributable to unrealized depreciation (appreciation) 8 (265) 615
---------- ---------- ----------
Balance at end of period 333 145 1
---------- ---------- ----------
Total shareholder's equity $ 19,489 17,491 16,904
========== ========== ==========
Total comprehensive income:
Net income $ 810 443 412
Other comprehensive income (change in net unrealized
appreciation (depreciation) of debt and equity securities) 188 144 (191)
---------- ---------- ----------
Total comprehensive income $ 998 587 221
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ -----------
(in thousands)
<S> <C> <C> <C>
Reconciliation of net income to net cash provided by (used in) operating
activities:
Net income $ 810 443 412
Adjustments to reconcile net
income (loss) to net cash provided by
(used in) operating activities:
Increase in future policy benefits 810 820 192
Increase in payables and
accrued liabilities 191 82 95
Decrease (increase) in accrued
investment income 185 (704) (556)
Amortization of intangible assets and
deferred policy acquisition costs 724 485 253
Amortization and accretion of
securities, premiums, and discounts (87) (10) 73
Net realized (gain) loss on sale of investments (178) (158) 28
Interest on policyholder deposits 5,486 4,837 2,563
Increase (decrease) in current and
deferred federal income taxes 523 91 (66)
Recapture commissions paid to OakRe (223) (159) (273)
Commissions and expenses deferred (3,411) (3,917) (2,413)
Due to/from affiliates -- -- 44
Other 219 (498) (452)
------------ ------------ -----------
Net cash provided by (used in) operating activities 5,049 1,312 (100)
------------ ------------ -----------
Cash flows from investing activities:
Cash used in the purchase of
investment securities (56,673) (53,534) (42,655)
Proceeds from investment securities
sold and matured 50,661 25,379 10,635
Other (121) (81) (90)
------------ ------------ -----------
Net cash used in investing activities (6,133) (28,236) (32,110)
------------ ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Statements of Cash Flows, Continued
Years ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Policyholder deposits $ 69,459 81,788 38,348
Transfers from OakRe 35,590 25,060 36,553
Transfer to separate accounts (60,181) (56,144) (13,669)
Return of policyholder deposits (39,943) (28,267) (28,521)
Capital contributions received 1,000 -- --
------------ ------------ -----------
Net cash provided by financing activities 5,925 22,437 32,711
------------ ------------ -----------
Increase (decrease) in cash and cash equivalents 4,841 (4,487) 501
Cash and cash equivalents - beginning of period 2,148 6,635 6,134
------------ ------------ -----------
Cash and cash equivalents - end of period $ 6,989 2,148 6,635
============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova Financial Services
Life Insurance Company)
Notes to Financial Statements
December 31, 1998, 1997, and 1996
(1) NATURE OF BUSINESS AND ORGANIZATION
NATURE OF THE BUSINESS
Cova Financial Life Insurance Company (the Company) markets and
services single premium deferred annuities, immediate annuities,
variable annuities, term life, single premium variable universal
life, and single premium whole life insurance policies. The
Company is licensed to conduct business in the state of
California. Most of the policies issued present no significant
mortality or longevity risk to the Company, but rather represent
investment deposits by the policyholders. Life insurance policies
provide policy beneficiaries with mortality benefits amounting to
a multiple, which declines with age, of the original premium.
Under the deferred fixed annuity contracts, interest rates
credited to policyholder deposits are guaranteed. The Company may
assess surrender fees against amounts withdrawn prior to scheduled
rate reset and adjust account values based on current crediting
rates. Policyholders also may incur certain federal income tax
penalties on withdrawals.
Under the variable annuity contracts, policyholder deposits are
allocated to various separate account sub-accounts or the general
account. A sub-account is valued at the sum of market values of
the securities in its underlying investment portfolio. The
contract value allocated to a sub-account will fluctuate based on
the performance of the sub-accounts. The contract value allocated
to the general account is credited with a fixed interest rate for
a specified period. The Company may assess surrender fees against
amounts withdrawn prior to the end of the withdrawal charge
period. Policyholders may also incur certain federal income tax
penalties on withdrawals.
Under the single premium variable life contracts, policyholder
deposits are allocated to various separate account sub-accounts.
The account value allocated to a sub-account will fluctuate based
on the performance of the sub-accounts. The Company guarantees a
minimum death benefit to be paid to the beneficiaries upon the
death of the insured. The Company may assess surrender fees
against amounts withdrawn prior to the end of the surrender charge
period. A deferred premium tax may also be assessed against
amounts withdrawn in the first ten years. Policyholders may also
incur certain federal income tax penalties on withdrawals.
Under the term life insurance policies, policyholders pay a level
premium over a certain period of time to guarantee a death benefit
will be paid to the beneficiaries upon the death of the insured.
This policy has no cash accumulation available to the
policyholder.
Although the Company markets its products through numerous
distributors, including regional brokerage firms, national
brokerage firms, and banks, approximately 97%, 85%, and 81% of the
Company's sales have been through two specific brokerage firms, A.
G. Edwards & Sons, Incorporated, and Edward Jones & Company,
Incorporated, in 1998, 1997, and 1996, respectively.
ORGANIZATION
The Company, formerly Xerox Financial Life Insurance Company
(XFLIC), is a wholly owned subsidiary of Cova Financial Services
Life Insurance Company (CFSLIC). On December 31, 1996, Cova
Corporation, an insurance holding company wholly owned by General
American Life Insurance Company (GALIC), transferred 100% of the
outstanding shares of the Company to CFSLIC, an affiliated life
insurer domiciled in Missouri. The transfer of direct ownership
had no effect on the operations of the Company as both CFSLIC and
the Company had existed under common management and control prior
to the transfer.
Cova Corporation purchased the Company from Xerox Financial
Services, Inc. (XFSI), a wholly owned subsidiary of Xerox
Corporation, on June 1, 1995. In conjunction with the purchase,
Cova Corporation entered into a financing reinsurance transaction
with OakRe Life Insurance Company (OakRe), a subsidiary of XFSI,
to assume the economic benefits and risks of the existing single
premium deferred annuity deposits (SPDAs) of the Company. The
receivable from OakRe to the Company that was created by this
transaction will be liquidated over the remaining crediting rate
guaranty periods which will be substantially expired by the end of
the year 2000, from the transfer of cash in the amount of the then
current account value, less a recapture commission fee to OakRe on
policies retained beyond their 30-day-no-fee surrender window by
the Company, upon the next crediting rate reset date of each
annuity policy. The Company may then reinvest that cash for those
policies that are retained and thereafter assume the benefits and
risks of those deposits.
In the event that both OakRe and XFSI default on the receivable,
the Company may draw funds from a standby bank irrevocable letter
of credit established by XFSI in the amount of $500 million. No
funds were drawn on this letter of credit during the periods
ending December 31, 1998 and 1997.
In substance, terms of the agreement have allowed the seller,
XFSI, to retain substantially all of the existing financial
benefits and risks of the existing business, while the purchaser,
GALIC, obtained the corporate operating and product licenses,
marketing, and administrative capabilities of the Company, and
access to the retention of the policyholder deposit base that
persists beyond the next crediting rate reset date.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEBT SECURITIES
Investments in all debt securities with readily determinable fair
values are classified into one of three categories:
held-to-maturity, trading, or available-for-sale. Classification
of investments is based on management's current intent. All debt
securities and short-term investments at December 31, 1998 and
1997 were classified as available-for-sale. Securities
available-for-sale are carried at fair value, with unrealized
holding gains and losses reported as accumulated other
comprehensive income of shareholder's equity, net of deferred
effects of income tax and related effects on deferred acquisition
costs and present value of future profits.
Amortization of the discount or premium from the purchase of
mortgage-backed bonds is recognized using a level-yield method
which considers the estimated timing and amount of prepayments of
the underlying mortgage loans. Actual prepayment experience is
periodically reviewed and effective yields are recalculated when
differences arise between the prepayments previously anticipated
and the actual prepayments received and currently anticipated.
When such a difference occurs, the net investment in the
mortgage-backed bond is adjusted to the amount that would have
existed had the new effective yield been applied since the
acquisition of the bond, with a corresponding charge or credit to
interest income (the "retrospective method").
Investment income is recorded when earned. Realized capital gains
and losses on the sale of investments are determined on the basis
of specific costs of investments and are credited or charged to
income.
A realized loss is recognized and charged against income if the
Company's carrying value in a particular investment in the
available-for-sale category has experienced a significant decline
in market value that is deemed to be other than temporary.
MORTGAGE LOANS AND POLICY LOANS
Mortgage loans and policy loans are carried at their unpaid
principal balances. An allowance for mortgage loan losses is
established based on an evaluation of the mortgage loan portfolio,
past credit loss experience, and current economic conditions.
Reserves for loans are established when the Company determines
that collection of all amounts due under the contractual terms is
doubtful and are calculated in conformity with Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures.
The Company had no impaired loans, and the valuation allowance for
potential losses on mortgage loans was $10,000 and $319, at
December 31, 1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency and demand deposits in
banks, U.S. Treasury bills, money market accounts, and commercial
paper with maturities under 90 days, which are not otherwise
restricted.
SEPARATE ACCOUNT ASSETS
Separate accounts contain segregated assets of the Company that
are specifically assigned to variable annuity policyholders in the
separate accounts and are not available to other creditors of the
Company. The earnings of separate account investments are also
assigned to the policyholders in the separate accounts, and are
not guaranteed or supported by the other general investments of
the Company. The Company earns mortality and expense risk fees
from the separate accounts and assesses withdrawal charges in the
event of early withdrawals. Separate accounts assets are valued at
fair market value.
In order to provide for optimum policyholder returns and to allow
for the replication of the investment performance of existing
"cloned" mutual funds, the Company has periodically transferred
capital to the separate accounts to provide for the initial
purchase of investments in new portfolios. As additional funds
have been received through policyholder deposits, the Company has
periodically reduced its capital investment in the separate
accounts. The Company's capital investment in the separate
accounts as of December 31, 1998 and 1997, are presented in note
3.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business which vary with and are
directly related to the production of new business, principally
commissions, premium taxes, sales costs, and certain policy
issuance and underwriting costs, are deferred. These deferred
costs are amortized in proportion to estimated future gross
profits derived from investment income, realized gains and losses
on sales of securities, unrealized securities gains and losses,
interest credited to accounts, surrender fees, mortality costs,
and policy maintenance expenses. The estimated gross profit
streams are periodically reevaluated and the unamortized balance
of deferred policy acquisition costs is adjusted to the amount
that would have existed had the actual experience and revised
estimates been known and applied from the inception of the
policies and contracts. The amortization and adjustments resulting
from unrealized gains and losses are not recognized currently in
income but as an offset to the accumulated other comprehensive
income of shareholder's equity. The amortization period is the
remaining life of the policies, which is approximately 20 years
from the date of original policy issue.
<TABLE>
<CAPTION>
The components of deferred policy acquisition costs are shown
below:
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred policy acquisition costs, beginning of period $ 6,774 3,321 1,164
Commissions and expenses deferred 3,411 3,917 2,413
Amortization (530) (320) (187)
Deferred policy acquisition costs attributable to
unrealized appreciation (513) (144) (69)
------------ ------------ ------------
Deferred policy acquisition costs, end of period $ 9,142 6,774 3,321
============ ============ ============
</TABLE>
PURCHASE RELATED INTANGIBLE ASSETS AND LIABILITIES
In accordance with the purchase method of accounting for business
combinations, two intangible assets and a future payable related
to accrued purchase price consideration were established as of the
purchase date.
Present Value of Future Profits
The Company established an intangible asset which represents
the present value of future profits (PVFP) to be derived from
both the purchased and transferred blocks of business. Certain
estimates were utilized in the computation of this asset,
including estimates of future policy retention, investment
income, interest credited to policyholders, surrender fees,
mortality costs, and policy maintenance costs discounted at a
pretax rate of 18% (12% net after tax).
In addition, as the Company has the option of retaining its
SPDA policies after they reach their next interest rate reset
date and are recaptured from OakRe, a component of this asset
represents estimates of future profits on recaptured business.
This asset will be amortized in proportion to estimated future
gross profits derived from investment income, realized gains
and losses on sales of securities, unrealized securities
appreciation and depreciation, interest credited to accounts,
surrender fees, mortality costs, and policy maintenance
expenses. The estimated gross profit streams are periodically
reevaluated and the unamortized balance of PVFP will be
adjusted to the amount that would have existed had the actual
experience and revised estimates been known and applied from
the inception. The amortization and adjustments resulting from
unrealized appreciation and depreciation is not recognized
currently in income but as an offset to the accumulated other
comprehensive income of shareholder's equity. The amortization
period is the remaining life of the policies, which is
estimated to be 20 years from the date of original policy
issue.
Based on current assumptions, amortization of the original
in-force PVFP asset, expressed as a percentage of the original
in-force asset, is projected to be 4.9%, 7.2%, 7.8%, 7.7%, and
7.2% for the years ended December 31, 1999 through 2003,
respectively. Actual amortization incurred during these years
may be more or less as assumptions are modified to incorporate
actual results.
During 1996, the Company adjusted its original purchase
accounting to include a revised estimate of the ultimate
renewal (recapture) rate. This adjustment resulted in a
reallocation of the net purchased intangible asset between
PVFP, goodwill, future payable, and deferred taxes. This final
allocation and the resulting impact on inception to date
amortization was recorded, in its entirety, in 1996.
<TABLE>
<CAPTION>
The components of PVFP are shown below:
1998 1997 1996
-------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
PVFP - beginning of period $ 900 1,178 576
Net amortization (54) (13) 78
Adjustment due to revised push-down purchase
accounting -- -- (91)
PVFP attributable to unrealized
depreciation (appreciation) 8 (265) 615
-------- ---------- ---------
PVFP - end of period $ 854 900 1,178
======== ========== =========
</TABLE>
Goodwill
Under the push-down method of purchase accounting, the excess
of purchase price over the fair value of tangible and
intangible assets and liabilities acquired is established as
an asset and referred to as goodwill. The Company has elected
to amortize goodwill on the straight-line basis over a 20-year
period.
<TABLE>
<CAPTION>
The components of goodwill are shown below:
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill - beginning of period $ 1,923 2,034 2,306
Amortization (110) (111) (105)
Adjustment due to revised push-down purchase
accounting -- -- (167)
------------ ------------ ------------
Future payable - end of period $ 1,813 1,923 2,034
============ ============ ============
</TABLE>
Future Payable
Pursuant to the financial reinsurance agreement, the
receivable from OakRe becomes due in installments when the
SPDA policies reach their next crediting rate reset date. For
any recaptured policies that continue in force with OakRe into
the next rate guarantee period, the Company will pay a
commission to OakRe of 1.75% up to 40% of policy account
values originally reinsured and 3.5% thereafter. On policies
that are recaptured and subsequently exchanged to a variable
annuity policy, the Company will pay a commission to OakRe of
0.50%.
The Company has recorded a future payable that represents the
present value of the anticipated future commission payments
payable to OakRe over the remaining life of the financial
reinsurance agreement discounted at an estimated borrowing
rate of 6.5%. This liability represents a contingent purchase
price payable for the policies transferred to OakRe on the
purchase date and has been pushed down to the Company through
the financial reinsurance agreement. The Company expects that
this payable will be substantially extinguished by the end of
the year 2000.
<TABLE>
<CAPTION>
The components of this future payable are shown below:
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future payable - beginning of period $ 565 683 1,265
Interest added 29 41 39
Payments to OakRe (252) (159) (273)
Adjustment due to revised push-down purchase
accounting -- -- (348)
---------- ---------- ----------
Future payable - end of period $ 342 565 683
========== ========== ==========
</TABLE>
DEFERRED TAX ASSETS AND LIABILITIES
XFSI and GALIC agreed to file an election to treat the acquisition
of the Company as an asset acquisition under the provisions of
Internal Revenue Code Section 338(h)(10). As a result of that
election, the tax basis of the Company's assets as of the date of
acquisition was revalued based upon fair market values as of June
1, 1995. The principal effect of the election was to establish a
tax asset on the tax-basis balance sheet of approximately $2.9
million for the value of the business acquired that is amortizable
for tax purposes over ten to fifteen years.
POLICYHOLDER DEPOSITS
The Company recognizes its liability for policy amounts that are
not subject to policyholder mortality nor longevity risk at the
stated contract value, which is the sum of the original deposit
and accumulated interest, less any withdrawals. The average
weighted interest crediting rate on the Company's policyholder
deposits as of December 31, 1998 was 6.05%.
FUTURE POLICY BENEFITS
Reserves are held for policy annuity benefits that subject the
Company to risks to make payments contingent upon the continued
survival of an individual or couple (longevity risk). These
reserves are valued at the present value of estimated future
benefits discounted for interest, expenses, and mortality. The
assumed mortality is the 1983 Individual Annuity Mortality Tables
discounted at 5.50% to 8.50%, depending upon year of issue.
Current mortality benefits payable are recorded for reported
claims and estimates of amounts incurred but not reported.
PREMIUM REVENUE
The Company recognizes premium revenue at the time of issue on
annuity policies that subject it to longevity risks. Amounts
collected on annuity policies not subject to longevity risk are
recorded as increases in the policyholder deposits liability. For
term and single premium variable life products, premiums are
recognized as revenue when due.
FEDERAL INCOME TAXES
Beginning in 1997, the Company files a consolidated income tax
return with its immediate parent, CFSLIC. Allocations of federal
income taxes are based upon separate return calculations.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
RISKS AND UNCERTAINTIES
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly
from those estimates.
The following elements of the financial statements are most
affected by the use of estimates and assumptions:
- Investment valuation
- Amortization of deferred policy acquisition costs
- Amortization of present value of future profits
- Recoverability of goodwill
The fair value of the Company's investments is subject to the risk
that interest rates will change and cause a temporary increase or
decrease in the liquidation value of debt securities. To the
extent that fluctuations in interest rates cause the cash flows of
assets and liabilities to change, the Company might have to
liquidate assets prior to their maturity and recognize a gain or
loss. Interest rate exposure for the investment portfolio is
managed through asset/liability management techniques which
attempt to control the risks presented by differences in the
probable cash flows and reinvestment of assets with the timing of
crediting rate changes in the Company's policies and contracts.
Changes in the estimated prepayments of mortgage-backed securities
also may cause retrospective changes in the amortization period of
securities and the related recognition of income.
The amortization of deferred acquisition costs is based on
estimates of long-term future gross profits from existing
policies. These gross profits are dependent upon policy retention
and lapses, the spread between investment earnings and crediting
rates, and the level of maintenance expenses. Changes in
circumstances or estimates may cause retrospective adjustment to
the periodic amortization expense and the carrying value of the
deferred expense.
In a similar manner, the amortization of PVFP is based on
estimates of long-term future profits from existing and recaptured
policies. These gross profits are dependent upon policy retention
and lapses, the spread between investment earnings and crediting
rates, and the level of maintenance expenses. Changes in
circumstances or estimates may cause retrospective adjustment to
the periodic amortization expense and the carrying value of the
asset.
The Company has considered the recoverability of goodwill and has
concluded that no circumstances have occurred which would give
rise to impairment of goodwill at December 31, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, applies fair value disclosure practices with regard
to financial instruments, both assets and liabilities, for which
it is practical to estimate fair value. In cases where quoted
market prices are not readily available, fair values are based on
estimates that use present value or other valuation techniques.
These techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash
flows. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in
assumptions could cause these estimates to vary materially. In
that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many
cases, might not be realized in the immediate settlement of the
instruments. SFAS No. 107 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements.
Because of this, and further because a value of a business is also
based upon its anticipated earning power, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents, Short-term Investments,
and Accrued Investment Income
The carrying value amounts reported in the balance sheets for
these instruments approximate their fair values. Short-term
debt securities are considered "available-for-sale" and are
carried at fair value.
Investments Securities and Mortgage Loans
(Including Mortgage-backed Securities)
Fair values of debt securities are based on quoted market
prices, where available. For debt securities not actively
traded, fair value estimates are obtained from independent
pricing services. In some cases, such as private placements,
certain mortgage-backed securities, and mortgage loans, fair
values are estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit
quality, and maturity of the investments (see note 3 for fair
value disclosures).
Policy Loans
Fair values of policy loans approximate carrying value as the
interest rates on the majority of policy loans are reset
periodically and therefore approximate current interest rates.
Investment Contracts
The Company's policy contracts require the beneficiaries to
commence receipt of payments by the later of age 85 or 10
years after purchase, and substantially all contracts permit
earlier surrenders, generally subject to fees and adjustments.
Fair values for the Company's liabilities for investment type
contracts (policyholder deposits) are estimated as the amount
payable on demand. As of December 31, 1998 and 1997, the cash
surrender value of policyholder deposits was $4,707,689 and
$7,204,647, respectively, less than their stated carrying
value. Of the contracts permitting surrender, substantially
all provide the option to surrender without fee or adjustment
during the 30 days following reset of guaranteed crediting
rates. The Company has not determined a practical method to
determine the present value of this option.
All of the Company's deposit obligations are fully guaranteed
by its ultimate parent, GALIC, and the receivable from OakRe
equal to the SPDA obligations is guaranteed by OakRe's parent,
XFSI.
REINSURANCE
The impact of reinsurance on the December 31, 1998 financial
statements is not considered material.
The financing reinsurance agreement entered into with OakRe does
not meet the conditions for reinsurance accounting under generally
accepted accounting principles (GAAP). The net assets initially
transferred to OakRe were established as a receivable and then are
subsequently increased as interest is accrued on the underlying
liabilities and decreased as funds are transferred back to the
Company when policies reach their crediting rate reset date or
benefits are claimed.
RECENTLY ADOPTED ACCOUNTING STANDARDS
On June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income
and its components in the financial statements. SFAS No. 130 is
effective for the fiscal year beginning after December 15, 1997.
Reclassification of financial statements for earlier periods
provided is required for comparative purposes. The Company has
elected to adopt SFAS No. 130 in 1998. The adoption of SFAS No.
130 has no impact on the Company's net income or shareholder's
equity. The Company's only component of accumulated other
comprehensive income relates to unrealized appreciation and
depreciation on debt securities.
RECENTLY ISSUED ACCOUNTING STANDARD
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued in June 1998. SFAS No. 133 requires all
derivative instruments to be recorded on the balance sheet at
estimated fair value. The Company's present accounting policies
would apply such accounting treatment only to marketable
securities as defined under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and to off-balance
sheet derivative instruments. SFAS No. 133 will broaden the
definition of derivative instruments to include all classes of
financial assets and liabilities. It also will require separate
disclosure of identifiable derivative instruments embedded in
hybrid securities. Change in the fair value of derivative
instruments is to be recorded each period either in current
earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it
is, on the type of hedge transaction.
SFAS No. 133 is effective for the Company beginning January 1,
2000. The Company's management is currently evaluating the impact
of SFAS No. 133; at present, the management does not believe it
will have a material effect on the Company's financial position or
results of operations.
OTHER
Certain 1997 and 1996 amounts have been reclassified to conform to
the 1998 presentation.
<TABLE>
<CAPTION>
(3) INVESTMENTS
The Company's investments in debt securities and short-term investments
are considered available-for-sale and carried at estimated fair value,
with the aggregate unrealized appreciation or depreciation being
recorded as a separate component of shareholder's equity. The amortized
cost, estimated fair value, and carrying value of investments at
December 31, 1998 and 1997, are as follows:
1998
-------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 100 1 -- 101 101
Collateralized
mortgage obligations 15,260 161 (32) 15,389 15,389
Corporate, state,
municipalities, and
political subdivisions 83,868 1,733 (433) 85,168 85,168
--------------- -------------- -------------- -------------- --------------
Total debt
securities 99,228 1,895 (465) 100,658 100,658
Mortgage loans (net) 5,245 204 -- 5,449 5,245
Policy loans 1,223 -- -- 1,223 1,223
--------------- -------------- -------------- -------------- --------------
Total investments $ 105,696 2,099 (465) 107,330 107,126
=============== ============== ============== ============== ==============
Company's beneficial
interest in separate
accounts $ 2 -- -- 2 2
=============== ============== ============== ============== ==============
</TABLE>
<TABLE>
1997
-------------------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Debt securities:
U.S. Government
treasuries $ 100 1 -- 101 101
Collateralized
mortgage obligations 24,018 305 (64) 24,259 24,259
Corporate, state,
municipalities, and
political subdivisions 72,766 1,500 (1,106) 73,160 73,160
--------------- -------------- -------------- -------------- --------------
Total debt
securities 96,884 1,806 (1,170) 97,520 97,520
Mortgage loans (net) 1,786 143 -- 1,929 1,786
Policy loans 1,083 -- -- 1,083 1,083
--------------- -------------- -------------- -------------- --------------
$ 99,753 1,949 (1,170) 100,532 100,389
=============== ============== ============== ============== ==============
Company's beneficial
interest in separate
accounts $ -- -- -- -- --
=============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of debt securities at
December 31, 1998, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties. Maturities of mortgage-backed securities will be
substantially shorter than their contractual maturity because they
require monthly principal installments and mortgagees may prepay
principal.
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Less than one year $ 2,341 2,362
Due after one year through five years 34,579 35,067
Due after five years through ten years 32,584 33,321
Due after ten years 14,464 14,519
Mortgage-backed securities 15,260 15,389
--------------- ---------------
Total $ 99,228 100,658
=============== ===============
</TABLE>
At December 31, 1998, approximately 95.1% of the Company's debt
securities are investment grade or are nonrated but considered to be of
investment grade. Of the 4.9% noninvestment grade debt securities, 4.3%
are rated as BB or its equivalent, and 0.6% are rated B or its
equivalent.
All debt securities were income producing during the years ended
December 31, 1998 and 1997. As of December 31, 1998 and 1997, the
Company had no impaired investments.
<TABLE>
<CAPTION>
The components of investment income, realized gains (losses), and
unrealized appreciation are as follows:
1998 1997 1996
------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income on debt securities $ 6,928 6,575 3,926
Income on short-term investments 305 186 243
Income on policy loans 92 83 86
Interest on mortgage loans 308 32 --
Miscellaneous interest 2 -- 8
------------ ------------- ------------
Total investment income 7,635 6,876 4,263
Investment expenses (119) (115) (87)
------------ ------------- ------------
Net investment income $ 7,516 6,761 4,176
============ ============= ============
Net realized capital gains (losses) -
debt securities $ 178 158 (28)
============ ============= ============
Unrealized appreciation
is as follows:
Debt securities $ 1,430 633 6
Short-term investments -- 3 --
Effects on deferred acquisition
costs amortization (726) (213) (69)
Effects on PVFP amortization (192) (200) 65
------------ ------------- ------------
Unrealized appreciation before income taxes 512 223 2
Unrealized income tax expenses (179) (78) (1)
------------ ------------- ------------
Net unrealized appreciation on
investments $ 333 145 1
============ ============= ============
</TABLE>
Proceeds from sales, redemptions, and paydowns of investments in debt
securities during 1998 were $50,660,583. Gross gains of $591,755 and
gross losses of $413,588 were realized on those sales. Included in these
amounts were $133,138 of gross gains and $106,165 of gross losses
realized on the sale of noninvestment grade securities.
Proceeds from sales, redemptions, and paydowns for investments in debt
securities during 1997 were $25,379,783. Gross gains of $166,335 and
gross losses of $8,658 were realized on those sales. Included in these
amounts were $47,391 of gross gains and $7,300 of gross losses realized
on the sale of noninvestment grade securities.
Proceeds from sales, redemptions, and paydowns for investments in debt
securities during 1996 were $10,635,608. Gross gains of $16,757 and
gross losses of $44,311 were realized on those sales. Included in these
amounts were $1,355 of gross gains realized on the sale of noninvestment
grade securities.
<TABLE>
<CAPTION>
(4) SECURITY GREATER THAN 10% OF SHAREHOLDER'S EQUITY
As of December 31, 1998 and 1997, the Company held the following
individual security which exceeded 10% of shareholder's equity:
1998 1997
--------------- ---------------
<S> <C> <C>
Colonial Realty, at carrying value $ 1,997,287 2,017,400
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
(5) COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income $ 810 443 412
------------ ------------ ------------
Other comprehensive income (loss), before tax -
unrealized appreciation (depreciation) on
investments arising during period:
Unrealized appreciation (depreciation)
on investments 616 472 (812)
Adjustment to deferred acquisition
costs attributable to unrealized
(appreciation) depreciation (398) (108) (67)
Adjustment to PVFP attributable to
unrealized (appreciation) depreciation 6 (198) 594
------------ ------------ ------------
Total unrealized appreciation (depreciation) on
investments arising during period 224 166 (285)
------------ ------------ ------------
Less reclassification adjustments for realized (gains) losses included
in net income:
Adjustment for (gains) losses included in
net realized gains (losses) on sales
of investments (178) (158) 28
Adjustment for (gains) losses included in
amortization of PVFP 115 36 2
Adjustment for (gains) losses included in
amortization of deferred acquisition costs (2) 67 (21)
------------ ------------ ------------
Total reclassification adjustments for (gains) losses
included in net income (65) (55) 9
------------ ------------ ------------
Other comprehensive income (loss), before related income tax
expense (benefits) 289 221 (294)
Related income tax expense (benefit) 101 77 (103)
------------ ------------ ------------
Other comprehensive income (loss), net of tax 188 144 (191)
------------ ------------ ------------
Comprehensive income $ 998 587 221
============ ============ ============
</TABLE>
(6) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company has no direct employees and no retired employees. All
personnel used to support the operations of the Company are supplied by
contract by Cova Life Management Company (CLMC), a wholly owned
subsidiary of Cova Corporation. The Company is allocated a portion of
certain health care and life insurance benefits for future retired
employees of CLMC. In 1998, 1997, and 1996, the Company was allocated a
portion of benefit costs including severance pay, accumulated vacations,
and disability benefits. At December 31, 1998, CLMC had no retired
employees nor any employees fully eligible for retirement, and had no
disbursements for such benefit commitments. The expense arising from
these allocations is not material.
<TABLE>
<CAPTION>
(7) INCOME TAXES
The Company will file a consolidated federal income tax return with its
immediate parent, CFSLIC. Income taxes are recorded in the statements of
income and directly in certain shareholder's equity accounts. Income
tax expense for the years ended December 31 was allocated as follows:
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Statements of income:
Operating income (excluding realized investment gains and losses) $ 215 250 295
Realized investment gains (losses) 62 55 (10)
--------- --------- ---------
Income tax expense included in the statements of
income 277 305 285
Shareholder's equity - change in deferred federal income taxes
related to unrealized appreciation (depreciation) on securities 101 77 (103)
--------- --------- ---------
Total income tax expense $ 378 382 182
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
The actual federal income tax expense differed from the expected tax
expense computed by applying the U.S. federal statutory rate to income
before taxes on income as follows:
1998 1997 1996
-------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $ 380 35.0% $ 262 35.0% $ 244 35.0%
Dividends received deduction - separate
account (150) (13.9) -- -- -- --
Amortization of intangible assets 39 3.6 39 5.2 37 5.3
Other 8 0.8 4 0.5 4 0.6
-------- ---------- -------- ---------- -------- ---------
Total $ 277 25.5% $ 305 40.7% $ 285 40.9%
======== ========== ======== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are as follows:
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Tax basis of intangible assets purchased $ 624 679
Liability for commission on recaptures 120 198
Policy reserves 2,477 1,898
DAC "Proxy Tax" 1,252 977
Other deferred tax assets (359) --
------------ ------------
Total deferred tax assets 4,114 3,752
------------ ------------
Deferred tax liabilities:
Unrealized gains in investments 179 78
PVFP 150 144
Deferred acquisition costs 3,200 2,371
Other deferred tax liabilities -- 117
------------ ------------
Total deferred tax liabilities 3,529 2,710
------------ ------------
Net deferred tax asset $ 585 1,042
============ ============
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. Management
believes the deferred tax assets will be fully realized in the future
based upon consideration of the reversal of existing temporary
differences, anticipated future earnings, and all other available
evidence. Accordingly, no valuation allowance was established at
December 31, 1998 or 1997.
(8) RELATED-PARTY TRANSACTIONS
On December 31, 1997, CLMC and Navisys Incorporated, affiliated
companies, purchased certain assets of Johnson & Higgins/Kirke Van
Orsdel, Inc. (J&H/KVI), an unaffiliated Delaware corporation, for
$2,500,000. The purchased assets are the administrative and service
systems that provide the marketing, underwriting, claims, and
administrative functions for the Company's life and annuity products. On
January 1, 1998, the purchased assets of J&H/KVI were merged into Cova
Life Administrative Service Company (CLASC). Navisys Incorporated
purchased 51% of CLASC, the remaining 49% was purchased by CLMC.
The Company has entered into management, operations, and servicing
agreements with its affiliated companies. The affiliated companies are
CLMC, a Delaware Corporation, which provides management services and
the employees necessary to conduct the activities of the Company; and
Conning Asset Management, which provides investment advice.
Additionally, a portion of overhead and other corporate expenses are
allocated by the Company's ultimate parent, GALIC. CLASC provides
various services for the Company including underwriting, claims, and
administrative functions. Expenses and fees paid to affiliated
companies in 1998, 1997, and 1996 for the Company were $1,587,833,
$396,806, and $303,694 respectively.
(9) STATUTORY SURPLUS AND DIVIDEND RESTRICTION
GAAP differs in certain respects from accounting practices prescribed or
permitted by insurance regulatory authorities (statutory accounting
principles).
The major differences arise principally from the immediate expense
recognition of policy acquisition costs and intangible assets for
statutory reporting, determination of policy reserves based on different
discount rates and methods, the recognition of deferred taxes under GAAP
reporting, the nonrecognition of financial reinsurance for GAAP
reporting, and the establishment of an asset valuation reserve as a
contingent liability based on the credit quality of the Company's
investment securities and an interest maintenance reserve as an unearned
liability to defer the realized gains and losses of fixed income
investments presumably resulting from changes to interest rates and
amortize them into income over the remaining life of the investment sold
under statutory accounting principles. In addition, adjustments to
record the carrying values of debt securities and certain equity
securities at estimated fair value are applied only under GAAP reporting
and capital contributions in the form of notes receivable from an
affiliated company are not recognized under GAAP reporting.
Purchase accounting creates another difference as it requires the
restatement of GAAP assets and liabilities to their established fair
values, and shareholder's equity to the net purchase price. Statutory
accounting does not recognize the purchase method of accounting.
<TABLE>
<CAPTION>
As of December 31, the differences between statutory capital and surplus
and shareholder's equity determined in conformity with GAAP were as
follows:
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Statutory capital and surplus $ 10,411 10,389
Reconciling items:
Statutory asset valuation reserve 1,078 1,151
Statutory interest maintenance reserve 190 111
GAAP investment adjustments to fair value 1,430 636
GAAP deferred policy acquisition costs 9,142 6,774
GAAP basis policy reserves (4,670) (3,871)
GAAP deferred federal income taxes (net) 585 1,042
GAAP guarantee assessment adjustment (1,000) (1,000)
GAAP goodwill 1,813 1,923
GAAP present value of future profits 854 900
GAAP future purchase price payable (342) (565)
Other (2) 1
------------ ------------
GAAP shareholder's equity $ 19,489 17,491
============ ============
</TABLE>
COVA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Cova
Financial Services Life Insurance Company)
Notes to Financial Statements
December 31, 1998, 1997, and 1996
Statutory net loss for the years ended December 31, 1998, 1997, and 1996
was $142,046, $461,118, and $113,236, respectively.
The maximum amount of dividends which can be paid by State of California
insurance companies to shareholders without prior approval of the
insurance commissioner is the greater of 10% of statutory surplus or
statutory net gain from operations for the preceding year. The maximum
dividend permissible during 1998 will be $761,109, which is 10% of the
Company's December 31, 1998 statutory surplus of $7,611,089.
The National Association of Insurance Commissioners has developed
certain risk based capital (RBC) requirements for life insurers. If
prescribed levels of RBC are not maintained, certain actions may be
required on the part of the Company or its regulators. At December 31,
1998, the Company's Total Adjusted Capital and Authorized Control Level
RBC were $11,488,766 and $1,619,495, respectively. This level of
adjusted capital qualifies under all tests.
(10) GUARANTY FUND ASSESSMENTS
The Company participates with life insurance companies licensed in
California in an association formed to guaranty benefits to
policyholders of insolvent life insurance companies. Under state law, as
a condition for maintaining the Company's authority to issue new
business, the Company is contingently liable for its share of claims
covered by the guaranty association for insolvencies incurred through
1998, but for which assessments have not yet been determined or
assessed, to a maximum generally of 1% of statutory premiums per annum.
In November 1998, the National Organization of Life and Health Guaranty
Associations distributed a study of the major outstanding industry
insolvencies, with estimates of future assessments by state. Based on
this study, the Company has accrued a liability for $1.0 million in
future assessments on insolvencies that occurred before December 31,
1998. Under the coinsurance agreement between the Company and OakRe (see
note 1), OakRe is required to reimburse the Company for any future
assessments that it pays which relate to insolvencies occurring prior to
June 1, 1995. The Company paid $33,505, $460,167, and $265,760 in
guaranty fund assessment in 1998, 1997, and 1996, respectively. These
payments were substantially reimbursed by OakRe.
At the same time, the Company is liable to OakRe for 80% of any future
premium tax recoveries that are realized from any such assessments and
may retain the remaining 20%. The credits to be retained for 1998 were
not material.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. FINANCIAL STATEMENTS
The following financial statements of the Separate Account are
included in Part B hereof:
1. Statement of Assets and Liabilities as of September 30, 1999.
2. Statement of Operations for the nine months ended September 30,
1999.
3. Statements of Changes in Net Assets for the nine months ended
September 30, 1999 and the year ended December 31, 1998.
4. Notes to Financial Statements - September 30, 1999.
5. Independent Auditors' Report.
6. Statement of Assets and Liabilities as of December 31, 1998.
7. Statement of Operations for the year ended December 31, 1998.
8. Statements of Changes in Net Assets for the years ended
December 31, 1998 and 1997.
9. Notes to Financial Statements - December 31, 1998 and 1997.
The following financial statements of the Company are included
In Part B hereof.
1. Balance Sheets as of September 30, 1999 and December 31, 1998.
2. Statements of Income for the three and nine months ended
September 30, 1999 and 1998.
3. Statements of Shareholder's Equity for the nine months ended
September 30, 1999 and 1998.
4. Statements of Cash Flows for the nine months ended September 30,
1999 and 1998.
5. Notes to Financial Statements - September 30, 1999 and 1998.
6. Independent Auditors' Report.
7. Balance Sheets as of December 31, 1998 and 1997.
8. Statements of Income for the years ended December 31, 1998,
1997 and 1996.
9. Statements of Shareholder's Equity for the Years Ended
December 31, 1998, 1997 and 1996.
10. Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996.
11. Notes to Financial Statements - December 31, 1998, 1997
and 1996.
b. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account(1)
2. Not Applicable
3. Principal Underwriter's Agreement(2)
4. Individual Flexible Purchase Payment Deferred Variable
Annuity Contract(1)
5. Application for Variable Annuity(1)
6. (i) Copy of Articles of Incorporation of the Company(2)
(ii) Copy of the Bylaws of the Company(2)
7. Not Applicable
8. (i) Form of Fund Participation Agreement by and among AIM Variable
Insurance Funds, Inc., A I M Distributors, Inc., Cova Financial
Life Insurance Company, on behalf of itself and its Separate
Accounts, and Cova Life Sales Company(3)
(ii) Form of Participation Agreement among Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and Cova
Financial Services Life Insurance Company(4)
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
11. Not Applicable
12. Not Applicable
13. Not Applicable
14. Company Organizational Chart
(1) incorporated by reference to Registrant's Form N-4 (File Nos.
333-90407 and 811-7060) as filed electronically on November 5,
1999.
(2) incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4
(File No. 333-34817) as filed electronically on November 19, 1997.
(3) incorporated by reference to Post-Effective Amendment No. 1 to
Form N-4 (File No. 333-34817) as filed electronically on February 11,
1998.
(4) incorporated by reference to Post-Effective Amendment No. 4 to Form N-4
(File No. 333-34817) as filed electronically on April 30, 1999.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
The following are the Officers and Directors who are engaged directly or
indirectly in activities relating to the Registrant or the variable annuity
contracts offered by the Registrant and the executive officers of the Company:
Name and Principal Positions and Offices
Business Address with Depositor
- -------------------------------- --------------------------------
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Mark E. Reynolds Executive Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Rd.
St. Louis, MO 63128
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Constance A. Doern Vice President
4700 Westown Parkway
West Des Moines, IA 50266
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Executive Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer and Director
700 Market Street
St. Louis, MO 63101
Douglas E. Jacobs Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Lisa O. Kirchner Vice President
4700 Westown Parkway
West Des Moines, IA 50266
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
William C. Mair Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market Street
St. Louis, MO 63101
Myron H. Sandberg Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Schaus Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Bernard J. Spaulding Senior Vice President, General Counsel
One Tower Lane, Suite 3000 and Secretary
Oakbrook Terrace, IL 60181-4644
Joann T. Tanaka Senior Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Patricia M. Wersching Assistant Treasurer
700 Market Street
St. Louis, MO 63101
Peter L. Witkewiz Vice President and Controller
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
A company organizational chart is filed as Exhibit 14 to this
registration statement.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable
ITEM 28. INDEMNIFICATION.
The Bylaws of the Company (Article V, Section 9) provide that:
This corporation shall indemnify, to the fullest extent allowed by California
law, its present and former directors and officers against expenses, judgments,
fines, settlements, and other amounts incurred in connection with any proceeding
or threatened proceeding brought against such directors or officers in their
capacity as such. Such indemnification shall be made in accordance with
procedures set forth by California law. Sums for expenses incurred in defending
any such proceeding may also be advanced to any such director or officer to the
extent and under the conditions provided by California law.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Cova Life Sales Company is the principal underwriter for the following
investment companies (other than Registrant):
Cova Variable Annuity Account One
Cova Variable Life Account One
Cova Variable Life Account Five
First Cova Variable Annuity Account One
Cova Variable Annuity Account Four
General American Separate Account Twenty-Eight
General American Separate Account Twenty-Nine
(b) Cova Life Sales Company is the principal underwriter for the Contracts. The
following persons are the officers and directors of Cova Life Sales Company. The
principal business address for each officer and director of Cova Life Sales
Company is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
Name and Principal Positions and Offices
Business Address with Underwriter
- ----------------------- ---------------------------
Lorry J. Stensrud Director
Patricia E. Gubbe President, Chief Compliance Officer
and Director
William C. Mair Director
Philip A. Haley Vice President
Shari Ruecker Vice President
Mark E. Reynolds Treasurer
James W. Koeger Assistant Treasurer
Bernard J. Spaulding Secretary
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
William Flory, whose address is One Tower Lane, Suite 3000, Oakbrook Terrace,
Illinois 60181-4644 and Cova Life Administration Services Company, 4700 Westown
Parkway, Bldg. 4, Suite 200, West Des Moines, IA 50266 maintain physical
possession of the accounts, books or documents of the Variable Account required
to be maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
d. Cova Financial Life Insurance Company ("Company") hereby represents that
the fees and charges deducted under the Contracts described in the Prospectus,
in the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has caused this Registration Statement to
be signed on its behalf, in the City of Oakbrook Terrace, and State of Illinois
on this 25th day of January, 2000.
COVA VARIABLE ANNUITY ACCOUNT FIVE
(Registrant)
By: COVA FINANCIAL LIFE INSURANCE COMPANY
By: /S/ BERNARD J. SPAULDING
_________________________________________
Senior Vice President, General Counsel and
Secretary
COVA FINANCIAL LIFE INSURANCE COMPANY
Depositor
By: /S/ BERNARD J. SPAULDING
________________________________________
Senior Vice President, General Counsel and
Secretary
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Chairman of the Board and
- ---------------------- Director --------
Richard A. Liddy Date
/S/ LORRY J. STENSRUD President and Director 1/25/00
- ---------------------- --------
Lorry J. Stensrud Date
/S/ J. ROBERT HOPSON Director 1/25/00
- ---------------------- --------
J. Robert Hopson Date
William C. Mair* Director 1/25/00
- ---------------------- --------
William C. Mair Date
E. Thomas Hughes, Jr.* Treasurer and Director 1/25/00
- ---------------------- --------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 1/25/00
- ---------------------- --------
Matthew P. McCauley Date
John W. Barber* Director 1/25/00
- ---------------------- --------
John W. Barber Date
/S/ MARK E. REYNOLDS 1/25/00
- --------------------- Director --------
Mark E. Reynolds Date
/S/ J. TERRI TANAKA 1/25/00
- --------------------- Director --------
J. Terri Tanaka Date
/S/ PETER L. WITKEWIZ 1/25/00
- --------------------- Controller --------
Peter L. Witkewiz Date
*By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EX-99.B9 Opinion and Consent of Counsel.
EX-99.B10 Consent of Independent Auditors.
EX-99.B14 Company Organizational Chart.
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
January 31, 2000
Board of Directors
Cova Financial Life Insurance Company
4100 Newport Place Drive, Suite 840
Newport Beach, CA 92600
RE: Opinion of Counsel - Cova Variable Annuity Account Five
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Pre-Effective Amendment to a
Registration Statement on Form N-4 for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts (the "Contracts") to be issued by Cova
Financial Life Insurance Company and its separate account, Cova Variable Annuity
Account Five.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. Cova Variable Annuity Account Five is a Unit Investment Trust as that
term is defined in Section 4(2) of the Investment Company Act of 1940 (the
"Act"), and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by an Owner pursuant to a
Contract issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable law, such an Owner will have a
legally-issued, fully paid, non-assessable contractual interest under such
Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /S/LYNN KORMAN STONE
__________________________
Lynn Korman Stone
Consent of Independent Auditors
The Board of Directors
Cova Financial Life Insurance Company
We consent to the use of our reports on the financial statements of Cova
Financial Life Insurance Company dated March 4, 1999, and on the financial
statements of the sub-accounts of Cova Variable Annuity Account Five dated
March 1, 1999, and to the reference to our firm under the heading "Experts"
in the Statement of Additional Information in the Pre-Effective Amendment
No. 1 to the Registration Statement (Form N-4, No. 333-90407) of Cova Variable
Annuity Account Five.
/s/KPMG LLP
KPMG LLP
Chicago, Illinois
February 1, 2000
Cova Corporation, a Missouri corporation, is owned by General American Life
Insurance Company, a Missouri company.
General American Life Insurance Company is owned by GenAmerica Corporation, a
Missouri corporation.
GenAmerica Corporation is owned by Metropolitan Life Insurance Company, a New
York company.
Cova Corporation owns 100% of Cova Financial Services Life Insurance Company,
a Missouri company, and Cova Life Management Company, a Delaware company.
Cova Financial Services Life Insurance Company owns 100% of First Cova Life
Insurance Company, a New York company, and Cova Financial Life Insurance
Company, a California company.
Cova Life Management Company owns 100% of Cova Investment Advisory Corporation,
an Illinois corporation, Cova Investment Allocation Corporation, an Illinois
corporation, and Cova Life Sales Company, a Delaware company.
