FIRST COVA LIFE INSURANCE COMPANY SEPTEMBER 5, 1996
PROFILE OF THE FIXED AND VARIABLE ANNUITY CONTRACT
This Profile is a summary of some of the more important points that you should
consider and know before purchasing the Contract. The Contract is more fully
described in the prospectus which accompanies this Profile. Please read the
prospectus carefully.
1. THE ANNUITY CONTRACT: The fixed and variable annuity contract offered by
First Cova is a contract between you, the owner, and First Cova, an insurance
company. The Contract provides a means for investing on a tax-deferred basis
in a fixed account of First Cova and 8 investment portfolios. The Contract is
intended for retirement savings or other long-term investment purposes and
provides for a death benefit and guaranteed income options.
The fixed account offers an interest rate that is guaranteed by the insurance
company, First Cova. This interest rate is set once each year. While your
money is in the fixed account, the interest your money will earn as well as
your principal is guaranteed by First Cova.
This Contract also offers 8 investment portfolios which are listed in Section
4. These portfolios are designed to offer a better return than the fixed
account. However, this is NOT guaranteed. You can also lose your money.
You can put money into any or all of the investment portfolios and the fixed
account. You can transfer between accounts up to 12 times a year without
charge or tax implications. After 12 transfers, the charge is $25 or 2% of the
amount transferred, whichever is less.
The Contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are taxed as income when you
make a withdrawal. The income phase occurs when you begin receiving regular
payments from your Contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine the amount of income payments during the
income phase.
2. ANNUITY PAYMENTS (THE INCOME PHASE): If you want to receive regular income
from your annuity, you can choose one of three options: (1) monthly payments
for your life (assuming you are the annuitant); (2) monthly payments for your
life, but with payments continuing to the beneficiary for 5, 10 or 20 years
(as you select) if you die before the end of the selected period; and (3)
monthly payments for your life and for the life of another person (usually
your spouse) selected by you. Once you begin receiving regular payments, you
cannot change your payment plan.
During the income phase, you have the same investment choices you had during
the accumulation phase. You can choose to have payments come from the fixed
account, the investment portfolios or both. If you choose to have any part of
your payments come from the investment portfolios, the dollar amount of your
payments may go up or down.
3. PURCHASE: You can buy this Contract with $5,000 or more under most
circumstances. You can add $2,000 or more any time you like during the
accumulation phase. Your registered representative can help you fill out the
proper forms.
4. INVESTMENT OPTIONS: You can put your money in any or all of these
investment portfolios which are described in the prospectuses for the funds:
<TABLE>
<CAPTION>
<S> <C>
MANAGED BY J.P. MORGAN INVESTMENT MANAGED BY LORD, ABBETT & CO.
MANAGEMENT INC. Bond Debenture
Select Equity Growth and Income
Large Cap Stock
Small Cap Stock MANAGED BY CONNING ASSET
International Equity MANAGEMENT COMPANY
Quality Bond Money Market
</TABLE>
Depending upon market conditions, you can make or lose money in any of these
portfolios.
5. EXPENSES: The Contract has insurance features and investment features, and
there are costs related to each.
Each year First Cova deducts a $30 contract maintenance charge from your
Contract. First Cova currently waives this charge if the value of your
Contract is at least $50,000. First Cova also deducts for its insurance
charges which total 1.40% of the average daily value of your Contract
allocated to the investment portfolios.
There are also investment charges which range from .205% to .95% of the
average daily value of the investment portfolio depending upon the investment
portfolio.
If you take your money out, First Cova may assess a withdrawal charge which is
equal to 7% of each payment you take out in the first and second years after
First Cova receives the payment, 5% of each payment you take out in the third,
fourth and fifth years, and 3% of each payment you take out in the sixth and
seventh years.
The following chart is designed to help you to understand the expenses in the
Contract. The column "Total Annual Expenses" shows the total of the $30
contract maintenance charge (which is represented as .10% below), the 1.40%
insurance charges and the investment expenses for each investment portfolio.
The next two columns show you two examples of the expenses, in dollars, you
would pay under a Contract. The examples assume that you invested $1,000 in a
Contract which earns 5% annually and that you withdraw your money: (1) at the
end of year 1, and (2) at the end of year 10. For year 1, the Total Annual
Expenses are assessed as well as the withdrawal charges. For year 10, the
example shows the aggregate of all the annual expenses assessed for the 10
years, but there is no withdrawal charge.
The premium tax is assumed to be 0% in both examples.
<TABLE>
<CAPTION>
EXAMPLES:
Total Annual
Total Annual Total Annual Total Expenses At End of:
Insurance Portfolio Annual (1) (2)
Portfolio Charges Expenses Expenses 1 Year 10 Years
- -------------------------- ------------- ------------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.
Select Equity 1.50% 0.85% 2.35% $ 93.80 $ 266.24
Large Cap Stock 1.50% 0.75% 2.25% $ 92.80 $ 256.13
Small Cap Stock 1.50% 0.95% 2.45% $ 94.80 $ 276.23
International Equity 1.50% 0.95% 2.45% $ 94.80 $ 276.23
Quality Bond 1.50% 0.65% 2.15% $ 91.79 $ 245.92
MANAGED BY LORD, ABBETT
& CO.
Bond Debenture 1.50% 0.85% 2.35% $ 93.80 $ 266.24
Growth and Income 1.50% 0.59% 2.09% $ 91.19 $ 239.74
MANAGED BY CONNING ASSET
MANAGEMENT COMPANY
Money Market 1.50% 0.205% 1.705% $ 87.31 $ 199.08
</TABLE>
For the newly formed Portfolios the expenses have been estimated. The expenses
reflect any expense reimbursement or fee waiver. For more detailed
information, see the Fee Table in the prospectus for the Contract.
6. TAXES: Your earnings are not taxed until you take them out. If you take
money out, earnings come out first and are taxed as income. If you are younger
than 59 1/2 when you take money out, you may be charged a 10% federal tax
penalty on the earnings. Payments during the income phase are considered
partly a return of your original investment. That part of each payment is not
taxable as income.
7. ACCESS TO YOUR MONEY: You can take money out at any time during the
accumulation phase. After the first year, you can take up to 10% of your total
purchase payments each year without charge from First Cova. Withdrawals in
excess of that will be charged 7% of each payment you take out in the first
and second years after First Cova receives the payment, 5% of each payment you
take out in the third, fourth and fifth years, and 3% of each payment you take
out in the sixth and seventh years. After First Cova has had a payment for 7
years, there is no charge for withdrawals. Of course, you may also have to pay
income tax and a tax penalty on any money you take out. Each purchase payment
you add to your Contract has its own 7 year withdrawal charge period.
8. PERFORMANCE: The value of the Contract will vary up or down depending upon
the investment performance of the investment portfolios you choose. First Cova
may provide total return figures for each investment portfolio.
9. DEATH BENEFIT: If you die before moving to the income phase, the person you
have chosen as your beneficiary will receive a death benefit. This death
benefit will be the greater of three amounts: 1) the money you've put in less
any money you've taken out, and the related withdrawal charges, or 2) the
current value of your Contract, or 3) the value of your Contract at the most
recent 7th-year-anniversary plus any money you've added since that anniversary
minus any money you've taken out since that anniversary, and the related
withdrawal charges. If you die after age 80, slightly different rules apply.
10. OTHER INFORMATION: Free Look. If you cancel the Contract within 10 days
after receiving it we will send you whatever your Contract is worth on the day
we receive your request (this may be more or less than your original payment)
without assessing a withdrawal charge. If you have purchased the Contract as
an Individual Retirement Annuity (IRA) you will receive back your purchase
payment. (Currently, the Contract is not available under an IRA until the IRA
Endorsement is approved by the State of New York Insurance Department.)
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
However, the avoidance of probate does not mean that the beneficiary will not
have tax liability as a result of receiving the death benefit.
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 tax brackets. You should not buy this
Contract if you are looking for a short-term investment or if you cannot take
the risk of getting back less money than you put in.
Additional Features. This Contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your Contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic Withdrawal
Program.
* You can arrange to have a regular amount of money automatically invested
in investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this feature
Dollar Cost Averaging.
* First Cova will automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
11. INQUIRIES: If you need more information about buying a Contract, please
contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
If you have any other questions, please contact us at our Home Office:
120 Broadway
New York, NY 10271
(800) 469-4545
(212) 766-0012
THE FIXED AND VARIABLE ANNUITY
issued by
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
and
FIRST COVA LIFE INSURANCE COMPANY
(formerly, First Xerox Life Insurance Company)
This prospectus describes the Fixed and Variable Annuity Contract offered by
First Cova Life Insurance Company (First Cova).
The annuity contract has 9 investment choices - a fixed account which offers
an interest rate which is guaranteed by First Cova, and 8 investment
portfolios listed below. The 8 investment portfolios are part of the Cova
Series Trust, the Lord Abbett Series Fund, Inc. or the General American
Capital Company. You can put your money in the fixed account and/or any of
these investment portfolios.
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.:
Select Equity
Large Cap Stock
Small Cap Stock
International Equity
Quality Bond
Managed by Lord, Abbett & Co.:
Bond Debenture
LORD ABBETT SERIES FUND, INC.:
Managed by Lord, Abbett & Co.:
Growth and Income
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management Company:
Money Market
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the First Cova Fixed and
Variable Annuity Contract.
To learn more about the First Cova Fixed and Variable Annuity Contract, you
can obtain a copy of the Statement of Additional Information (SAI) dated
September 5, 1996. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is legally a part of the prospectus. The Table of
Contents of the SAI is on Page 14 of this prospectus. For a free copy of the
SAI, call us at (800) 831-5433 or write us at: One Tower Lane, Suite 3000,
Oakbrook Terrace, Illinois 60181-4644.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
September 5, 1996.
TABLE OF CONTENTS
PAGE
INDEX OF SPECIAL TERMS
FEE TABLE
EXAMPLES
1. THE ANNUITY CONTRACT
2. ANNUITY PAYMENTS (THE INCOME PHASE)
3. PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
4. INVESTMENT OPTIONS
Cova Series Trust
Lord Abbett Series Fund, Inc.
General American Capital Company
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
5. EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the Withdrawal Charge
Transfer Fee
Income Taxes
Investment Portfolio Expenses
6. TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Diversification
7. ACCESS TO YOUR MONEY
Systematic Withdrawal Program
8. PERFORMANCE
9. DEATH BENEFIT
Upon Your Death
Death of Annuitant
10. OTHER INFORMATION
First 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 A
PERFORMANCE INFORMATION
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you
as possible. By the very nature of the contract, however, certain technical
words or terms are unavoidable. We have identified the following as some of
these words or terms. They are identified in the text in italic and the page
that is indicated here is where we believe you will find the best explanation
for the word or term.
PAGE
Accumulation Phase..................................................... 6
Accumulation Unit....................................................... 7
Annuitant............................................................... 6
Annuity Date............................................................ 6
Annuity Options......................................................... 6
Annuity Payments........................................................ 6
Annuity Unit............................................................ 7
Beneficiary.............................................................. 14
Fixed Account............................................................ 6
Income Phase............................................................. 6
Investment Portfolios.................................................... 7
Joint Owner.............................................................. 14
Non-Qualified............................................................ 10
Owner.................................................................... 13
Purchase Payment......................................................... 7
Qualified................................................................ 10
Tax Deferral............................................................. 10
FEE TABLE
<TABLE>
<CAPTION>
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage Years Since
of purchase payments) (see Note 2 below) Payment Charge
----------- -------
1 7%
2 7%
3 5%
4 5%
5 5%
6 3%
7 3%
8+ 0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Transfer Fee (see Note 3 below) No charge for first 12 transfers in a
contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of
the amount transferred.
Contract Maintenance Charge $30 per contract per year
(see Note 4 below)
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
-----
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Other Expenses
(after expense Total
INVESTMENT PORTFOLIO CHARGES reimbursement for Annual
(as a percentage of the average daily net Management 12b-1 certain Portfolios- Portfolio
assets of an investment portfolio) Fees Fees see Note 5 below) Expenses
----------- ------ -------------------- ----------
COVA SERIES TRUST
Managed by J.P. Morgan Investment
Management Inc.
Select Equity* .75% --- .10% .85%
Large Cap Stock* .65% --- .10% .75%
Small Cap Stock* .85% --- .10% .95%
International Equity* .85% --- .10% .95%
Quality Bond* .55% --- .10% .65%
Managed by Lord, Abbett & Co.
Bond Debenture* .75% --- .10% .85%
LORD ABBETT SERIES FUND, INC.
Managed by Lord, Abbett & Co.
Growth and Income# .50% .07% .02% .59%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset
Management Company
Money Market .205% --- .00% .205%
<FN>
* Estimated. The Portfolio commenced regular investment operations on April 1, 1996.
# The expenses for the Growth and Income Portfolio of Lord Abbett Series Fund, Inc. have
been restated to reflect a 12b-1 plan which provides for payments to Lord, Abbett & Co. for
remittance to a life insurance company for certain distribution expenses (see the Fund
Prospectus). The 12b-1 Plan provides that such remittances, in the aggregate, will not exceed
.15%, on an annual basis, of the daily net asset value of shares of the Growth and Income
Portfolio. The 12b-1 plan was implemented on or about June 28, 1996. The 12b-1 fees shown above
have been estimated for the year ending December 31, 1996. The examples below for this Portfolio
reflect the imposition of the estimated 12b-1 fees.
</TABLE>
EXAMPLES:
You will pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized.
<TABLE>
<CAPTION>
<S> <C> <C>
Time Periods
1 year 3 years
------------- -----------
COVA SERIES TRUST
Managed by J.P. Morgan Investment Management Inc.
Select Equity (a) $93.80 (a) $118.16
(b) $23.80 (b) $73.16
Large Cap Stock (a) $92.80 (a) $115.15
(b) $22.80 (b) $70.15
Small Cap Stock (a) $94.80 (a) $121.17
(b) $24.80 (b) $76.17
International Equity (a) $94.80 (a) $121.17
(b) $24.80 (b) $76.17
Quality Bond (a) $91.79 (a) $112.12
(b) $21.79 (b) $67.12
Managed by Lord, Abbett & Co.
Bond Debenture (a) $93.80 (a) $118.16
(b) $23.80 (b) $73.16
LORD ABBETT SERIES FUND, INC.
Managed by Lord, Abbett & Co.
Growth and Income (a) $91.19 (a) $110.30
(b) $21.19 (b) $65.30
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management
Company
Money Market (a) $87.31 (a) $98.54
(b) $17.31 (b) $53.54
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. The purpose of the Fee Table is to show you the various expenses you
will incur directly or indirectly with the contract. The Fee Table reflects
expenses of the Separate Account as well as the investment portfolios.
2. The withdrawal charge is 7% of each payment you take out in the first
and second years after First Cova receives the payment, 5% of each payment you
take out in the third, fourth and fifth years, and 3% of each payment you take
out in the sixth and seventh years. After First Cova has had a purchase
payment for 7 years, there is no charge by First Cova for a withdrawal of that
purchase payment. You may also have to pay income tax and a tax penalty on any
money you take out. After the first year, you can take up to 10% of your total
purchase payments each year without a charge from First Cova.
3. First Cova will not charge you the transfer fee even if there are more
than 12 transfers in a year if the transfer is for the Dollar Cost Averaging
or Automatic Rebalancing Programs.
4. First 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, First Cova will charge the contract maintenance charge.
5. An affiliate of First Cova currently reimburses the investment
portfolios of Cova Series Trust for all operating expenses (exclusive of the
management fees) in excess of approximately .10%. Absent this expense
reimbursement, the expenses (exclusive of the management fees) for the period
from April 1, 1996 (commencement of operations of investment portfolios) to
December 31, 1996 are estimated to be: .64% for the Select Equity Portfolio;
.59% for the Large Cap Stock Portfolio; .69% for the Small Cap Stock
Portfolio; .66% for the International Equity Portfolio; .55% for the Quality
Bond Portfolio; and .53% for the Bond Debenture Portfolio.
6. Premium taxes are not reflected. New York does not assess premium
taxes.
7. The assumed average contract size is $30,000.
8. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1. THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
First Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case First Cova), where the insurance company promises to pay you an
income, in the form of annuity payments, beginning on a designated date that's
at least one year 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 8
investment portfolios. 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 First Cova. This interest rate is set once
each year. First Cova guarantees that the interest credited to the fixed
account will not be less than 3% per year. If you select the fixed account,
your money will be placed with the other general assets of First 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 First Cova in writing. You and
another person can be named joint owners. We have described more information
on this in Section 10 - Other Information.
2. ANNUITY PAYMENTS (THE INCOME PHASE)
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month. You can
also choose among income plans. We call those annuity options.
We ask you to choose your annuity date and annuity option when you purchase
the contract. You can change either at any time before the annuity date with
30 days notice to us. Your annuity date cannot be any earlier than one year
after we issue the contract. Annuity payments must begin by the annuitant's
90th birthday. The annuitant is the person whose life we look to when we make
annuity payments.
If you do not choose an annuity option at the time you purchase the contract,
we will assume that you selected Option 2 which provides a life annuity with
10 years of guaranteed payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from the fixed account, the investment portfolio(s)
or a combination of both. If you don't tell us otherwise, your annuity
payments will be based on the investment allocations that were in place on the
annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things: 1) the value of your contract in the investment portfolio(s) on the
annuity date, 2) the 3% assumed investment rate used in the annuity table for
the contract, and 3) the performance of the investment portfolios you
selected. If the actual performance exceeds the 3% assumed rate, your annuity
payments will increase. Similarly, if the actual rate is less than 3%, your
annuity payments will decrease.
You can choose one of the following annuity options. After annuity payments
begin, you cannot change the annuity option.
OPTION 1. LIFE ANNUITY. Under this option, we will make an annuity
payment each month so long as the annuitant is alive. After the annuitant
dies, we stop making annuity payments.
OPTION 2. LIFE ANNUITY WITH 5, 10 OR 20 YEARS GUARANTEED. Under this
option, we will make an annuity payment each month so long as the annuitant is
alive. However, if, when the annuitant dies, we have made annuity payments for
less than the selected guaranteed period, we will then continue to make
annuity payments for the rest of the guaranteed period to the beneficiary. If
the beneficiary does not want to receive annuity payments, he or she can ask
us for a single lump sum.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will
make annuity payments each month so long as the annuitant and a second person
are both alive. When either of these people dies, we will continue to make
annuity payments, so long as the survivor continues to live. The amount of the
annuity payments we will make to the survivor can be equal to 100%, 66 2/3% or
50% of the amount that we would have paid if both were alive.
Annuity payments are made monthly unless you have less than $2,000 to apply
toward a payment. In that case, First Cova may provide your annuity payment in
a single lump sum. Likewise, if your annuity payments would be less than $20 a
month, First Cova has the right to change the frequency of payments so that
your annuity payments are at least $20.
3. PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you give us to buy the contract. The minimum
we will accept is $5,000 when the contract is bought as a non-qualified
contract. If you are buying the contract as part of an IRA (Individual
Retirement Annuity) the minimum we will accept is $2,000. (Currently, the
contract is not available under an IRA until the IRA Endorsement is approved
by the State of New York Insurance Department.) The maximum we accept is $1
million without our prior approval. You can make additional purchase payments
of $2,000 or more to either type of contract.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have
selected. If you make additional purchase payments, we will allocate them in
the same way as your first purchase payment unless you tell us otherwise.
There is a $500 minimum balance requirement for the fixed account and for each
investment portfolio.
If you change your mind about owning this contract, you can cancel it within
10 days after receiving it. When you cancel the contract within this time
period, First Cova will not assess a withdrawal charge. You will receive back
whatever your contract is worth on the day we receive your request. If you
have purchased the contract as an IRA, we are required to give you back your
purchase payment if you decide to cancel your contract within 10 days
after receiving it.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within 2 business
days. If you do not give us all of the information we need, we will contact
you to get it. If for some reason we are unable to complete this process
within 5 business days, we will either send back your money or get your
permission to keep it until we get all of the necessary information. If you
add more money to your contract by making additional purchase payments, we
will credit these amounts to your contract within one business day. Our
business day closes when the New York Stock Exchange closes, usually 4:00 P.M.
Eastern time.
ACCUMULATION UNITS
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
(1) determining the total amount of money invested in the particular
investment portfolio;
(2) subtracting from that amount any insurance charges and any other
charges such as taxes we have deducted; and
(3) dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio divided by
the value of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your
contract.
EXAMPLE:
On Monday we receive an additional purchase payment of $5,000 from you.
You have told us you want this to go to the Quality Bond Portfolio. When the
New York Stock Exchange closes on that Monday, we determine that the value of
an accumulation unit for the Quality Bond Portfolio is $13.90. We then divide
$5,000 by $13.90 and credit your contract on Monday night with 359.71
accumulation units for the Quality Bond Portfolio.
4. INVESTMENT OPTIONS
The Contract offers 8 investment portfolios which are described below.
Additional investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
COVA SERIES TRUST
Cova Series Trust is managed by Cova Advisory, which is an affiliate of First
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
Large Cap Stock Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolio:
Bond Debenture Portfolio
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios. Each
portfolio is managed by Lord, Abbett & Co. The following portfolio is
available under the contract:
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
TRANSFERS
You can transfer money among the fixed account and the 8 investment
portfolios.
TRANSFERS DURING THE ACCUMULATION PHASE. You can make 12 transfers every
year during the accumulation phase without charge. We measure a year from the
anniversary of the day we issued your contract. You can make a transfer to or
from the fixed account and to or from any investment portfolio. If you make
more than 12 transfers in a year, there is a transfer fee deducted. The fee is
$25 per transfer or, if less, 2% of the amount transferred. The following
apply to any transfer during the accumulation phase:
1. The minimum amount which you can transfer is $500 or your entire value
in the investment portfolio or fixed account.
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. You cannot make any transfers within 7 calendar days of the annuity
date.
TRANSFERS DURING THE INCOME PHASE. You can only make transfers between
the investment portfolios once each year. We measure a year from the
anniversary of the day we issued your contract. You cannot transfer from the
fixed account to an investment portfolio, but you can transfer from one or
more investment portfolios to the fixed account at any time. If you make more
than 12 transfers in a year, a transfer fee will be charged.
You can make transfers by telephone. If you own the contract with a joint
owner, unless First Cova is instructed otherwise, First Cova will accept
instructions from either you or the other owner. First Cova will use
reasonable procedures to confirm that instructions given us by telephone are
genuine. If First Cova fails to use such procedures, we may be liable for any
losses due to unauthorized or fraudulent instructions. First 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 of General American Capital
Company 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 minimum amount which can be transferred each month is $500. You must have
at least $6,000 in the Money Market Fund of General American Capital Company
or the fixed account, (or the amount required to complete your program,
if less) in order to participate in the Dollar Cost Averaging Program.
All Dollar Cost Averaging transfers will be made on the 15th day of the month
unless that day is not a business day. If it is not, then the transfer will be
made the next business day.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
AUTOMATIC REBALANCING PROGRAM
Once your money has been allocated among the investment portfolios, the
performance of each portfolio may cause your allocation to shift. You can
direct us to automatically rebalance your contract to return to your original
percentage allocations by selecting our Automatic Rebalancing Program. You can
tell us whether to rebalance quarterly, semi-annually or annually. We will
measure these periods from the anniversary of the date we issued your
contract. The transfer date will be the 1st day after the end of the period
you selected. 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 Select Equity Portfolio. Over the next 2 1/2 months the bond
market does very well while the stock market performs poorly. At the end of
the first quarter, the Quality Bond Portfolio now represents 50% of your
holdings because of its increase in value. If you had chosen to have your
holdings rebalanced quarterly, on the first day of the next quarter, First
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
First Cova is the legal owner of the investment portfolio shares. However,
First Cova believes that when an investment portfolio solicits proxies in
conjunction with a vote of shareholders, it is required to obtain from you and
other owners instructions as to how to vote those shares. When we receive
those instructions, we will vote all of the shares we own in proportion to
those instructions. This will also include any shares that First Cova owns on
its own behalf. Should First Cova determine that it is no longer required to
comply with the above, we will vote the shares in our own right.
SUBSTITUTION
First Cova may be required to substitute one of the investment portfolios you
have selected with another portfolio. We would not do this without the prior
approval of the Securities and Exchange Commission. We will give you notice of
our intent to do this.
5. EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
INSURANCE CHARGES
Each day, First Cova makes a deduction for its insurance charges. First Cova
does this as part of its calculation of the value of the accumulation units
and the annuity units. The insurance charge has two parts: 1) the mortality
and expense risk premium and 2) the administrative expense charge.
MORTALITY AND EXPENSE RISK PREMIUM. This charge is equal, on an annual
basis, to 1.25% of the daily value of the contracts invested in an investment
portfolio, after expenses have been deducted. This charge is for all the
insurance benefits e.g., guarantee of annuity rates, the death benefits, for
certain expenses of the contract, and for assuming the risk (expense risk)
that the current charges will be sufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then First Cova will bear the loss. First Cova does, however,
expect to profit from this charge. The mortality and expense risk premium
cannot be increased. First Cova may use any profits we make from this charge
to pay for the costs of distributing the contract.
ADMINISTRATIVE EXPENSE CHARGE. This charge is equal, on an annual basis,
to .15% of the daily value of the contracts invested in an investment
portfolio, after expenses have been deducted. This charge, together with the
contract maintenance charge (see below) is for all the expenses associated
with the administration of the contract. Some of these expenses are:
preparation of the contract, confirmations, annual reports and statements,
maintenance of contract records, personnel costs, legal and accounting fees,
filing fees, and computer and systems costs. Because this charge is taken out
of every unit value, you may pay more in administrative costs than those that
are associated solely with your contract. First Cova does not intend to profit
from this charge. However, if this charge and the contract maintenance charge
are not enough to cover the costs of the contracts in the future, First Cova
will bear the loss.
CONTRACT MAINTENANCE CHARGE
During the accumulation phase, every year on the anniversary of the date when
your contract was issued, First Cova deducts $30 from your contract as a
contract maintenance charge. This charge is for administrative expenses (see
above). This charge can not be increased.
First Cova will not deduct this charge, if when the deduction is to be made,
the value of your contract is $50,000 or more. First 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 prorata portion of the charge will be deducted
if the annuity date is other than an anniversary. After the annuity date, the
charge will be collected monthly out of the annuity payment.
WITHDRAWAL CHARGE
During the accumulation phase, you can make withdrawals from your contract.
First Cova keeps track of each purchase payment. Once a year after the first
year, you can withdraw up to 10% of your total purchase payments and no
withdrawal charge will be assessed on the 10%, if on the day you make your
withdrawal the value of your contract is $5,000 or more. Otherwise, the charge
is 7% of each payment you take out in the first and second years after First
Cova receives the payment, 5% of each payment you take out in the third,
fourth and fifth years, and 3% of each payment you take out in the sixth and
seventh years. After First Cova has had a purchase payment for 7 years, there
is no charge when you withdraw that purchase payment. For purposes of the
withdrawal charge, First Cova treats withdrawals as coming from the oldest
purchase payment first. When the withdrawal is for only part of the value of
your contract, the withdrawal charge is deducted from the remaining value in
your contract.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the contract. Thus, for tax purposes, earnings are considered to
come out first.
First Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
First Cova will reduce or eliminate the amount of the withdrawal charge when
the contract is sold to an officer, director or employee of First Cova. In no
event will elimination of the Withdrawal Charge be permitted where elimination
will be unfairly discriminatory to any person.
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct
a transfer fee of $25 or 2% of the amount that is transferred whichever is
less.
If the transfer is part of the Dollar Cost Averaging Program or the Automatic
Rebalancing Program it will not count in determining the transfer fee.
INCOME TAXES
First Cova will deduct from the contract for any income taxes which it incurs
because of the contract. At the present time, we are not making any such
deductions.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the attached fund prospectuses.
6. TAXES
NOTE: First 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. First
Cova has included in the Statement of Additional Information an additional
discussion regarding taxes.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs -
usually retirement. Congress recognized how important saving for retirement
was and provided special rules in the Internal Revenue Code (Code) for
annuities.
Simply stated these rules provide that you will not be taxed on the earnings
on the money held in your annuity contract until you take the money out. This
is referred to as tax deferral. There are different rules as to how you will
be taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your
contract until a distribution occurs - either as a withdrawal or as annuity
payments. When you make a withdrawal you are taxed on the amount of the
withdrawal that is earnings. For annuity payments, different rules apply. A
portion of each annuity payment is treated as a partial return of your
purchase payments and will not be taxed. The remaining portion of the annuity
payment will be treated as ordinary income. How the annuity payment is divided
between taxable and non-taxable portions depends upon the period over which
the annuity payments are expected to be made. Annuity payments received after
you have received all of your purchase payments are fully includible in
income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than tax-qualified trusts),
the contract will generally not be treated as an annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under an Individual
Retirement Annuity (IRA), your contract is referred to as a non-qualified
contract.
If you purchase the contract under an IRA, your contract is referred to as a
qualified contract. Currently, the contract is not available under an IRA
until the IRA Endorsement is approved by the State of New York Insurance
Department.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts: (1)
paid on or after the taxpayer reaches age 59 1/2; (2) paid after you die; (3)
paid if the taxpayer becomes totally disabled (as that term is defined in the
Code); (4) paid in a series of substantially equal payments made annually (or
more frequently) under a lifetime annuity, (5) paid under an immediate
annuity; or (6) which come from purchase payments made prior to August 14,
1982.
WITHDRAWALS - QUALIFIED CONTRACTS
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
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. First 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 First
Cova would be considered the owner of the shares of the investment portfolios.
If this occurs, it will result in the loss of the favorable tax treatment for
the contract. It is unknown to what extent under federal tax law owners are
permitted to select investment portfolios, to make transfers among the
investment portfolios or the number and type of investment portfolios owners
may select from. If any guidance is provided which is considered a new
position, then the guidance would generally be applied prospectively. However,
if such guidance is considered not to be a new position, it may be applied
retroactively. This would mean that you, as the owner of the contract, could
be treated as the owner of the investment portfolios.
Due to the uncertainty in this area, First Cova reserves the right to modify
the contract in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making a withdrawal
(either a partial or a complete withdrawal); (2) by electing to receive
annuity payments; or (3) when a death benefit is paid to your beneficiary.
Withdrawals can only be made during the accumulation phase.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any applicable withdrawal charge, less
any premium tax and less any contract maintenance charge. (See Section 5.
Expenses for a discussion of the charges.)
Unless you instruct First Cova otherwise, any partial withdrawal will be made
pro-rata from all the investment portfolios and the fixed account you
selected. Under most circumstances the amount of any partial withdrawal must
be for at least $500. First Cova requires that after a partial withdrawal is
made you keep at least $1,000 in your contract.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
SYSTEMATIC WITHDRAWAL PROGRAM
If you are 59 1/2 or older, you may use the Systematic Withdrawal Program.
This program provides an automatic monthly payment to you of up to 10% of
your total purchase payments each year. No withdrawal charge will be
deducted for these payments. First Cova does not have any charge for this
program. If you use this program, you may not also make a single 10% free
withdrawal. For a discussion of the withdrawal charge and the 10% free
withdrawal, see Section 5. Expenses.
All Systematic Withdrawals will be paid on the 15th day of the month unless
that day is not a business day. If it is not, then the payment will be the
next business day.
Income taxes may apply to Systematic Withdrawals.
8. PERFORMANCE
First Cova periodically advertises performance of the various investment
portfolios. First Cova will calculate performance by determining the
percentage change in the value of an accumulation unit by dividing the
increase (decrease) for that unit by the value of the accumulation unit at the
beginning of the period. This performance number reflects the deduction of the
insurance charges. It does not reflect the deduction of any applicable
contract maintenance charge and withdrawal charge. The deduction of any
applicable contract maintenance charge and withdrawal charges would reduce the
percentage increase or make greater any percentage decrease. Any advertisement
will also include total return figures which reflect the deduction of the
insurance charges, contract maintenance charges, and withdrawal charges.
Appendix A 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.
PART 1. This section shows the actual investment performance of the Lord
Abbett Series Fund, Inc. Growth and Income Portfolio and the General American
Capital Company Money Market Fund, each of which has been in existence for
some time and therefore has an investment performance history. In order to
show how investment experience of the Growth and Income Portfolio and the
Money Market Fund affects accumulation unit values, hypothetical performance
information was developed.
Chart 1 contained in Appendix A sets out hypothetical information based
upon the historical experience of the Growth and Income Portfolio and the
Money Market Fund and is for the periods shown. The performance figures for
the Growth and Income Portfolio and the Money Market Fund reflect the
deduction of the actual fees and expenses paid by the Growth and Income
Portfolio and the Money Market Fund. There are performance figures for the
accumulation units which reflect the insurance charges as well as the fees and
expenses of the Growth and Income Portfolio and the Money Market Fund. There
are also performance figures for the accumulation units which reflect the
insurance charges, the contract maintenance charge, the fees and expenses of
each of the Growth and Income Portfolio and the Money Market Fund, and assume
that you make a withdrawal at the end of the period and therefore the
withdrawal charge is reflected.
PART 2. The Bond Debenture investment portfolio is relatively new and
therefore does not yet have any meaningful performance record. However, it has
the same investment objectives and follows substantially the same investment
strategies as a certain mutual fund advised by the same sub-adviser. This
fund is sold to the public (Public Fund) and has an investment performance
record. In order to demonstrate how the performance of the Public Fund affects
accumulation unit values, hypothetical performance information was developed.
Chart 2 contained in Appendix A shows the historical performance of the
Public Fund. These performance figures reflect the deduction of the historical
fees and expenses paid by the Public Fund and not those paid by the investment
portfolio. The hypothetical figures for the accumulation units assume the
deduction of the fees and expenses anticipated to actually be paid by the
investment portfolio, but use the actual performance results of the Public
Fund. There are hypothetical performance figures for the accumulation units
which reflect the insurance charges as well as the portfolio expenses. There
are also hypothetical performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the portfolio
expenses, and assume that you make a withdrawal at the end of the period and
therefore the withdrawal charge is reflected.
PART 3. J.P. Morgan Investment Management Inc. is the sub-adviser for
five investment portfolios. The portfolios are relatively new and have no
meaningful performance history. However, all of these investment portfolios
(except the International Equity Portfolio) have investment objectives,
policies and strategies substantially similar to those employed by the
sub-adviser with respect to certain private accounts (Private Accounts). Thus
the performance information derived from these Private Accounts is deemed
relevant to the investor. In order to demonstrate how the actual investment
experience of these Private Accounts affects accumulation unit values,
hypothetical performance information was developed.
Chart 3 contained in Appendix A shows hypothetical performance
information derived from the historical performance of composites of the
comparable Private Accounts with respect to the Select Equity, Large Cap
Stock, Small Cap Stock and Quality Bond investment portfolios. The
hypothetical performance figures for the investment portfolios represent the
actual performance results of the composites of comparable Private Accounts,
adjusted to reflect the deduction of the fees and expenses anticipated to be
paid by the investment portfolio. The actual composite performance figures of
the Private Accounts are time-weighted rates of return which include all
income and accrued income and realized and unrealized gains or losses, but do
not reflect the deduction of investment advisory fees actually charged to the
Private Accounts. There are hypothetical performance figures for the
accumulation units which reflect the actual performance results of the
composites of comparable Private Accounts, adjusted to reflect the deduction
of the fees and expenses anticipated to be paid by the investment portfolio
and the insurance charges. There are also hypothetical performance figures for
the accumulation units which reflect the actual performance results of the
composites of comparable Private Accounts, adjusted to reflect the deduction
of the fees and expenses anticipated to be paid by the investment portfolio
plus the insurance charges, the contract maintenance charge, and also assume
that you make a withdrawal at the end of the period and therefore the
withdrawal charge is reflected.
Please note that Appendix A does not contain performance information for the
International Equity Portfolio.
9. DEATH BENEFIT
UPON YOUR DEATH
If you die before annuity payments begin, First Cova will pay a death benefit
to your beneficiary (see below). If you have a joint owner, the death benefit
will be paid when the first of you dies. The surviving joint owner will be
treated as the beneficiary.
The amount of the death benefit depends on how old you or your joint owner is.
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greater of:
1. Total purchase payments, less withdrawals (and any withdrawal charges
paid on the withdrawals);
2. The value of your contract at the time the death benefit is to be
paid; or
3. The value of your contract on the most recent seven year anniversary
before the date of death, plus any subsequent purchase payments, less any
withdrawals (and any withdrawal charges paid on the withdrawals.)
After you, or your joint owner, reaches age 80, the death benefit will be the
greater of:
1. Total purchase payments, less any withdrawals (and any withdrawal
charges paid on the withdrawals);
2. The value of your contract at the time the death benefit is to be
paid; or
3. The value of your contract on the most recent seven year anniversary
on or before you or your joint owner reaches age 80, plus any subsequent
purchase payments, less any withdrawals (and any withdrawal charges paid on
the withdrawals).
The entire death benefit must be paid within 5 years of the date of death
unless the beneficiary elects to have the death benefit payable under an
annuity option. The death benefit payable under an annuity option must be paid
over the beneficiary's lifetime or for a period not extending beyond the
beneficiary's life expectancy. Payment must begin within one year of the date
of death. If the beneficiary is the spouse of the owner, he/she can continue
the contract in his/her own name at the then current value. If a lump sum
payment is elected and all the necessary requirements are met, the payment
will be made within 7 days.
DEATH OF ANNUITANT
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days
of the death of the annuitant, you will become the annuitant. However, if the
owner is a non-natural person (for example, a corporation), then the death or
change of annuitant will be treated as the death of the owner, and a new
annuitant may not be named.
Upon the death of the annuitant after annuity payments begin, the death
benefit, if any, will be as provided for in the annuity option selected.
10. OTHER INFORMATION
FIRST COVA
First Cova Life Insurance Company (First Cova) was organized under the laws of
the State of New York on December 31, 1992. First Cova is a wholly-owned
subsidiary of Cova Financial Services Life Insurance Company, a Missouri
insurance company. On June 1, 1995, a wholly-owned subsidiary of General
American Life Insurance Company purchased First Cova which on that date
changed its name to First Cova Life Insurance Company.
First Cova is licensed to do business only in the state of New York.
THE SEPARATE ACCOUNT
First Cova has established a separate account, First Cova Variable Annuity
Account One (Separate Account), to hold the assets that underlie the
contracts. The Board of Directors of First Cova adopted a resolution to
establish the Separate Account under New York insurance law on December 31,
1992. We have registered the Separate Account with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of
1940.
The assets of the Separate Account are held in First Cova's name on behalf of
the Separate Account and legally belong to First Cova. However, those assets
that underlie the contracts, are not chargeable with liabilities arising out
of any other business First 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 First 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 First Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions of up to 3.5% of purchase payments. In
addition, under certain circumstances, an expense allowance of up to 2.75% of
purchase payments may be payable. The New York Insurance Department has ruled
that asset based compensation is permissible under certain circumstances.
First Cova may, in the future, adopt an asset based compensation program in
addition to, or in lieu of, the present compensation program. To the extent
that the withdrawal charge is insufficient to cover the actual cost of
distribution, First Cova may use any of its corporate assets, including any
profit from the mortality and expense risk premium, to make up any difference.
OWNERSHIP
OWNER. You, as the owner of the contract, have all the rights under the
contract. Prior to the annuity date, the owner is as designated at the time
the contract is issued, unless changed. On and after the annuity date, the
annuitant is the owner. The beneficiary becomes the owner when a death benefit
is payable.
JOINT OWNER. The contract can be owned by joint owners. Upon the death of
either joint owner, the surviving owner will be the designated beneficiary.
Any other beneficiary designation at the time the contract was issued or as
may have been later changed will be treated as a contingent beneficiary unless
otherwise indicated.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before you die.
ASSIGNMENT
You can assign the contract at any time during your lifetime. First Cova will
not be bound by the assignment until it receives the written notice of the
assignment. First Cova will not be liable for any payment or other action we
take in accordance with the contract before we receive notice of the
assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be
limitations on your ability to assign the contract.
SUSPENSION OF PAYMENTS OR TRANSFERS
First Cova may be required to suspend or postpone payments for withdrawal 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 First 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.
First Cova has reserved the right to defer payment for a withdrawal or
transfer from the fixed account for the period permitted by law but not for
more than six months.
FINANCIAL STATEMENTS
The financial statements of First Cova have been included in the Statement of
Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE
Company
Experts
Legal Opinions
Distribution
Performance Information
Tax Status
Annuity Provisions
Financial Statements
APPENDIX A
PERFORMANCE INFORMATION
Future performance will vary and the results shown are not necessarily
representative of future results.
PART 1 GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND AND LORD ABBETT
SERIES FUND, INC. GROWTH AND INCOME PORTFOLIO
The General American Capital Company Money Market Fund and the Lord Abbett
Series Fund, Inc. Growth and Income Portfolio have been in existence for
sometime and therefore have an investment performance history. In order to
show how investment performance of the Money Market Fund and the Growth and
Income Portfolio affects accumulation unit values, we have developed
hypothetical performance information.
The chart below shows the actual investment performance of the Money Market
Fund and the Growth and Income Portfolio and the hypothetical accumulation
unit performance calculated by assuming that accumulation units were invested
in each of the Money Market Fund and the Growth and Income Portfolio for the
same periods.
The performance figures in Column A below for each of the Money Market Fund
and the Growth and Income Portfolio reflect the actual fees and expenses paid
by each of the Money Market Fund and the Growth and Income Portfolio. Column B
presents hypothetical performance figures for the accumulation units which
reflects the insurance charges as well as the fees and expenses of the Money
Market Fund and the Growth and Income Portfolio. Column C presents
hypothetical performance figures for the accumulation units which reflects the
insurance charges, the contract maintenance charge, the fees and expenses of
each of the Money Market Fund and the Growth and Income Portfolio, and assumes
that you make a withdrawal at the end of the period and therefore the
withdrawal charge is reflected.
CHART 1
GENERAL AMERICAN CAPITAL COMPANY MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 12/31/95
<TABLE>
<CAPTION>
Column A Column B Column C
Fund Performance Hypothetical Accumulation Unit Performance
Portfolio 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ------------ ------- ------------ ------- ------------- ------------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market 6.17% 4.82% 6.46% 4.77% 3.42% 5.06% (2.33%) (1.18%) 4.96%
</TABLE>
LORD ABBETT SERIES FUND, INC.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 12/31/95
<TABLE>
<CAPTION>
Column A Column B Column C
Portfolio Performance Accumulation Unit Performance
since since since
Portfolio 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- ----------------- ---------- ------------ ---------- ------- ------------- ---------- ------------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income 29.82% 17.59% 14.86% 28.03% 15.99% 13.31% 20.46% 14.86% 12.55%
</TABLE>
PART 2 PUBLIC FUND
The investment portfolio set out in the chart below is relatively new and does
not yet have any meaningful performance record. However, it has the same
investment objectives and follows substantially the same investment strategies
as a mutual fund advised by the same sub-adviser. This fund is sold to the
public and is referred to here as a Public Fund.
The chart below shows the historical performance of the Public Fund. The
performance figures in Column A reflect the deduction of the historical fees
and expenses paid by the Public Fund and not those paid by the investment
portfolio. Column B presents hypothetical performance figures for the
accumulation units which reflect the insurance charges and the deduction of
the fees and expenses anticipated to actually be paid by the investment
portfolio. Column C presents hypothetical performance figures for the
accumulation units which reflect the insurance charges, the contract
maintenance charge, the deduction of the fees and expenses anticipated to
actually be paid by the investment portfolio and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
CHART 2
PUBLIC FUND
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 12/31/95
<TABLE>
<CAPTION>
Column A Column B Column C
Public Fund Performance Hypothetical Accumulation Unit Performance
Portfolio 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ---------------- ------- ------ ------------ ------- ------------- ------------- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lord Abbett Bond
Debenture Fund 17.50% 16.00% 10.10% 16.10% 14.60% 8.70% 9.00% 10.00% 8.60%
</TABLE>
PART 3 HYPOTHETICAL PERFORMANCE INFORMATION DERIVED FROM PRIVATE ACCOUNTS
The investment portfolios set out in the chart below are relatively new and do
not yet have their own meaningful performance record. However, they have
investment objectives, policies and strategies substantially similar to those
employed by J.P. Morgan Investment Management Inc. with respect to certain
Private Accounts. Thus, the performance information derived from these Private
Accounts is deemed relevant to the investor. The performance of the investment
portfolios may vary from the Private Account composite information because
each investment portfolio will be actively managed and its investments will
vary from time to time and will not be identical to the past portfolio
investments of the Private Accounts. Moreover, the Private Accounts are not
registered under the Investment Company Act of 1940 ("1940 Act") and therefore
are not subject to certain investment restrictions that are imposed by the
1940 Act, which, if imposed, could have adversely affected the Private
Accounts' performance.
The chart below shows hypothetical performance information derived from
historical composite performance of the Private Accounts included in the
Active Equity Composite, Structured Stock Selection Composite, Small Cap
Directly Invested Composite and Public Bond Composite. The hypothetical
performance figures for the investment portfolios in Column A represent the
actual performance results of the composites of comparable Private Accounts,
adjusted to reflect the deduction of the fees and expenses anticipated to be
paid by the investment portfolio. The actual Private Account composite
performance figures are time-weighted rates of return which include all income
and accrued income and realized and unrealized gains or losses, but do not
reflect the deduction of investment advisory fees actually charged to the
Private Accounts. Column B presents the hypothetical performance figures for
the accumulation units which reflect the actual performance results of the
composites of comparable Private Accounts, adjusted to reflect the deduction
of the fees and expenses anticipated to be paid by the investment portfolio
and the insurance charges. Column C presents the hypothetical performance
figures for the accumulation units which reflect the insurance charges, the
contract maintenance charge, and the actual performance results of the
composites of comparable Private Accounts, adjusted to reflect the deduction
of the fees and expenses anticipated to be paid by the investment portfolio.
Column C also assumes that you make a withdrawal at the end of the period and
therefore the withdrawal charge is reflected. Inception was June 1, 1987 for
the Public Bond Composite and November 1, 1989 for the Structured Stock
Selection Composite.
CHART 3
HYPOTHETICAL PERFORMANCE INFORMATION DERIVED FROM PRIVATE ACCOUNT COMPOSITE
PERFORMANCE REDUCED BY ANTICIPATED INVESTMENT PORTFOLIO FEES AND EXPENSES
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 12/31/95
<TABLE>
<CAPTION>
COLUMN A COLUMN B
Hypothetical Investment
Portfolio Performance Hypothetical Accumulation
10 yrs or 10 yrs or
Portfolio 1 yr 5 yrs since inception 1 yr 5 yrs since inception
- ---------------------------- ------------- ------------ ---------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Active Equity Composite 32.56% 17.71% 15.51% 31.16% 16.31% 14.11%
(Select Equity Portfolio)
Structured Stock Selection
Composite 37.47% 17.40% 14.05% 36.07% 16.00% 12.65%
(Large Cap Stock Portfolio)
Small Cap Directly Invested
Composite 35.29% 20.75% 12.00% 33.89% 19.35% 10.60%
(Small Cap Stock Portfolio)
Public Bond Composite 17.71% 9.46% 9.52% 16.31% 8.06% 8.12%
(Quality Bond Portfolio)
COLUMN C
Unit Performance
10 yrs
Portfolio 1 yr 5 yrs or since inception
- ---------------------------- --------- ------------ -------------------
<S> <C> <C> <C>
Active Equity Composite 24.06% 11.71% 14.01%
(Select Equity Portfolio)
Structured Stock Selection
Composite 28.97% 11.40% 12.55%
(Large Cap Stock Portfolio)
Small Cap Directly Invested
Composite 26.79% 14.75% 10.50%
(Small Cap Stock Portfolio)
Public Bond Composite 9.21% 3.46% 8.02%
(Quality Bond Portfolio)
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE RECAP RECAP
Performance Accumulation
Column A Column B
Chart 10 Yrs or 10 Yrs or
Portfolio Type # 1 Yr 5 Yrs Since Inception 1 Yr 5 Yrs Since Inception
- ----------------------------- ------------------ ----- ------ --------- ---------------- ------ --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.
Select Equity Private Account 3 32.56% 17.71% 15.51% 31.16% 16.31% 14.11%
Composite
Large Cap Stock Private Account 3 37.47% 17.40% 14.05% 36.07% 16.00% 12.65%
Composite
Small Cap Stock Private Account 3 35.29% 20.75% 12.00% 33.89% 19.35% 10.60%
Composite
Quality Bond Private Account 3 17.71% 9.46% 9.52% 16.31% 8.06% 8.12%
Composite
MANAGED BY LORD, ABBETT & CO.
Growth and Income Existing Portfolio 1 29.82% 17.59% 14.86% 28.03% 15.99% 13.31%
Bond Debenture Public Fund 2 17.50% 16.00% 10.10% 16.10% 14.60% 8.70%
MANAGED BY CONNING ASSET
MANAGEMENT COMPANY
Money Market 1 6.17% 4.82% 6.46% 4.77% 3.42% 5.06%
PERFORMANCE RECAP
Unit Performance
Column C
10 Yrs
Portfolio 1 Yr 5 Yrs or Since Inception
- ----------------------------- ------- ------------ -------------------
<S> <C> <C> <C>
MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT INC.
Select Equity 24.06% 11.71% 14.01%
Large Cap Stock 28.97% 11.40% 12.55%
Small Cap Stock 26.79% 14.75% 10.50%
Quality Bond 9.21% 3.46% 8.02%
MANAGED BY LORD, ABBETT & CO.
Growth and Income 20.46% 14.86% 12.55%
Bond Debenture 9.00% 10.00% 8.60%
MANAGED BY CONNING ASSET
MANAGEMENT COMPANY
Money Market (2.33)% (1.18)% 4.96%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
________________________________________________________________________
__________________
__________________
__________________
FRONT
- -----
First Cova Life Insurance Company
Attn: Variable Products
120 Broadway, 10th Floor
New York, New York 10271
________________________________________________________________________
________________________________________________________________________
Please send me, at no charge, the Statement of Additional Information
dated September 5, 1996, for The Annuity Contract issued by First Cova.
(Please print or type and fill in all information)
BACK ________________________________________________________________________
- -----
Name
________________________________________________________________________
Address
________________________________________________________________________
City State Zip Code
________________________________________________________________________
CNY-1090 (1/97) FIRST COVA VA
</TABLE>
COVA
First Cova Life Insurance Company
Home Office
120 Broadway, 10th Floor
New York, NY 10271
212-766-0012
800-469-4545
CNY-1023(9/96) Policy Form Series CNY-672 21-VARI-NY(1/97)
