File Nos. 33-74174
811-8306
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 5 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 6 [X]
(Check appropriate box or boxes.)
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
_______________________________________
(Exact Name of Registrant)
FIRST COVA LIFE INSURANCE COMPANY
__________________________________
(Name of Depositor)
120 Broadway, New York, New York 10271
____________________________________________________ _________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 469-4545
Name and Address of Agent for Service
Lorry J. Stensrud, President
First Cova Life Insurance Company
120 Broadway
New York, NY 10271
(800) 469-4545
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 First Cova Life Insurance
Company
(203) 226-7866 120 Broadway
New York, NY 10271
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on May 1, 2000 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Title of Securities Registered:
Individual Variable Annuity Contracts
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
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PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Summary
Item 4. Condensed Financial Information . . . Appendix A - Condensed Financial
Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Cova
Series Trust; General American
Capital Company; Appendix B
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Annuity Contract
Item 8. Annuity Period . . . . . . . . . . . . Annuity Payments
(The 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
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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.
EXPLANATORY NOTE
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This Registration Statement contains three Prospectuses (Version A, Version B
and Version C). The three versions are substantially similar except for the
funding options. The Prospectuses will be filed with the Commission pursuant
to Rule 497 under the Securities Act of 1933. The Registrant undertakes to
update this Explanatory Note, as needed, each time a Post-Effective Amendment
is filed.
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PART A - VERSION A
The Fixed
And Variable Annuity
issued by
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
and
FIRST COVA 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 25 investment choices - a fixed account which offers an
interest rate which is guaranteed by First Cova, and 24 investment portfolios
listed below. You can put your money in the fixed account and/or any of these
investment portfolios.
AIM Variable Insurance Funds:
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Alliance Variable Products Series Fund, Inc.:
Managed by Alliance Capital Management L.P.
Premier Growth Portfolio (Class A)
Real Estate Investment Portfolio (Class A)
Cova Series Trust:
Managed by J.P. Morgan
Investment Management Inc.
Select Equity Portfolio
Large Cap Stock Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond 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
Franklin Templeton Variable Insurance Products Trust, Class 1 Shares*:
Managed by Franklin Advisers, Inc.
Franklin Small Cap Fund (the surviving fund of the
merger with Franklin Small Cap Investments)
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities Fund (formerly, Templeton
International)
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities Fund (formerly,
Templeton Developing Markets)
*Effective May 1, 2000, the portfolios of Templeton Variable Products Series
Fund were merged into similar portfolios of Franklin Templeton Variable
Insurance Products Trust.
General American Capital Company:
Managed by Conning Asset
Management Company
Money Market Fund
MFS Variable Insurance Trust:
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS High Income Series
MFS Global Governments Series
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 May 1,
2000. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page __ of this prospectus. For a free
copy of the SAI, call us at (800) 523-1661 or write us at: One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 2000
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS
SUMMARY
Fee Table
Examples
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Annuity Payments
Annuity Options
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds
Alliance Variable Products Series Fund, Inc.
Cova Series Trust
Franklin Templeton Variable Insurance Products Trust
General American Capital Company
MFS Variable Insurance Trust
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Suspension of Payments or Transfers
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
First Cova
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Participating Investment Portfolios
APPENDIX C
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
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 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. 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 24 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 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.
You can put money into any or all of the investment portfolios and the fixed
account. You can transfer between accounts up to 12 times a year without charge
or tax implications.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments during
the income phase.
ANNUITY PAYMENTS (THE INCOME PHASE):
If you want to receive regular income from your annuity, you can choose an
annuity option. Once you begin receiving regular payments, you cannot change
your payment plan. During the income phase, you have the same investment choices
you had during the accumulation phase. You can choose to have payments come from
the fixed account, the investment portfolios or both. If you choose to have any
part of your payments come from the investment portfolios, the dollar amount of
your payments may go up or down.
HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
INVESTMENT OPTIONS:
You can put your money in any or all of the investment portfolios which are
briefly described in Appendix B and more fully 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 features and investment features, and there are costs
related to each.
* Each year First Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, 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.
* If you take your money out, First Cova may assess a withdrawal charge of
up to 7% of the purchase payment withdrawn. After First Cova has had a purchase
payment for seven years, there is no charge by First Cova for a withdrawal of
that purchase payment.
* The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
* There are also investment charges which range from ____% to ____% 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,
earnings come out first and are taxed as income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% federal tax penalty on the
earnings. Payments during the income phase are considered partly a return of
your original investment. That part of each payment is not taxable as income.
ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from First Cova. Withdrawals of purchase payments in excess of
that may be charged a withdrawal charge, depending on how long your money has
been in the contract. However, First Cova will never assess a withdrawal charge
on earnings you withdraw. Earnings are defined as the value in your contract
minus the remaining purchase payments in your contract. Of course, you may also
have to pay income tax and a tax penalty on any money you take out.
DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
OTHER INFORMATION:
Free Look. If you cancel the contract within 10 days after receiving it 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 income tax brackets. You should not buy this contract if
you are looking for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* First Cova will automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
These features may not be suitable for your particular situation.
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, 10th Floor
New York, NY 10271
(800) 469-4545
(212) 766-0012
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will incur
directly or indirectly with the contract. The Fee Table reflects expenses of the
Separate Account as well as of the investment portfolios. Expenses of the
investment portfolios are not fixed or specified under the terms of the contract
and actual expenses may vary.
OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of Years Since
purchase payments) (see Note 1 below) Payment Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
The revised Withdrawal Charge schedule shown here is effective as of the date
of this Prospectus for all contracts, including existing contracts.
Transfer Fee (see Note 2 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
CONTRACT MAINTENANCE CHARGE (see Note 3 below) $30 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
---
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
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Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Other Expenses
(after expense
Management reimbursement for Total Annual
Fees certain Portfolios Portfolio Expenses
- -------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund .62% .11% .73%
AIM V.I. International Equity Fund .75% .22% .97%
AIM V.I. Value Fund .61% .15% .76%
- -------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Portfolio (Class A) 1.00% .05% 1.05%
Real Estate Investment Portfolio
(Class A) (a) .49% .46% .95%
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Cova Series Trust (b)
Managed by J.P. Morgan
Investment Management Inc.
<S> <C> <C> <C>
Select Equity Portfolio .67% .10% .77%
Large Cap Stock Portfolio .65% .10% .75%
Small Cap Stock Portfolio .85% .19% 1.04%
International Equity Portfolio .79% .31% 1.10%
Quality Bond Portfolio .54% .10% .64%
- -------------------------------------------------------------------------------------------------------------------------------
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 (c) .65% .05% .70%
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Franklin Templeton Variable Insurance Products Trust,
Class 1 Shares
Managed by Franklin Advisers, Inc.
Franklin Small Cap Fund (d) .55% .27% .82%
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities
Fund (e) 1.25% .31% 1.56%
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities Fund (f) .69% .19% .88%
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General American Capital Company
Managed by Conning Asset
Management Company
Money Market Fund .125% .08% .205%
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MFS Variable Insurance Trust (g)
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Series .75% .09% .84%
MFS Research Series .75% .11% .86%
MFS Growth With Income Series .75% .13% .88%
MFS High Income Series (h) .75% .16% .91%
MFS Global Governments Series (h) .75% .16% .91%
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<FN>
(a) The expenses shown with respect to the Real Estate Investment Portfolio are
net of voluntary reimbursements. Expenses have been capped at .95% annually
and the adviser to the Fund intends to continue such reimbursements for the
foreseeable future. For the year ended December 31, 1999 the expenses for
the Real Estate Investment Portfolio, before reimbursement, were: .90%
management fees and .82% for other expenses.
(b) Cova reimburses the investment portfolios, except the Select Equity,
Small Cap Stock and International Equity Portfolios, for all operating
expenses (exclusive of the management fees) in excess of approximately .30%
for the Mid-Cap Value, Large Cap Research and Developing Growth Portfolios
and in excess of approximately .10% for the other investment portfolios.
Prior to May 1, 1999, Cova had reimbursed expenses in excess of approximately
.10% with respect to the Select Equity, Small Cap Stock, International Equity,
Mid-Cap Value, Large Cap Research and Developing Growth Portfolios. Therefore,
the amounts shown above under "Other Expenses" have been restated to reflect
the estimated expenses for the Select Equity, Small Cap Stock and International
Equity Portfolios for the year ending December 31, 2000. Absent these expense
reimbursement arrangements, the total annual portfolio expenses for the year
ended December 31, 1999 were: 1.09% for the Small Cap Stock Portfolio; 1.15%
for the International Equity Portfolio; .71% for the Quality Bond Portfolio;
.76% for the Large Cap Stock Portfolio; .86% for the Bond Debenture Portfolio;
1.41% for the Mid-Cap Value Portfolio; 1.38% for the Large Cap Research
Portfolio; and 1.34% for the Developing Growth Portfolio.
(c) The Portfolio commenced investment operations on January 8, 1999.
(d) On 2/8/00, a merger and reorganization was approved that combined the
assets of the fund with a similar fund of Templeton Variable Products Series
Fund, effective 5/1/00. On 2/8/00, fund shareholders approved new management
fees, which apply to the combined fund effective 5/1/00. The table shows
restated total expenses based on the new fees and assets of the fund as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 0.55%, Other Expenses
0.27%, and Total Fund Operating Expenses 0.82%.
(e) On 2/8/00, shareholders approved a merger and reorganization that
combined the fund with the Templeton Developing Markets Equity Fund,
effective 5/1/00. The shareholders of that fund had approved new management
fees, which apply to the combined fund effective 5/1/00. The table shows
restated total expenses based on the new fees and the assets of the fund as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 1.25%, Other Expenses
0.29%, and Total Fund Operating Expenses 1.54%.
(f) On 2/8/00, shareholders approved a merger and reorganization
that combined the fund with the Templeton International Equity Fund,
effective 5/1/00. The shareholders of that fund had approved new management
fees, which apply to the combined fund effective 5/1/00. The table shows
restated total expenses based on the new fees and the assets of the fund as
of 12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 0.65%, Other Expenses
0.20%, and Total Fund Operating Expenses 0.85%.
(g) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. The expenses shown in the table above
do not take into account these expense reductions, and are therefore higher
than the actual expenses of the series.
(h) MFS has contractually agreed, subject to reimbursement, to bear
expenses for these series, such that each such series' "Other Expenses" do
not exceed the following percentages of the average daily net assets of
the series during the current fiscal year: 0.15% for the Global Governments
Series and the High Income Series. The payments made by MFS on behalf of
each series under this arrangement are subject to reimbursement by
the series to MFS, which will be accomplished by the payment of an expense
reimbursement fee by the series to MFS computed and paid monthly at a percentage
of the series' average daily net assets for its then current fiscal year,
with a limitation that immediately after such payment, the series' "Other
Expenses" will not exceed the percentage set forth above for that series. The
obligation of MFS to bear a series' "Other Expenses" pursuant to this
arrangement, and the series' obligation to pay the reimbursement fee to MFS,
terminates on the earlier of the date on which payments made by the series
equal the prior payment of such reimbursable expenses by MFS or December 31,
2004. MFS may, in its discretion, terminate this arrangement at an earlier date
provided that the arrangement will continue for each series until at least May 1,
2001, unless terminated with the consent of the board of trustees which oversees
the series. Absent expense reimbursement for the series, total annual
portfolio expenses for the year ended December 31, 1999 were .97% with respect to
the High Income Series and 1.05% with respect to the Global Governments Series.
</FN>
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Examples
The examples should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
(a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract value
to an annuity option.
Time Periods
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1 year 3 years 5 years 10 years
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AIM Variable Insurance Funds
Managed by A I M Advisors, Inc.
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation (a) $92.59 (a) $114.54
(b) $22.59 (b) $ 69.54
AIM V.I. International Equity (a) $95.00 (a) $121.77
(b) $25.00 (b) $ 76.77
AIM V.I. Value (a) $92.90 (a) $115.45
(b) $22.90 (b) $ 70.45
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Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth (a) $95.80 (a) $124.17
(b) $25.80 (b) $ 79.17
Real Estate Investment (a) $94.80 (a) $121.17
(b) $24.80 (b) $ 76.17
- -------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan
Investment Management Inc.
<S> <C> <C> <C> <C>
Select Equity (a) $93.00 (a) $115.75 (a) $147.96 (a) $258.16
(b) $23.00 (b) $ 70.75 (b) $120.96 (b) $258.16
Large Cap Stock (a) $92.80 (a) $115.15 (a) $146.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Small Cap Stock (a) $95.70 (a) $123.87 (a) $161.49 (a) $285.14
(b) $25.70 (b) $ 78.87 (b) $134.49 (b) $285.14
International Equity (a) $96.30 (a) $125.66 (a) $164.48 (a) $291.02
(b) $26.30 (b) $ 80.66 (b) $137.48 (b) $291.02
Quality Bond (a) $91.69 (a) $111.82 (a) $141.38 (a) $244.89
(b) $21.69 (b) $ 66.82 (b) $114.38 (b) $244.89
- ------------------------------------------------------------------------------------------------------------------------------------
Managed by Lord, Abbett & Co.
Bond Debenture (a) $93.80 (a) $118.16 (a) $151.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Mid-Cap Value (a) $98.30 (a) $131.62 (a) $174.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Large Cap Research (a) $98.30 (a) $131.62 (a) $174.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Developing Growth (a) $97.30 (a) $128.65 (a) $169.42 (a) $300.75
(b) $27.30 (b) $ 83.65 (b) $142.42 (b) $300.75
Lord Abbett Growth and Income (a) $92.29 (a) $113.63 (a) $144.42 (a) $251.04
(b) $22.29 (b) $ 68.63 (b) $117.42 (b) $251.04
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust, Class 1 Shares
Managed by Franklin Advisers, Inc
Franklin Small Cap (a) $93.50 (a) $117.26
(b) $23.50 (b) $ 72.26
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities (a) $100.89 (a) $139.31
(b) $ 30.89 (b) $ 94.31
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities (a) $94.10 (a) $119.07
(b) $24.10 (b) $ 74.07
- -----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset
Management Company
Money Market (a) $87.31 (a) $98.54 (a) $119.02 (a) $199.08
(b) $17.31 (b) $53.54 (b) $ 92.02 (b) $199.08
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $93.70 (a) $117.86
(b) $23.70 (b) $ 72.86
MFS Global Governments (a) $94.40 (a) $119.97
(b) $24.40 (b) $ 74.97
MFS Growth With Income (a) $94.10 (a) $119.07
(b) $24.10 (b) $ 74.07
MFS High Income (a) $94.40 (a) $119.97
(b) $24.40 (b) $ 74.97
MFS Research (a) $93.90 (a) $118.46
(b) $23.90 (b) $ 73.46
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
Explanation of Fee Table
1. 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.
2. 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.
3. During the accumulation phase, 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.
4. Premium taxes are not reflected. New York does not assess premium taxes.
THERE IS AN ACCUMULATION UNIT VALUE HISTORY (CONDENSED FINANCIAL INFORMATION)
CONTAINED IN APPENDIX A.
</FN>
</TABLE>
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 an income to
you, in the form of annuity payments, beginning on a designated date that is 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 24
investment portfolios and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends, in part, upon the investment performance of the
investment portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by First Cova. 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 interest and 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 under "Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one year after we issue the contract.
Annuity Payments
You will receive annuity payments during the income phase. In general, 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.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from:
* the fixed account,
* the investment portfolio(s), or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the 3% assumed investment rate used in the annuity table for the
contract, and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
Annuity payments are made monthly unless you have less than $2,000 to apply
toward a payment and you have not made a purchase payment in 3 years. 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 reduce the frequency of payments so that your annuity payments
are at least $20.
Annuity Options
You can choose among income plans. We call them annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. If you do not choose
an annuity option at the time you purchase the contract, we will assume that you
selected Option 2 which provides a life annuity with 10 years of guaranteed
payments.
You can choose one of the following annuity options or any other annuity option
acceptable to First Cova. After annuity payments begin, you cannot change the
annuity option.
Option 1. Life Annuity. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
Option 2. Life Annuity with 5, 10 or 20 Years Guaranteed. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a non-
qualified contract. If you are purchasing the contract as part of an IRA
(Individual Retirement Annuity) 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 purchase
payment we accept is $1 million without our prior approval. You can make
additional purchase payments of $500 or more to either type of contract.
Allocation of Purchase Payments
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise. 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. 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.
Accumulation Units
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular investment
portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Quality Bond Portfolio. When the
New York Stock Exchange closes on that Monday, we determine that the value
of an accumulation unit for the Quality Bond Portfolio is $13.90. We then
divide $5,000 by $13.90 and credit your contract on Monday night with
359.71 accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The contract offers 24 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY. Copies of these
prospectuses will be sent to you with your contract. (See Appendix B which
contains a summary of investment objectives and strategies for each investment
portfolio.)
The investment objectives and policies of certain of the investment
portfolios are similar to the investment objectives and policies of other
mutual funds that certain of the investment advisers manage. Although the
objectives and policies may be similar, the investment results of the
investment portfolios may be higher or lower than the results of such other
mutual funds. The investment advisers cannot guarantee, and make no
representation, that the investment results of similar funds will be comparable
even though the funds have the same investment advisers.
A fund's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a fund with a small asset base. A
fund may not experience similar performance as its assets grow.
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various
life insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous
to you.
First Cova may enter into certain arrangements under which it is reimbursed
by the investment portfolios' advisers, distributors and/or affiliates
for the administrative services which it provides to the portfolios.
AIM VARIABLE INSURANCE FUNDS
AIM Variable Insurance Funds is a mutual fund with multiple portfolios.
A I M Advisors, Inc. is the investment adviser to each portfolio.
The following portfolios are available under the contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
Premier Growth Portfolio (Class A)
Real Estate Investment Portfolio (Class A)
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (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 portfolios:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Franklin Templeton Variable Insurance Products Trust is a mutual fund with
multiple portfolios. Effective May 1, 2000, the portfolios of Templeton
Variable Products Series Fund were merged into similar portfolios of
Franklin Templeton Variable Insurance Products Trust. Each portfolio
has two classes of shares: Class 1 and Class 2. The portfolios available
in connection with your contract are Class 1 shares. Franklin Advisers, Inc.
is the investment adviser for the Franklin Small Cap Fund, Templeton
Asset Management Ltd, is the investment adviser for the Templeton Developing
Markets Securities Fund and Templeton Investment Counsel, Inc. is the
investment adviser for the Templeton International Securities Fund. The
following portfolios are available under the contract:
Franklin Small Cap Fund (the surviving fund of the merger with
Franklin Small Cap Investments Fund)
Templeton Developing Markets Securities Fund (formerly, Templeton
Developing Markets Fund)
Templeton International Securities Fund (formerly, Templeton
International Fund)
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
MFS VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust is a mutual fund with multiple portfolios.
Massachusetts Financial Services Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
MFS Emerging Growth Series
MFS Global Governments Series
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
Transfers
You can transfer money among the fixed account and the investment portfolios.
Telephone Transfers. 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.
Transfers During the Accumulation Phase.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The following apply to any transfer during the
accumulation phase:
1. 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.
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. Currently, First Cova does not charge for
participating in the Dollar Cost Averaging Program. First Cova will waive the
minimum transfer amount and the minimum amount required to establish dollar
cost averaging if you establish dollar cost averaging for 6 to 12 months at the
time you buy the contract.
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.
First Cova may, from time to time, offer other dollar cost averaging programs
which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to the investment portfolios, the performance
of each portfolio may cause your allocation to shift. You can direct us to
automatically rebalance your contract to return to your original percentage
allocations by selecting our Automatic Rebalancing Program. You can tell us
whether to rebalance quarterly, semi-annually or annually. We will measure these
periods from the anniversary of the date we issued your contract. The transfer
date will be the 1st day after the end of the period you selected.
The Automatic Rebalancing Program is available only during the accumulation
phase. Currently, First Cova does not charge for participating in the Automatic
Rebalancing Program. If you participate in the Automatic Rebalancing Program,
the transfers made under the program are not taken into account in determining
any transfer fee.
Example:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Quality Bond Portfolio and
60% to be in the Select Equity Portfolio. Over the next 2 1/2 months the
bond market does very well while the stock market performs poorly. At the
end of the first quarter, the Quality Bond Portfolio now represents 50% of
your holdings because of its increase in value. If you have chosen to have
your holdings rebalanced quarterly, on the first day of the next quarter,
First Cova will sell some of your units in the Quality Bond Portfolio to
bring its value back to 40% and use the money to buy more units in the
Select Equity Portfolio to increase those holdings to 60%.
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
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 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.
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 fund expenses have been deducted. This charge is for the insurance
benefits e.g., guarantee of annuity rates, the death benefits, for certain
expenses of the contract, and for assuming the risk (expense risk) that the
current charges will be sufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below) is for the expenses associated with the
administration of the contract. Some of these expenses are: preparation of the
contract, confirmations, annual reports and statements, maintenance of contract
records, personnel costs, legal and accounting fees, filing fees, and computer
and systems costs. Because this charge is taken out of every unit value, you may
pay more in administrative costs than those that are associated solely with your
contract. 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 cannot be increased.
First 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. 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, unless the
purchase payment was made more than 7 years ago, the charge is:
<TABLE>
<CAPTION>
Years Since
Payment Charge
<S> <C>
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
</TABLE>
The revised Withdrawal Charge schedule shown above is effective as of the date
of this Prospectus for all contracts, including existing contracts.
After First Cova has had a purchase payment for 7 years, there is no charge when
you withdraw that purchase payment. First Cova does not assess a withdrawal
charge on earnings withdrawn from the contract. Earnings are defined as the
value in your contract minus the remaining purchase payments in your contract.
The withdrawal order for calculating the withdrawal charge is shown below.
* 10% of purchase payments free.
* Remaining purchase payments that are over 7 years old and not subject
to a withdrawal charge.
* Earnings in the contract free.
* Remaining purchase payments that are less than 7 years old and are
subject to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules may
apply to Section 1035 exchanges.
When the withdrawal is for only part of the value of your contract, the
withdrawal charge is deducted from the remaining value in your contract if
sufficient, or from the amount withdrawn.
First Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
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.
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 an additional discussion regarding taxes in the Statement of
Additional Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under 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.
An annuity contract will not provide any necessary or additional tax deferral if
it is used to fund a qualified plan that is tax deferred. However, the contract
has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing an annuity contract to
fund a qualified plan.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio
of pre-tax purchase payments to the after-tax purchase payments in your
contract. If all of your purchase payments were made with pre-tax money,
then the full amount of any withdrawal is includible in taxable income.
Special rules may apply to withdrawals from certain types of qualified
contracts.
The Code also provides that any amount received under a qualified contract
which is included in income may be subject to a penalty. The amount of
the penalty is equal to 10% of the amount that is includible in income.
Some withdrawals will be exempt from the penalty. They include any
amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid in a series of substantially equal periodic payments made
annually (or more frequently) under a lifetime annuity;
(5) paid for certain allowable medical expenses (as defined in the
Code);
(6) paid on account of an IRS levy upon the qualified contract;
(7) paid from an IRA for medical insurance (as defined in the Code);
(8) paid from an IRA for qualified higher education expenses; or
(9) paid from an IRA for up to $10,000 for qualified first-time
homebuyer expenses (as defined in the Code).
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 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 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 without being considered the owner of the
shares. If any guidance is provided which is considered a new position, then the
guidance would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean that you, as the owner of the contract, could be treated as the owner of
the shares of the investment portfolios.
Due to the uncertainty in this area, First Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
You can only make withdrawals during the accumulation phase.
When you make a complete withdrawal you will receive the withdrawal value. The
withdrawal value is 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 "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 or if smaller, the remaining withdrawal value. First Cova requires
that after a partial withdrawal is made you keep at least $500 in your contract.
When you make a withdrawal, the amount of the death benefit is reduced. See
"Death Benefits."
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
Systematic Withdrawal Program
The Systematic Withdrawal 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.
Income taxes and tax penalties may apply to Systematic Withdrawals.
Suspension of Payments or Transfers
First 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 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.
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.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios, performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
First Cova may, from time to time, include in its advertising and sales
materials, tax deferred compounding charts and other hypothetical illustrations,
which may include comparisons of currently taxable and tax deferred investment
programs, based on selected tax brackets.
Appendix C contains performance information that you may find informative. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and the results shown are not necessarily
representative of future results.
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.
For contracts purchased on or after May 1, 2000, your death benefit is the
Annual Step-Up Option. If you bought your contract before May 1, 2000, you
received the Seven Year Step-Up Option. On your next contract anniversary after
May 1, 2000, you can elect the Annual Step-Up Option. If you do not make an
election on such contract anniversary, your death benefit will remain the
Seven Year Step-Up Option. Note: If you reached age 80 prior to making an
election, you are not affected by the changes to the death benefit and you need
not make an election. This means that the Seven Year Step-Up Option will
remain as 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 FOR CONTRACTS ISSUED ON OR AFTER MAY 1, 2000
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary prior to the date of your or
your joint owner's death, and on each day a purchase payment or withdrawal is
made. On the contract anniversary, if the current contract value is greater than
the GACV, the GACV will be increased to the current value of your contract. If a
purchase payment is made, the amount of the purchase payment will increase the
GACV. If a withdrawal is made, the GACV will be reduced by the amount withdrawn
(and any associated withdrawal charges) divided by the value of your contract
immediately before the withdrawal multiplied by the GACV immediately prior to
the withdrawal. The following example describes the effect of a withdrawal on
the GACV:
Example:
Assumed facts for example:
$10,000 current GACV
$8,000 contract value
$5,000 total purchase payments, less any prior withdrawals and associated
withdrawal charges
$2,100 partial withdrawal ($2,000 withdrawal + $100 withdrawal charge)
New GACV = $10,000 - [($2,100/$8,000) X $10,000]
which results in the current GACV of $10,000 being reduced by $2,625
The new GACV is $7,375.
The contract value immediately after the withdrawal is $5,900, which is $8,000
less the $2,000 withdrawal and the $100 withdrawal charge.
The death benefit immediately after the withdrawal is the greatest of purchase
payments less withdrawals and withdrawal charges ($5,000 minus $2,100) or the
contract value ($5,900) or the GACV ($7,375).
The death benefit is therefore $7,375.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary on or before your, or your
joint owner's, 80th birthday, and on each day a purchase payment or withdrawal
is made. On the contract anniversary on or before your, or your joint owner's,
80th birthday, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the example above explains the effect of a withdrawal on the
GACV.
ANNUAL STEP-UP OPTION FOR CONTRACTS ISSUED PRIOR TO MAY 1, 2000
Prior to you or your joint owner, reaching age 80, the death benefit will be the
greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day First Cova
receives notice that you have elected this death benefit option. This figure is
based on your existing death benefit as described in your contract under the
Seven Year Step-Up Option. The GACV is then evaluated at each subsequent
contract anniversary prior to your or your joint owner's death and on each
subsequent day a purchase payment or withdrawal is made. On the contract
anniversary, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the GACV will be reduced by the amount withdrawn (and any
associated withdrawal charges) divided by the value of your contract immediately
before the withdrawal multiplied by the GACV immediately prior to the
withdrawal. The example above under the Annual Step-Up Option explains the
effect of a withdrawal on the GACV under this death benefit option.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day First Cova
receives notice that you have elected this death benefit option. This figure is
based on your existing death benefit as described in your contract under the
Seven Year Step-Up Option. The GACV is then evaluated at each subsequent
contract anniversary on or before your or your joint owner's, 80th birthday, and
on each subsequent day a purchase payment or withdrawal is made. On the contract
anniversary on or before your or your joint owner's, 80th birthday, if the
current contract value is greater than the GACV, the GACV will be increased to
the current value of your contract. If a purchase payment is made, the amount of
the purchase payment will increase the GACV. If a withdrawal is made, the GACV
will be reduced by the amount withdrawn (and any associated withdrawal charges)
divided by the value of your contract immediately before the withdrawal,
multiplied by the GACV immediately prior to the withdrawal. The example above
under the Annual Step-Up Option explains the effect of a withdrawal on the GACV
under this death benefit option.
SEVEN YEAR STEP-UP OPTION FOR CONTRACTS ISSUED PRIOR TO MAY 1, 2000
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 greatest of:
1. Total purchase payments, less withdrawals (and any withdrawal charges paid
on the withdrawals);
2. The value of your contract at the time the death benefit is to be paid; or
3. The 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.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date First Cova receives proof of death. If First Cova does
not receive an election during such time, it will make a single sum payment to
the beneficiary at the end of the 60 day period.
Death of Annuitant
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death benefit,
if any, will be as provided for in the annuity option selected.
OTHER INFORMATION
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 (Cova Life), 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. 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 First Cova. The acquisition of GenAmerica
Corporation does not affect policy benefits or any other terms or conditions
under your contract.
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 Separate
Account is divided into sub-accounts.
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. The Separate Account
is subject to the laws of the State of New York. 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 a commission of up to 3.5% of purchase payments and
an expense allowance of up to 1.25% of purchase payments and up to .25% of the
contract value. Alternatively, the broker-dealers will be paid a commission of
up to 3.5% of purchase payments and an expense allowance of up to 2.75% of
purchase payments.
If the contract is annuitized, the broker-dealers will be paid a commission
ranging from 1% to 4% of contract value depending on the terms of the annuity
option chosen by the contract owner.
Ownership
Owner. You, as the owner of the contract, have all the interest and rights under
the contract. Prior to the annuity date, the owner is as designated at the time
the contract is issued, unless changed. On and after the annuity date, the
annuitant is the owner (this may be a taxable event). The beneficiary becomes
the owner when a death benefit is payable. When this occurs, some ownership
rights may be limited.
Joint Owner. The contract can be owned by joint owners. 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.
Financial Statements
The financial statements of First Cova and the Separate Account have been
included in the Statement of Additional Information.
Table of Contents of the Statement of Additional Information
Company
Experts
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
APPENDIX A
Condensed Financial Information
Accumulation Unit Value History
The following schedule includes accumulation unit values for the period
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97
- ---------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan
Investment Management Inc.
Select Equity Sub-Account
<S> <C> <C> <C>
Beginning of Period $16.99 $14.05 $11.76
End of Period 18.38 16.99 14.05
Number of Accum. Units Outstanding 8,820 5,207 1,321
Small Cap Stock Sub-Account
Beginning of Period $12.58 $13.49 $10.92
End of Period 17.93 12.58 13.49
Number of Accum. Units Outstanding 4,804 2,679 530
International Equity Sub-Account
Beginning of Period $12.89 $11.46 $11.14
End of Period 16.34 12.89 11.46
Number of Accum. Units Outstanding 12,265 6,954 3,836
Quality Bond Sub-Account
Beginning of Period $11.91 $11.16 $10.45
End of Period 11.57 11.91 11.16
Number of Accum. Units Outstanding 5,664 5,759 2,068
Large Cap Stock Sub-Account
Beginning of Period $19.43 $14.89 $12.40
End of Period 22.55 19.43 14.89
Number of Accum. Units Outstanding 13,610 6,695 2,807
- -------------------------------------------------------------------------------------------------------------------
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $13.50 $12.88 $11.74
End of Period 13.77 13.50 12.88
Number of Accum. Units Outstanding 17,199 11,913 8,928
- -------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Sub-Account
Beginning of Period $10.44 $11.05 N/A
End of Period 10.88 10.44
Number of Accum. Units Outstanding 5,899 1,487
- -------------------------------------------------------------------------------------------------------------------
Large Cap Research Sub-Account
Beginning of Period $11.83 $10.95 N/A
End of Period 14.64 11.83
Number of Accum. Units Outstanding 7,259 2,713
- -------------------------------------------------------------------------------------------------------------------
Developing Growth Sub-Account
Beginning of Period $11.07 $10.19 N/A
End of Period 14.45 11.07
Number of Accum. Units Outstanding 3,257 167
- -------------------------------------------------------------------------------------------------------------------
Lord Abbett Growth & Income Sub-Account
Beginning of Period $35.90 N/A N/A
End of Period 39.46
Number of Accum. Units Outstanding 14,640
- -------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market Sub-Account
Beginning of Period $11.11 $11.11 N/A
End of Period 11.56 11.11
Number of Accum. Units Outstanding 9 2,161
- -------------------------------------------------------------------------------------------------------------------
<FN>
* The accumulation unit values shown above for the beginning of the period
reflect the date these accumulation units first invested in the Cova Series
Trust investment portfolios as follows: Select Equity (3/11/97), Small Cap
Stock (3/17/97), International Equity (3/11/97), Quality Bond (5/15/97),
Large Cap Stock (3/11/97), Bond Debenture (5/15/97), Mid-Cap Value
(3/4/98), Large Cap Research (3/3/98) and Developing Growth (11/23/98). The
General American Capital Company Money Market Sub-Account commenced
investment operations on December 28, 1998. There are no accumulation unit
values shown for certain investment portfolios, because they were not
available with your contract until the date of this prospectus.
</FN>
</TABLE>
APPENDIX B
PARTICIPATING INVESTMENT PORTFOLIOS
Below are the investment objectives and strategies of each investment portfolio
available under the contract. The fund prospectuses contain more complete
information including a description of the investment objectives, policies,
restrictions and risks. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
AIM VARIABLE INSURANCE FUNDS:
AIM Variable Insurance Funds is a mutual fund with multiple portfolios.
A I M Advisors, Inc. is the investment adviser to each portfolio.
The following portfolios are available under the contract:
AIM V.I. CAPITAL APPRECIATION FUND
Investment Objective: The Fund's investment objective is growth of capital
through investment in common stocks, with emphasis on medium- and small-sized
companies. The portfolio managers focus on companies they believe are
likely to benefit from new or innovative products, services or processes
as well as those that have experienced above-average, long-term growth
in earnings and have excellent prospects for future growth.
AIM V.I. INTERNATIONAL EQUITY FUND
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing in a diversified portfolio of international
equity securities whose issuers are considered to have strong earnings momentum.
AIM V.I. VALUE FUND
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in equity securities judged by the
Fund's investment advisor to be undervalued relative to the investment advisor's
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PREMIER GROWTH PORTFOLIO (Class A)
Investment Objective: The Portfolio's investment objective is growth of capital
by pursuing aggressive investment policies. The Portfolio invests primarily
in equity securities of U.S. companies. Normally, the Portfolio invests in
about 40-50 companies, with the 25 most highly regarded of these companies
usually constituting approximately 70% of the Portfolio's net assets.
REAL ESTATE INVESTMENT PORTFOLIO (Class A)
Investment Objective: The Portfolio's investment objective is total return from
long-term growth of capital and income principally through investing in equity
securities of companies that are primarily engaged in or related to the real
estate industry.
COVA SERIES TRUST: Cova Series Trust is managed by Cova Investment Advisory
Corporation (Cova Advisory), which is an affiliate of First Cova. Cova Series
Trust is a mutual fund with multiple portfolios. Cova Advisory has engaged
sub-advisers to provide investment advice for the individual investment
portfolios. The following portfolios are available under the contract:
PORTFOLIOS MANAGED BY J. P. MORGAN INVESTMENT MANAGEMENT INC.:
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: The International Equity Portfolio seeks to provide a high
total return from a portfolio of equity securities of foreign corporations.
LARGE CAP STOCK PORTFOLIO
Investment Objective: The Large Cap Stock Portfolio seeks to provide long-term
growth of capital and income.
QUALITY BOND PORTFOLIO
Investment Objective: The Quality Bond Portfolio seeks to provide a high total
return consistent with moderate risk of capital and maintenance of liquidity.
SELECT EQUITY PORTFOLIO
Investment Objective: The Select Equity Portfolio seeks to provide long-term
growth of capital and income.
SMALL CAP STOCK PORTFOLIO
Investment Objective: The Small Cap Stock Portfolio seeks to provide a high
total return from a portfolio of equity securities of small companies.
PORTFOLIOS MANAGED BY LORD, ABBETT & CO.:
BOND DEBENTURE PORTFOLIO
Investment Objective: The Bond Debenture Portfolio seeks to provide high current
income and the opportunity for capital appreciation to produce a high total
return.
DEVELOPING GROWTH PORTFOLIO
Investment Objective: The Developing Growth Portfolio seeks long-term growth of
capital through a diversified and actively-managed portfolio consisting of
developing growth companies, many of which are traded over the counter.
LARGE CAP RESEARCH PORTFOLIO
Investment Objective: The Large Cap Research Portfolio seeks growth of capital
and growth of income consistent with reasonable risk.
LORD ABBETT GROWTH AND INCOME PORTFOLIO
Investment Objective: The Lord Abbett Growth and Income Portfolio seeks to
achieve long-term growth of capital and income without excessive fluctuation in
market value.
MID-CAP VALUE PORTFOLIO
Investment Objective: The Mid-Cap Value Portfolio seeks capital appreciation
through investments, primarily in equity securities, which are believed to be
undervalued in the marketplace.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST, CLASS 1 SHARES:
Franklin Templeton Variable Insurance Products Trust is a mutual fund with
multiple portfolios. Effective May 1, 2000 the portfolios of Templeton Variable
Products Series Fund were merged into similar portfolios of Franklin Templeton
Variable Insurance Products Trust. Each portfolio has two classes of shares:
Class 1 and Class 2. The portfolios available in connection with your contract
are Class 1 shares. Franklin Advisers, Inc. is the investment adviser for the
Franklin Small Cap Fund, Templeton Investment Counsel, Inc. is the investment
adviser for the Templeton International Securities Fund, and Templeton Asset
Management Ltd. is the investment adviser for the Templeton Developing Markets
Securities Fund. The following portfolios are available under the contract:
FRANKLIN SMALL CAP FUND (the surviving fund of the merger with Franklin
Small Cap Investments Fund)
Investment Objective and Principal Investments: The Fund's investment goal is
long-term capital growth. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of U.S. small
capitalization (small cap) growth companies.
TEMPLETON INTERNATIONAL SECURITIES FUND (formerly, Templeton International
Fund)
Investment Objective and Principal Investments: The Fund's investment goal is
long-term capital growth. Under normal market conditions, the Fund will invest
at least 65% of its total assets in the equity securities of companies located
outside the U.S., including in emerging markets.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND (formerly, Templeton
Developing Markets Fund)
Investment Objective and Principal Investments: The Fund's investment goal is
long-term capital appreciation. Under normal market conditions, the Fund will
invest at least 65% of its total assets in emerging market equity securities.
Emerging market equity securities generally include equity securities that trade
in emerging markets or are issued by companies that derive revenue from goods or
services produced, or that have their principal activities or assets in,
emerging market countries.
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
MONEY MARKET FUND
Investment Objective: The Money Market Fund's investment objective is to provide
investors with current income while preserving capital and maintaining
liquidity. The Fund seeks to achieve this objective by investing primarily in
high-quality, short-term money market instruments. The Fund purchases securities
that meet the quality, maturity, and diversification requirements applicable to
money market funds.
MFS VARIABLE INSURANCE TRUST:
MFS Variable Insurance Trust is a mutual fund with multiple portfolios.
Massachusetts Financial Services Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
MFS EMERGING GROWTH SERIES
Investment Objective: The Series' investment objective is long term growth of
capital. The Series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities of emerging growth
companies.
MFS GLOBAL GOVERNMENTS SERIES
Investment Objective: The Series' investment objective is to provide income
and capital appreciation. The Series invests primarily in U.S. and foreign
government securities.
MFS GROWTH WITH INCOME SERIES
Investment Objective: The Series' investment objective is to provide reasonable
current income and long-term growth of capital and income. The Series invests,
under normal market conditions, at least 65% of its total assets in common
stocks and related securities.
MFS HIGH INCOME SERIES
Investment Objective: The Series' investment objective is to provide high
current income by investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve equity features.
The Series invests, under normal market conditions, at least 80% of its total
assets in high yield fixed income securities which generally are lower rated
bonds commonly known as junk bonds. Junk bonds are subject to a substantially
higher degree of risk than higher rated bonds.
MFS RESEARCH SERIES
Investment Objective: The Series' investment objective is long-term growth of
capital and future income. The Series invests, under normal market conditions,
at least 80% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts.
<TABLE>
<CAPTION>
APPENDIX C
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
Note: The figures below present investment performance information for the
periods ended December 31, 1999. While these numbers represent the returns as
of that date, they do not represent performance information of the portfolios
since that date. Performance information for the periods after December 31,
1999 may be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
J.P. Morgan Investment Management Inc. is the sub-adviser for the following
portfolios of Cova Series Trust: Select Equity, Small Cap Stock, International
Equity, Quality Bond and Large Cap Stock. Lord, Abbett & Co. is the sub-adviser
for the following Portfolios of Cova Series Trust: Bond Debenture, Mid-Cap
Value, Large Cap Research and Developing Growth. All of these portfolios began
operations before December 31, 1999. As a result, performance information is
available for the accumulation unit values investing in these portfolios.
* Column A presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected. The withdrawal charge rate has been revised as of the date of
this Prospectus. The performance information shown in Column A below
reflects the previous withdrawal charge rate.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
investment portfolio.
The inception dates shown below reflect the dates the Separate Account first
invested in the Portfolio. The total return figures are not annualized if the
sub-account was in existence for less than one year.
Part 1 Cova Series Trust
Average Annual Total Return for the period ended 12/31/99:
- -------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all charges (reflects insurance
and portfolio charges and
expenses) portfolio expenses)
Separate Account
Inception Date since since
Portfolio in Portfolio 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Equity 3/11/97 1.82% 15.90% 8.22% 17.24%
Small Cap Stock 3/17/97 36.07% 18.12% 42.52% 19.43%
International Equity 3/11/97 20.30% 13.20% 26.73% 14.59%
Quality Bond 5/15/97 -9.31% 2.20% -2.92% 3.95%
Large Cap Stock 3/11/97 9.64% 22.51% 16.06% 23.74%
Bond Debenture 5/15/97 -4.41% 4.59% 1.99% 6.24%
Mid-Cap Value 3/04/98 -2.21% -4.50% 4.19% -0.87%
Large Cap Research 3/03/98 17.34% 14.00% 23.76% 17.18%
Developing Growth 11/23/98 24.15% 31.52% 30.58% 37.18%
Lord Abbett Growth and Income 1/08/99 NA 2.78% NA 9.89%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PART 1 General American Capital Company Money Market Fund
Average Annual Total Return for the period ended 12/31/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all charges (reflects insurance
and portfolio charges and
expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date 1 yr since 1 yr since
Portfolio in Portfolio inception inception
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 12/28/98 -2.36% -2.31% 4.04% 4.04%
</TABLE>
<TABLE>
<CAPTION>
PART 2 - HISTORICAL FUND PERFORMANCE
Certain portfolios have been in existence for some time and have an investment
performance history. In order to show how the historical performance of the
portfolios affects the contract's accumulation unit values, the following
performance information was developed.
The information is based upon the historical experience of the portfolios and is
for the periods shown. The chart below shows the investment performance of the
portfolios and the accumulation unit performance calculated by assuming that the
contracts were invested in the portfolios for the same periods.
o The performance figures in Column A reflect the fees and expenses paid by
each portfolio.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of each portfolio, and assumes that you make a withdrawal at
the end of the period and therefore the withdrawal charge is reflected. The
withdrawal charge reflected is the revised charge which takes effect as of
the date of this Prospectus.
o Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
o Performance figures shown for portfolios in existence for less than one
year are not annualized.
Total Return for the periods ended 12/31/99
- - ----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- - ----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- - ----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation 5/5/93 44.61% 25.59% 22.33% 36.20% 22.29% 20.69% 42.60% 24.19% 20.93%
AIM V.I.
International Equity 5/5/93 55.04% 21.93% 18.82% 46.49% 18.63% 17.18% 52.89% 20.53% 17.42%
AIM V.I. Value 5/5/93 29.90% 27.23% 23.07% 21.69% 23.93% 21.43% 28.09% 25.83% 21.67%
- - ----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth
(Class A) 6/26/92 32.32% 36.03% 26.31% 24.08% 32.73% 24.81% 30.48% 34.63% 24.91%
Real Estate
Investment
(Class A) 1/9/97 -5.11% N/A -1.79% -12.83% N/A -4.83% -6.43% N/A -3.19%
- - ----------------------------------------------------------------------------------------------------------------------------------
Part 2 Cova Series Trust
Average Annual Total Return for the period ended 12/31/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all charges (reflects insurance
Fund Performance and portfolio charges and
Column A expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio
Inception since since since
Portfolio Date 1 yr inception 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Select Equity 5/1/96 9.71% 19.44% 1.82% 16.70% 8.22% 17.79%
Small Cap Stock 5/1/96 44.56% 17.30% 36.07% 14.58% 42.52% 15.67%
International Equity 5/1/96 28.52% 15.26% 20.30% 12.56% 26.73% 13.65%
Quality Bond 5/1/96 -1.54% 5.79% -9.31% 3.25% -2.92% 4.34%
Large Cap Stock 5/1/96 17.64% 26.52% 9.64% 23.71% 16.06% 24.80%
Bond Debenture 5/1/96 3.40% 10.32% -4.41% 7.72% 1.99% 8.81%
Mid-Cap Value 8/20/97 5.71% 4.95% -2.21% 1.58% 4.19% 3.61%
Large Cap Research 8/20/97 25.54% 18.96% 17.34% 15.45% 23.76% 17.48%
Developing Growth 8/20/97 32.47% 18.35% 24.15% 14.83% 30.58% 16.86%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Franklin Templeton Variable Insurance Products Trust,
Class 1 Shares
Templeton Developing
Markets Securities
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund (1) 3/4/96 53.84% N/A -5.30% 46.04% N/A -7.75% 52.44% N/A -6.70%
Templeton
International
Securities Fund (2) 5/1/92 23.61% 17.21% 15.36% 15.81% 13.91% 13.86% 22.21% 15.81% 13.96%
Franklin Small Cap
Fund (3) 11/1/95 96.94% N/A 30.41% 89.14% N/A 28.26% 95.54% N/A 29.01%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Previously, the Templeton Developing Markets Fund. Effective May 1, 2000,
the Templeton Developing Markets Fund merged into the Templeton Developing
Markets Equity Fund. Performance shown reflects historical performance and
inception date of the Templeton Developing Markets Securities Fund.
(2) Previously, the Templeton International Fund. Effective May 1, 2000, the
Templeton International Securities Fund merged into the Templeton International
Equity Fund. Performance shown reflects historical performance and inception
date of the Templeton International Securities Fund.
(3) Effective May 1, 2000, the Franklin Small Cap Investments Fund (previously
offered under the contract) merged into the Franklin Small Cap Fund. Performance
shown reflects historical performance and inception date of the Franklin Small
Cap Fund.
<TABLE>
<CAPTION>
Part 2 General American Capital Company Money Market Fund
Average Annual Total Return for the period ended 12/31/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all charges (reflects insurance
Fund Performance and portfolio charges and
Column A expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio
Inception
Portfolio Date 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> <C> <C>
Money Market 10/1/87 5.20% 5.60% 5.35% -2.36% 2.30% 3.85% 4.04% 4.20% 3.95%
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging
Growth 7/24/95 76.71% N/A 36.44% 67.86% N/A 34.33% 74.26% N/A 35.04%
MFS Global
Governments 6/14/94 -2.50% 4.36% 4.07% -10.25% 1.06% 2.24% -3.85% 2.96% 2.67%
MFS Growth
With Income 10/9/95 6.69% N/A 21.12% -1.19% N/A 18.98% 5.21% N/A 19.72%
MFS High Income 7/26/95 6.44% N/A 8.24% -1.43% N/A 6.12% 4.97% N/A 6.84%
MFS Research 7/26/95 24.05% N/A 22.86% 15.92% N/A 20.74% 22.32% N/A 21.46%
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
- ------------------------
- ------------------------
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
May 1, 2000, for The Annuity Contract issued by First Cova.
(Please print or type and fill in all information)
- ------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------
City State Zip Code
CNY-1090 (5/00) FIRST COVA VA
PART A - VERSION B
The Fixed
And Variable Annuity
issued by
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
and
FIRST COVA 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 42 investment choices - a fixed account which offers an
interest rate which is guaranteed by First Cova, and 41 investment portfolios
listed below. You can put your money in the fixed account and/or any of these
investment portfolios.
AIM Variable Insurance Funds:
Managed by A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Alliance Variable Products Series Fund, Inc.:
Managed by Alliance Capital
Management L.P.
Premier Growth Portfolio (Class A)
Real Estate Investment Portfolio (Class A)
Cova Series Trust:
Managed by J.P. Morgan
Investment Management Inc.
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Managed by Lord, Abbett & Co.
Bond Debenture Portfolio
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value Portfolio
Franklin Templeton Variable Insurance Products Trust*, Class 1 Shares:
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund (the surviving fund of the
merger with Mutual Shares Investments Fund)
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities Fund (formerly,
Templeton Developing Markets Fund)
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities Fund (formerly, Templeton
International Fund)
*Effective May 1, 2000, the portfolios of the Templeton Variable Products
Series Fund were merged into similar portfolios of Franklin Templeton
Variable Insurance Products Trust.
General American Capital Company:
Managed by Conning Asset
Management Company
Money Market Fund
Goldman Sachs Variable Insurance Trust ("VIT"):
Managed by Goldman Sachs
Asset Management, a unit of the Investment Management Division
of Goldman, Sachs & Co.
Goldman Sachs VIT Growth and Income Fund
Managed by Goldman Sachs
Asset Management International
Goldman Sachs VIT Global Income Fund
Goldman Sachs VIT International Equity Fund
Kemper Variable Series:
Managed by Scudder Kemper
Investments, Inc.
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
Liberty Variable Investment Trust:
Managed by Newport Fund
Management Inc.
Newport Tiger Fund, Variable Series
MFS Variable Insurance Trust:
Managed by Massachusetts
Financial Services Company
MFS Emerging Growth Series
MFS Global Governments Series
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
Oppenheimer Variable Account Funds:
Managed by OppenheimerFunds, Inc.
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Strategic Bond Fund/VA
Putnam Variable Trust:
Managed by Putnam Investment
Management, Inc.
Putnam VT Growth and Income Fund - Class IA Shares
Putnam VT International Growth Fund - Class IA Shares
Putnam VT International New
Opportunities Fund - Class IA Shares
Putnam VT New Value Fund - Class IA Shares
Putnam VT Vista Fund - Class IA Shares
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 May 1,
2000. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page __ of this prospectus. For a free
copy of the SAI, call us at (800) 523-1661 or write us at: One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 2000
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS
SUMMARY
Fee Table
Examples
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Annuity Payments
Annuity Options
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
AIM Variable Insurance Funds
Alliance Variable Products Series Fund, Inc.
Cova Series Trust
Franklin Templeton Variable Insurance Products Trust
General American Capital Company
Goldman Sachs Variable Insurance Trust
Kemper Variable Series
Liberty Variable Investment Trust
MFS Variable Insurance Trust
Oppenheimer Variable Account Funds
Putnam Variable Trust
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Suspension of Payments or Transfers
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
First Cova
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Participating Investment Portfolios
APPENDIX C
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
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 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. 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 41 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 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.
You can put money into any or all of the investment portfolios and the fixed
account. You can transfer between accounts up to 12 times a year without charge
or tax implications.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments during
the income phase.
ANNUITY PAYMENTS (THE INCOME PHASE):
If you want to receive regular income from your annuity, you can choose an
annuity option. Once you begin receiving regular payments, you cannot change
your payment plan. During the income phase, you have the same investment choices
you had during the accumulation phase. You can choose to have payments come from
the fixed account, the investment portfolios or both. If you choose to have any
part of your payments come from the investment portfolios, the dollar amount of
your payments may go up or down.
HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
INVESTMENT OPTIONS:
You can put your money in any or all of the investment portfolios which are
briefly described in Appendix B and more fully 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 features and investment features, and there are costs
related to each.
* Each year First Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, 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.
* If you take your money out, First Cova may assess a withdrawal charge of
up to 7% of the purchase payment withdrawn. After First Cova has had a purchase
payment for seven years, there is no charge by First Cova for a withdrawal of
that purchase payment.
* The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
* There are also investment charges which range from ____% to ____% 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,
earnings come out first and are taxed as income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% federal tax penalty on the
earnings. Payments during the income phase are considered partly a return of
your original investment. That part of each payment is not taxable as income.
ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from First Cova. Withdrawals of purchase payments in excess of
that may be charged a withdrawal charge, depending on how long your money has
been in the contract. However, First Cova will never assess a withdrawal charge
on earnings you withdraw. Earnings are defined as the value in your contract
minus the remaining purchase payments in your contract. Of course, you may also
have to pay income tax and a tax penalty on any money you take out.
DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
OTHER INFORMATION:
Free Look. If you cancel the contract within 10 days after receiving it 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 income tax brackets. You should not buy this contract if
you are looking for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* First Cova will automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
These features may not be suitable for your particular situation.
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, 10th Floor
New York, NY 10271
(800) 469-4545
(212) 766-0012
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will incur
directly or indirectly with the contract. The Fee Table reflects expenses of the
Separate Account as well as of the investment portfolios. Expenses of the
investment portfolios are not fixed or specified under the terms of the contract
and actual expenses may vary.
OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of Years Since
purchase payments) (see Note 1 below) Payment Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
Transfer Fee (see Note 2 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
CONTRACT MAINTENANCE CHARGE (see Note 3 below) $30 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
---
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
<TABLE>
<CAPTION>
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Total Annual
Management Fees Other Expenses Portfolio Expenses
- - ----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds
Managed by A I M Advisors, Inc.
<S> <C> <C> <C>
A I M V.I. Capital Appreciation Fund .62% .11% .73%
A I M V.I. International Equity Fund .75% .22% .97%
A I M V.I. Value Fund .61% .15% .76%
- - ----------------------------------------------------------------------------------------------------------------------------------
Other Expenses after Total Annual Portfolio
(expense reimbursement Expenses (after expense
Management for Real Estate reimbursement for Real
Fees Investment Portfolio) Estate Investment Portfolio)
- - ----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth Portfolio (Class A) 1.00% .05% 1.05%
Real Estate Investment Portfolio (Class A)* .49% .46% .95%
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The expenses shown with respect to the Real Estate Investment Portfolio are
net of voluntary reimbursements. Expenses have been capped at .95% annually and
the adviser to the Fund intends to continue such reimbursements for the
foreseeable future. For the year ended December 31, 1999, the expenses for the
Real Estate Investment Portfolio, before reimbursement, were: .90% management
fees and .82% for other expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees certain Portfolios)(1) certain Portfolios)(1)
- - ----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
<S>
<C> <C> <C>
International Equity Portfolio .79% .31% 1.10%
Large Cap Stock Portfolio .65% .10% .75%
Quality Bond Portfolio .54% .10% .64%
Select Equity Portfolio .67% .10% .77%
Small Cap Stock Portfolio .85% .19% 1.04%
Managed by Lord, Abbett &Co.
Bond Debenture Portfolio .75% .10% .85%
Developing Growth Portfolio .90% .30% 1.20%
Large Cap Research Portfolio 1.00% .30% 1.30%
Lord Abbett Growth and Income Portfolio(2) .65% .05% .70%
Mid-Cap Value Portfolio 1.00% .30% 1.30%
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Cova reimburses the investment portfolios, except the Select Equity,
Small Cap Stock and International Equity Portfolios, for all operating
expenses (exclusive of the management fees) in excess of approximately .30%
for the Mid-Cap Value, Large Cap Research and Developing Growth Portfolios
and in excess of approximately .10% for the other investment portfolios.
Prior to May 1, 1999, Cova had reimbursed expenses in excess of approximately
.10% with respect to the Select Equity, Small Cap Stock, International Equity,
Mid-Cap Value, Large Cap Research and Developing Growth Portfolios. Therefore,
the amounts shown above under "Other Expenses" have been restated to reflect
the estimated expenses for the Select Equity, Small Cap Stock and International
Equity Portfolios for the year ending December 31, 2000. Absent these
expense reimbursement arrangements, the total annual portfolio
expenses for the year ended December 31, 1999 were: 1.09% for the Small Cap
Stock Portfolio; 1.15% for the International Equity Portfolio; .71% for the
Quality Bond Portfolio; .76% for the Large Cap Stock Portfolio; .86% for the
Bond Debenture Portfolio; 1.41% for the Mid-Cap Value Portfolio; 1.38% for the
Large Cap Research Portfolio; and 1.34% for the Developing Growth Portfolio.
(2) The Portfolio commenced investment operations on January 8, 1999.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees one Portfolio) one Portfolio)
- - ----------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust, Class 1 Shares
<S> <C> <C> <C> <C>
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund(*) .60% .19% .79%
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets
Securities Fund (**) 1.25% .31% 1.56%
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities
Fund (***) .69% .19% .88%
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
* On 2/8/00, a merger and reorganization was approved that combined the fund
with a similar fund of Templeton Variable Products Series Fund, effective
5/1/00. The table shows total expenses based on the fund's assets as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected combined assets, the fund's expenses after 5/1/00 would be
estimated as: Management Fees 0.60%, Other Expenses 0.19%, and Total Fund
Operating Expenses 0.79%.
** On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton Developing Markets Equity Fund, effective
5/1/00. The shareholders of that fund had approved new management fees,
which apply to the combined fund effective 5/1/00. The table shows restated
total expenses based on the new fees and the assets of the fund as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 1.25%, Other Expenses
0.29%, and Total Fund Operating Expenses 1.54%.
*** On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with the Templeton International Equity Fund, effective 5/1/00.
The shareholders of that fund had approved new management fees, which apply
to the combined fund effective 5/1/00. The table shows restated total
expenses based on the new fees and the assets of the fund as of 12/31/99,
and not the assets of the combined fund. However, if the table reflected
both the new fees and the combined assets, the fund's expenses after 5/1/00
would be estimated as: Management Fees 0.65%, Other Expenses 0.20%, and
Total Fund Operating Expenses 0.85%.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- - ----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
<S> <C> <C> <C>
Money Market Fund .125% .08% .205%
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Annual
Other Expenses Portfolio Expenses
Management (after expense (after expense
Fees reimbursement)* reimbursement)*
- - ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs VIT Growth and Income Fund .75% .25% 1.00%
Managed by Goldman Sachs Asset Management International
Goldman Sachs VIT Global Income Fund .90% .25% 1.15%
Goldman Sachs VIT International Equity Fund 1.00% .35% 1.35%
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The investment advisers to the Goldman Sachs VIT Growth and Income, International
Equity and Global Income Funds have voluntarily agreed to reduce or limit
certain "Other Expenses" of such Funds (excluding management fees, taxes,
interest, brokerage fees, litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.25%, 0.35% and 0.25% per
annum of such Funds' average daily net assets, respectively. The expenses
shown include this reimbursement. If not included, the "Other Expenses" and
"Total Annual Portfolio Expenses" for the Goldman Sachs VIT Growth and Income,
International Equity and Global Income Funds would be .47% and 1.22%, .77% and
1.77% and 1.78% and 2.68%, respectively. The reductions or limitations may be
discontinued or modified by the investment advisers in their discretion at any
time. The Fund's expenses shown in the fee table are based on estimated expenses
for the fiscal year ending December 31, 2000.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees Small Cap Value Portfolio) Small Cap Value Portfolio)
- - ----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
<S> <C> <C> <C>
Kemper Government Securities Portfolio .55% .08% .63%
Kemper Small Cap Growth Portfolio .65% .06% .71%
Kemper Small Cap Value Portfolio .75% .09%* .84%
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Pursuant to its agreement with Kemper Variable Series, the investment manager
and the accounting agent have agreed, for the one year period commencing May 1,
2000, to limit their respective fees and to reimburse other operating expenses to
the extent necessary to limit total operating expenses of the Kemper Small Cap
Value Portfolio to .84%. The amounts set forth in the table above reflect
actual expenses for the past fiscal year, which were at or lower than these
expense limits, after the benefit of any custodial credits.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- - ----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
<S> <C> <C> <C>
Newport Tiger Fund, Variable Series .90% .31% 1.21%
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement reimbursement
Fees for certain Series) for certain Series)
- - ----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust (1)
Managed by Massachusetts Financial Services Company
MFS Emerging Growth Series .75% .09% .84%
MFS Global Governments Series (2) .75% .16% .91%
MFS Growth With Income Series .75% .13% .88%
MFS High Income Series (2) .75% .16% .91%
MFS Research Series .75% .11% .86%
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which would also have the
effect of reducing the series' expenses. The expenses shown above do not take
into account these expense reductions, and are therefore higher than the
actual expenses of the series.
(2) MFS has contractually agreed to bear expenses for these series, subject to
reimbursement by these series, such that each series' "Other Expenses" do not
exceed 0.15% of the average daily net assets of the series during the current
fiscal year. Absent the expense reimbursement, the Total Annual Portfolio
Expenses for the year ended December 31, 1999, would have been 1.05% for
the MFS Global Governments Series and .97% for the High Income Series. The
payments made by MFS on behalf of each series under this arrangement are
subject to reimbursement by the series to MFS, which will be accomplished by
the payment of an expense reimbursement fee by the series to MFS computed and
paid monthly at a percentage of the series' average daily net assets for
its then current fiscal year, with a limitation that immediately after such
payment, the series' "Other Expenses" will not exceed the percentage set forth
above for that series. The obligation of MFS to bear a series' "Other Expenses"
pursuant to this arrangement, and the series' obligation to pay the
reimbursement fee to MFS, terminates on the earlier of the date on which
payments made by the series equal the prior payment of such reimbursable
expenses by MFS or December 31, 2004. MFS may, in its discretion, terminate
this arrangement at an earlier date provided that the arrangement will continue
for each series until at least May 1, 2001, unless terminated with the consent
of the board of trustees which oversees the series.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Total Annual
Management Fees Other Expenses Portfolio Expenses
- - ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
<S> <C> <C> <C>
Oppenheimer Bond Fund/VA .72% .01% .73%
Oppenheimer Capital Appreciation Fund/VA .68% .02% .70%
Oppenheimer High Income Fund/VA .74% .01% .75%
Oppenheimer Main Street Growth & Income Fund/VA .73% .05% .78%
Oppenheimer Strategic Bond Fund/VA .74% .04% .78%
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Annual
Other Expenses Portfolio Expenses
(after expense (after expense
Management reimbursement for reimbursement for
Fees one Portfolio) one Portfolio)
- - ----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
<S> <C> <C> <C>
Putnam VT Growth and Income Fund - Class IA Shares .46% .04% .50%
Putnam VT International Growth Fund - Class IA Shares .80% .22% 1.02%
Putnam VT International New Opportunities Fund - Class IA Shares 1.08% .33% 1.41%
Putnam VT New Value Fund - Class IA Shares .70% .10% .80%
Putnam VT Vista Fund - Class IA Shares .65% .10% .75%
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Examples
The examples should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
(a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract value
to an annuity option.
Time Periods
- ------------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds
Managed by A I M Advisors, Inc.
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation (a) $92.59 (a) $114.54
(b) $22.59 (b) $ 69.54
AIM V.I. International Equity (a) $95.00 (a) $121.77
(b) $25.00 (b) $ 76.77
AIM V.I. Value (a) $92.90 (a) $115.45
(b) $22.90 (b) $ 70.45
- - ----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Managed by Alliance Capital Management L.P.
Premier Growth (Class A) (a) $95.80 (a) $124.17 (a) $161.99 (a) $286.12
(b) $25.80 (b) $ 79.17 (b) $134.99 (b) $286.12
Real Estate Investment (Class A) (a) $94.80 (a) $121.17 (a) $157.00 (a) $276.23
(b) $24.80 (b) $ 76.17 (b) $130.00 (b) $276.23
- - ----------------------------------------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan Investment Management Inc.
International Equity (a) $96.30 (a) $125.66 (a) $164.48 (a) $291.02
(b) $26.30 (b) $ 80.66 (b) $137.48 (b) $291.02
Large Cap Stock (a) $92.80 (a) $115.15 (a) $146.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Quality Bond (a) $91.69 (a) $111.82 (a) $141.38 (a) $244.89
(b) $21.69 (b) $ 66.82 (b) $114.38 (b) $244.89
Select Equity (a) $93.00 (a) $115.75 (a) $147.96 (a) $258.16
(b) $23.00 (b) $ 70.75 (b) $120.96 (b) $258.16
Small Cap Stock (a) $95.70 (a) $123.87 (a) $161.49 (a) $285.14
(b) $25.70 (b) $ 78.87 (b) $134.49 (b) $285.14
- - ----------------------------------------------------------------------------------------------------------------------------------
Managed by Lord, Abbett & Co.
Bond Debenture (a) $93.80 (a) $118.16 (a) $151.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Developing Growth (a) $97.30 (a) $128.65 (a) $169.42 (a) $300.75
(b) $27.30 (b) $ 83.65 (b) $142.42 (b) $300.75
Large Cap Research (a) $98.30 (a) $131.62 (a) $174.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.32 (b) $310.37
Lord Abbett Growth and Income (a) $92.29 (a) $113.63 (a) $144.42 (a) $251.04
(b) $22.29 (b) $ 68.63 (b) $117.42 (b) $251.04
Mid-Cap Value (a) $98.30 (a) $131.62 (a) $174.35 (a) $310.37
(b) $28.30 (b) $86.62 (b) $147.35 (b) $310.37
- - ----------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust, Class 1 Shares
Managed by Franklin Mutual Advisers, LLC
Mutual Shares Securities (a) $93.20 (a) $116.35
(b) $23.20 (b) $ 71.35
Managed by Templeton Asset Management Ltd.
Templeton Developing Markets Securities (a) $100.89 (a) $139.31
(b) $ 30.89 (b) $ 94.31
Managed by Templeton Investment Counsel, Inc.
Templeton International Securities (a) $94.10 (a) $119.07
(b) $24.10 (b) $ 74.07
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- - ----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset Management Company
<S> <C> <C> <C> <C>
Money Market (a) $87.31 (a) $98.54 (a) $119.02 (a) $199.08
(b) $17.31 (b) $53.54 (b) $ 92.02 (b) $199.08
- - ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Managed by Goldman Sachs Asset Management
Goldman Sachs VIT Growth and Income Fund (a) $95.30 (a) $122.67
(b) $25.30 (b) $ 77.67
Managed by Goldman Sachs Asset Management International
Goldman Sachs VIT Global Income Fund (a) $96.80 (a) $127.16
(b) $26.80 (b) $ 82.16
Goldman Sachs VIT International Equity Fund (a) $98.79 (a) $133.11
(b) $28.79 (b) $ 88.11
- - ----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Managed by Scudder Kemper Investments, Inc.
Kemper Government Securities (a) $91.59 (a) $111.51
(b) $21.59 (b) $ 66.51
Kemper Small Cap Growth (a) $92.39 (a) $113.94
(b) $22.39 (b) $ 68.94
Kemper Small Cap Value (a) $93.70 (a) $117.86
(b) $23.70 (b) $72.86
- - ----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Managed by Newport Fund Management Inc.
Newport Tiger Fund, Variable Series (a) $97.40 (a) $128.94
(b) $27.40 (b) $ 83.94
- - ----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
Managed by Massachusetts Financial Services Company
MFS Emerging Growth (a) $93.70 (a) $117.86
(b) $23.70 (b) $ 72.86
MFS Global Governments (a) $94.40 (a) $119.97
(b) $24.40 (b) $ 74.97
MFS Growth With Income (a) $94.10 (a) $119.07
(b) $24.10 (b) $ 74.07
MFS High Income (a) $94.40 (a) $119.97
(b) $24.40 (b) $ 74.97
MFS Research (a) $93.90 (a) $118.46
(b) $23.90 (b) $ 73.46
- - ----------------------------------------------------------------------------------------------------------------------------------
Examples (continued)
Time Periods
1 year 3 years 5 years 10 years
- - ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Managed by OppenheimerFunds, Inc.
Oppenheimer Bond Fund/VA (a) $92.59 (a) $114.54
(b) $22.59 (b) $ 69.54
Oppenheimer Capital Appreciation Fund/VA (a) $92.29 (a) $113.63
(b) $22.29 (b) $ 68.63
Oppenheimer High Income Fund/VA (a) $92.80 (a) $115.15
Oppenheimer Main Street Growth & Income Fund/VA (a) $93.10 (a) $116.05
(b) $23.10 (b) $ 71.05
Oppenheimer Strategic Bond Fund/VA (a) $93.10 (a) $116.05
(b) $23.10 (b) $ 71.05
- - ----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Managed by Putnam Investment Management, Inc.
Putnam VT Growth and Income - Class IA Shares (a) $90.29 (a) $107.56
(b) $20.29 (b) $ 62.56
Putnam VT International Growth - Class IA Shares (a) $95.50 (a) $123.27
(b) $25.50 (b) $ 78.27
Putnam VT International New Opportunities - Class IA Shares (a) $99.39 (a) $134.88
(b) $29.39 (b) $ 89.88
Putnam VT New Value - Class IA Shares (a) $93.30 (a) $116.65
(b) $23.30 (b) $ 71.65
Putnam VT Vista - Class IA Shares (a) $92.80 (a) $115.15
(b) $22.80 (b) $ 70.15
- - ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Explanation of Fee Table
1. 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.
2. 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.
3. During the accumulation phase, 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.
4. Premium taxes are not reflected. New York does not assess premium taxes.
THERE IS AN ACCUMULATION UNIT VALUE HISTORY (CONDENSED FINANCIAL INFORMATION)
CONTAINED IN APPENDIX A.
</FN>
</TABLE>
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 an income to
you, in the form of annuity payments, beginning on a designated date that is 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 41
investment portfolios and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends, in part, upon the investment performance of the
investment portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by First Cova. 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 interest and 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 under "Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one year after we issue the contract.
Annuity Payments
You will receive annuity payments during the income phase. In general, 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.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from:
* the fixed account,
* the investment portfolio(s), or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the 3% assumed investment rate used in the annuity table for the
contract, and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
Annuity payments are made monthly unless you have less than $2,000 to apply
toward a payment and you have not made a purchase payment in 3 years. 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 reduce the frequency of payments so that your annuity payments
are at least $20.
Annuity Options
You can choose among income plans. We call them annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. If you do not choose
an annuity option at the time you purchase the contract, we will assume that you
selected Option 2 which provides a life annuity with 10 years of guaranteed
payments.
You can choose one of the following annuity options or any other annuity option
acceptable to First Cova. After annuity payments begin, you cannot change the
annuity option.
Option 1. Life Annuity. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
Option 2. Life Annuity with 5, 10 or 20 Years Guaranteed. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a non-
qualified contract. If you are purchasing the contract as part of an IRA
(Individual Retirement Annuity) 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 purchase
payment we accept is $1 million without our prior approval. You can make
additional purchase payments of $500 or more to either type of contract.
Allocation of Purchase Payments
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise. 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. 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.
Accumulation Units
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular investment
portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Quality Bond Portfolio. When the
New York Stock Exchange closes on that Monday, we determine that the value
of an accumulation unit for the Quality Bond Portfolio is $13.90. We then
divide $5,000 by $13.90 and credit your contract on Monday night with
359.71 accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The contract offers 41 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
You should read the prospectuses for this funds carefully. Copies of these
prospectuses will be sent to you with your contract. Certain portfolios
contained in the fund prospectuses may not be available with your contract.
(See Appendix B which contains a summary of investment objectives and
strategies for each investment portfolio.)
The investment objectives and policies of certain of the investment
portfolios are similar to the investment objectives and policies of other
mutual funds that certain of the investment advisers manage. Although the
objectives and policies may be similar, the investment results of the investment
portfolios may be higher or lower than the results of such other mutual funds.
The investment advisers cannot guarantee, and make no representation, that the
investment results of similar funds will be comparable even though the funds
have the same investment advisers.
A fund's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a fund with a small asset base. A
fund may not experience similar performance as its assets grow.
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
First Cova may enter into certain arrangements under which it is reimbursed
by the investment portfolios' advisers, distributors and/or affiliates
for the administrative services which it provides to the portfolios.
AIM VARIABLE INSURANCE FUNDS
AIM Variable Insurance Funds is a mutual fund with multiple portfolios.
A I M Advisors, Inc. is the investment adviser to each portfolio.
The following portfolios are available under the contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
Premier Growth Portfolio (Class A)
Real Estate Investment Portfolio (Class A)
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory), which is an affiliate of First Cova. Cova Series Trust is a mutual
fund with multiple portfolios. Cova Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
portfolios are available under the contract:
J.P. Morgan Investment Management Inc. is the sub-adviser to the following
portfolios:
International Equity Portfolio
Large Cap Stock Portfolio
Quality Bond Portfolio
Select Equity Portfolio
Small Cap Stock Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolios:
Bond Debenture Portfolio
Developing Growth Portfolio
Large Cap Research Portfolio
Lord Abbett Growth and Income Portfolio
Mid-Cap Value Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Franklin Templeton Variable Insurance Products Trust is a mutual fund with
multiple portfolios. Effective May 1, 2000, the portfolios of Templeton Variable
Products Series Fund were merged into similar portfolios of Franklin Templeton
Variable Insurance Products Trust. Each portfolio has two classes of shares:
Class 1 and Class 2. The portfolios available in connection with your contract
are Class 1 shares. Templeton Asset Management Ltd. is the investment adviser
for the Templeton Developing Markets Securities Fund, Templeton Investment
Counsel, Inc. is the investment adviser for the Templeton International
Securities Fund and Franklin Mutual Advisers, LLC is the investment adviser for
the Mutual Shares Securities Fund. The following portfolios are available under
the contract:
Mutual Shares Securities Fund (the surviving fund of the merger with
Mutual Shares Investments Fund)
Templeton Developing Markets Securities Fund (formerly, Templeton
Developing Markets Fund)
Templeton International Securities Fund (formerly, Templeton
International Fund)
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Goldman Sachs Variable Insurance Trust is a mutual fund with multiple
portfolios. Goldman Sachs Asset Management is the investment adviser for the
Goldman Sachs VIT Growth and Income Fund and Goldman Sachs Asset Management
International is the investment adviser for the Goldman Sachs VIT International
Equity Fund and the Goldman Sachs VIT Global Income Fund. The following
portfolios are available under the contract:
Goldman Sachs VIT Global Income Fund
Goldman Sachs VIT Growth and Income Fund
Goldman Sachs VIT International Equity Fund
KEMPER VARIABLE SERIES
Kemper Variable Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the Kemper Government Securities
Portfolio, the Kemper Small Cap Growth Portfolio and the Kemper Small Cap Value
Portfolio. The following portfolios are available under the contract:
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
LIBERTY VARIABLE INVESTMENT TRUST
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger Fund, Variable Series. The following
portfolio is available under the contract:
Newport Tiger Fund, Variable Series
MFS VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust is a mutual fund with multiple portfolios.
Massachusetts Financial Services Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
MFS Emerging Growth Series
MFS Global Governments Series
MFS Growth With Income Series
MFS High Income Series
MFS Research Series
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Variable Account Funds is a mutual fund with multiple portfolios.
OppenheimerFunds, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Strategic Bond Fund/VA
PUTNAM VARIABLE TRUST
Putnam Variable Trust is a mutual fund with multiple portfolios. Putnam
Investment Management, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
Putnam VT Growth and Income Fund - Class IA Shares
Putnam VT International Growth Fund - Class IA Shares
Putnam VT International New Opportunities Fund - Class IA Shares
Putnam VT New Value Fund - Class IA Shares
Putnam VT Vista Fund (a stock portfolio) - Class IA Shares
Transfers
You can transfer money among the fixed account and the investment portfolios.
Telephone Transfers. 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.
Transfers During the Accumulation Phase.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The following apply to any transfer during the
accumulation phase:
1. 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.
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. Currently, First Cova does not charge for
participating in the Dollar Cost Averaging Program. First Cova will waive
the minimum transfer amount and the minimum amount required to establish dollar
cost averaging if you establish dollar cost averaging for 6 or 12 months at
the time you buy the contract.
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.
First Cova may, from time to time, offer other dollar cost averaging programs
which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to the investment portfolios, the performance
of each portfolio may cause your allocation to shift. You can direct us to
automatically rebalance your contract to return to your original percentage
allocations by selecting our Automatic Rebalancing Program. You can tell us
whether to rebalance quarterly, semi-annually or annually. We will measure these
periods from the anniversary of the date we issued your contract. The transfer
date will be the 1st day after the end of the period you selected.
The Automatic Rebalancing Program is available only during the accumulation
phase. Currently, First Cova does not charge for participating in the Automatic
Rebalancing Program. If you participate in the Automatic Rebalancing Program,
the transfers made under the program are not taken into account in determining
any transfer fee.
Example:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Quality Bond Portfolio and
60% to be in the Select Equity Portfolio. Over the next 2 1/2 months the
bond market does very well while the stock market performs poorly. At the
end of the first quarter, the Quality Bond Portfolio now represents 50% of
your holdings because of its increase in value. If you have chosen to have
your holdings rebalanced quarterly, on the first day of the next quarter,
First Cova will sell some of your units in the Quality Bond Portfolio to
bring its value back to 40% and use the money to buy more units in the
Select Equity Portfolio to increase those holdings to 60%.
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
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 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.
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 fund expenses have been deducted. This charge is for the insurance
benefits e.g., guarantee of annuity rates, the death benefits, for certain
expenses of the contract, and for assuming the risk (expense risk) that the
current charges will be sufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below) is for the expenses associated with the
administration of the contract. Some of these expenses are: preparation of the
contract, confirmations, annual reports and statements, maintenance of contract
records, personnel costs, legal and accounting fees, filing fees, and computer
and systems costs. Because this charge is taken out of every unit value, you may
pay more in administrative costs than those that are associated solely with your
contract. 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 cannot be increased.
First 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. 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, unless the
purchase payment was made more than 7 years ago, the charge is:
<TABLE>
<CAPTION>
Years Since
Payment Charge
<S> <C>
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
</TABLE>
After First Cova has had a purchase payment for 7 years, there is no charge when
you withdraw that purchase payment. First Cova does not assess a withdrawal
charge on earnings withdrawn from the contract. Earnings are defined as the
value in your contract minus the remaining purchase payments in your contract.
The withdrawal order for calculating the withdrawal charge is shown below.
* 10% of purchase payments free.
* Remaining purchase payments that are over 7 years old and not subject
to a withdrawal charge.
* Earnings in the contract free.
* Remaining purchase payments that are less than 7 years old and are
subject to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules may
apply to Section 1035 exchanges.
When the withdrawal is for only part of the value of your contract, the
withdrawal charge is deducted from the remaining value in your contract if
sufficient, or from the amount withdrawn.
First Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
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.
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 an additional discussion regarding taxes in the Statement of
Additional Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under 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.
An annuity contract will not provide any necessary or additional tax deferral if
it is used to fund a qualified plan that is tax deferred. However, the contract
has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing an annuity contract to
fund a qualified plan.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio
of pre-tax purchase payments to the after-tax purchase payments in your
contract. If all of your purchase payments were made with pre-tax money,
then the full amount of any withdrawal is includible in taxable income.
Special rules may apply to withdrawals from certain types of qualified
contracts.
The Code also provides that any amount received under a qualified contract
which is included in income may be subject to a penalty. The amount of
the penalty is equal to 10% of the amount that is includible in income.
Some withdrawals will be exempt from the penalty. They include any
amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid in a series of substantially equal periodic payments made
annually (or more frequently) under a lifetime annuity;
(5) paid for certain allowable medical expenses (as defined in the
Code);
(6) paid on account of an IRS levy upon the qualified contract;
(7) paid from an IRA for medical insurance (as defined in the Code);
(8) paid from an IRA for qualified higher education expenses; or
(9) paid from an IRA for up to $10,000 for qualified first-time
homebuyer expenses (as defined in the Code).
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 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 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 without being considered the owner of the
shares. If any guidance is provided which is considered a new position, then the
guidance would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean that you, as the owner of the contract, could be treated as the owner of
the shares of the investment portfolios.
Due to the uncertainty in this area, First Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
You can only make withdrawals during the accumulation phase.
When you make a complete withdrawal you will receive the withdrawal value. The
withdrawal value is 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 "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 or if smaller, the remaining withdrawal value. First Cova requires
that after a partial withdrawal is made you keep at least $500 in your contract.
When you make a withdrawal, the amount of the death benefit is reduced. See
"Death Benefits."
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
Systematic Withdrawal Program
The Systematic Withdrawal 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.
Income taxes and tax penalties may apply to Systematic Withdrawals.
Suspension of Payments or Transfers
First 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 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.
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.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios, performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
First Cova may, from time to time, include in its advertising and sales
materials, tax deferred compounding charts and other hypothetical illustrations,
which may include comparisons of currently taxable and tax deferred investment
programs, based on selected tax brackets.
Appendix C contains performance information that you may find informative. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and the results shown are not necessarily
representative of future results.
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 death benefit is 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
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary prior to the date of your or
your joint owner's death, and on each day a purchase payment or withdrawal is
made. On the contract anniversary, if the current contract value is greater than
the GACV, the GACV will be increased to the current value of your contract. If a
purchase payment is made, the amount of the purchase payment will increase the
GACV. If a withdrawal is made, the GACV will be reduced by the amount withdrawn
(and any associated withdrawal charges) divided by the value of your contract
immediately before the withdrawal multiplied by the GACV immediately prior to
the withdrawal. The following example describes the effect of a withdrawal on
the GACV:
Example:
Assumed facts for example:
$10,000 current GACV
$8,000 contract value
$5,000 total purchase payments, less any prior withdrawals and associated
withdrawal charges
$2,100 partial withdrawal ($2,000 withdrawal + $100 withdrawal charge)
New GACV = $10,000 - [($2,100/$8,000) X $10,000]
which results in the current GACV of $10,000 being reduced by $2,625
The new GACV is $7,375.
The contract value immediately after the withdrawal is $5,900, which is $8,000
less the $2,000 withdrawal and the $100 withdrawal charge.
The death benefit immediately after the withdrawal is the greatest of purchase
payments less withdrawals and withdrawal charges ($5,000 minus $2,100) or the
contract value ($5,900) or the GACV ($7,375).
The death benefit is therefore $7,375.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary on or before your, or your
joint owner's, 80th birthday, and on each day a purchase payment or withdrawal
is made. On the contract anniversary on or before your, or your joint owner's,
80th birthday, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the example above explains the effect of a withdrawal on the
GACV.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name at the then current value. If a lump sum payment is elected and
all the necessary requirements are met, the payment will be made within 7 days.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date First Cova receives proof of death. If First Cova does
not receive an election during such time, it will make a single sum payment to
the beneficiary at the end of the 60 day period.
Death of Annuitant
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death benefit,
if any, will be as provided for in the annuity option selected.
OTHER INFORMATION
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 (Cova Life), 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. 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 First Cova. The acquisition of GenAmerica
Corporation does not affect policy benefits or any other terms or conditions
under your contract.
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 Separate
Account is divided into sub-accounts.
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. The Separate Account
is subject to the laws of the State of New York. 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 may be paid a commission of up to 5.63% of purchase payments and
an asset-based commission of up to .25% of the contract value. Alternatively,
the broker-dealer may be paid a commission of up to 2.50% of purchase payments
and an asset-based commission of up to 1.00% of the contract value.
If the contract is annuitized, the broker-dealer will be paid a commission
ranging from 1% to 4% of contract value depending on the term of the annuity
option chosen by the contract owner.
Ownership
Owner. You, as the owner of the contract, have all the interest and rights under
the contract. Prior to the annuity date, the owner is as designated at the time
the contract is issued, unless changed. On and after the annuity date, the
annuitant is the owner (this may be a taxable event). The beneficiary becomes
the owner when a death benefit is payable. When this occurs, some ownership
rights may be limited.
Joint Owner. The contract can be owned by joint owners. 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.
Financial Statements
The financial statements of First Cova and the Separate Account have been
included in the Statement of Additional Information.
Table of Contents of the Statement of Additional Information
Company
Experts
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
APPENDIX A
Condensed Financial Information
Accumulation Unit Value History
The following schedule includes accumulation unit values for the period
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
Year or Period Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98 Ended 12/31/97
- ----------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan
Investment Management Inc.
Select Equity Sub-Account
<S> <C> <C> <C>
Beginning of Period $16.99 $14.05 $11.76
End of Period 18.38 16.99 14.05
Number of Accum. Units Outstanding 8,820 5,207 1,321
Small Cap Stock Sub-Account
Beginning of Period $12.58 $13.49 $10.92
End of Period 17.93 12.58 13.49
Number of Accum. Units Outstanding 4,804 2,679 530
International Equity Sub-Account
Beginning of Period $12.89 $11.46 $11.14
End of Period 16.34 12.89 11.46
Number of Accum. Units Outstanding 12,265 6,954 3,836
Quality Bond Sub-Account
Beginning of Period $11.91 $11.16 $10.45
End of Period 11.57 11.91 11.16
Number of Accum. Units Outstanding 5,664 5,759 2,068
Large Cap Stock Sub-Account
Beginning of Period $19.43 $14.89 $12.40
End of Period 22.55 19.43 14.89
Number of Accum. Units Outstanding 13,610 6,695 2,807
- -------------------------------------------------------------------------------------------------------------------
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $13.50 $12.88 $11.74
End of Period 13.77 13.50 12.88
Number of Accum. Units Outstanding 17,199 11,913 8,928
- -------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Sub-Account
Beginning of Period $10.44 $11.05 N/A
End of Period 10.88 10.44
Number of Accum. Units Outstanding 5,899 1,487
- -------------------------------------------------------------------------------------------------------------------
Large Cap Research Sub-Account
Beginning of Period $11.83 $10.95 N/A
End of Period 14.64 11.83
Number of Accum. Units Outstanding 7,259 2,713
- -------------------------------------------------------------------------------------------------------------------
Developing Growth Sub-Account
Beginning of Period $11.07 $10.19 N/A
End of Period 14.45 11.07
Number of Accum. Units Outstanding 3,257 167
- -------------------------------------------------------------------------------------------------------------------
Lord Abbett Growth & Income Sub-Account
Beginning of Period $35.90 N/A N/A
End of Period 39.46
Number of Accum. Units Outstanding 14,640
- -------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market Sub-Account
Beginning of Period $11.11 $11.11 N/A
End of Period 11.56 11.11
Number of Accum. Units Outstanding 9 2,161
<FN>
* The accumulation unit values shown above for the beginning of the period
reflect the date these accumulation units first invested in the Cova Series
Trust investment portfolios as follows: Select Equity (3/11/97), Small Cap
Stock (3/17/97), International Equity (3/11/97), Quality Bond (5/15/97),
Large Cap Stock (3/11/97), Bond Debenture (5/15/97), Mid-Cap Value
(3/4/98), Large Cap Research (3/3/98) and Developing Growth (11/23/98). The
General American Capital Company Money Market Sub-Account commenced
investment operations on December 28, 1998. There are no accumulation unit
values shown for certain investment portfolios, because they were not
available with your contract until the date of this prospectus.
</FN>
</TABLE>
APPENDIX B
PARTICIPATING INVESTMENT PORTFOLIOS
Below are the investment objectives and strategies of each investment
portfolio available under the contract. The fund prospectuses contain more
complete information including a description of the investment objectives,
policies, restrictions and risks. THERE CAN BE NO ASSURANCE THAT THE
INVESTMENT OBJECTIVES WILL BE ACHIEVED.
AIM VARIABLE INSURANCE FUNDS:
AIM Variable Insurance Funds is a mutual fund with multiple portfolios.
A I M Advisors, Inc. is the investment adviser to each portfolio.
The following portfolios are available under the contract:
AIM V.I. CAPITAL APPRECIATION FUND
Investment Objective: The Fund's investment objective is growth of capital
through investment in common stocks, with emphasis on medium- and small-sized
companies. The portfolio managers focus on companies they believe are likely
to benefit from new or innovative products, services or processes as well as
those that have experienced above-average, long-term growth in earnings
and have excellent prospects for future growth.
AIM V.I. INTERNATIONAL EQUITY FUND
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing in a diversified portfolio of international
equity securities whose issuers are considered to have strong earnings momentum.
AIM V.I. VALUE FUND
Investment Objective: The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in equity securities judged by the
Fund's investment advisor to be undervalued relative to the investment
advisor's appraisal of the current or projected earnings of the companies
issuing the securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to the equity
market generally. Income is a secondary objective.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.:
Alliance Variable Products Series Fund, Inc. is a mutual fund with multiple
portfolios. Alliance Capital Management L.P. is the investment adviser to each
portfolio. The following portfolios are available under the contract:
PREMIER GROWTH PORTFOLIO (Class A)
Investment Objective: The Portfolio's investment objective is growth of capital
by pursuing aggressive investment policies. The Portfolio invests primarily
in equity securities of U.S. companies. Normally, the Portfolio invests in
about 40-50 companies, with the 25 most highly regarded of these companies
usually constituting approximately 70% of the Portfolio's net assets.
REAL ESTATE INVESTMENT PORTFOLIO (Class A)
Investment Objective: The Portfolio's investment objective is total return from
long-term growth of capital and income principally through investing in equity
securities of companies that are primarily engaged in or related to the real
estate industry.
COVA SERIES TRUST: Cova Series Trust is managed by Cova Investment Advisory
Corporation (Cova Advisory), which is an affiliate of First Cova. Cova Series
Trust is a mutual fund with multiple portfolios. Cova Advisory has engaged
sub-advisers to provide investment advice for the individual investment
portfolios. The following portfolios are available under the contract:
PORTFOLIOS MANAGED BY J. P. MORGAN INVESTMENT MANAGEMENT INC.:
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: The International Equity Portfolio seeks to provide a high
total return from a portfolio of equity securities of foreign corporations.
LARGE CAP STOCK PORTFOLIO
Investment Objective: The Large Cap Stock Portfolio seeks to provide long-term
growth of capital and income.
QUALITY BOND PORTFOLIO
Investment Objective: The Quality Bond Portfolio seeks to provide a high total
return consistent with moderate risk of capital and maintenance of liquidity.
SELECT EQUITY PORTFOLIO
Investment Objective: The Select Equity Portfolio seeks to provide long-term
growth of capital and income.
SMALL CAP STOCK PORTFOLIO
Investment Objective: The Small Cap Stock Portfolio seeks to provide a high
total return from a portfolio of equity securities of small companies.
PORTFOLIOS MANAGED BY LORD, ABBETT & CO.:
BOND DEBENTURE PORTFOLIO
Investment Objective: The Bond Debenture Portfolio seeks to provide high current
income and the opportunity for capital appreciation to produce a high total
return.
DEVELOPING GROWTH PORTFOLIO
Investment Objective: The Developing Growth Portfolio seeks long-term growth of
capital through a diversified and actively-managed portfolio consisting of
developing growth companies, many of which are traded over the counter.
LARGE CAP RESEARCH PORTFOLIO
Investment Objective: The Large Cap Research Portfolio seeks growth of capital
and growth of income consistent with reasonable risk.
LORD ABBETT GROWTH AND INCOME PORTFOLIO
Investment Objective: The Lord Abbett Growth and Income Portfolio seeks to
achieve long-term growth of capital and income without excessive fluctuation in
market value.
MID-CAP VALUE PORTFOLIO
Investment Objective: The Mid-Cap Value Portfolio seeks capital appreciation
through investments, primarily in equity securities, which are believed to be
undervalued in the marketplace.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST, CLASS 1 SHARES:
Franklin Templeton Variable Insurance Products Trust is a mutual fund with
multiple portfolios. Effective May 1, 2000 the portfolios of Templeton Variable
Products Series Fund were merged into similar portfolios of Franklin Templeton
Variable Insurance Products Trust. Each portfolio has two classes of shares:
Class 1 and Class 2. The portfolios available in connection with your contract
are Class 1 shares. Franklin Mutual Advisers, LLC is the investment adviser for
the Mutual Shares Securities Fund, Templeton Investment Counsel, Inc. is the
investment adviser for the Templeton International Securities Fund, and
Templeton Asset Management Ltd. is the investment adviser for the Templeton
Developing Markets Securities Fund. The following portfolios are available under
the contract:
MUTUAL SHARES SECURITIES FUND (the surviving fund of the merger
with Mutual Shares Investments Fund)
Investment Objective and Principal Investments: The Fund's principal
goal is capital appreciation. Its secondary goal is income. Under
normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities of companies that the manager believes
are available at market prices less than their value based on
certain recognized or objective criteria (intrinsic value).
TEMPLETON INTERNATIONAL SECURITIES FUND (formerly, Templeton International
Fund)
Investment Objective and Principal Investments: The Fund's investment goal
is long-term capital growth. Under normal market conditions, the Fund
will invest at least 65% of its total assets in the equity securities of
companies located outside the U.S., including in emerging markets.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND (formerly, Templeton
Developing Markets Fund)
Investment Objective and Principal Investments: The Fund's investment goal
is long-term capital appreciation. Under normal market conditions, the Fund
will invest at least 65% of its total assets in emerging market equity
securities. Emerging market equity securities generally include equity
securities that trade in emerging markets or are issued by companies that
derive revenue from goods or services produced or that have their principal
activities or assets in, emerging market countries.
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
MONEY MARKET FUND
Investment Objective: The Money Market Fund's investment objective is to provide
investors with current income while preserving capital and maintaining
liquidity. The Fund seeks to achieve this objective by investing primarily in
high-quality, short-term money market instruments. The Fund purchases securities
that meet the quality, maturity, and diversification requirements applicable to
money market funds.
GOLDMAN SACHS VARIABLE INSURANCE TRUST: Goldman Sachs Variable Insurance Trust
is a mutual fund with multiple portfolios. Goldman Sachs Asset Management, a
unit of the Investment Management Division of Goldman, Sachs & Co., is the
investment adviser for the Goldman Sachs VIT Growth and Income Fund and Goldman
Sachs Asset Management International is the investment adviser for the Goldman
Sachs VIT International Equity Fund and the Goldman Sachs VIT Global Income
Fund. The following portfolios are available under the contract:
GOLDMAN SACHS GLOBAL INCOME FUND
Investment Objective: The Fund seeks a high total return, emphasizing current
income, and, to a lesser extent, providing opportunities for capital
appreciation. The Fund invests primarily in a portfolio of high quality
fixed-income securities of U.S. and foreign issuers and enters into
transactions in foreign currencies.
GOLDMAN SACHS GROWTH AND INCOME FUND
Investment Objective: The Fund seeks long-term growth of capital and growth of
income by investing in large capitalization U.S. stocks that are believed to
be undervalued or undiscovered in the marketplace.
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Investment Objective: The Fund seeks long-term capital appreciation by investing
primarily in equity securities of companies organized outside the United States
or whose securities are principally traded outside the United States. The
Fund intends to invest in companies with public stock market capitalizations
that are larger than $1 billion at the time of investment.
KEMPER VARIABLE SERIES
Kemper Variable Series is a mutual fund with multiple portfolios. Scudder Kemper
Investments, Inc. is the investment adviser for the Kemper Government Securities
Portfolio, the Kemper Small Cap Growth Portfolio and the Kemper Small Cap Value
Portfolio. The following portfolios are available under the contract:
KEMPER GOVERNMENT SECURITIES PORTFOLIO
Investment Objective: Kemper Government Securities seeks high current return
consistent with preservation of capital. The Portfolio pursues its objective
by investing at least 65% of its total assets in U.S. Government securities
and repurchase agreements of U.S. Government securities.
KEMPER SMALL CAP GROWTH PORTFOLIO
Investment Objective: Kemper Small Cap Growth Portfolio seeks maximum
appreciation of investors' capital. The Portfolio pursues its objective by
investing at least 65% of its total assets in small capitalization stocks
similar in size to those companies comprising the Russell 2000 Index. Many
of these companies would be in the early stages of their life cycle. Equity
securities in which the Portfolio invests consist primarily of common stocks,
but may include convertible securities, including warrants and rights.
KEMPER SMALL CAP VALUE PORTFOLIO
Investment Objective: Kemper Small Cap Value Portfolio seeks long-term capital
appreciation. The Portfolio pursues its investment objective by investing
primarily in a diversified portfolio of the stocks of small U.S. companies,
which are those similar in size to those comprising the Russell 2000 Index and
that the investment manager believes to be undervalued. Under normal market
conditions, the Portfolio invests at least 65% of its assets in small
capitalization stocks similar in size to those comprising the Russell 2000
Index.
LIBERTY VARIABLE INVESTMENT TRUST:
Liberty Variable Investment Trust is a mutual fund with multiple portfolios.
Liberty Advisory Services Corp. (LASC) is the investment manager to the Trust.
LASC has engaged Newport Fund Management, Inc. as sub-adviser to provide
investment advice for the Newport Tiger Fund, Variable Series. The following
portfolio is available under the contract:
NEWPORT TIGER FUND, VARIABLE SERIES
Investment Objective: The Fund seeks long-term capital appreciation. Under
normal market conditions, the Fund invests primarily in stocks of companies
located in the nine Tiger countries of Asia. The Tigers of Asia are Hong Kong,
Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The People's
Republic of China and the Philippines. The Fund typically invests in stocks of
larger, well-established companies.
MFS VARIABLE INSURANCE TRUST:
MFS Variable Insurance Trust is a mutual fund with multiple portfolios.
Massachusetts Financial Services Company is the investment adviser to each
portfolio. The following portfolios are available under the contract:
MFS EMERGING GROWTH SERIES
Investment Objective: The Series' investment objective is long term growth of
capital. The Series invests, under normal market conditions, at least 65% of its
total assets in common stocks and related securities of emerging growth
companies.
MFS GLOBAL GOVERNMENTS SERIES
Investment Objective: The Series' investment objective is to provide income
and capital appreciation. The Series invests primarily in U.S. and foreign
government securities.
MFS GROWTH WITH INCOME SERIES
Investment Objective: The Series' investment objective is to provide reasonable
current income and long-term growth of capital and income. The Series invests,
under normal market conditions, at least 65% of its total assets in common
stocks and related securities.
MFS HIGH INCOME SERIES
Investment Objective: The Series' investment objective is to provide high
current income by investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve equity features.
The Series invests, under normal market conditions, at least 80% of its total
assets in high yield fixed income securities which generally are lower rated
bonds commonly known as junk bonds. Junk bonds are subject to a substantially
higher degree of risk than higher rated bonds.
MFS RESEARCH SERIES
Investment Objective: The Series' investment objective is long-term growth of
capital and future income. The Series invests, under normal market conditions,
at least 80% of its total assets in common stocks and related securities, such
as preferred stocks, convertible securities and depositary receipts.
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Variable Account Funds is a mutual fund with multiple portfolios.
OppenheimerFunds, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
OPPENHEIMER BOND FUND/VA
Investment Objective: The Fund's main objective is to seek a high level of
current income. As a secondary objective, the Fund seeks capital appreciation
when consistent with its primary objective. Normally, the Fund invests at least
65% of its total assets in investment-grade debt securities, U.S. Government
securities and money market instruments.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA
Investment Objective: The Fund seeks capital appreciation by investing in
securities of well-known established companies. The Fund invests mainly in
common stocks of established and well-known U.S. companies.
OPPENHEIMER HIGH INCOME FUND/VA
Investment Objective: The Fund seeks a high level of current income from
investment in high-yield fixed income securities. The Fund invests mainly
in a variety of high-yield fixed-income securities of domestic and foreign
issuers.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
Investment Objective: The Fund's objective is to seek high total return (which
includes growth in the value of its shares as well as current income) from
equity and debt securities. The Fund invests mainly in common stocks of U.S.
companies, and can also invest in other equity securities such as preferred
stocks and securities convertible into common stocks.
OPPENHEIMER STRATEGIC BOND FUND/VA
Investment Objective: The Fund seeks a high level of current income. The
Fund invests mainly in debt securities of issuers in three market sectors:
foreign governments and companies, U.S. government securities and lower-grade
high-yield securities of U.S. companies.
PUTNAM VARIABLE TRUST:
Putnam Variable Trust is a mutual fund with multiple portfolios. Putnam
Investment Management, Inc. is the investment adviser to each portfolio. The
following portfolios are available under the contract:
PUTNAM VT GROWTH AND INCOME FUND - CLASS IA SHARES
Investment Objective: The Fund seeks capital growth and current income.
PUTNAM VT INTERNATIONAL GROWTH FUND - CLASS IA SHARES
Investment Objective: The Fund seeks capital appreciation.
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND - CLASS IA SHARES
Investment Objective: The Fund seeks long-term capital appreciation.
PUTNAM VT NEW VALUE FUND - CLASS IA SHARES
Investment Objective: The Fund seeks long-term capital appreciation.
PUTNAM VT VISTA FUND - CLASS IA SHARES
Investment Objective: The Fund seeks capital appreciation.
APPENDIX C
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
Note: The figures below present investment performance information for the
periods ended December 31, 1999. While these numbers represent the returns as
of that date, they do not represent performance information of the portfolios
since that date. Performance information for the periods after December 31,
1999 may be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
J.P. Morgan Investment Management Inc. is the sub-adviser for the following
portfolios of Cova Series Trust: Select Equity, Small Cap Stock, International
Equity, Quality Bond and Large Cap Stock. Lord, Abbett & Co. is the sub-adviser
for the following Portfolios of Cova Series Trust: Bond Debenture, Mid-Cap
Value, Large Cap Research and Developing Growth. All of these portfolios began
operations before December 31, 1999. As a result, performance information is
available for the accumulation unit values investing in these portfolios.
* Column A presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
investment portfolio.
The inception dates shown below reflect the dates the Separate Account first
invested in the Portfolio. The total return figures are not annualized if the
sub-account was in existence for less than one year.
<TABLE>
<CAPTION>
Part 1 Cova Series Trust
Average Annual Total Return for the period ended 12/31/99:
- -------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all charges (reflects insurance
and portfolio charges and
expenses) portfolio expenses)
Separate Account
Inception Date since since
Portfolio in Portfolio 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Equity 3/11/97 1.82% 15.90% 8.22% 17.24%
Small Cap Stock 3/17/97 36.07% 18.12% 42.52% 19.43%
International Equity 3/11/97 20.30% 13.20% 26.73% 14.59%
Quality Bond 5/15/97 -9.31% 2.20% -2.92% 3.95%
Large Cap Stock 3/11/97 9.64% 22.51% 16.06% 23.74%
Bond Debenture 5/15/97 -4.41% 4.59% 1.99% 6.24%
Mid-Cap Value 3/04/98 -2.21% -4.50% 4.19% -0.87%
Large Cap Research 3/03/98 17.34% 14.00% 23.76% 17.18%
Developing Growth 11/23/98 24.15% 31.52% 30.58% 37.18%
Lord Abbett Growth and Income 01/08/99 N/A 2.78% N/A 9.89%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PART 1 General American Capital Company Money Market Fund
Average Annual Total Return for the period ended 12/31/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all charges (reflects insurance
and portfolio charges and
expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date 1 yr since 1 yr since
Portfolio in Portfolio inception inception
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 12/28/98 -2.36% -2.31% 4.04% 4.04%
</TABLE>
<TABLE>
<CAPTION>
PART 2 - HISTORICAL FUND PERFORMANCE
Certain portfolios have been in existence for some time and have an investment
performance history. In order to show how the historical performance of the
portfolios affects the contract's accumulation unit values, the following
performance information was developed.
The information is based upon the historical experience of the portfolios and is
for the periods shown. The chart below shows the investment performance of the
portfolios and the accumulation unit performance calculated by assuming that the
contracts were invested in the portfolios for the same periods.
o The performance figures in Column A reflect the fees and expenses paid by
each portfolio.
o Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of each portfolio, and assumes that you make a withdrawal at
the end of the period and therefore the withdrawal charge is reflected.
o Column C presents performance figures for the accumulation units which
reflect the insurance charges and the fees and expenses of each portfolio.
o Performance figures shown for portfolios in existence for less than one
year are not annualized.
Total Return for the periods ended 12/31/99
- - ----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- - ----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- - ----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds
AIM V.I. Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appreciation 5/5/93 44.61% 25.59% 22.33% 36.20% 22.29% 20.69% 42.60% 24.19% 20.93%
AIM V.I.
International Equity 5/5/93 55.04% 21.93% 18.82% 46.49% 18.63% 17.18% 52.89% 20.53% 17.42%
AIM V.I. Value 5/5/93 29.90% 27.23% 23.07% 21.69% 23.93% 21.43% 28.09% 25.83% 21.67%
- - ----------------------------------------------------------------------------------------------------------------------------------
Alliance Variable Products Series Fund, Inc.
Premier Growth
(Class A) 6/26/92 32.32% 36.03% 26.31% 24.08% 32.73% 24.81% 30.48% 34.63% 24.91%
Real Estate
Investment (Class A) 1/9/97 -5.11% N/A -1.79% -12.83% N/A -4.83% -6.43% N/A -3.19%
- - ----------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust,
Class 1 Shares
Mutual Shares
Securities (1) 11/8/96 13.40% N/A 10.86% 5.60% N/A 8.20% 12.00% N/A 9.46%
Templeton Developing
Markets Securities
Fund (2) 3/4/96 53.84% N/A -5.30% 46.04% N/A -7.75% 52.44% N/A -6.70%
Templeton
International
Securities Fund (3) 5/1/92 23.61% 17.21% 15.36% 15.81% 13.91% 13.86% 22.21% 15.81% 13.96%
(1) Effective May 1, 2000, the Mutual Shares Investments Fund (previously offered
under the contract) merged into the Mutual Shares Securities Fund. Performance
shown reflects historical performance and inception date of the Mutual Shares
Securities Fund.
(2) Previously, Templeton Developing Markets Fund. Effective May 1, 2000, the Templeton
Developing Markets Fund merged into the Templeton Developing Markets Equity Fund.
Performance shown reflects historical performance and inception date of the Templeton
Developing Market Securities Fund.
(3) Previously, Templeton International Fund. Effective May 1, 2000, the
Templeton International Securities Fund merged into the Templeton International
Equity Fund. Performance shown reflects historical performance and inception
date of the Templeton International Securities Fund.
- -------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market 10/1/87 5.20% 5.60% 5.35% -2.36% 2.30% 3.85% 4.04% 4.20% 3.95%
- - ----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance Trust
Goldman Sachs VIT
Global Income 1/12/98 -1.01% N/A 3.59% -8.79% N/A -0.69% -2.39% N/A 2.19%
Goldman Sachs VIT
Growth and Income 1/12/98 5.41% N/A 5.53% -2.46% N/A 1.25% 3.94% N/A 4.13%
Goldman Sachs VIT
International Equity 1/12/98 31.85% N/A 26.26% 23.62% N/A 21.98% 30.02% N/A 24.86%
- - ----------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 12/31/99:
- - ----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- - ----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- - ----------------------------------------------------------------------------------------------------------------------------------
Kemper Variable Series
Kemper Government
Securities 9/3/87 0.68% 7.46% 7.12% -7.11% 4.16% 5.62% -0.71% 6.06% 5.72%
Kemper Small
Cap Growth 5/2/94 34.56% 28.92% 25.97% 26.29% 25.62% 24.15% 32.69% 27.52% 24.57%
Kemper Small
Cap Value 5/1/96 2.80% N/A 3.42% -5.04% N/A 0.93% 1.36% N/A 2.02%
- - ----------------------------------------------------------------------------------------------------------------------------------
Liberty Variable Investment Trust
Newport Tiger Fund,
Variable Series 5/1/95 68.01% N/A 7.31% 59.29% N/A 5.23% 65.69% N/A 5.91%
- - ----------------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust
MFS Emerging
Growth 7/24/95 76.71% N/A 36.44% 67.86% N/A 34.33% 74.26% N/A 35.04%
MFS Global
Governments 6/14/94 -2.50% 4.36% 4.07% -10.25% 1.06% 2.24% -3.85% 2.96% 2.67%
MFS Growth
With Income 10/9/95 6.69% N/A 21.12% -1.19% N/A 18.98% 5.21% N/A 19.72%
MFS High Income 7/26/95 6.44% N/A 8.24% -1.43% N/A 6.12% 4.97% N/A 6.84%
MFS Research 7/26/95 24.05% N/A 22.86% 15.92% N/A 20.74% 22.32% N/A 21.46%
- - ----------------------------------------------------------------------------------------------------------------------------------
APPENDIX C
PERFORMANCE INFORMATION (continued)
Total Return for the periods ended 12/31/99:
- - ----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and portfolio
Column A portfolio expenses) expenses)
- - ----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- - ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account
Funds
Oppenheimer Bond
Fund/VA 4/3/85 -1.52% 7.10% 7.76% -9.29% 3.80% 6.26% -2.89% 5.70% 6.36%
Oppenheimer Capital
Appreciation
Fund/VA 4/3/85 41.66% 30.65% 18.46% 33.29% 27.35% 16.96% 39.69% 29.25% 17.06%
Oppenheimer High
Income Fund/VA 4/30/86 4.29% 10.24% 12.65% -3.56% 6.94% 11.15% 2.84% 8.84% 11.25%
Oppenheimer Main
Street Growth &
Income Fund/VA 7/5/95 21.71% N/A 25.80% 13.61% N/A 23.69% 20.01% N/A 24.40%
Oppenheimer Strategic
Bond Fund/VA 5/3/93 2.83% 8.25% 6.18% -5.00% 4.95% 4.68% 1.40% 6.85% 4.78%
- - ----------------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust
Putnam VT Growth
and Income -
Class IA Shares 2/1/88 1.59% 19.40% 14.00% -6.23% 16.10% 12.50% 0.17% 18.00% 12.60%
Putnam VT International
Growth - Class
IA Shares 1/2 /97 60.13% N/A 30.29% 51.51% N/A 27.26% 57.91% N/A 28.89%
Putnam VT International
New Opportunities -
Class IA Shares 1/2 /97 102.95% N/A 32.92% 93.74% N/A 29.89% 100.14% N/A 31.52%
Putnam VT New Value -
Class IA Shares 1/2 /97 0.27% N/A 7.83% -7.53% N/A 4.80% -1.13% N/A 6.43%
Putnam VT Vista -
Class IA Shares 1/2 /97 52.90% N/A 31.14% 44.37% N/A 28.11% 50.77% N/A 29.74%
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
- ------------------------
- ------------------------
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
May 1, 2000, for The Annuity Contract issued by First Cova.
(Please print or type and fill in all information)
- ------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------
City State Zip Code
PART A - VERSION C
The Fixed
And Variable Annuity
issued by
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
and
FIRST COVA 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 7 investment choices - a fixed account which offers an
interest rate which is guaranteed by First Cova, and 6 investment portfolios
listed below. The 6 investment portfolios are part of Russell Insurance
Funds or General American Capital Company. You can put your money in the
fixed account and/or any of these investment portfolios.
Russell Insurance Funds:
Managed by Frank Russell
Investment Management Company
Aggressive Equity Fund
Core Bond Fund
Multi-Style Equity Fund
Non-U.S. Fund
Real Estate Securities Fund
General American Capital Company:
Managed by Conning Asset
Management Company
Money Market Fund
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 May 1,
2000. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page __ of this prospectus. For a free
copy of the SAI, call us at (800) 523-1661 or write us at: One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
May 1, 2000
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS
SUMMARY
Fee Table
Examples
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Annuity Payments
Annuity Options
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
Russell Insurance Funds
General American Capital Company
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Suspension of Payments or Transfers
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
First Cova
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Performance Information
INDEX OF SPECIAL TERMS
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
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 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. The contract is intended
for retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
This contract offers 6 investment portfolios. These portfolios are designed to
offer a better return than the fixed account. However, this is NOT guaranteed.
You can also lose your money.
The fixed account offers an interest rate that is guaranteed by the insurance
company, 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.
You can put money into any or all of the investment portfolios and the fixed
account. You can transfer between accounts up to 12 times a year without charge
or tax implications.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments during
the income phase.
ANNUITY PAYMENTS (THE INCOME PHASE):
If you want to receive regular income from your annuity, you can choose an
annuity option. Once you begin receiving regular payments, you cannot change
your payment plan. During the income phase, you have the same investment choices
you had during the accumulation phase. You can choose to have payments come from
the fixed account, the investment portfolios or both. If you choose to have any
part of your payments come from the investment portfolios, the dollar amount of
your payments may go up or down.
HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
INVESTMENT OPTIONS:
You can put your money in 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 features and investment features, and there are costs
related to each.
* Each year First Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, 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.
* If you take your money out, First Cova may assess a withdrawal charge of
up to 7% of the purchase payment withdrawn. After First Cova has had a purchase
payment for seven years, there is no charge by First Cova for a withdrawal of
that purchase payment.
* The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
* There are also investment charges which range from .125% 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,
earnings come out first and are taxed as income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% federal tax penalty on the
earnings. Payments during the income phase are considered partly a return of
your original investment. That part of each payment is not taxable as income.
ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from First Cova. Withdrawals of purchase payments in excess of
that may be charged a withdrawal charge, depending on how long your money has
been in the contract. However, First Cova will never assess a withdrawal charge
on earnings you withdraw. Earnings are defined as the value in your contract
minus the remaining purchase payments in your contract. Of course, you may also
have to pay income tax and a tax penalty on any money you take out.
DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
OTHER INFORMATION:
Free Look. If you cancel the contract within 10 days after receiving it 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 income tax brackets. You should not buy this contract if
you are looking for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* First Cova will automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
These features may not be suitable for your particular situation.
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, 10th Floor
New York, NY 10271
(800) 469-4545
(212) 766-0012
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will incur
directly or indirectly with the contract. The Fee Table reflects expenses of the
Separate Account as well as of the investment portfolios. Expenses of the
investment portfolios are not fixed or specified under the terms of the contract
and actual expenses may vary.
OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of Years Since
purchase payments) (see Note 1 below) Payment Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
Transfer Fee (see Note 2 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
CONTRACT MAINTENANCE CHARGE (see Note 3 below) $30 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
---
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
<TABLE>
<CAPTION>
Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Other Expenses Total Annual
Management Fees Portfolio
(after reimbursement Expenses
and/or waivers as noted) (after
reimbursement
and/or waivers
as noted)
- - ----------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds*
Managed by Frank Russell
Investment Management Company
<S> <C> <C> <C>
Aggressive Equity Fund .86% .39% 1.25%
Core Bond Fund .54% .26% .80%
Multi-Style Equity Fund .77% .15% .92%
Non-U.S. Fund .75% .55% 1.30%
Real Estate Securities Fund .85% .30% 1.15%
- - ----------------------------------------------------------------------------------------------------------------------------------
General American Capital Company
Managed by Conning Asset
Management Company
Money Market Fund .125% .08% .205%
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
*The manager of Russell Insurance Funds, Frank Russell Investment
Management Company, has contractually agreed to waive, at least until
April 30, 2001, a portion of the management fee, up to the full amount
of that fee, equal to the amount by which the Fund's total operating
expenses exceed the amounts set forth above under "Total Annual Portfolio
Expenses" and to reimburse the Fund for all remaining expenses, after fee
waivers which exceed the amount set forth above for each Fund under "Total
Annual Portfolio Expenses". Absent such waiver and reimbursement, the management
fees and total operating expenses would be .78% and .93% for the Multi-Style
Equity Fund; .95% and 1.34% for the Aggressive Equity Fund; .95% and 2.37% for
the Non-U.S. Fund; .60% and .66% for the Core Bond Fund.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Examples
The examples should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
(a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract value
to an annuity option.
Time Periods
- ------------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
Managed by Frank Russell
Investment Management Company
<S> <C> <C> <C> <C>
Aggressive Equity Fund (a)$ 97.80 (a) $130.14
(b)$ 27.80 (b) $ 85.14
Core Bond Fund (a)$ 93.30 (a) $116.65
(b)$ 23.30 (b) $ 71.65
Multi-Style Equity Fund (a)$ 94.50 (a) $120.27
(b)$ 24.50 (b) $ 75.27
Non-U.S. Fund (a)$ 98.30 (a) $131.62
(b)$ 28.30 (b) $ 86.62
Real Estate Securities Fund (a)$ 96.80 (a) $127.16
(b)$ 26.80 (b) $ 82.16
General American Capital Company
Managed by Conning Asset
Management Company
Money Market Fund (a)$ 87.31 (a)$98.54
(b)$ 17.31 (b)$53.54
- ---------------------------------------------------------------------------------------------------------------
<FN>
Explanation of Fee Table
1. 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.
2. 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.
3. During the accumulation phase, 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.
4. Premium taxes are not reflected. New York does not assess premium taxes.
THERE IS AN ACCUMULATION UNIT VALUE HISTORY (CONDENSED FINANCIAL INFORMATION)
CONTAINED IN APPENDIX A.
</FN>
</TABLE>
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 an income to
you, in the form of annuity payments, beginning on a designated date that is 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 6
investment portfolios and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends, in part, upon the investment performance of the
investment portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by First Cova. 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 interest and 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 under "Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one year after we issue the contract.
Annuity Payments
You will receive annuity payments during the income phase. In general, 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.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from:
* the fixed account,
* the investment portfolio(s), or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the 3% assumed investment rate used in the annuity table for the
contract, and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
Annuity payments are made monthly unless you have less than $2,000 to apply
toward a payment and you have not made a purchase payment in 3 years. 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 reduce the frequency of payments so that your annuity payments
are at least $20.
Annuity Options
You can choose among income plans. We call them annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. If you do not choose
an annuity option at the time you purchase the contract, we will assume that you
selected Option 2 which provides a life annuity with 10 years of guaranteed
payments.
You can choose one of the following annuity options or any other annuity option
acceptable to First Cova. After annuity payments begin, you cannot change the
annuity option.
Option 1. Life Annuity. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
Option 2. Life Annuity with 5, 10 or 20 Years Guaranteed. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a non-
qualified contract. If you are purchasing the contract as part of an IRA
(Individual Retirement Annuity) 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 purchase
payment we accept is $1 million without our prior approval. You can make
additional purchase payments of $500 or more to either type of contract.
Allocation of Purchase Payments
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise. 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. 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.
Accumulation Units
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular investment
portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Quality Bond Portfolio. When the
New York Stock Exchange closes on that Monday, we determine that the value
of an accumulation unit for the Quality Bond Portfolio is $13.90. We then
divide $5,000 by $13.90 and credit your contract on Monday night with
359.71 accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The contract offers 6 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
You should read the prospectuses for these funds carefully. Copies of these
prospectuses are attached to this prospectus.
The investment objectives and policies of certain of the investment
portfolios are similar to the investment objectives and policies of other
mutual funds that certain of the investment advisers manage. Although the
objectives and policies may be similar, the investment results of the
investment portfolios may be higher or lower than the results of such other
mutual funds. The investment advisers cannot guarantee, and make no
representation, that the investment results of similar funds will be comparable
even though the funds have the same investment advisers.
A fund's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a fund with a small asset base. A
fund may not experience similar performance as its assets grow.
Shares of the investment portfolios may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with Cova. Certain
investment portfolios may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
First Cova may enter into certain arrangements under which it is reimbursed
by the investment portfolios' advisers, distributors and/or affiliates
for the administrative services which it provides to the portfolios.
Russell Insurance Funds
Russell Insurance Funds is managed by Frank Russell Investment Management
Company. Russell Insurance Funds is a mutual fund with five portfolios, each
with its own investment objective. The following portfolios are available under
the contract:
Aggressive Equity Fund
Core Bond Fund
Multi-Style Equity Fund
Non-U.S. Fund
Real Estate Securities Fund
General American Capital Company
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
Transfers
You can transfer money among the fixed account and the investment portfolios.
Telephone Transfers. 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.
Transfers During the Accumulation Phase.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The following apply to any transfer during the
accumulation phase:
1. 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.
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. Currently, First Cova does not charge for
participating in the Dollar Cost Averaging Program. First Cova will waive
the minimum transfer amount and the minimum amount required to establish dollar
cost averaging if you establish dollar cost averaging for 6 or 12 months at the
time you buy the contract.
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.
First Cova may, from time to time, offer other dollar cost averaging programs
which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to the investment portfolios, the performance
of each portfolio may cause your allocation to shift. You can direct us to
automatically rebalance your contract to return to your original percentage
allocations by selecting our Automatic Rebalancing Program. You can tell us
whether to rebalance quarterly, semi-annually or annually. We will measure these
periods from the anniversary of the date we issued your contract. The transfer
date will be the 1st day after the end of the period you selected.
The Automatic Rebalancing Program is available only during the accumulation
phase. Currently, First Cova does not charge for participating in the Automatic
Rebalancing Program. If you participate in the Automatic Rebalancing Program,
the transfers made under the program are not taken into account in determining
any transfer fee.
Example:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Quality Bond Portfolio and
60% to be in the Select Equity Portfolio. Over the next 2 1/2 months the
bond market does very well while the stock market performs poorly. At the
end of the first quarter, the Quality Bond Portfolio now represents 50% of
your holdings because of its increase in value. If you have chosen to have
your holdings rebalanced quarterly, on the first day of the next quarter,
First Cova will sell some of your units in the Quality Bond Portfolio to
bring its value back to 40% and use the money to buy more units in the
Select Equity Portfolio to increase those holdings to 60%.
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
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 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.
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 fund expenses have been deducted. This charge is for the insurance
benefits e.g., guarantee of annuity rates, the death benefits, for certain
expenses of the contract, and for assuming the risk (expense risk) that the
current charges will be sufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then 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
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below) is for the expenses associated with the
administration of the contract. Some of these expenses are: preparation of the
contract, confirmations, annual reports and statements, maintenance of contract
records, personnel costs, legal and accounting fees, filing fees, and computer
and systems costs. Because this charge is taken out of every unit value, you may
pay more in administrative costs than those that are associated solely with your
contract. 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 cannot be increased.
First 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. 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, unless the
purchase payment was made more than 7 years ago, the charge is:
<TABLE>
<CAPTION>
Years Since
Payment Charge
<S> <C>
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
</TABLE>
After First Cova has had a purchase payment for 7 years, there is no charge when
you withdraw that purchase payment. First Cova does not assess a withdrawal
charge on earnings withdrawn from the contract. Earnings are defined as the
value in your contract minus the remaining purchase payments in your contract.
The withdrawal order for calculating the withdrawal charge is shown below.
* 10% of purchase payments free.
* Remaining purchase payments that are over 7 years old and not subject
to a withdrawal charge.
* Earnings in the contract free.
* Remaining purchase payments that are less than 7 years old and are
subject to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules may
apply to Section 1035 exchanges.
When the withdrawal is for only part of the value of your contract, the
withdrawal charge is deducted from the remaining value in your contract if
sufficient, or from the amount withdrawn.
First Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
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.
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 an additional discussion regarding taxes in the Statement of
Additional Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under 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.
An annuity contract will not provide any necessary or additional tax deferral
if it is used to fund a qualified plan that is tax deferred. However, the
contract has features and benefits other than tax deferral that may make it
an appropriate investment for a qualified plan. You should consult your
tax adviser regarding these features and benefits prior to purchasing an
annuity contract to fund a qualified plan.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio
of pre-tax purchase payments to the after-tax purchase payments in your
contract. If all of your purchase payments were made with pre-tax money,
then the full amount of any withdrawal is includible in taxable income.
Special rules may apply to withdrawals from certain types of qualified
contracts.
The Code also provides that any amount received under a qualified contract
which is included in income may be subject to a penalty. The amount of
the penalty is equal to 10% of the amount that is includible in income.
Some withdrawals will be exempt from the penalty. They include any
amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid in a series of substantially equal periodic payments made
annually (or more frequently) under a lifetime annuity;
(5) paid for certain allowable medical expenses (as defined in the
Code);
(6) paid on account of an IRS levy upon the qualified contract;
(7) paid from an IRA for medical insurance (as defined in the Code);
(8) paid from an IRA for qualified higher education expenses; or
(9) paid from an IRA for up to $10,000 for qualified first-time
homebuyer expenses (as defined in the Code).
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 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 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 without being considered the owner of the
shares. If any guidance is provided which is considered a new position, then the
guidance would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean that you, as the owner of the contract, could be treated as the owner of
the shares of the investment portfolios.
Due to the uncertainty in this area, First Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
You can only make withdrawals during the accumulation phase.
When you make a complete withdrawal you will receive the withdrawal value. The
withdrawal value is 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 "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 or if smaller, the remaining withdrawal value. First Cova requires
that after a partial withdrawal is made you keep at least $500 in your contract.
When you make a withdrawal, the amount of the death benefit is reduced. See
"Death Benefits."
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
Systematic Withdrawal Program
The Systematic Withdrawal 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.
Income taxes and tax penalties may apply to Systematic Withdrawals.
Suspension of Payments or Transfers
First 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 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.
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.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios, performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
First 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, 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 death benefit is 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
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary prior to the date of you or
your joint owner's death, and on each day a purchase payment or withdrawal is
made. On the contract anniversary, if the current contract value is greater that
the GACV, the GACV will be increased to the current value of your contract. If a
purchase payment is made, the amount of the purchase payment will increase the
GACV. If a withdrawal is made, the GACV will be reduced by the amount withdrawn
(and any associated withdrawal charges) divided by the value of your contract
immediately before the withdrawal multiplied by the GACV immediately prior to
the withdrawal. The following example describes the effect of a withdrawal on
the GACV:
Example:
Assumed facts for example:
$10,000 current GACV
$8,000 contract value
$5,000 total purchase payments, less any prior withdrawals and associated
withdrawal charges
$2,100 partial withdrawal ($2,000 withdrawal + $100 withdrawal charge)
New GACV = $10,000 - [($2,100/ $8,000) X $10,000]
which results in the current GACV of $10,000 being reduced by $2,625
The new GACV is $7,375.
The contract value immediately after the withdrawal is $5,900, which is $8,000
less the $2,000 withdrawal and the $100 withdrawal charge.
The death benefit immediately after the withdrawal is the greatest of purchase
payments less withdrawals and withdrawal charges ($5,000 minus $2,100) or the
contract value ($5,900) or the GACV ($7,375).
The death benefit is therefore $7,375.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary on or before your, or your
joint owner's, 80th birthday, and on each day a purchase payment or withdrawal
is made. On the contract anniversary on or before your, or your joint owner's,
80th birthday, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the example above explains the effect of a withdrawal on the
GACV.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name at the then current value. If a lump sum payment is elected and
all the necessary requirements are met, the payment will be made within 7 days.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date First Cova receives proof of death. If First Cova does
not receive an election during such time, it will make a single sum payment to
the beneficiary at the end of the 60 day period.
Death of Annuitant
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death benefit,
if any, will be as provided for in the annuity option selected.
OTHER INFORMATION
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 (Cova Life), 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. 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 First Cova. The acquisition of GenAmerica
Corporation does not affect policy benefits or any other terms or conditions
under your contract.
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 Separate
Account is divided into sub-accounts.
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. The Separate Account
is subject to the laws of the State of New York. 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 may be paid a commission of up to 5.63% of purchase payments and an
asset-based commission of up to .25% of the contract value. Alternatively, the
broker-dealer may be paid a commission of up to 2.50% of purchase payments and
an asset-based commission of up to 1.00% of the contract value.
If the contract is annuitized, the broker-dealer will be paid a commission
ranging from 1% to 4% of contract value depending on the term of the annuity
option chosen by the contract owner.
Ownership
Owner. You, as the owner of the contract, have all the interest and rights under
the contract. Prior to the annuity date, the owner is as designated at the time
the contract is issued, unless changed. On and after the annuity date, the
annuitant is the owner (this may be a taxable event). The beneficiary becomes
the owner when a death benefit is payable. When this occurs, some ownership
rights may be limited.
Joint Owner. The contract can be owned by joint owners. 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.
Financial Statements
The financial statements of First Cova and the Separate Account have been
included in the Statement of Additional Information.
Table of Contents of the Statement of Additional Information
Company
Experts
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
APPENDIX A
Condensed Financial Information
Accumulation Unit Value History
The following schedule includes accumulation unit values for the period
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
Year or Period Year or Period
Ended 12/31/99 Ended 12/31/98
(unaudited)
- ----------------------------------------------------------------------------------------------------
General American Capital Company
Money Market Sub-Account
<S> <C> <C>
Beginning of Period $11.11 $11.11
End of Period 11.56 11.11
Number of Accum. Units Outstanding 9 2,161
<FN>
The General American Capital Company Money Market Sub-Account
commenced investment operations on December 28, 1998. There are no accumulation
unit values shown for the investment portfolios of Russell Insurance Funds
because they were not available with your contract until the date of this
prospectus.
</FN>
</TABLE>
APPENDIX B
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
Note: The figures below present investment performance information for the
periods ended December 31, 1999. While these numbers represent the returns as
of that date, they do not represent performance information of the portfolios
since that date. Performance information for the periods after December 31,
1999 may be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
* Column A presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
investment portfolio.
The inception dates shown below reflect the dates the Separate Account first
invested in the Portfolio.
<TABLE>
<CAPTION>
PART 1 General American Capital Company Money Market Fund
Average Annual Total Return for the period ended 12/31/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all charges (reflects insurance
and portfolio charges and
expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date 1 yr since 1 yr since
Portfolio in Portfolio inception inception
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market Fund 12/28/98 -2.36% -2.31% 4.04% 4.04%
</TABLE>
<TABLE>
<CAPTION>
PART 2 - HISTORICAL FUND PERFORMANCE
Certain Portfolios have been in existence for a longer time and therefore
have an investment performance history. In order to show how the historical
performance of the Portfolios affects accumulation unit values, we have
developed performance information.
The chart below shows the investment performance of the Portfolios and the
accumulation unit performance calculated by assuming that accumulation units
were invested in the Portfolios for the same periods.
* The performance figures in Column A reflect the fees and expenses paid by
the Portfolio.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
* Column C presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
Portfolio.
Total Return for the period ended 12/31/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all (reflects insurance
Portfolio Performance charges and charges and
Column A portfolio expenses) portfolio expenses)
- - ----------------------------------------------------------------------------------------------------------------------------------
Portfolio 10 yrs or 10 yrs or 10 yrs or
Inception since since since
Portfolio Date 1 yr 5 yrs inception 1 yr 5 yrs inception 1 yr 5 yrs inception
- - ----------------------------------------------------------------------------------------------------------------------------------
Russell Insurance Funds
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Equity Fund 1/2 /97 6.08% N/A 13.14% -1.79% N/A 10.11% 4.61% N/A 11.74%
Core Bond Fund 1/2 /97 -0.61% N/A 5.42% -8.39% N/A 2.39% -1.99% N/A 4.02%
Multi-Style Equity Fund 1/2/97 17.17% N/A 24.73% 9.14% N/A 21.70% 15.54% N/A 23.33%
Non-U.S. Fund 1/2 /97 33.36% N/A 14.78% 25.10% N/A 11.75% 31.50% N/A 13.38%
Real Estate Securities Fund 4/30/99 N/A N/A -7.26% N/A N/A -13.30% N/A N/A -8.20%
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
- ------------------------
- ------------------------
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
May 1, 2000, for The Annuity Contract issued by First Cova.
(Please print or type and fill in all information)
- ------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------
City State Zip Code
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
ISSUED BY
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
AND
FIRST COVA LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 2000 FOR THE
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS DESCRIBED
HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644,
(800) 831-LIFE.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 2000.
TABLE OF CONTENTS
Page
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTION
CALCULATION OF PERFORMANCE INFORMATION
Total Return
Historical Unit Values
Reporting Agencies
Performance Information
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
ANNUITY PROVISIONS
Variable Annuity
Fixed Annuity
Annuity Unit
Net Investment Factor
Mortality and Expense Guarantee
FINANCIAL STATEMENTS
COMPANY
First Cova Life Insurance Company (the "Company") was organized under the laws
of the state of New York on December 31, 1992. The Company is presently licensed
to do business only in the state of New York. The Company is a wholly-owned
subsidiary of Cova Financial Services Life Insurance Company ("Cova Life"), a
Missouri insurance company. On December 31, 1992, Cova Life acquired Wausau
Underwriters Life Insurance Company ("Wausau"), a stock life insurance company
organized under the laws of the state of Wisconsin. On April 16, 1993, Wausau
was merged into the Company, with the Company as the surviving corporation.
On June 1, 1995, a wholly-owned subsidiary of General American Life Insurance
Company ("General American") purchased Cova Life from Xerox Financial Services,
Inc. The acquisition of Cova Life included related companies, including the
Company. On June 1, 1995, the Company changed its name to First Cova 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 First Cova.
The acquisition of GenAmerica Corporation does not affect policy benefits
or any other terms or conditions under your contract.
EXPERTS
The statutory statements of admitted assets, liabilities, and capital stock and
surplus of the Company as of December 31, 1999 and 1998, and the related
statutory statements of operations, capital stock and surplus, and cash flow for
each of the years in the three-year period ended December 31, 1999, and the
statement of assets and liabilities of the Separate Account as of December 31,
1999, and the related statement of operations for the year then ended, and the
statements of changes in net assets for the year then ended and 1998, 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.
PERFORMANCE INFORMATION
TOTAL RETURN
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.25% Mortality and Expense Risk Premium, a .15% Administrative
Expense Charge, the expenses for the underlying investment portfolio being
advertised and any applicable Contract Maintenance Charges and Withdrawal
Charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Withdrawal Charges to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P ( 1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment made
at the beginning of the time periods used.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
You should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what your total return may be in any future period.
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.
PERFORMANCE INFORMATION
Certain funds have been in existence for some time and consequently have
an investment performance history. In order to demonstrate how investment
experience of these Portfolios affects Accumulation Unit values, performance
information was developed. The information is based upon the historical
experience of the Portfolios and is for the periods shown. The prospectus
contains a chart of performance information.
Future performance of the Portfolios will vary and the results shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance of the Portfolios is calculated for a specified period of time by
assuming an initial Purchase Payment of $1,000 allocated to the Portfolio. There
are performance figures for the Accumulation Units which reflect the insurance
charges as well as the portfolio expenses. There are also performance figures
for the Accumulation Units which reflect the insurance charges, the contract
maintenance charge, the portfolio expenses, and assume that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected. The percentage increases (decreases) are determined by subtracting
the initial Purchase Payment from the ending value and dividing the remainder by
the beginning value. The performance may also show figures when no withdrawal is
assumed.
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.
PARTIAL 1035 EXCHANGES
Section 1035 of the Code provides that an annuity contract may be exchanged in
a tax-free transaction for another annuity contract. Historically, it was
presumed that only the exchange of an entire contract, as opposed to a
partial exchange, would be accorded tax-free status. In 1998 in CONWAY VS.
COMMISSIONER, the Tax Court held that the direct transfer of a portion of
an annuity contract into another annuity contract qualified as a non-taxable
exchange. On November 22, 1999, the Internal Revenue Service filed an Action
on Decision which indicated that it acquiesced in the Tax Court decision in
CONWAY. However, in its acquiescence with the decision of the Tax Court, the
Internal Revenue Service stated that it will challenge transactions where
taxpayers enter into a series of partial exchanges and annuitizations as part
of a design to avoid application of the 10% premature distribution penalty or
other limitations imposed on annuity contracts under the Code. In the absence
of further guidance from the Internal Revenue Service it is unclear what
specific types of partial exchange designs and transactions will be challenged
by the Internal Revenue Service. Due to the uncertainty in this area owners
should consult their own tax advisers prior to entering into a partial exchange
of an annuity contract.
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 AND TRANSFER OF OWNERSHIP
An assignment, pledge or transfer of ownership of a Contract may be a taxable
event. Owners should therefore consult competent tax advisers should they wish
to assign, pledge or transfer ownership of their Contracts.
DEATH BENEFITS
Any death benefits 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.
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; 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 may also be used as Qualified Contracts. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified
Contract 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. The
following discussion of Qualified Contracts is not exhaustive and is for general
informational purposes only. The tax rules regarding Qualified Contracts are
very complex and will have differing applications depending on individual facts
and circumstances. Each purchaser should obtain competent tax advice prior to
purchasing Qualified Contracts.
An annuity contract will not provide any necessary or additional tax deferral if
it is used to fund a qualified plan that is tax deferred. However, the contract
has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan.
Qualified Contracts include special provisions restricting Contract provisions
that may otherwise be available as described herein. Generally, Qualified
Contracts are not transferable except upon surrender or annuitization.
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. Qualified Contracts 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.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
THE CONTRACTS ARE NOT AVAILABLE AS QUALIFIED CONTRACTS UNTIL AN IRA ENDORSEMENT
IS APPROVED BY THE STATE OF NEW YORK INSURANCE DEPARTMENT. 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.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
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 Section 408(b) (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 Annuitant reaches age 59
1/2; (b) distributions following the death or disability of the Annuitant (for
this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Annuitant
or the joint lives (or joint life expectancies) of the Annuitant and his or her
designated Beneficiary; (d) 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; (e) 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); (f) 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; (g) distributions made on account of an IRS
levy upon the Qualified Contract; and (h) 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).
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must commence no later than April
1 of the calendar year following the year in which the employee attains age 70
1/2. 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.
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account. At the
Annuity Date, the Contract Value in each investment portfolio will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. If, as of the Annuity Date, the then current Annuity
Option rates applicable to this class of Contracts provide a first Annuity
Payment greater than guaranteed under the same Annuity Option under this
Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value
of an Annuity Unit as of the Annuity Date. This establishes the number of
Annuity Units for each monthly payment. The number of Annuity Units remains
fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month preceding the month for which
the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
investment portfolios' Variable Annuity Payments reduced by the applicable
Contract Maintenance Charge.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. The first monthly Annuity Payment will be based upon
the Annuity Option elected and the appropriate Annuity Option Table.
ANNUITY UNIT
The value of an Annuity Unit for each investment portfolio was arbitrarily set
initially at $10. This was done when the first investment portfolio shares were
purchased. The investment portfolio Annuity Unit value at the end of any
subsequent Valuation Period is determined by multiplying the investment
portfolio Annuity Unit value for the immediately preceding Valuation Period by
the product of (a) the Net Investment Factor for the day for which the Annuity
Unit value is being calculated, and (b) 0.999919.
NET INVESTMENT FACTOR
The Net Investment Factor for any investment portfolio for any Valuation Period
is determined by dividing:
(a) the Accumulation Unit value as of the close of the current Valuation
Period, by
(b) the Accumulation Unit value as of the close of the immediately
preceding Valuation Period.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Contract Owners of First Cova Variable
Annuity Account One, Board of Directors
and Shareholder of First Cova Life
Insurance Company:
We have audited the accompanying statement of assets and liabilities of
each of the sub-accounts comprising First Cova Variable Annuity Account One
of First Cova Life Insurance Company (the Separate Account), as of December
31, 1999, 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 audit 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, 1999 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
First Cova Variable Annuity Account One of First Cova Life Insurance
Company as of December 31, 1999, 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 20, 2000
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
Assets:
Investments:
Cova Series Trust (Cova):
<S> <C> <C> <C>
Lord Abbett Growth and Income Portfolio 24,000 shares at a net asset value of $24.070563 per share $ 577,682
Bond Debenture Portfolio 18,980 shares at a net asset value of $12.474609 per share 236,768
Developing Growth Portfolio 3,162 shares at a net asset value of $14.885144 per share 47,072
Large Cap Research Portfolio 7,087 shares at a net asset value of $14.991245 per share 106,244
Mid-Cap Value Portfolio 5,744 shares at a net asset value of $11.168093 per share 64,155
Quality Bond Portfolio 6,142 shares at a net asset value of $10.669328 per share 65,526
Small Cap Stock Portfolio 4,989 shares at a net asset value of $17.268582 per share 86,161
Large Cap Stock Portfolio 14,845 shares at a net asset value of $20.674865 per share 306,919
Select Equity Portfolio 10,064 shares at a net asset value of $16.112437 per share 162,157
International Equity Portfolio 12,351 shares at a net asset value of $16.225039 per share 200,393
General American Capital Company (GACC):
Money Market Fund 5 shares at a net asset value of $20.252283 per share 102
-------------
Total assets $ 1,853,179
=============
Liabilities:
Cova Lord Abbett Growth and Income $ 44
Cova Bond Debenture 18
Cova Developing Growth 4
Cova Large Cap Research 8
Cova Mid-Cap Value 5
Cova Quality Bond 5
Cova Small Cap Stock 6
Cova Large Cap Stock 24
Cova Select Equity 13
Cova International Equity 15
-------------
Total liabilities $ 142
=============
Net Assets:
Accumulation units:
Cova Lord Abbett Growth and Income 14,640 accumulation units at $39.456238 per unit $ 577,638
Cova Bond Debenture 17,199 accumulation units at $13.765717 per unit 236,750
Cova Developing Growth 3,257 accumulation units at $14.452824 per unit 47,068
Cova Large Cap Research 7,259 accumulation units at $14.635296 per unit 106,236
Cova Mid-Cap Value 5,899 accumulation units at $10.875326 per unit 64,150
Cova Quality Bond 5,664 accumulation units at $11.567101 per unit 65,521
Cova Small Cap Stock 4,804 accumulation units at $17.933548 per unit 86,155
Cova Large Cap Stock 13,610 accumulation units at $22.548635 per unit 306,895
Cova Select Equity 8,820 accumulation units at $18.384195 per unit 162,144
Cova International Equity 12,265 accumulation units at $16.337166 per unit 200,378
GACC Money Market 9 accumulation units at $11.558870 per unit 102
-------------
Net assets $ 1,853,037
=============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1999
<TABLE>
<CAPTION>
Cova
----------------------------------------------------------------------------------------
Lord Abbett
Growth Large Small
and Bond Developing Cap Mid-Cap Quality Cap
Income Debenture Growth Research Value Bond Stock
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ - 3,910 - 103 53 722 169
----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Mortality and expense risk 5,724 2,547 308 831 488 827 700
Administrative fee 687 306 37 100 59 99 84
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses 6,411 2,853 345 931 547 926 784
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income (expense) (6,411) 1,057 (345) (828) (494) (204) (615)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net realized gain on investments:
Realized gain on sale of portfolio
shares 1,698 42 104 142 23 144 65
Realized gain distributions - 1,267 - - - 361 -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net realized gain 1,698 1,309 104 142 23 505 65
----------- ----------- ----------- ----------- ----------- ----------- -----------
Change in unrealized appreciation 55,182 2,221 9,454 17,889 2,817 (2,260) 26,658
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets from operations $ 50,469 4,587 9,213 17,203 2,346 (1,959) 26,108
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1999
<TABLE>
<CAPTION>
Cova GACC Lord Abbett
------------------------------------ ----------- -----------
Large Growth
Cap Select International Money and
Stock Equity Equity Market Income Total
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 311 369 724 - - 6,361
----------- ---------- ----------- ----------- ----------- -----------
Expenses:
Mortality and expense risk 2,852 1,704 1,739 214 87 18,021
Administrative fee 342 204 209 26 10 2,163
----------- ---------- ----------- ----------- ----------- -----------
Total expenses 3,194 1,908 1,948 240 97 20,184
----------- ---------- ----------- ----------- ----------- -----------
Net investment income (expense) (2,883) (1,539) (1,224) (240) (97) (13,823)
----------- ---------- ----------- ----------- ----------- -----------
Net realized gain on investments:
Realized gain on sale of portfolio
shares 1,093 159 277 846 16,931 21,524
Realized gain distributions 6,787 12,513 1,936 - - 22,864
----------- ---------- ----------- ----------- ----------- -----------
Net realized gain 7,880 12,672 2,213 846 16,931 44,388
----------- ---------- ----------- ----------- ----------- -----------
Change in unrealized appreciation 30,178 (440) 38,202 (6) (2,381) 177,514
----------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets from operations $ 35,175 10,693 39,191 600 14,453 208,079
=========== ========== =========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1999
<TABLE>
<CAPTION>
Cova
----------------------------------------------------------------------------------------
Lord Abbett
Growth Large Small
and Bond Developing Cap Mid-Cap Quality Cap
Income Debenture Growth Research Value Bond Stock
----------- ----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (expense) $ (6,411) 1,057 (345) (828) (494) (204) (615)
Net realized gain 1,698 1,309 104 142 23 505 65
Change in unrealized appreciation 55,182 2,221 9,454 17,889 2,817 (2,260) 26,658
Net increase (decrease) from
----------- ----------- ----------- ---------- ----------- ----------- -----------
operations 50,469 4,587 9,213 17,203 2,346 (1,959) 26,108
----------- ----------- ----------- ---------- ----------- ----------- -----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 90,778 41,228 12,849 42,395 9,150 - 3,822
Transfers between sub-accounts
(including fixed account), net 442,801 35,530 23,161 14,994 37,227 4,632 22,564
Transfers for contract benefits,
terminations and insurance charges (6,410) (5,378) 1 (434) (94) (5,764) (48)
Net increase (decrease) in net
assets from contract
----------- ----------- ----------- ---------- ----------- ----------- -----------
transactions 527,169 71,380 36,011 56,955 46,283 (1,132) 26,338
----------- ----------- ----------- ---------- ----------- ----------- -----------
Net increase (decrease) in net
assets 577,638 75,967 45,224 74,158 48,629 (3,091) 52,446
Net assets at beginning of period - 160,783 1,844 32,078 15,521 68,612 33,709
----------- ----------- ----------- ---------- ----------- ----------- -----------
Net assets at end of period $ 577,638 236,750 47,068 106,236 64,150 65,521 86,155
=========== =========== =========== ========== =========== =========== ===========
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1999
<TABLE>
<CAPTION>
Cova GACC Lord Abbett
--------------------------------------- ----------- -----------
Large Growth
Cap Select International Money and
Stock Equity Equity Market Income Total
----------- ----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (expense) $ (2,883) (1,539) (1,224) (240) (97) (13,823)
Net realized gain 7,880 12,672 2,213 846 16,931 44,388
Change in unrealized appreciation 30,178 (440) 38,202 (6) (2,381) 177,514
Net increase (decrease) from
----------- ----------- ------------- ----------- ----------- ----------
operations 35,175 10,693 39,191 600 14,453 208,079
----------- ----------- ------------- ----------- ----------- ----------
Contract transactions:
Cova payments - - - 100 - 100
Cova redemptions - - - - - -
Payments received from contract
owners 77,295 20,000 13,209 - 1,382 312,108
Transfers between sub-accounts
(including fixed account), net 71,124 43,240 59,115 (24,606) (328,602) 401,180
Transfers for contract benefits,
terminations and insurance charges (6,781) (239) (788) - 9 (25,926)
Net increase (decrease) in net
assets from contract
----------- ----------- ------------- ----------- ----------- ----------
transactions 141,638 63,001 71,536 (24,506) (327,211) 687,462
----------- ----------- ------------- ----------- ----------- ----------
Net increase (decrease) in net
assets 176,813 73,694 110,727 (23,906) (312,758) 895,541
Net assets at beginning of period 130,082 88,450 89,651 24,008 312,758 957,496
----------- ----------- ------------- ----------- ----------- ----------
Net assets at end of period $ 306,895 162,144 200,378 102 - 1,853,037
=========== =========== ============= =========== =========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Cova
----------------------------------------------------------------------------------------
Large Small Large
Bond Developing Cap Mid-Cap Quality Cap Cap
Debenture Growth Research Value Bond Stock Stock
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (expense) $ 2,046 (1) (171) (96) 671 (203) (887)
Net realized gain (loss) 1,566 - 3 (4) 64 432 907
Change in unrealized appreciation 2,573 121 2,958 87 2,940 91 22,305
Net increase (decrease) from
----------- ----------- ----------- ----------- ----------- ----------- -----------
operations 6,185 120 2,790 (13) 3,675 320 22,325
----------- ----------- ----------- ----------- ----------- ----------- -----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 25,475 - 28,039 14,334 34,865 9,652 35,989
Transfers between sub-accounts
(including fixed account), net 16,036 1,724 1,249 1,200 8,993 16,587 31,944
Transfers for contract benefits,
terminations and insurance charges (1,924) - - - (1,989) 4 (1,975)
Net increase (decrease) in net
assets from contract
----------- ----------- ----------- ----------- ----------- ----------- -----------
transactions 39,587 1,724 29,288 15,534 41,869 26,243 65,958
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets 45,772 1,844 32,078 15,521 45,544 26,563 88,283
Net assets at beginning of period 115,011 - - - 23,068 7,146 41,799
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets at end of period $ 160,783 1,844 32,078 15,521 68,612 33,709 130,082
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
<TABLE>
<CAPTION>
Cova GACC Lord Abbett
------------------------- ----------- -----------
Growth
Select International Money and
Equity Equity Market Income Total
---------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (expense) $ (527) 205 (3) 1,159 2,193
Net realized gain (loss) 2,516 42 - 14,754 20,280
Change in unrealized appreciation 9,506 7,092 11 10,125 57,809
Net increase (decrease) from
---------- ------------- ----------- ----------- -----------
operations 11,495 7,339 8 26,038 80,282
---------- ------------- ----------- ----------- -----------
Contract transactions:
Cova payments - - - - -
Cova redemptions - - - - -
Payments received from contract
owners 39,613 16,232 24,000 66,977 295,176
Transfers between sub-accounts
(including fixed account), net 18,967 22,607 - 50,718 170,025
Transfers for contract benefits,
terminations and insurance charges (191) (501) - (2,035) (8,611)
Net increase (decrease) in net
assets from contract
---------- ------------- ----------- ----------- -----------
transactions 58,389 38,338 24,000 115,660 456,590
---------- ------------- ----------- ----------- -----------
Net increase (decrease) in net
assets 69,884 45,677 24,008 141,698 536,872
Net assets at beginning of period 18,566 43,974 - 171,060 420,624
---------- ------------- ----------- ----------- -----------
Net assets at end of period $ 88,450 89,651 24,008 312,758 957,496
========== ============= =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
(1) ORGANIZATION
First Cova Variable Annuity Account One (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by First Cova Life Insurance Company (FCLIC) and
exists in accordance with the regulations of the New York Department of
Insurance. The Separate Account is a funding vehicle for variable annuity
contracts issued by FCLIC.
The Separate Account is divided into sub-accounts with the assets of each
sub-account invested in corresponding portfolios of the following
investment companies which are diversified, open-end, management
investment companies 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 FCLIC.
Cova Series Trust (Cova) 10 portfolios
General American Capital Company (GACC) 1 portfolio
Lord Abbett Series Fund, Inc. (Lord Abbett) 1 portfolio
The Lord Abbett Series Fund, Inc. Growth and Income sub-account ceased
operations on January 8, 1999 and the Cova Series Trust Lord Abbett
Growth and Income sub-account commenced operations on January 8, 1999.
On August 26, 1999, FCLIC's ultimate parent company, GenAmerica
Corporation, entered into a definitive agreement to be acquired by
Metropolitan Life Insurance Company. The acquisition occurred on January
6, 2000.
(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.
(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 FCLIC which is taxed as a Life Insurance
Company under the provisions of the Internal Revenue Code (IRC).
Under current IRC provisions, FCLIC 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 FCLIC 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 FCLIC.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
(3) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION, CONTINUED
FCLIC 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 FCLIC 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 seven years after receipt and is
equal to 7% of the purchase payment withdrawn in the first and second
years, 5% of the purchase payments withdrawn withdrawn in the third,
fourth and fifth years and 3% of the purchase payments withdrawn in the
sixth and seventh years. 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 year ended December 31, 1999, withdrawal fees
of $446 were deducted from 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
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 year ended December 31, 1999, contract maintenance and
transfer fees of $600 were deducted from the Separate Account.
Currently, FCLIC advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes at the time annuity
payments begin. FCLIC reserves the right to deduct premium taxes when
incurred.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
<TABLE>
<CAPTION>
(5) COST BASIS OF INVESTMENTS
The cost basis of each sub-account's investment follows:
<S> <C>
Cova Lord Abbett Growth and Income $ 522,500
Cova Bond Debenture 231,928
Cova Developing Growth 37,497
Cova Large Cap Research 85,397
Cova Mid-Cap Value 61,251
Cova Quality Bond 64,745
Cova Small Cap Stock 59,109
Cova Large Cap Stock 255,034
Cova Select Equity 151,989
Cova International Equity 157,064
GACC Money Market 97
--------------
$ 1,626,611
==============
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
<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 Net Assets (in thousands)
------------------------------------ ------------------------------------
Operations 12/31/99 12/31/98 12/31/97 12/31/99 12/31/98 12/31/97
------------ ----------- ----------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 $ 39.456238 - - $ 578 - -
Cova Bond Debenture 5/15/97 13.765717 13.496763 12.882042 237 161 115
Cova Developing Growth 11/23/98 14.452824 11.068002 - 47 2 -
Cova Large Cap Research 3/3/98 14.635296 11.825475 - 106 32 -
Cova Mid-Cap Value 3/4/98 10.875326 10.437999 - 64 16 -
Cova Quality Bond 5/15/97 11.567101 11.914486 11.155130 66 69 23
Cova Small Cap Stock 3/17/97 17.933548 12.583415 13.492111 86 34 7
Cova Large Cap Stock 3/11/97 22.548635 19.428714 14.889594 307 130 42
Cova Select Equity 3/11/97 18.384195 16.987197 14.053502 162 88 19
Cova International Equity 3/11/97 16.337166 12.891430 11.462941 200 90 44
GACC Money Market 12/28/98 11.558870 11.109941 - - 24 -
</TABLE>
<TABLE>
Separate Account Expenses
Commenced Total Return* As a % of Average Net Assets**
------------------------------------ -------------------------------------
Operations 1999 1998 1997 1999 1998 1997
------------ ----------- ------------ --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cova Lord Abbett Growth and Income 1/8/99 9.89% - - 1.40% - -
Cova Bond Debenture 5/15/97 1.99% 4.77% 9.71% 1.40% 1.40% 1.40%
Cova Developing Growth 11/23/98 30.58% 8.57% - 1.40% 1.40% -
Cova Large Cap Research 3/3/98 23.76% 8.01% - 1.40% 1.40% -
Cova Mid-Cap Value 3/4/98 4.19% -5.54% - 1.40% 1.40% -
Cova Quality Bond 5/15/97 -2.92% 6.81% 6.79% 1.40% 1.40% 1.40%
Cova Small Cap Stock 3/17/97 42.52% -6.74% 23.53% 1.40% 1.40% 1.40%
Cova Large Cap Stock 3/11/97 16.06% 30.49% 20.08% 1.40% 1.40% 1.40%
Cova Select Equity 3/11/97 8.22% 20.88% 19.47% 1.40% 1.40% 1.40%
Cova International Equity 3/11/97 26.73% 12.46% 2.87% 1.40% 1.40% 1.40%
GACC Money Market 12/28/98 4.04% - - 1.40% - -
* 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>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
<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 years ended
December 31, 1999 and 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 Lord Abbett Growth and Income 1999 $ 45,506 $ 43,808 $ 1,698
1998 - - -
Cova Bond Debenture 1999 5,846 5,804 42
1998 3,263 3,243 20
Cova Developing Growth 1999 3,945 3,841 104
1998 1 1 -
Cova Large Cap Research 1999 1,385 1,243 142
1998 206 203 3
Cova Mid-Cap Value 1999 484 461 23
1998 105 109 (4)
Cova Quality Bond 1999 6,688 6,544 144
1998 2,573 2,509 64
Cova Small Cap Stock 1999 873 808 65
1998 205 216 (11)
Cova Large Cap Stock 1999 7,899 6,806 1,093
1998 2,908 2,698 210
Cova Select Equity 1999 2,424 2,265 159
1998 759 722 37
Cova International Equity 1999 2,628 2,351 277
1998 1,440 1,412 28
GACC Money Market 1999 24,749 23,903 846
1998 - - -
Lord Abbett Growth and Income 1999 330,371 313,440 16,931
1998 3,648 3,636 12
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS) AND CHANGE IN 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>
Cova Lord Abbett Growth and Income 1999 $ 55,182 $ - $ 55,182
1998 - - -
Cova Bond Debenture 1999 4,840 2,619 2,221
1998 2,619 46 2,573
Cova Developing Growth 1999 9,575 121 9,454
1998 121 - 121
Cova Large Cap Research 1999 20,847 2,958 17,889
1998 2,958 - 2,958
Cova Mid-Cap Value 1999 2,904 87 2,817
1998 87 - 87
Cova Quality Bond 1999 781 3,041 (2,260)
1998 3,041 101 2,940
Cova Small Cap Stock 1999 27,052 394 26,658
1998 394 303 91
Cova Large Cap Stock 1999 51,885 21,707 30,178
1998 21,707 (598) 22,305
Cova Select Equity 1999 10,168 10,608 (440)
1998 10,608 1,102 9,506
Cova International Equity 1999 43,329 5,127 38,202
1998 5,127 (1,965) 7,092
GACC Money Market 1999 5 11 (6)
1998 11 - 11
Lord Abbett Growth and Income 1999 - 2,381 (2,381)
1998 2,381 (7,744) 10,125
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS
The change in the number of units for each sub-account follows:
Cova
----------------------------------------------------------------------------------------
Lord Abbett
Growth Large Small
and Bond Developing Cap Mid-Cap Quality Cap
Income Debenture Growth Research Value Bond Stock
----------- ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - 8,928 - - - 2,068 530
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased - 1,929 - 2,602 1,370 3,068 711
Contract units transferred, net - 1,205 167 111 117 794 1,439
Contract units redeemed - (149) - - - (171) (1)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Unit balance at 12/31/98 - 11,913 167 2,713 1,487 5,759 2,679
Cova units purchased - - - - - - -
Cova units redeemed - - - - - - -
Contract units purchased 2,611 3,066 1,155 3,404 935 - 322
Contract units transferred, net 12,203 2,618 1,936 1,175 3,486 400 1,807
Contract units redeemed (174) (398) (1) (33) (9) (495) (4)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Unit balance at 12/31/99 14,640 17,199 3,257 7,259 5,899 5,664 4,804
=========== =========== =========== =========== ========== =========== ===========
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1999 and 1998
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED
Cova GACC Lord Abbett
---------------------------------------- ---------- -----------
Large Growth
Cap Select International Money and
Stock Equity Equity Market Income
----------- ---------- --------------- ---------- -----------
<S> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 2,807 1,321 3,836 - 5,547
Cova units purchased - - - - -
Cova units redeemed - - - - -
Contract units purchased 2,093 2,639 1,307 2,161 2,036
Contract units transferred, net 1,930 1,260 1,863 - 1,600
Contract units redeemed (135) (13) (52) - (71)
----------- ---------- --------------- ---------- -----------
Unit balance at 12/31/98 6,695 5,207 6,954 2,161 9,112
Cova units purchased - - - 9 -
Cova units redeemed - - - - -
Contract units purchased 3,821 1,160 1,031 - 63
Contract units transferred, net 3,422 2,467 4,337 - (9,152)
Contract units redeemed (328) (14) (57) (2,161) (23)
----------- ---------- --------------- ---------- -----------
Unit balance at 12/31/99 13,610 8,820 12,265 9 -
=========== ========== =============== ========== ===========
</TABLE>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Financial Statements and Schedule
December 31, 1999, 1998, and 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
First Cova Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and capital stock and surplus of First Cova Life Insurance
Company (the Company) as of December 31, 1999 and 1998, and the related
statutory statements of operations, capital stock and surplus, and cash
flow for each of the years in the three-year period ended December 31,
1999. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory 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 audit 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.
As described more fully in note 2 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed
or permitted by the New York State Insurance Department, which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles are also described
in note 2.
In our opinion, because of the effects of the matter discussed in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting
principles, the financial position of First Cova Life Insurance Company as
of December 31, 1999 and 1998, or the results of its operations or its cash
flows for each of the years in the three-year period ended December 31,
1999.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities, and
capital stock and surplus of First Cova Life Insurance Company as of
December 31, 1999 and 1998, and the results of its operations and its cash
flow for each of the years in the three-year period ended December 31,
1999, on the basis of accounting described in note 2.
Our audits were made for the purpose of forming an opinion on the basic
statutory financial statements taken as a whole. The supplementary
information included in the accompanying schedule is presented for purposes
of additional analysis and is not a required part of the basic statutory
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic statutory financial
statements and, in our opinion, is fairly stated in all material respects
in relation to the basic statutory financial statements taken as a whole.
Chicago, Illinois
March 3, 2000
<PAGE>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets, Liabilities,
and Capital Stock and Surplus
December 31, 1999 and 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
ADMITTED ASSETS 1999 1998
----------- ------------
<S> <C> <C>
Bonds $ 54,543 58,302
Other invested asset 520 --
Cash and short-term investments 1,169 5,894
----------- ------------
Total cash and investments 56,232 64,196
----------- ------------
Investment income due and accrued 803 829
Other assets 1 8
----------- ------------
Total admitted assets excluding Separate Account assets 57,036 65,033
Separate Account assets 1,853 958
----------- ------------
Total admitted assets $ 58,889 65,991
=========== ============
LIABILITIES AND CAPITAL STOCK AND SURPLUS
Aggregate reserve for life policies and annuity contracts $ 21,918 30,366
Supplementary contracts without life contingencies 331 288
Life policy and annuity contract claims (1) (1)
Interest maintenance reserve 3,516 3,192
General expenses due or accrued 114 64
Transfers to Separate Accounts due or accrued (54) (31)
Taxes, licenses, and fees due or accrued
excluding Federal income taxes 225 216
Federal income taxes 1,103 1,393
Remittances and items not allocated 14 22
Asset valuation reserve 472 523
Payable to parent, subsidiaries, and affiliates 19 20
Reinsurance payable to parent -- 1,369
Checks outstanding 141 291
Accounts payable - security purchases -- 480
----------- ------------
Total liabilities excluding Separate Account liabilities 27,798 38,192
Separate Account liabilities 1,853 958
----------- ------------
Total liabilities 29,651 39,150
----------- ------------
Common capital stock, $10 par value. Authorized,
issued, and outstanding 200,000 shares 2,000 2,000
Gross paid-in and contributed surplus 11,501 11,501
Unassigned surplus 15,737 13,340
----------- ------------
Total capital stock and surplus 29,238 26,841
----------- ------------
Total liabilities and capital stock and surplus $ 58,889 65,991
=========== ============
</TABLE>
See accompanying notes to statutory financial statements.
<PAGE>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years ended December 31, 1999, 1998, and 1997
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ----------
Income:
<S> <C> <C> <C>
Premiums and annuity considerations $ -- (128,883) --
Deposit-type funds 977 948 6,851
Considerations for supplementary contracts
without life contingencies 106 219 54
Net investment income 4,169 13,813 13,771
Amortization of interest maintenance reserve (228) (347) (244)
Separate Account net gain from operations
excluding unrealized gains or losses -- 11 --
Separate Account administration fee income 21 9 2
------------ ------------ ----------
Total income 5,045 (114,230) 20,434
------------ ------------ ----------
Benefits and expenses:
Death benefits -- 2,471 3,294
Annuity benefits 360 383 365
Surrender benefits and other fund withdrawals 9,607 12,758 7,222
Interest on policy or contract funds -- 47 11
Payment on supplementary contracts without
life contingencies 78 62 24
(Decrease) increase in aggregate reserves
for life policies and annuity contracts (8,448) (134,624) 5,904
Increase in reserve for supplementary
contracts without life contingencies 43 168 30
Commissions on premiums, annuity
considerations and deposit-type funds 38 44 239
Commissions and expense allowances on
reinsurance assumed -- 405 423
General insurance expenses 727 679 966
Insurance taxes, licenses, and fees,
excluding Federal income taxes -- (170) 142
Net transfers to Separate Accounts 665 446 388
Other expenses -- 1
------------ ------------ ----------
Total benefits and expenses 3,070 (117,331) 19,009
------------ ------------ ----------
Income from operations before Federal income taxes
and realized capital gains 1,975 3,101 1,425
Federal income tax (benefit) expense,
excluding tax on capital gains (371) 837 145
------------ ------------ ----------
Net gain from operations before realized capital gains 2,346 2,264 1,280
Realized capital gains (net of tax expense of $75 and $992 in 1999 and 1998,
respectively, and tax benefit of $89 in 1997, and net of amounts transferred
to the IMR of $95, $1,263 and
$(122), in 1999, 1998, and 1997, respectively) -- -- --
------------ ------------ ----------
Net income $ 2,346 2,264 1,280
============ ============ ==========
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Capital Stock and Surplus
Years ended December 31, 1999, 1998, and 1997
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Capital stock - balance at beginning and end of year $ 2,000 2,000 2,000
---------- ---------- ----------
Gross paid-in and contributed surplus -
balance at beginning and end of year 11,501 11,501 11,501
---------- ---------- ----------
Unassigned surplus:
Balance at beginning of year 13,340 10,863 9,642
Net income 2,346 2,264 1,280
Change in reserve on account of change in valuation basis -- (781) --
Change in asset valuation reserve 51 1,005 (59)
Other changes in surplus in Separate Accounts Statement -- (11) --
---------- ---------- ----------
Balance at end of year 15,737 13,340 10,863
---------- ---------- ----------
Total capital stock and surplus $ 29,238 26,841 24,364
========== ========== ==========
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years ended December 31, 1999, 1998, and 1997
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ----------
Cash from operations:
<S> <C> <C> <C>
Premiums and annuity considerations $ -- (128,883) --
Deposit-type funds 977 948 6,852
Considerations for supplementary contracts without
life contingencies 106 219 54
Net investment income 4,236 15,912 13,310
Separate Account administration fee income 21 9 2
------------ ------------ ----------
5,340 (111,795) 20,218
------------ ------------ ----------
Death benefits -- 3,196 2,842
Surrender benefits and other fund withdrawals 9,607 12,758 7,222
Other benefits to policyholders, primarily annuity benefits 438 495 399
Commissions, other expenses, and taxes paid,
excluding Federal income tax 726 1,262 1,709
Net transfers to Separate Accounts 688 456 409
Federal income taxes (recovered) paid, excluding
tax on capital gains (81) (622) 544
------------ ------------ ----------
11,378 17,545 13,125
------------ ------------ ----------
Net cash (used in) from operations (6,038) (129,340) 7,093
------------ ------------ ----------
Cash from investments:
Proceeds from investments sold, matured, or repaid:
Bonds 21,380 118,066 40,473
Mortgage loans -- 11,057 364
------------ ------------ ----------
Total investment proceeds 21,380 129,123 40,837
------------ ------------ ----------
Taxes (paid) recovered on capital gains and losses (54) (721) 67
------------ ------------ ----------
Cost of investments acquired:
Bonds 17,492 14,981 44,688
Mortgage loans -- 1,500 479
Other invested asset 520 -- --
------------ ------------ ----------
Total investments acquired 18,012 16,481 45,167
------------ ------------ ----------
Net (decrease) increase in policy loans -- (20,544) 1,651
------------ ------------ ----------
Net cash from (used for) investments 3,314 132,465 (5,914)
------------ ------------ ----------
Cash from (used in) financing and miscellaneous sources:
Cash provided - other 8 761 13
Cash applied - other (2,009) (1,018) (2,155)
------------ ------------ ----------
Net cash used in financing and miscellaneous sources (2,001) (257) (2,142)
------------ ------------ ----------
Net change in cash and short-term investments (4,725) 2,868 (963)
Cash and short-term investments at beginning of year 5,894 3,026 3,989
------------ ------------ ----------
Cash and short-term investments at end of year $ 1,169 5,894 3,026
============ ============ ==========
See accompanying notes to statutory financial statements.
</TABLE>
<PAGE>
FIRST COVA LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1999, 1998, and 1997
(1) COMPANY OWNERSHIP AND NATURE OF BUSINESS
COMPANY OWNERSHIP
First Cova Life Insurance Company (the Company) is a wholly owned
subsidiary of Cova Financial Services Life Insurance Company
(CFSLIC), which is a downstream subsidiary of General American
Life Insurance Company (GALIC), a Missouri domiciled life
insurance company. GALIC is wholly owned by GenAmerica
Corporation, which in turn is wholly owned by the ultimate parent,
General American Mutual Holding Company (GAMHC).
On August 26, 1999, GAMHC entered into a definitive agreement,
whereby Metropolitan Life Insurance Company (MetLife), a New York
domiciled life insurance company, will acquire GenAmerica
Corporation and all its holdings 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.
NATURE OF BUSINESS
The Company is licensed to do business in the state of New York.
The Company markets and services single premium deferred annuities
and variable annuities. Most of the policies issued present no
significant mortality nor 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 annuity contracts, interest rates credited to
policyholder deposits are guaranteed by the Company for periods
from one to seven years, but in no case may renewal rates be less
than 3%. The Company may assess surrender fees against amounts
withdrawn prior to scheduled rate reset and adjust account values
based on current crediting rates. Policyholders may also 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
accounts. 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 accounts 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 also may incur certain federal income tax
penalties on withdrawals.
Although the Company markets its products through numerous
distributors, including regional brokerage firms, national
brokerage firms, and banks, approximately 54% of the Company's
sales were through Edward Jones and Company in both 1999 and 1998,
and approximately 58% of the Company's sales were through Dreyfus
Service Organization in 1997.
(2) BASIS OF PRESENTATION
The accompanying statutory financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the New
York State Insurance Department, which is a comprehensive basis of
accounting other than generally accepted accounting principles.
Prescribed statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the National Association of Insurance Commissioners
(NAIC). Permitted statutory accounting practices encompass all
accounting practices that are not prescribed; such practices differ from
state to state, may differ from company to company within a state, and
may change in the future. All material transactions recorded by the
Company during 1999, 1998, and 1997 are in conformity with prescribed
practices.
Generally accepted accounting principles (GAAP) differ in certain
respects from the 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 non-recognition of financial reinsurance
for GAAP reporting, the establishment of an Asset Valuation Reserve as a
contingent liability based on the credit quality of the Company's
investment securities on a statutory basis, and the establishment of an
Interest Maintenance Reserve on a statutory basis 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. In addition, adjustments to record the carrying values of debt
securities and certain equity securities at market are applied only
under GAAP reporting.
Another difference arises from Federal income taxes being charged to
operations based on income that is currently taxable. Deferred income
taxes are not provided for the tax effect of temporary differences
between book and tax basis of assets and liabilities on a statutory
basis.
Purchase accounting creates another difference as it requires the
restatement of GAAP assets and liabilities to their estimated fair
values and shareholder's equity to the net purchase price. Statutory
accounting does not recognize the purchase method of accounting.
The following schedules set forth the adjustments to statutory net
income and capital stock and surplus necessary to present them in
accordance with generally accepted accounting principles:
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
(IN THOUSANDS)
Net income (loss):
<S> <C> <C> <C>
As reported under statutory accounting practices $ 2,346 2,264 1,280
Deferred acquisition costs 61 51 477
Change in reserve for policies and contracts (168) (5,499) 344
Interest maintenance reserve 323 1,609 122
Deferred income taxes (923) 3,003 (827)
Amortization of intangible assets and liabilities (338) (4,370) (216)
Loss on securities due to reinsurance recaptured -- (1,986) --
Premiums recaptured -- 2,164 --
Other, net (25) (17) 421
------------ ------------ -----------
As reported under generally accepted accounting
principles $ 1,276 (2,781) 1,601
============ ============ ===========
1999 1998 1997
------------ ------------ -----------
(IN THOUSANDS)
Capital stock and surplus:
As reported under statutory accounting practices $ 29,238 26,841 24,364
Deferred acquisition costs 637 576 525
Reserves for policies and contracts 110 301 5,173
Asset valuation reserve 472 523 1,528
Interest maintenance reserve 3,516 3,192 1,583
Unrealized (depreciation) appreciation of investments (2,654) 897 2,964
Deferred income taxes 2,010 2,191 (1,163)
Present value of future profits 1,705 491 3,350
Goodwill 1,886 2,009 2,131
------------ ------------ -----------
As reported under generally accepted accounting
principles $ 36,920 37,021 40,455
============ ============ ===========
</TABLE>
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles (the Codification). The Codification will constitute the only
source of "prescribed" statutory accounting practices. Accordingly, once
implemented, the definitions of what comprises prescribed versus
permitted statutory accounting practices may result in changes to the
accounting policies that insurance enterprises use to prepare their
statutory financial statements. The implementation date for the
Company's state of domicile is January 1, 2001. The Company is currently
evaluating the impact of the Codification on its statutory financial
statements.
In preparing the statutory 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. Investment valuation is most affected by the use of
estimates and assumptions.
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 flow of assets and
liabilities to change, the Company might have to liquidate assets prior
to their maturity and recognize a gain or a 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 such securities and the related recognition of income.
<PAGE>
(3) BASIS OF VALUATION AND INCOME RECOGNITION OF INVESTED ASSETS
Asset values are generally stated as follows:
O Investments are valued as prescribed by the NAIC.
O Bonds not backed by other loans are valued at amortized cost using
the interest method.
O Mortgage-backed bonds, included in bonds, are valued at amortized
cost. Amortization of the discount or premium from the purchase of
these securities 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 originally anticipated
and the actual prepayments received and currently anticipated. When
such differences occur, 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).
Other invested asset consists of investment in Farmers Insurance
Exchange surplus note. The surplus note carries an interest rate of 8.5%
and matures in August 1, 2004.
Investment income is recorded when earned. Realized capital gains and
losses on the sales of investments are determined on the basis of
specific costs of investments and are credited or charged to income net
of federal income taxes.
(4) REVENUE AND EXPENSE RECOGNITION
Premiums, annuity considerations and deposit-type funds are credited to
revenue when collected. Expenses, including acquisition costs related to
acquiring new business, are charged to operations as incurred.
(5) ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
Life insurance companies are required to establish an Asset Valuation
Reserve (AVR) and an Interest Maintenance Reserve (IMR). The AVR
provides for a standardized statutory investment valuation reserve for
bonds, preferred stocks, short-term investments, mortgage loans, common
stocks, real estate, and other invested assets. The IMR is designed to
defer net realized capital gains and losses presumably resulting from
changes in the level of interest rates in the market and to amortize
them into income over the remaining life of the bond or mortgage loan
sold. The IMR represents the unamortized portion not yet taken
into income.
(6) FEDERAL INCOME TAXES
Federal income taxes are charged to operations based on income that is
currently taxable. No charge to operations is made nor liability
established for the tax effect of timing differences between financial
reporting and taxable income.
For 1999, the Company will file a consolidated Federal income tax return
with its parent company, CFSLIC. The method of allocation between the
companies is both subject to written agreement and approval by the Board
of Directors. Allocation is to be based upon separate return
calculations, adjusted for any tax deferred intercompany transactions,
with current credit for net losses to the extent recoverable in the
consolidated return. Intercompany tax balances are to be settled no
later than 30 days after related returns are filed.
Amounts payable or recoverable related to periods before June 1, 1995
are subject to an indemnification agreement with Xerox Corporation which
has the effect that the Company is not at risk for any income taxes or
entitled to recoveries related to those periods.
<PAGE>
The actual Federal income tax expense differed from the expected tax
expense computed by applying the U.S. Federal statutory rate to the
1999, 1998, and 1997 net gain from operations before Federal income
taxes as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
(IN THOUSANDS)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $ 692 35.0%$ 1,085 35.0%$ 499 35.0%
Tax basis reserve adjustment 44 2.2 41 1.3 13 0.9
IMR amortization 80 4.0 121 3.9 85 6.0
Proxy tax on insurance
acquisition costs -- -- 3 0.1 33 2.3
Adjustment for prior years (821) (41.6) 48 1.5 (127) (8.9)
Intangible amortization (376) (19.0) (376) (12.1) (376) (26.4)
Other 10 0.6 (85) (2.7) 18 1.3
------------ ----------- ------------ ----------- ------------ -----------
$ (371) (18.8)%$ 837 27.0%$ 145 10.2%
============ =========== ============ =========== ============ ===========
</TABLE>
The Budget Reconciliation Act of 1990 requires life insurers to
capitalize and amortize a "proxy" amount of policy acquisition costs
beginning in 1990. This proxy amount is based on a percentage of the
life insurance company's premium income and not on actual policy
acquisition costs.
(7) TRANSACTIONS WITH AFFILIATES
The Company has entered into a service agreement and an investment
accounting service agreement with its parent, CFSLIC. The Company has
also entered into an investment services agreement with Conning Asset
Management Company, a Missouri corporation and an affiliate of the
Company, pursuant to which the Company receives investment advice. Under
the terms of the agreements, the companies (Service Providers) perform
various services for the Company which include investment, underwriting,
claims, and certain administrative functions. The Service Providers are
reimbursed for their services. Expenses and fees paid to affiliated
companies during 1999, 1998, and 1997 were $361,042, $386,821, and
$339,670, respectively.
(8) CAPITAL STOCK AND SURPLUS RESTRICTIONS
The amount of dividends which can be paid by State of New York insurance
companies to shareholders is subject to prior approval of the Insurance
Commissioner. There have been no other restrictions placed on the
unassigned surplus funds.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About
Fair Value of Financial Instruments (SFAS 107), extends 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 or market conditions
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, could not be realized in the
immediate settlement of the instruments. SFAS 107 excludes certain
financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE>
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.
BONDS
Fair value of bonds are based on quoted market prices, where
applicable. For bonds 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).
OTHER INVESTED ASSET
Other invested asset consists of investment in Farmers Insurance
Exchange surplus note, at 8.5% and matures at August 1, 2004. The
amortized cost and estimated fair value of the surplus note is
approximately $520,000.
INVESTMENT CONTRACTS
The Company's policy contracts require beneficiaries commence
receipt of payments by the later of age 85 or 10 years after
purchase, and may permit earlier surrenders, generally subject to
fees and adjustments. Fair values for the Company's liabilities
under investment type contracts are estimated as the amount
payable on demand. As of December 31, 1999 and 1998, the cash
surrender value of policyholder deposits was approximately
$883,000 and $1,118,000 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.
(10) LIFE AND ANNUITY ACTUARIAL RESERVES
There are no deferred fractional premiums on any policies sold or
currently in force. There are no premiums beyond the date of death.
There are no required reserves for the waiver of deferred fractionals or
refund of premiums beyond the date of death.
Substandard policies are valued using a modification of the standard
valuation tables based on the substandard rating. The modification is a
25% additional mortality increase of the standard table for each table
rating.
As of December 31, 1999, the Company had no insurance in force for which
the gross premiums were less than the net premiums according to the
standard valuation set by the State of New York.
The tabular interest has been determined from the basic data for the
calculation of policy reserves.
Tabular interest for funds not involving life contingencies for each
valuation rate and contractual guaranteed rate was determined as the
statutory amount required to support the required statutory reserve
based on the Commissioner's annuity reserve valuation method. Generally
it is 1/100 of the product of such valuation rate of interest times the
mean funds at the beginning and end of the valuation period or issue
date of the policy, if less.
<PAGE>
<TABLE>
<CAPTION>
The life and annuity actuarial reserves as provided in the accompanying
statutory financial statements segregated by type and valuation
characteristics for 1999 and 1998 are given below.
1999 1998 VALUATION WITHDRAWAL
---------- --------------
TYPE RESERVE RESERVE BASIC/RATE CHARACTERISTIC
---------- -------------- --------------------------- ---------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Structured settlements $ 1,124 1,090 1983 IAM 8.25% No withdrawal permitted
SPDA - 1 year 11,192 11,585 CARVM 5.25% - 6.25% Fixed surrender charge
SPDA - 5 year - 11,867 CARVM 5.75% - 6.25% Withdrawal limited to
10% per year
SPDA - 5 year 4,889 314 CARVM 5.25% - 6.25% Market value adjustment
SPDA - 6 year 43 42 CARVM 5.75% Market value adjustment
SPDA - 7 year 5,564 6,249 CARVM 5.25% - 5.75% Market value adjustment
Variable annuity-fixed 229 310 5.25% - 7.00% Fixed surrender charge
Ordinary life 130 123 1958 CSO 3.5% NL Fixed surrender charge
Ordinary life 271 39 1980 CSO CRVM Fixed surrender charge
Ordinary life 43 249 1980 CSO 4.5% NO Fixed surrender charge
Ordinary life 1 2 Group conversion Fixed surrender charge
excess mortality
Ordinary life 3 3 Guaranteed insurability Fixed surrender charge
Miscellaneous 19 16 -- --
Reinsurance ceded (1,590) (1,523) -- --
---------- -----------
$ 21,918 30,366
========== ===========
</TABLE>
<PAGE>
(11) INVESTMENTS
<TABLE>
<CAPTION>
The cost or amortized cost and estimated fair value of bonds at December
31, 1999 and 1998 is as follows:
1999
-----------------------------------------------------------------------------------
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- --------------- --------------- --------------- ---------------
(IN THOUSANDS)
Bonds:
<S> <C> <C> <C> <C> <C>
Governments $ 1,446 -- 41 1,405 1,446
Public utilities 3,814 -- 121 3,693 3,814
Industrial and
miscellaneous 49,283 31 988 48,326 49,283
--------------- --------------- --------------- --------------- ---------------
Total bonds $ 54,543 31 1,150 53,424 54,543
=============== =============== =============== =============== ===============
1998
-----------------------------------------------------------------------------------
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- --------------- --------------- --------------- ---------------
(IN THOUSANDS)
Bonds:
Governments $ 1,288 45 -- 1,333 1,288
Public utilities 1,800 45 -- 1,845 1,800
Industrial and
miscellaneous 55,214 1,039 114 56,139 55,214
--------------- --------------- --------------- --------------- ---------------
Total bonds $ 58,302 1,129 114 59,317 58,302
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
The amortized cost and estimated fair value of bonds at December 31,
1999, by contractual maturity, are shown in the following table.
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 may require monthly principal installments and mortgagees
may prepay principal.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
--------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less $ 3,490 3,489
Due after one year through five years 21,583 21,305
Due after five years through ten years 15,474 14,635
Due after ten years 7,120 7,120
Mortgage-backed securities 6,876 6,875
--------------- ---------------
Total $ 54,543 53,424
=============== ===============
</TABLE>
Approximately 45.9% of the Company's bonds are of highest quality, 48.1%
are of high quality, and 6.0% are of medium quality based on NAIC rating
methodology. No provision was made for possible decline in the fair
value of individual bonds, other than the establishment of AVR, as of
December 31, 1999 or 1998, as the Company intends to hold the
investments until such time as no significant loss would result.
<TABLE>
<CAPTION>
The components of net investment income were as follows:
1999 1998 1997
------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income on bonds $ 4,061 11,211 11,354
Income on mortgage loans -- 855 786
Income on short-term investments 144 242 197
Income on cash on deposit -- 6 7
Income on policy loans -- 1,588 1,531
Income on other invested assets 18 -- --
------------- -------------- --------------
Total investment income 4,223 13,902 13,875
Investment expenses (54) (89) (104)
------------- -------------- --------------
Net investment income $ 4,169 13,813 13,771
============= ============== ==============
Realized capital gains/(losses):
Mortgages $ -- 661 --
Bonds 170 1,594 (211)
Short-term investments -- -- --
------------- -------------- --------------
Net realized gains/(losses) on investments $ 170 2,255 (211)
============= ============== ==============
</TABLE>
Proceeds from sales, redemptions, and paydowns of investments in bonds
during 1999 were $21,379,855. Gross gains of $224,080 and gross losses
of $56,712 were realized on those sales.
Proceeds from sales, redemptions, and paydowns of investments in bonds
during 1998 were $118,066,396. Gross gains of $2,641,028 and gross
losses of $1,046,860 were realized on those sales.
Proceeds from sales, redemptions, and paydowns of investments in bonds
during 1997 were $40,473,142. Gross gains of $213,835 and gross losses
of $424,506 were realized on those sales.
Bonds with a carrying value of approximately $866,583 at
December 31, 1999 were deposited with governmental authorities
as required by law.
The Company held the following individual securities which exceeded 10%
of capital stock and surplus as of December 31, 1999 and 1998:
<PAGE>
<TABLE>
<CAPTION>
AMORTIZED
LONG-TERM DEBT SECURITIES COST
-------------------
(IN THOUSANDS)
1999:
<S> <C>
Community First Bankshares $ 4,000
Time Warner 3,145
Develop Div Rlty 3,005
ERAC USA Finance 2,998
Salomon Inc. 2,947
===================
1998:
Community First Bankshares $ 4,000
FNMA Remic Tr 1992 Ser 124-PH 3,433
Countryside Mtg. 1993-12 A4 3,211
Time Warner 3,200
Develop Div Rlty 3,019
ERAC USA Finance 2,998
RJR Nabisco Inc. 2,947
Salomon Inc. 2,934
===================
</TABLE>
(12) NON-ADMITTED ASSETS
Assets must be included in the statements of assets and liabilities at
admitted asset value, and non-admitted assets, principally agents'
balances greater than 90 days past due, must be excluded through a
charge against unassigned surplus.
(13) REINSURANCE
In 1993, the Company entered into a reinsurance treaty with its parent,
CFSLIC. The underlying block of business assumed was single premium
whole life policies. On December 31, 1998, the reinsurance contract was
terminated and CFSLIC recaptured all of the single premium whole life
policies previously assumed by the Company.
The Company ceded reserves of $1,687,957 and $1,634,569 at December 31,
1999 and 1998, respectively, to Nationwide Life Insurance Company.
Reinsurance does not discharge the Company from its primary liability to
policyholders.
(14) RISK-BASED CAPITAL
The NAIC 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, 1999, the Company's total adjusted capital and authorized
control level - RBC were $29,710,733 and $903,209, respectively. At this
level of adjusted capital, no action is required.
(15) GUARANTY FUND ASSESSMENTS
The Company participates, along with all life insurance companies
licensed in New York, in an association formed to guarantee benefits to
policyholders of insolvent life insurance companies. Under the state
law, the Company is contingently liable for its share of claims covered
by the guaranty association for insolvencies incurred through 1999 but
for which assessments have not yet been determined.
The Company has not established an estimated liability for unassessed
guarantee fund claims incurred prior to December 31, 1999 as management
believes that such assessments are not material to the financial
statements.
(16) COMMITMENTS AND CONTINGENCIES
In the ordinary course of business the Company is involved in various
legal actions for which it establishes reserves where appropriate. In
the opinion of the Company's management, based upon the advice of legal
counsel, the resolution of such litigation is not expected to have a
material adverse effect on the statutory financial statements.
(17) OTHER
Certain 1998 and 1997 amounts have been reclassified to conform to the
1999 presentation.
<PAGE>
SCHEDULE 1
FIRST COVA LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1999
(In thousands of dollars)
<TABLE>
<CAPTION>
Investment income earned:
<S> <C>
Government bonds $ 73
Other bonds (unaffiliated) 3,988
Bonds of affiliates --
Preferred stocks (unaffiliated) --
Preferred stocks of affiliates --
Common stocks (unaffiliated) --
Common stocks of affiliates --
Mortgage loans --
Real estate --
Premium notes, policy loans, and liens --
Collateral loans --
Cash on hand and on deposit --
Short-term investments 144
Other invested assets 18
Derivative instruments --
Aggregate write-in for investment income --
------------
Gross investment income 4,223
------------
Real estate owned - book value less encumbrances --
Mortgage loans - book value:
Farm mortgages --
Residential mortgages --
Commercial mortgages --
------------
Total mortgage loans --
------------
Mortgage loans by standing - book value:
Good standing --
Good standing with restructured terms --
Interest overdue --
Foreclosure in process --
Other long-term assets - statement value --
Collateral loans --
Bonds and stocks of parents, subsidiaries, and affiliates - book value:
Bonds --
Preferred stocks --
Common stocks --
</TABLE>
<PAGE>
SCHEDULE 1, CONT.
FIRST COVA LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1999
(In thousands of dollars)
<TABLE>
<CAPTION>
Bonds and short-term investments by class and maturity: Bonds by maturity -
statement value:
<S> <C>
Due within 1 year or less $ 7,243
Over 1 year through 5 years 26,784
Over 5 years through 10 years 18,857
Over 10 years through 20 years 2,750
Over 20 years 3
------------
Total by maturity 55,637
------------
Bonds by class - statement value:
Class 1 25,565
Class 2 26,791
Class 3 3,281
Class 4 --
Class 5 --
Class 6 --
------------
Total by class 55,637
------------
Total bonds publicly traded 42,562
Total bonds privately placed 11,981
Preferred stocks - statement value --
Common stocks - market value --
Short-term investments - book value 1,094
Financial options owned - statement value --
Financial options written and in force - statement value --
Financial futures contracts open - current price --
Cash on deposit 75
Life insurance in force (000's omitted):
Industrial --
Ordinary --
Credit life --
Group life --
------------
Amount of accidental death insurance in
force under ordinary policies --
------------
</TABLE>
<PAGE>
SCHEDULE 1, CONT.
FIRST COVA LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1999
(In thousands of dollars)
<TABLE>
<CAPTION>
Life insurance policies with disability provisions in force:
<S> <C>
Industrial $ --
Ordinary --
Credit life --
Group life --
Supplementary contracts in force:
Ordinary - not involving life contingencies 10
Amount on deposit --
Income payable 82,618
Ordinary - involving life contingencies --
Income payable --
Group - not involving life contingencies --
Amount on deposit --
Income payable --
Group - involving life contingencies --
Income payable --
Annuities:
Ordinary:
Immediate - amount of income payable --
Deferred - fully paid account balance 23,610
Deferred - not fully paid - account balance --
Group:
Immediate - amount of income payable --
Fully paid account balance --
Not fully paid - account balance --
Accident and health insurance - premiums in force:
Ordinary --
Group --
Credit --
Deposit funds and dividend accumulations:
Deposit funds - account balance --
Dividend accumulations - account balance --
Claim payments 1998:
Group accident and health year ended December 31, 1999:
1999 --
1998 --
1997 --
Other accident and health:
1999 --
1998 --
1997 --
Other coverages that use developmental methods to
calculate claims reserves:
1999 --
1998 --
1997 --
============
See accompanying independent auditors' report.
</TABLE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
a. Financial Statements
---------------------------------------------------------------
The following financial statements of the Separate Account
are included in Part B hereof:
1. Independent Auditors' Report.
2. Statement of Assets and Liabilities as of December 31, 1999.
3. Statement of Operations for the year ended December 31, 1999.
4. Statements of Changes in Net Assets for the years ended December
31, 1999 and 1998.
5. Notes to Financial Statements - December 31, 1999 and 1998.
The following financial statements of the Company are included in
Part B hereof:
1. Independent Auditors' Report.
2. Statutory Statements of Admitted Assets, Liabilities, and
Capital Stock and Surplus as of December 31, 1999 and 1998.
3. Statutory Statements of Operations for the years ended
December 31, 1999, 1998, and 1997.
4. Statutory Statements of Capital Stock and Surplus for
the years ended December 31, 1999, 1998, and 1997.
5. Statutory Statements of Cash Flow for the Years ended
December 31, 1999, 1998, and 1997.
6. Notes to Statutory Financial Statements - December 31, 1999,
1998, and 1997.
b. Exhibits
---------------------------------------------------------------
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account.*
2. Not Applicable.
3. Principal Underwriter's Agreement.*
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.*
(i) Rebalancing Transfers Endorsement.**
(ii) Automatic Withdrawals Endorsement.*
(iii)Dollar Cost Averaging Endorsement.**
(iv) Endorsement (Death Benefit)*
(v) Withdrawal Charge Endorsement
5. Application for Variable Annuity.**
6.(i) Copy of Articles of Incorporation of the Company.*
(ii) Copy of the Bylaws of the Company.*
7. Not Applicable.
8. Not Applicable.
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
11. Not Applicable.
12. Not Applicable.
13. Calculation of Performance Information.
14. Company Organizational Chart.
27. Not Applicable
<FN>
* incorporated by reference to Registrant's Post-Effective
Amendment No. 4 (File Nos. 33-74174 and 811-8306) as
electronically filed on December 30, 1999.
** incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 to Form N-4 (File No. 33-74174) as electronically
filed on May 14, 1996.
</FN>
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
Norse N. Blazzard Director
4401 West Tradewinds Avenue
Suite 207
Lauderdale by the Sea, FL 33308
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Connie A. Doern Vice President
4700 Westown Parkway
West Des Moines, IA 50266
Francis A. Goodhue III Director
Morgan Guaranty
345 Park Avenue
New York, NY 10017
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
Richard A. Hemmings Director
Lord, Bissell & Brook
115 S. LaSalle Street
Chicago, IL 60603
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer
700 Market St.
St. Louis, MO 63101
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
Lisa O. Kirchner Vice President
1776 West Lakes Parkway
West Des Moines, IA 50266
William C. Mair Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John J. Myers Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market St.
St. Louis, MO 63101
Thomas A. Price Director
Bank of New York
1 Wall Street
New York, NY 10286
Mark E. Reynolds Executive Vice President, Chief Financial
One Tower Lane, Suite 3000 Officer and Director
Oakbrook Terrace, IL 60181-4644
Br. Thomas J. Scanlan, F.S.C. Director
Manhattan College
Riverdale, NY 10471
Bernard J. Spaulding Senior Vice President, General Counsel and
One Tower Lane, Suite 3000 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
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart is filed as Exhibit 14 herein.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 12, 2000, there were 42 Non-Qualified Contract Owners and 6
Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article II, Section 13) provide that:
Each person who is or was a director, officer or employee of the Corporation or
is or was serving at the request of the Corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise (including the heirs, executors, administrators
or estate of such person) shall be indemnified by the Corporation as of right to
the full extent that officers and directors are permitted to be indemnified by
the laws of the State of New York, as now in effect and as hereafter amended,
against any liability, judgment, fine, amount paid in settlement, cost or
expense including attorneys' fees) asserted or threatened against or incurred by
such person in his capacity as or arising out of his status as a director,
officer or employee of the Corporation or if serving at the request of the
Corporation, as a director, officer or employee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
The indemnification provided by this By-Law provision shall not be exclusive of
any other rights to which those indemnified may be entitled under any other
By-Law or under any agreement, resolution of shareholders or directors or
otherwise, which forms of indemnification are hereby expressly authorized, and
shall not limit in any way any right which the Corporation may have to make
different or further indemnification with respect to the same or different
persons or classes of persons. Notwithstanding the foregoing, a director shall
not be entitled to indemnification for liability to the Corporation or any of
its shareholders under the By-Laws or under any agreement or resolution of
shareholders or directors, if such liability is of the type described in
subsections (i) or (ii) of Section 10 of the Corporation's Certificate of
Incorporation and Charter.
The Corporation shall have the power, in furtherance of the provisions of this
Section 13, to apply for, purchase and maintain insurance of the type and in
such amounts as is or may hereafter be permitted by Section 726 of the Business
Corporation Law.
No payment of indemnification, advancement or allowance under Sections 721 to
726, inclusive, of the Business Corporation Law shall be made unless a notice
has been filed with the Superintendent of Insurance of the State of New York,
not less than thirty days prior to such payment, specifying the payees, the
amounts, the manner in which such payment is authorized and the nature and
status, at the time of such notice, of the litigation or threatened litigation.
If any action with respect to indemnification of directors and officers of the
Corporation shall be taken by resolution of directors, or by agreement or
otherwise, a notice shall be filed with the Superintended of Insurance of the
State of New York not less than thirty days thereafter specifying the action
taken.
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 Annuity Account Five
Cova Variable Life Account One
Cova Variable Life Account Five
Cova Variable Annuity Account Four
General American Separate Account Twenty-Eight
General American Separate Account Twenty-Nine
Security Equity Separate Account 26
Security Equity Separate Account 27
(b) Cova Life Sales Company is the principal underwriter for the Contracts.
The following persons are the officers and directors of Cova Life Sales Company.
The principal business address for each officer and director of Cova Life Sales
Company is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
William Flory, whose address is One Tower Lane, Suite 3000, Oakbrook Terrace,
Illinois 60181-4644 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. First Cova 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.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Oakbrook
Terrace, and State of Illinois on this 28th day of April, 2000.
<TABLE>
<CAPTION>
<S> <C>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: FIRST COVA LIFE INSURANCE COMPANY
By: /s/BERNARD J. SPAULDING
____________________________________
Senior Vice President, General Counsel and
Secretary
FIRST COVA LIFE INSURANCE COMPANY
Depositor
By: /s/BERNARD J. SPAULDING
____________________________________
Senior Vice President, General Counsel and
Secretary
</TABLE>
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------- Chairman of the Board and ------
Richard A. Liddy Director Date
/s/LORRY J. STENSRUD President and Director 4-28-00
- ---------------------- -------
Lorry J. Stensrud Date
/s/ J. Robert Hopson* Director 4-28-00
- ---------------------- -------
J. Robert Hopson Date
/s/ William C. Mair* Director 4-28-00
- ---------------------- -------
William C. Mair Date
/s/ Matthew P. McCauley* Director 4-28-00
- ------------------------ -------
Matthew P. McCauley Date
Director
- ---------------------- -------
John W. Barber Date
/s/ Norse N. Blazzard* 4-28-00
- ---------------------- Director -------
Norse N. Blazzard Date
/s/ Francis A. Goodhue III* 4-28-00
- --------------------------- Director -------
Francis A. Goodhue III Date
/s/ Richard A. Hemmings* 4-28-00
- ---------------------- Director -------
Richard A. Hemmings Date
/s/ Thomas A. Price* 4-28-00
- ---------------------- Director -------
Thomas A. Price Date
/s/ Thomas J. Scanlan, FSC* 4-28-00
- ---------------------- Director -------
Thomas J. Scanlan, FSC Date
/s/MARK E. REYNOLDS 4-28-00
- ---------------------- Director -------
Mark E. Reynolds Date
/s/J. TERRI TANAKA 4-28-00
- ---------------------- Director -------
J. Terri Tanaka Date
/s/PETER L. WITKEWIZ 4-28-00
- --------------------- Controller --------
Peter L. Witkewiz Date
</TABLE>
*By: /s/LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EXHIBIT NO.
EX-99.B4(ii) Automatic Withdrawals Endorsement
EX-99.B4(v) Withdrawal Charge Endorsement
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Auditors
EX-99.B13 Calculation of Performance Information
EX-99.B14 Company Organizational Chart
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM N-4
FOR
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
First Cova Life Insurance Company
120 Broadway
New York, New York 10271
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is May 1, 2000. The Contract is amended in
the following manner:
The first paragraph of the WITHDRAWAL CHARGE provision is deleted in its
entirety and replaced with the following:
"WITHDRAWAL CHARGE -- A Withdrawal Charge may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. The Withdrawal Charge
is imposed on a withdrawal of Contract Value attributable to a Purchase
Payment within seven (7) years of receipt of the Purchase Payment. The
Withdrawal Charge, if any, is equal to 7% of the Purchase Payment withdrawn
within the first year following receipt, 6% of the Purchase Payment
withdrawn within the second year following receipt, 5% of the Purchase
Payment withdrawn within the third year following receipt, 4% of the
Purchase Payment withdrawn within the fourth year following receipt, 3% of
the Purchase Payment withdrawn within the fifth year of receipt, 2% of the
Purchase Payment withdrawn within the sixth year of receipt, 1% of the
Purchase Payment withdrawn within the seventh year of receipt and 0%
thereafter."
All other terms and conditions of the Contract remain unchanged.
First Cova Life Insurance Company has caused this Endorsement to be signed by
its President and Secretary.
_______________________________Secretary ________________________President
CNY-4339 (3/00)
April 28, 2000
Board of Directors
First Cova Life Insurance Company
120 Broadway
New York, NY 10271
Re: Opinion of Counsel - First Cova Variable Annuity Account One
------------------------------------------------------------
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-4 for the Fixed and Variable Annuity Contracts
(the "Contracts") to be issued by First Cova Life Insurance Company and its
separate account, First Cova Variable Annuity Account One.
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. First Cova Variable Annuity Account One 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
First Cova Life Insurance Company
We consent to the use of our reports on the statutory financial statements of
First Cova Life Insurance Company (the Company) dated March 3, 2000, and
on the financial statements of the sub-accounts of First Cova Variable Annuity
Account One dated March 20, 2000, and to the reference to our firm under the
heading "Experts" in the Statement of Additional Information, in the
Post-Effective Amendment No. 5 to the Registration Statement (Form N-4, File
No. 33-74174) of First Cova Variable Annuity Account One.
/s/KPMG LLP
------------
KPMG LLP
Chicago, Illinois
April 28, 2000
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One
Standard 1 Year Return Data
As of 12/31/99
Sub-Account Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
6 Lord Abbett Growth & Income
<S> <C> <C> <C> <C> <C> <C> <C>
6 12/31/1998 purchase 1,000.00 0.000000 0.0000 #DIV/0! #DIV/0!
6 12/31/1999 annual fee #DIV/0! 39.456238 #DIV/0! #DIV/0! #DIV/0!
6 12/31/1999 surrender fee (63.00) 39.456238 #DIV/0! (1.5967) #DIV/0!
8 LA Bond Debenture
8 12/31/1998 purchase 1,000.00 13.496763 0.0000 74.0918 74.0918
8 12/31/1999 annual fee (1.02) 13.765717 74.0918 (0.0741) 74.0177
8 12/31/1999 surrender fee (63.00) 13.765717 74.0177 (4.5766) 69.4411
9 GACC Money Market
9 12/31/1998 purchase 1,000.00 11.109941 0.0000 90.0095 90.0095
9 12/31/1999 annual fee (1.04) 11.558870 90.0095 (0.0900) 89.9195
9 12/31/1999 surrender fee (63.00) 11.558870 89.9195 (5.4504) 84.4691
11 LA Developing Growth
11 12/31/1998 purchase 1,000.00 11.068002 0.0000 90.3505 90.3505
11 12/31/1999 annual fee (1.31) 14.452824 90.3505 (0.0906) 90.2599
11 12/31/1999 surrender fee (63.00) 14.452824 90.2599 (4.3590) 85.9009
12 LA Large Cap Research
12 12/31/1998 purchase 1,000.00 11.825475 0.0000 84.5632 84.5632
12 12/31/1999 annual fee (1.24) 14.635296 84.5632 (0.0847) 84.4785
12 12/31/1999 surrender fee (63.00) 14.635296 84.4785 (4.3047) 80.1738
13 LA Mid-Cap Value
13 12/31/1998 purchase 1,000.00 10.437999 0.0000 95.8038 95.8038
13 12/31/1999 annual fee (1.04) 10.875326 95.8038 (0.0956) 95.7082
13 12/31/1999 surrender fee (63.00) 10.875326 95.7082 (5.7929) 89.9153
15 JPM Quality Bond
15 12/31/1998 purchase 1,000.00 11.914486 0.0000 83.9314 83.9314
15 12/31/1999 annual fee (0.97) 11.567101 83.9314 (0.0839) 83.8475
15 12/31/1999 surrender fee (63.00) 11.567101 83.8475 (5.4465) 78.4010
16 JPM Small Cap Stock
16 12/31/1998 purchase 1,000.00 12.583415 0.0000 79.4697 79.4697
16 12/31/1999 annual fee (1.43) 17.933548 79.4697 (0.0797) 79.3900
16 12/31/1999 surrender fee (63.00) 17.933548 79.3900 (3.5130) 75.8770
17 JPM Large Cap Stock
17 12/31/1998 purchase 1,000.00 19.428714 0.0000 51.4702 51.4702
17 12/31/1999 annual fee (1.16) 22.548635 51.4702 (0.0514) 51.4188
17 12/31/1999 surrender fee (63.00) 22.548635 51.4188 (2.7940) 48.6248
18 JPM Select Equity
18 12/31/1998 purchase 1,000.00 16.987197 0.0000 58.8679 58.8679
18 12/31/1999 annual fee (1.08) 18.384195 58.8679 (0.0587) 58.8092
18 12/31/1999 surrender fee (63.00) 18.384195 58.8092 (3.4269) 55.3823
19 JPM International Equity
19 12/31/1998 purchase 1,000.00 12.891430 0.0000 77.5709 77.5709
19 12/31/1999 annual fee (1.27) 16.337166 77.5709 (0.0777) 77.4932
19 12/31/1999 surrender fee (63.00) 16.337166 77.4932 (3.8562) 73.6370
First Cova Variable Annuity Account One
Standard 1 Year Returns
12/31/1999
Sub-Account Total Account 12/31/1999 Initial Inception
Return Value AUV Investment Date
6 Lord Abbett Growth & Income (1) #DIV/0! $39.456238 $1,000.00 1/8/1999
8 LA Bond Debenture -4.41% 955.91 13.765717 1,000.00 5/15/1997
9 GACC Money Market -2.36% 976.37 11.558870 1,000.00 12/28/1998
11 LA Developing Growth 24.15% 1,241.51 14.452824 1,000.00 11/23/1998
12 LA Large Cap Research 17.34% 1,173.37 14.635296 1,000.00 3/3/1998
13 LA Mid-Cap Value -2.21% 977.86 10.875326 1,000.00 3/4/1998
15 JPM Quality Bond -9.31% 906.87 11.567101 1,000.00 5/15/1997
16 JPM Small Cap Stock 36.07% 1,360.74 17.933548 1,000.00 3/17/1997
17 JPM Large Cap Stock 9.64% 1,096.42 22.548635 1,000.00 3/11/1997
18 JPM Select Equity 1.82% 1,018.16 18.384195 1,000.00 3/11/1997
19 JPM International Equity 20.30% 1,203.02 16.337166 1,000.00 3/11/1997
============= ============================
91.02% 191.514916 11,000.00
============= ============================
(1)Sub-account has not been in existence for 1 year.
First Cova Variable Annuity Account One
Standard Inception to Date Return Data
As of 12/31/99
Sub-Account Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
6 Lord Abbett Growth & Income 0.98 yrs
6 1/8/1999 purchase 1,000.00 35.903751 0.0000 27.8522 27.8522
6 12/31/1999 annual fee (1.10) 39.456238 27.8522 (0.0279) 27.8243
6 12/31/1999 surrender fee (70.00) 39.456238 27.8243 (1.7741) 26.0502
8 LA Bond Debenture 2.63 yrs
8 5/15/1997 purchase 1,000.00 11.739181 0.0000 85.1848 85.1848
8 5/15/1998 annual fee (1.15) 13.492811 85.1848 (0.0852) 85.0996
8 5/17/1999 annual fee (1.16) 13.636712 85.0996 (0.0851) 85.0145
8 12/31/1999 annual fee (1.17) 13.765717 85.0996 (0.0850) 85.0146
8 12/31/1999 surrender fee (45.00) 13.765717 85.0146 (3.2690) 81.7456
9 GACC Money Market 1.01 yrs
9 12/28/1998 purchase 1,000.00 11.106100 0.0000 90.0406 90.0406
9 12/28/1999 annual fee (1.04) 11.552038 90.0406 (0.0900) 89.9506
9 12/31/1999 annual fee (1.04) 11.558870 89.9506 (0.0900) 89.8606
9 12/31/1999 surrender fee (63.00) 11.558870 89.9506 (5.4504) 84.5002
11 LA Developing Growth 1.10 yrs
11 11/23/1998 purchase 1,000.00 10.194480 0.0000 98.0923 98.0923
11 11/23/1999 annual fee (1.24) 12.669157 98.0923 (0.0979) 97.9944
11 12/31/1999 annual fee (1.42) 14.452824 97.9944 (0.0983) 97.8961
11 12/31/1999 surrender fee (63.00) 14.452824 97.9944 (4.3590) 93.6354
12 LA Large Cap Research 1.83 yrs
12 3/3/1998 purchase 1,000.00 10.948763 0.0000 91.3345 91.3345
12 3/3/1999 annual fee (1.06) 11.646603 91.3345 (0.0910) 91.2435
12 12/31/1999 annual fee (1.34) 14.635296 91.2435 (0.0916) 91.1519
12 12/31/1999 surrender fee (63.00) 14.635296 91.1519 (4.3047) 86.8472
13 LA Mid-Cap Value 1.83 yrs
13 3/4/1998 purchase 1,000.00 11.049791 0.0000 90.4994 90.4994
13 3/4/1999 annual fee (0.90) 9.949762 90.4994 (0.0905) 90.4089
13 12/31/1999 annual fee (0.98) 10.875326 90.4089 (0.0901) 90.3188
13 12/31/1999 surrender fee (63.00) 10.875326 90.3188 (5.7929) 84.5259
15 JPM Quality Bond 2.63 yrs
15 5/15/1997 purchase 1,000.00 10.446609 0.0000 95.7248 95.7248
15 5/15/1998 annual fee (1.09) 11.366225 95.7248 (0.0959) 95.6289
15 5/17/1999 annual fee (1.12) 11.686540 95.6289 (0.0958) 95.5331
15 12/31/1999 annual fee (1.11) 11.567101 95.5331 (0.0960) 95.4371
15 12/31/1999 surrender fee (45.00) 11.567101 95.4371 (3.8903) 91.5468
16 JPM Small Cap Stock 2.79 yrs
16 3/17/1997 purchase 1,000.00 10.922871 0.0000 91.5510 91.5510
16 3/17/1998 annual fee (1.35) 14.721789 91.5510 (0.0917) 91.4593
16 3/17/1999 annual fee (1.08) 11.819980 91.4593 (0.0914) 91.3679
16 12/31/1999 annual fee (1.64) 17.933548 91.3679 (0.0914) 91.2765
16 12/31/1999 surrender fee (45.00) 17.933548 91.2765 (2.5093) 88.7672
17 JPM Large Cap Stock 2.81 yrs
17 3/11/1997 purchase 1,000.00 12.396556 0.0000 80.6676 80.6676
17 3/11/1998 annual fee (1.33) 16.534692 80.6676 (0.0804) 80.5872
17 3/11/1999 annual fee (1.63) 20.221179 80.5872 (0.0806) 80.5066
17 12/31/1999 annual fee (1.82) 22.548635 80.5066 (0.0807) 80.4259
17 12/31/1999 surrender fee (45.00) 22.548635 80.4259 (1.9957) 78.4302
18 JPM Select Equity 2.81 yrs
18 3/11/1997 purchase 1,000.00 11.761258 0.0000 85.0249 85.0249
18 3/11/1998 annual fee (1.31) 15.372541 85.0249 (0.0852) 84.9397
18 3/11/1999 annual fee (1.47) 17.351972 84.9397 (0.0847) 84.8550
18 12/31/1999 annual fee (1.56) 18.384195 84.8550 (0.0849) 84.7701
18 12/31/1999 surrender fee (45.00) 18.384195 84.7701 (2.4478) 82.3223
19 JPM International Equity 2.81 yrs
19 3/11/1997 purchase 1,000.00 11.144845 0.0000 89.7276 89.7276
19 3/11/1998 annual fee (1.12) 12.474291 89.7276 (0.0898) 89.6378
19 3/11/1999 annual fee (1.15) 12.866528 89.6378 (0.0894) 89.5484
19 12/31/1999 annual fee (1.46) 16.337166 89.5484 (0.0894) 89.4590
19 12/31/1999 surrender fee (45.00) 16.337166 89.4590 (2.7545) 86.7045
First Cova Variable Annuity Account One
Standard Since Inception Returns
12/31/1999
Sub-Account Annualized Account 12/31/1999 Initial Inception
Inception Value AUV Investment Date
Return
6 Lord Abbett Growth & Income (1) $1,027.84 $39.456238 $1,000.00 1/8/1999
8 LA Bond Debenture 4.59% 1,125.29 13.765717 1,000.00 5/15/1997
9 GACC Money Market -2.31% 976.73 11.558870 1,000.00 12/28/1998
11 LA Developing Growth 31.52% 1,353.30 14.452824 1,000.00 11/23/1998
12 LA Large Cap Research 14.00% 1,271.03 14.635296 1,000.00 3/3/1998
13 LA Mid-Cap Value -4.50% 919.25 10.875326 1,000.00 3/4/1998
15 JPM Quality Bond 2.20% 1,058.93 11.567101 1,000.00 5/15/1997
16 JPM Small Cap Stock 18.12% 1,591.91 17.933548 1,000.00 3/17/1997
17 JPM Large Cap Stock 22.51% 1,768.49 22.548635 1,000.00 3/11/1997
18 JPM Select Equity 15.90% 1,513.43 18.384195 1,000.00 3/11/1997
19 JPM International Equity 13.20% 1,416.51 16.337166 1,000.00 3/11/1997
(1)Returns are not annualized for sub-accounts in existence less than 1 year.
First Cova Variable Annuity Account One
Non-Standard 1 Year Return Data
As of 12/31/99
Sub-Account Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
6 Lord Abbett Growth & Income
6 12/31/1998 purchase 1,000.00 0.000000 0.0000 #DIV/0! #DIV/0!
6 12/31/1999 annual fee 39.456238 #DIV/0! 0.0000 #DIV/0!
6 12/31/1999 surrender fee 39.456238 #DIV/0! 0.0000 #DIV/0!
8 LA Bond Debenture
8 12/31/1998 purchase 1,000.00 13.496763 0.0000 74.0918 74.0918
8 12/31/1999 annual fee 13.765717 74.0918 0.0000 74.0918
8 12/31/1999 surrender fee 13.765717 74.0918 0.0000 74.0918
9 GACC Money Market
9 12/31/1998 purchase 1,000.00 11.109941 0.0000 90.0095 90.0095
9 12/31/1999 annual fee 11.558870 90.0095 0.0000 90.0095
9 12/31/1999 surrender fee 11.558870 90.0095 0.0000 90.0095
11 LA Developing Growth
11 12/31/1998 purchase 1,000.00 11.068002 0.0000 90.3505 90.3505
11 12/31/1999 annual fee 14.452824 90.3505 0.0000 90.3505
11 12/31/1999 surrender fee 14.452824 90.3505 0.0000 90.3505
12 LA Large Cap Research
12 12/31/1998 purchase 1,000.00 11.825475 0.0000 84.5632 84.5632
12 12/31/1999 annual fee 14.635296 84.5632 0.0000 84.5632
12 12/31/1999 surrender fee 14.635296 84.5632 0.0000 84.5632
13 LA Mid-Cap Value
13 12/31/1998 purchase 1,000.00 10.437999 0.0000 95.8038 95.8038
13 12/31/1999 annual fee 10.875326 95.8038 0.0000 95.8038
13 12/31/1999 surrender fee 10.875326 95.8038 0.0000 95.8038
15 JPM Quality Bond
15 12/31/1998 purchase 1,000.00 11.914486 0.0000 83.9314 83.9314
15 12/31/1999 annual fee 11.567101 83.9314 0.0000 83.9314
15 12/31/1999 surrender fee 11.567101 83.9314 0.0000 83.9314
16 JPM Small Cap Stock
16 12/31/1998 purchase 1,000.00 12.583415 0.0000 79.4697 79.4697
16 12/31/1999 annual fee 17.933548 79.4697 0.0000 79.4697
16 12/31/1999 surrender fee 17.933548 79.4697 0.0000 79.4697
17 JPM Large Cap Stock
17 12/31/1998 purchase 1,000.00 19.428714 0.0000 51.4702 51.4702
17 12/31/1999 annual fee 22.548635 51.4702 0.0000 51.4702
17 12/31/1999 surrender fee 22.548635 51.4702 0.0000 51.4702
18 JPM Select Equity
18 12/31/1998 purchase 1,000.00 16.987197 0.0000 58.8679 58.8679
18 12/31/1999 annual fee 18.384195 58.8679 0.0000 58.8679
18 12/31/1999 surrender fee 18.384195 58.8679 0.0000 58.8679
19 JPM International Equity
19 12/31/1998 purchase 1,000.00 12.891430 0.0000 77.5709 77.5709
19 12/31/1999 annual fee 16.337166 77.5709 0.0000 77.5709
19 12/31/1999 surrender fee 16.337166 77.5709 0.0000 77.5709
First Cova Variable Annuity Account One
Non-Standard 1 Year Returns
12/31/1999
Sub-Account Total Account 12/31/1999 Initial Inception
Return Value AUV Investment Date
6 Lord Abbett Growth & Income (1) #DIV/0! $39.456238 $1,000.00 1/8/1999
8 LA Bond Debenture 1.99% 1,019.93 13.765717 1,000.00 5/15/1997
9 GACC Money Market 4.04% 1,040.41 11.558870 1,000.00 12/28/1998
11 LA Developing Growth 30.58% 1,305.82 14.452824 1,000.00 11/23/1998
12 LA Large Cap Research 23.76% 1,237.61 14.635296 1,000.00 3/3/1998
13 LA Mid-Cap Value 4.19% 1,041.90 10.875326 1,000.00 3/4/1998
15 JPM Quality Bond -2.92% 970.84 11.567101 1,000.00 5/15/1997
16 JPM Small Cap Stock 42.52% 1,425.17 17.933548 1,000.00 3/17/1997
17 JPM Large Cap Stock 16.06% 1,160.58 22.548635 1,000.00 3/11/1997
18 JPM Select Equity 8.22% 1,082.24 18.384195 1,000.00 3/11/1997
19 JPM International Equity 26.73% 1,267.29 16.337166 1,000.00 3/11/1997
(1) Sub-account has not been in existence for 1 year.
First Cova Variable Annuity Account One
Non-Standard Since Inception Return Data
As of 12/31/99
Sub-Account Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
6 Lord Abbett Growth & Income 0.98 yrs
6 1/8/1999 purchase 1,000.00 35.903751 0.0000 27.8522 27.8522
6 12/31/1999 annual fee 39.456238 27.8522 0.0000 27.8522
6 12/31/1999 surrender fee 39.456238 27.8522 0.0000 27.8522
8 LA Bond Debenture 2.63 yrs
8 5/15/1997 purchase 1,000.00 11.739181 0.0000 85.1848 85.1848
8 5/15/1998 annual fee 13.492811 85.1848 0.0000 85.1848
8 5/17/1999 annual fee 13.636712 85.1848 0.0000 85.1848
8 12/31/1999 annual fee 13.765717 85.1848 0.0000 85.1848
8 12/31/1999 surrender fee 13.765717 85.1848 0.0000 85.1848
9 GACC Money Market 1.01 yrs
9 12/28/1998 purchase 1,000.00 11.106100 0.0000 90.0406 90.0406
9 12/28/1999 annual fee 11.552038 90.0406 0.0000 90.0406
9 12/31/1999 annual fee 11.558870 90.0406 0.0000 90.0406
9 12/31/1999 surrender fee 11.558870 90.0406 0.0000 90.0406
11 LA Developing Growth 1.10 yrs
11 11/23/1998 purchase 1,000.00 10.194480 0.0000 98.0923 98.0923
11 11/23/1999 annual fee 12.669157 98.0923 0.0000 98.0923
11 12/31/1999 annual fee 14.452824 98.0923 0.0000 98.0923
11 12/31/1999 surrender fee 14.452824 98.0923 0.0000 98.0923
12 LA Large Cap Research 1.83 yrs
12 3/3/1998 purchase 1,000.00 10.948763 0.0000 91.3345 91.3345
12 3/3/1999 annual fee 11.646603 91.3345 0.0000 91.3345
12 12/31/1999 annual fee 14.635296 91.3345 0.0000 91.3345
12 12/31/1999 surrender fee 14.635296 91.3345 0.0000 91.3345
13 LA Mid-Cap Value 1.83 yrs
13 3/4/1998 purchase 1,000.00 11.049791 0.0000 90.4994 90.4994
13 3/4/1999 annual fee 9.949762 90.4994 0.0000 90.4994
13 12/31/1999 annual fee 10.875326 90.4994 0.0000 90.4994
13 12/31/1999 surrender fee 10.875326 90.4994 0.0000 90.4994
15 JPM Quality Bond 2.63 yrs
15 5/15/1997 purchase 1,000.00 10.446609 0.0000 95.7248 95.7248
15 5/15/1998 annual fee 11.366225 95.7248 0.0000 95.7248
15 5/17/1999 annual fee 11.686540 95.7248 0.0000 95.7248
15 12/31/1999 annual fee 11.567101 95.7248 0.0000 95.7248
15 12/31/1999 surrender fee 11.567101 95.7248 0.0000 95.7248
16 JPM Small Cap Stock 2.79 yrs
16 3/17/1997 purchase 1,000.00 10.922871 0.0000 91.5510 91.5510
16 3/17/1998 annual fee 14.721789 91.5510 0.0000 91.5510
16 3/17/1999 annual fee 11.819980 91.5510 0.0000 91.5510
16 12/31/1999 annual fee 17.933548 91.5510 0.0000 91.5510
16 12/31/1999 surrender fee 17.933548 91.5510 0.0000 91.5510
17 JPM Large Cap Stock 2.81 yrs
17 3/11/1997 purchase 1,000.00 12.396556 0.0000 80.6676 80.6676
17 3/11/1998 annual fee 16.534692 80.6676 0.0000 80.6676
17 3/11/1999 annual fee 20.221179 80.6676 0.0000 80.6676
17 12/31/1999 annual fee 22.548635 80.6676 0.0000 80.6676
17 12/31/1999 surrender fee 22.548635 80.6676 0.0000 80.6676
18 JPM Select Equity 2.81 yrs
18 3/11/1997 purchase 1,000.00 11.761258 0.0000 85.0249 85.0249
18 3/11/1998 annual fee 15.372541 85.0249 0.0000 85.0249
18 3/11/1999 annual fee 17.351972 85.0249 0.0000 85.0249
18 12/31/1999 annual fee 18.384195 85.0249 0.0000 85.0249
18 12/31/1999 surrender fee 18.384195 85.0249 0.0000 85.0249
19 JPM International Equity 2.81 yrs
19 3/11/1997 purchase 1,000.00 11.144845 0.0000 89.7276 89.7276
19 3/11/1998 annual fee 12.474291 89.7276 0.0000 89.7276
19 3/11/1999 annual fee 12.866528 89.7276 0.0000 89.7276
19 12/31/1999 annual fee 16.337166 89.7276 0.0000 89.7276
19 12/31/1999 surrender fee 16.337166 89.7276 0.0000 89.7276
First Cova Variable Annuity Account One
Non-Standard Since Inception Returns
12/31/1999
Sub-Account Annualized Account 12/31/1999 Initial Inception
Inception Value AUV Investment Date
Return
6 Lord Abbett Growth & Income (1) $1,098.94 $39.456238 $1,000.00 1/8/1999
8 LA Bond Debenture 6.24% 1,172.63 13.765717 1,000.00 5/15/1997
9 GACC Money Market 4.04% 1,040.77 11.558870 1,000.00 12/28/1998
11 LA Developing Growth 37.18% 1,417.71 14.452824 1,000.00 11/23/1998
12 LA Large Cap Research 17.18% 1,336.71 14.635296 1,000.00 3/3/1998
13 LA Mid-Cap Value -0.87% 984.21 10.875326 1,000.00 3/4/1998
15 JPM Quality Bond 3.95% 1,107.26 11.567101 1,000.00 5/15/1997
16 JPM Small Cap Stock 19.43% 1,641.83 17.933548 1,000.00 3/17/1997
17 JPM Large Cap Stock 23.74% 1,818.94 22.548635 1,000.00 3/11/1997
18 JPM Select Equity 17.24% 1,563.11 18.384195 1,000.00 3/11/1997
19 JPM International Equity 14.59% 1,465.89 16.337166 1,000.00 3/11/1997
(1) Returns are not annualized for sub-accounts in existence less than 1 year.
First Cova Variable Annuity Account One
Standard 1 Year Return Data
As of 12/31/99
Sub-Account Account Account
Value Value
Before After
Transaction Transaction
6 Lord Abbett Growth & Income
6 12/31/1998 0.00 #DIV/0!
6 12/31/1999 #DIV/0! #DIV/0!
6 12/31/1999 #DIV/0! #DIV/0!
8 LA Bond Debenture
8 12/31/1998 0.00 1,000.00
8 12/31/1999 1,019.93 1,018.91
8 12/31/1999 1,018.91 955.91
9 GACC Money Market
9 12/31/1998 0.00 1,000.00
9 12/31/1999 1,040.41 1,039.37
9 12/31/1999 1,039.37 976.37
11 LA Developing Growth
11 12/31/1998 0.00 1,000.00
11 12/31/1999 1,305.82 1,304.51
11 12/31/1999 1,304.51 1,241.51
12 LA Large Cap Research
12 12/31/1998 0.00 1,000.00
12 12/31/1999 1,237.61 1,236.37
12 12/31/1999 1,236.37 1,173.37
13 LA Mid-Cap Value
13 12/31/1998 0.00 1,000.00
13 12/31/1999 1,041.90 1,040.86
13 12/31/1999 1,040.86 977.86
15 JPM Quality Bond
15 12/31/1998 0.00 1,000.00
15 12/31/1999 970.84 969.87
15 12/31/1999 969.87 906.87
16 JPM Small Cap Stock
16 12/31/1998 0.00 1,000.00
16 12/31/1999 1,425.17 1,423.74
16 12/31/1999 1,423.74 1,360.74
17 JPM Large Cap Stock
17 12/31/1998 0.00 1,000.00
17 12/31/1999 1,160.58 1,159.42
17 12/31/1999 1,159.42 1,096.42
18 JPM Select Equity
18 12/31/1998 0.00 1,000.00
18 12/31/1999 1,082.24 1,081.16
18 12/31/1999 1,081.16 1,018.16
19 JPM International Equity
19 12/31/1998 0.00 1,000.00
19 12/31/1999 1,267.29 1,266.02
19 12/31/1999 1,266.02 1,203.02
First Cova Variable Annuity Account One
Standard 1 Year Returns
12/31/1999
Sub-Account Days Since
Inception
6 Lord Abbett Growth & Income 357
8 LA Bond Debenture 960
9 GACC Money Market 368
11 LA Developing Growth 403
12 LA Large Cap Research 668
13 LA Mid-Cap Value 667
15 JPM Quality Bond 960
16 JPM Small Cap Stock 1,019
17 JPM Large Cap Stock 1,025
18 JPM Select Equity 1,025
19 JPM International Equity 1,025
(1)Sub-account has not been in existence for
First Cova Variable Annuity Account One
Standard Inception to Date Return Data
As of 12/31/99
Sub-Account Account Account
Value Value
Before After
Transaction Transaction
6 Lord Abbett Growth & Income
6 1/8/1999 0.00 1,000.00
6 12/31/1999 1,098.94 1,097.84
6 12/31/1999 1,097.84 1,027.84
8 LA Bond Debenture
8 5/15/1997 0.00 1,000.00
8 5/15/1998 1,149.38 1,148.23
8 5/17/1999 1,160.48 1,159.32
8 12/31/1999 1,171.46 1,170.29
8 12/31/1999 1,170.29 1,125.29
9 GACC Money Market
9 12/28/1998 0.00 1,000.00
9 12/28/1999 1,040.15 1,039.11
9 12/31/1999 1,039.73 1,038.69
9 12/31/1999 1,039.73 976.73
11 LA Developing Growth
11 11/23/1998 0.00 1,000.00
11 11/23/1999 1,242.75 1,241.51
11 12/31/1999 1,416.30 1,414.88
11 12/31/1999 1,416.30 1,353.30
12 LA Large Cap Research
12 3/3/1998 0.00 1,000.00
12 3/3/1999 1,063.74 1,062.68
12 12/31/1999 1,335.38 1,334.04
12 12/31/1999 1,334.04 1,271.03
13 LA Mid-Cap Value
13 3/4/1998 0.00 1,000.00
13 3/4/1999 900.45 899.55
13 12/31/1999 983.23 982.25
13 12/31/1999 982.25 919.25
15 JPM Quality Bond
15 5/15/1997 0.00 1,000.00
15 5/15/1998 1,088.03 1,086.94
15 5/17/1999 1,117.57 1,116.45
15 12/31/1999 1,105.04 1,103.93
15 12/31/1999 1,103.93 1,058.93
16 JPM Small Cap Stock
16 3/17/1997 0.00 1,000.00
16 3/17/1998 1,347.79 1,346.44
16 3/17/1999 1,081.05 1,079.97
16 12/31/1999 1,638.55 1,636.91
16 12/31/1999 1,636.91 1,591.91
17 JPM Large Cap Stock
17 3/11/1997 0.00 1,000.00
17 3/11/1998 1,333.81 1,332.48
17 3/11/1999 1,629.57 1,627.94
17 12/31/1999 1,815.31 1,813.49
17 12/31/1999 1,813.49 1,768.49
18 JPM Select Equity
18 3/11/1997 0.00 1,000.00
18 3/11/1998 1,307.05 1,305.74
18 3/11/1999 1,473.87 1,472.40
18 12/31/1999 1,559.99 1,558.43
18 12/31/1999 1,558.43 1,513.43
19 JPM International Equity
19 3/11/1997 0.00 1,000.00
19 3/11/1998 1,119.29 1,118.17
19 3/11/1999 1,153.33 1,152.18
19 12/31/1999 1,462.97 1,461.51
19 12/31/1999 1,461.51 1,416.51
First Cova Variable Annuity Account One
Standard Since Inception Returns
12/31/1999
Sub-Account Days Since
Inception
6 Lord Abbett Growth & Income 357
8 LA Bond Debenture 960
9 GACC Money Market 368
11 LA Developing Growth 403
12 LA Large Cap Research 668
13 LA Mid-Cap Value 667
15 JPM Quality Bond 960
16 JPM Small Cap Stock 1,019
17 JPM Large Cap Stock 1,025
18 JPM Select Equity 1,025
19 JPM International Equity 1,025
(1)Returns are not annualized for sub-account
First Cova Variable Annuity Account One
Non-Standard 1 Year Return Data
As of 12/31/99
Sub-Account Account Account
Value Value
Before After
Transaction Transaction
6 Lord Abbett Growth & Income
6 12/31/1998 0.00 #DIV/0!
6 12/31/1999 #DIV/0! #DIV/0!
6 12/31/1999 #DIV/0! #DIV/0!
8 LA Bond Debenture
8 12/31/1998 0.00 1,000.00
8 12/31/1999 1,019.93 1,019.93
8 12/31/1999 1,019.93 1,019.93
9 GACC Money Market
9 12/31/1998 0.00 1,000.00
9 12/31/1999 1,040.41 1,040.41
9 12/31/1999 1,040.41 1,040.41
11 LA Developing Growth
11 12/31/1998 0.00 1,000.00
11 12/31/1999 1,305.82 1,305.82
11 12/31/1999 1,305.82 1,305.82
12 LA Large Cap Research
12 12/31/1998 0.00 1,000.00
12 12/31/1999 1,237.61 1,237.61
12 12/31/1999 1,237.61 1,237.61
13 LA Mid-Cap Value
13 12/31/1998 0.00 1,000.00
13 12/31/1999 1,041.90 1,041.90
13 12/31/1999 1,041.90 1,041.90
15 JPM Quality Bond
15 12/31/1998 0.00 1,000.00
15 12/31/1999 970.84 970.84
15 12/31/1999 970.84 970.84
16 JPM Small Cap Stock
16 12/31/1998 0.00 1,000.00
16 12/31/1999 1,425.17 1,425.17
16 12/31/1999 1,425.17 1,425.17
17 JPM Large Cap Stock
17 12/31/1998 0.00 1,000.00
17 12/31/1999 1,160.58 1,160.58
17 12/31/1999 1,160.58 1,160.58
18 JPM Select Equity
18 12/31/1998 0.00 1,000.00
18 12/31/1999 1,082.24 1,082.24
18 12/31/1999 1,082.24 1,082.24
19 JPM International Equity
19 12/31/1998 0.00 1,000.00
19 12/31/1999 1,267.29 1,267.29
19 12/31/1999 1,267.29 1,267.29
First Cova Variable Annuity Account One
Non-Standard 1 Year Returns
12/31/1999
Sub-Account Days Since
Inception
6 Lord Abbett Growth & Income 357
8 LA Bond Debenture 960
9 GACC Money Market 368
11 LA Developing Growth 403
12 LA Large Cap Research 668
13 LA Mid-Cap Value 667
15 JPM Quality Bond 960
16 JPM Small Cap Stock 1,019
17 JPM Large Cap Stock 1,025
18 JPM Select Equity 1,025
19 JPM International Equity 1,025
(1) Sub-account has not been in existence for
First Cova Variable Annuity Account One
Non-Standard Since Inception Return Data
As of 12/31/99
Sub-Account Account Account
Value Value
Before After
Transaction Transaction
6 Lord Abbett Growth & Income
6 1/8/1999 0.00 1,000.00
6 12/31/1999 1,098.94 1,098.94
6 12/31/1999 1,098.94 1,098.94
8 LA Bond Debenture
8 5/15/1997 0.00 1,000.00
8 5/15/1998 1,149.38 1,149.38
8 5/17/1999 1,161.64 1,161.64
8 12/31/1999 1,172.63 1,172.63
8 12/31/1999 1,172.63 1,172.63
9 GACC Money Market
9 12/28/1998 0.00 1,000.00
9 12/28/1999 1,040.15 1,040.15
9 12/31/1999 1,040.77 1,040.77
9 12/31/1999 1,040.77 1,040.77
11 LA Developing Growth
11 11/23/1998 0.00 1,000.00
11 11/23/1999 1,242.75 1,242.75
11 12/31/1999 1,417.71 1,417.71
11 12/31/1999 1,417.71 1,417.71
12 LA Large Cap Research
12 3/3/1998 0.00 1,000.00
12 3/3/1999 1,063.74 1,063.74
12 12/31/1999 1,336.71 1,336.71
12 12/31/1999 1,336.71 1,336.71
13 LA Mid-Cap Value
13 3/4/1998 0.00 1,000.00
13 3/4/1999 900.45 900.45
13 12/31/1999 984.21 984.21
13 12/31/1999 984.21 984.21
15 JPM Quality Bond
15 5/15/1997 0.00 1,000.00
15 5/15/1998 1,088.03 1,088.03
15 5/17/1999 1,118.69 1,118.69
15 12/31/1999 1,107.26 1,107.26
15 12/31/1999 1,107.26 1,107.26
16 JPM Small Cap Stock
16 3/17/1997 0.00 1,000.00
16 3/17/1998 1,347.79 1,347.79
16 3/17/1999 1,082.13 1,082.13
16 12/31/1999 1,641.83 1,641.83
16 12/31/1999 1,641.83 1,641.83
17 JPM Large Cap Stock
17 3/11/1997 0.00 1,000.00
17 3/11/1998 1,333.81 1,333.81
17 3/11/1999 1,631.19 1,631.19
17 12/31/1999 1,818.94 1,818.94
17 12/31/1999 1,818.94 1,818.94
18 JPM Select Equity
18 3/11/1997 0.00 1,000.00
18 3/11/1998 1,307.05 1,307.05
18 3/11/1999 1,475.35 1,475.35
18 12/31/1999 1,563.11 1,563.11
18 12/31/1999 1,563.11 1,563.11
19 JPM International Equity
19 3/11/1997 0.00 1,000.00
19 3/11/1998 1,119.29 1,119.29
19 3/11/1999 1,154.48 1,154.48
19 12/31/1999 1,465.89 1,465.89
19 12/31/1999 1,465.89 1,465.89
First Cova Variable Annuity Account One
Non-Standard Since Inception Returns
12/31/1999
Sub-Account Days Since
Inception
6 Lord Abbett Growth & Income 357
8 LA Bond Debenture 960
9 GACC Money Market 368
11 LA Developing Growth 403
12 LA Large Cap Research 668
13 LA Mid-Cap Value 667
15 JPM Quality Bond 960
16 JPM Small Cap Stock 1,019
17 JPM Large Cap Stock 1,025
18 JPM Select Equity 1,025
19 JPM International Equity 1,025
(1) Returns are not annualized for sub-accounts in existence less than 1 year.
</TABLE>
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.
